EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Between
NORTH FORK BANCORPORATION, INC.
and
NEW YORK BANCORP INC.
Dated as of October 7, 1997
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
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1.1. The Merger............................................... 2
1.2. Effective Time........................................... 3
1.3. Effects of the Merger.................................... 3
1.4. Conversion of Company Common Stock....................... 3
1.5. Stock Options............................................ 6
1.6. Buyer Common Stock....................................... 9
1.7. Certificate of Incorporation............................. 9
1.8. By-Laws.................................................. 9
1.9. Directors and Officers................................... 10
1.10. Tax Consequences......................................... 10
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available........................... 10
2.2. Exchange of Shares....................................... 11
ARTICLE II-A
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
2A.1 Disclosure Schedules..................................... 16
2A.2 Standards................................................ 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Corporate Organization................................... 19
3.2. Capitalization........................................... 21
3.3. Authority; No Violation.................................. 24
3.4. Consents and Approvals................................... 28
3.5. Reports.................................................. 29
3.6. Financial Statements..................................... 31
3.7. Broker's Fees............................................ 33
3.8. Absence of Certain Changes or Events..................... 33
3.9. Legal Proceedings........................................ 35
3.10. Taxes.................................................... 36
3.11. Employees................................................ 38
3.12. SEC Reports.............................................. 42
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3.13. Company Information...................................... 43
3.14. Compliance with Applicable Law........................... 43
3.15. Certain Contracts........................................ 44
3.16. Agreements with Regulatory Agencies...................... 45
3.17. Investment Securities.................................... 46
3.18. Intellectual Property.................................... 47
3.19. State Takeover Laws...................................... 47
3.20. Administration of Fiduciary Accounts..................... 47
3.21. Environmental Matters.................................... 48
3.22. Derivative Transactions.................................. 50
3.23. Opinion.................................................. 51
3.24. Approvals................................................ 52
3.25. Loan Portfolio........................................... 52
3.26. Property................................................. 54
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
4.1. Corporate Organization................................... 56
4.2. Capitalization........................................... 58
4.3. Authority; No Violation.................................. 61
4.4. Consents and Approvals................................... 64
4.5. Reports.................................................. 66
4.6. Financial Statements..................................... 67
4.7. Broker's Fees............................................ 69
4.8. Absence of Certain Changes or Events..................... 69
4.9. Legal Proceedings........................................ 69
4.10. Taxes.................................................... 70
4.11. Employees................................................ 72
4.12. SEC Reports.............................................. 76
4.13. Buyer Information........................................ 76
4.14. Compliance with Applicable Law........................... 77
4.15. Ownership of Company Common Stock;
Affiliates and Associates....................... 77
4.16. Agreements with Regulatory Agencies...................... 78
4.17. Approvals................................................ 79
4.18. Accounting for the Merger; Reorganization................ 79
4.19. Intellectual Property.................................... 79
4.20. Environmental Matters.................................... 80
4.21. Derivative Transactions.................................. 82
4.22. Opinion.................................................. 83
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4.23. Loan Portfolio........................................... 83
4.24. Property................................................. 85
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants of the Company................................. 86
5.2. Covenants of Buyer....................................... 95
5.3. Conduct of Buyer's Business.............................. 96
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. Regulatory Matters....................................... 97
6.2. Access to Information.................................... 99
6.3. Stockholder Meetings.....................................102
6.4. Legal Conditions to Merger...............................103
6.5. Affiliates...............................................104
6.6. Stock Exchange Listing...................................104
6.7. Employee Benefit Plans; Existing Agreements..............105
6.8. Indemnification..........................................106
6.9. Subsequent Interim and Annual
Financial Statements............................111
6.10. Additional Agreements....................................111
6.11. Advice of Changes........................................112
6.12. Current Information......................................113
6.13. Execution and Authorization of Bank
Merger Agreement................................113
6.14. Directorship.............................................114
6.15. Coordination of Dividends................................114
6.16. Issuance of Treasury Shares..............................115
6.17. Loans....................................................115
6.18. SERP Amendment...........................................116
6.19. Consulting Agreement.....................................116
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation
To Effect the Merger............................116
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7.2. Conditions to Obligations of Buyer.......................118
7.3. Conditions to Obligations of the Company.................121
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination..............................................124
8.2. Effect of Termination; Expenses..........................130
8.3. Amendment................................................130
8.4. Extension; Waiver........................................131
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing..................................................132
9.2. Nonsurvival of Representations,
Warranties and Agreements.............................132
9.3. Expenses.................................................133
9.4. Notices..................................................133
9.5. Interpretation...........................................134
9.6. Counterparts.............................................135
9.7. Entire Agreement.........................................135
9.8. Governing Law............................................135
9.9. Enforcement of Agreement.................................136
9.10. Severability.............................................136
9.11. Publicity................................................137
9.12. Assignment; No Third Party Beneficiaries.................137
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 7, 1997, between
NORTH FORK BANCORPORATION, INC., a Delaware corporation ("Buyer"), and NEW YORK
BANCORP INC., a Delaware corporation (the "Company"). (Buyer and the Company are
herein sometimes collectively referred to herein as the "Constituent
Corporations".)
WHEREAS, the Boards of Directors of Buyer and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transaction provided
for herein in which the Company will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into Buyer; and
WHEREAS, as soon as practicable after the execution and delivery of
this Agreement, North Fork Bank, a New York-chartered stock commercial bank and
a wholly owned subsidiary of Buyer ("Buyer Bank", and sometimes referred to
herein as the "Surviving Bank"), and Home Federal Savings Bank, a federally
chartered stock savings bank and a wholly owned subsidiary of the Company (the
"Company Bank"), will enter into a Subsidiary Agreement and Plan of Merger (the
"Bank Merger Agreement") providing for the merger (the "Subsidiary Merger") of
the
Company Bank with and into Buyer Bank, and it is intended that the Subsidiary
Merger be consummated immediately following the consummation of the Merger; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and
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conditions of this Agreement, in accordance with the Delaware General
Corporation Law (the "DGCL"), at the Effective Time (as defined in Section 1.2
hereof), the Company shall merge with and into Buyer. Buyer shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
in the Merger, and shall continue its corporate existence under the laws of the
State of Delaware. The name of the Surviving Corporation shall continue to be
North Fork Bancorporation, Inc.
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Upon consummation of the Merger, the separate corporate existence of the Company
shall terminate.
1.2. Effective Time. The Merger shall become effective as set forth
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in the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the State of Delaware (the "Secretary") on the
Closing Date (as defined in Section 9.1 hereof). The term "Effective Time" shall
be the date and time when the Merger becomes effective, as set forth in the
Certificate of Merger.
1.3. Effects of the Merger. At and after the Effective Time, the
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Merger shall have the effects set forth in Sections 259 and 261 of the DGCL.
1.4. Conversion of Company Common Stock.
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(a) At the Effective Time, subject to
Section 2.2(e) hereof, each share of the common stock, par value $0.01 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock held (x) in the Company's treasury or (y) directly or indirectly by Buyer
or the Company or any of their respective Subsidiaries (as defined below)
(except for Trust Account Shares and DPC shares, as such terms are defined in
Section 1.4(b) hereof)) shall, by virtue
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of this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for 1.19 shares (the "Exchange Ratio") of the
common stock, par value $2.50 per share, of Buyer ("Buyer Common Stock")
(together with the number of Buyer Rights (as defined in Section 4.2 hereof)
associated therewith). All of the shares of Company Common Stock converted into
Buyer Common Stock pursuant to this Article I shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Company Common
Stock shall thereafter only represent the right to receive (i) the number of
whole shares of Buyer Common Stock and (ii) the cash in lieu of fractional
shares into which the shares of Company Common Stock represented by such
Certificate have been converted pursuant to this Section 1.4(a) and Section
2.2(e) hereof. Certificates previously representing shares of Company Common
Stock shall be exchanged for certificates representing whole shares of Buyer
Common Stock and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Certificates in accordance with Section 2.2
hereof, without any interest thereon. If, between the date of this Agreement and
the
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Effective Time, the shares of Buyer Common Stock shall be changed into a
different number or class of shares by reason of any reclassification,
recapitalization, spilt- up, combination, exchange of shares or readjustment, or
a stock dividend thereon shall be declared with a record date within said
period, the Exchange Ratio shall be adjusted accordingly.
(b) At the Effective Time, all shares of Company Common Stock
that are owned by the Company as treasury stock and all shares of Company Common
Stock that are owned directly or indirectly by Buyer or the Company or any of
their respective Subsidiaries (other than shares of Company Common Stock (x)
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, and shares of Buyer Common Stock which are similarly
held, whether held directly or indirectly by Buyer or the Company, as the case
may be, being referred to herein as "Trust Account Shares") and (y) held by
Buyer or the Company or any of their respective Subsidiaries in respect of a
debt previously contracted (any such shares of Company Common Stock, and shares
of Buyer Common Stock which are similarly held, whether held directly or indi-
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rectly by Buyer or the Company, being referred to herein as "DPC Shares")) shall
be cancelled and shall cease to exist and no stock of Buyer or other
consideration shall be delivered in exchange therefor. All shares of Buyer
Common Stock that are owned by the Company or any of its Subsidiaries (other
than Trust Account Shares and DPC Shares) shall become treasury stock of Buyer.
1.5. Stock Options. (a) At the Effective Time, each option granted
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by the Company (a "Company Option") to purchase shares of Company Common Stock
which is outstanding and unexercised immediately prior thereto shall, except as
otherwise provided in Section 1.5(b) hereof, be converted automatically into an
option to purchase shares of Buyer Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
Company's 1990 Incentive Stock Option Plan (the "1990 Incentive Plan"), the
Company's 1990 Stock Option Plan for Outside Directors (the "1990 Option Plan"),
the Company's 1993 Long-Term Incentive Plan (the "1993 Incentive Plan), and the
Company's 1993 Stock Option Plan for Outside Directors (the "1993 Option Plan"
and, together with the 1990 Incentive Plan, the 1990 Option Plan and the 1993
Incentive Plan, the "Company Plans"):
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(1) The number of shares of Buyer Common Stock to be subject
to the new option shall be equal to the product of the number of shares of
Company Common Stock subject to the original option and the Exchange
Ratio, provided that any fractional share of Buyer Common Stock resulting
from such multiplication shall be rounded down to the nearest share; and
(2) The exercise price per share of Buyer Common Stock under
the new option shall be equal to the exercise price per share of Company
Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the new option shall be the same as the original option, except that
all references to the Company shall be deemed to be references to Buyer.
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(b) Without limiting the foregoing, and provided that the right
contained in this paragraph (b) is not inconsistent with any of the conditions
contained in Article VII hereof, each holder of a Company Option that is not an
"incentive stock option," shall have the right (which right shall be exercised
at least 5 days prior to the Closing Date by written notice to Buyer) to elect,
in lieu of the provisions of Section 1.5(a), to convert, at the Effective Time,
all or a portion of his or her Company Options which are not "incentive stock
options" and which have not expired prior to the Effective Time into the right
to receive such number of shares (rounded to the nearest whole share) of Buyer
Common Stock as are equal in value (determined by valuing each share of Buyer
Common Stock at the Average Closing Price (as defined below)) to the excess of
(i) the product of the number of shares of Company Common Stock subject to such
option, the Exchange Ratio and the Average Closing Price of the Buyer Common
Stock over (ii) the aggregate exercise price of such option. As used herein, the
term "Average Closing Price" means the average closing sales price per share of
Buyer Common Stock on the New York Stock Exchange ("NYSE") (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative
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source), for the 20 consecutive NYSE trading days ending on the fifth business
day prior to the date on which the last of all regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger and the
Subsidiary Merger) are obtained, without regard to any requisite waiting periods
in respect thereof.
1.6. Buyer Common Stock. Except for shares of Buyer Common Stock
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owned by the Company or any of its Subsidiaries (other than Trust Account Shares
and DPC Shares), which shall be converted into treasury stock of Buyer as
contemplated by Section 1.4 hereof, the shares of Buyer Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and such shares shall remain issued and outstanding.
1.7. Certificate of Incorporation. At the Effective Time, the
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Certificate of Incorporation of Buyer, as in effect at the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of Buyer, as in
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effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving
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Corporation until thereafter amended in accordance with applicable law.
1.9. Directors and Officers. Except as provided in Section 6.14
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hereof, the directors and officers of Buyer immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger and the
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Subsidiary Merger each constitute a reorganization within the meaning of Section
368(a) of the Code, and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available. At or
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prior to the Effective Time, Buyer shall deposit, or shall cause to be
deposited, with a bank or trust company (which may be a Subsidiary of Buyer)
(the "Exchange Agent"), selected by Buyer and reasonably satisfactory to
10
the Company, for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, certificates representing the shares of Buyer
Common Stock and the cash in lieu of fractional shares (such cash and
certificates for shares of Buyer Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to
Section 2.2(a) in exchange for outstanding shares of Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after the
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Effective Time, and in no event more than three business days thereafter, the
Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing the shares of Buyer Common Stock and the cash in lieu
of fractional shares into which the shares of Company Common Stock represented
by such Certificate or Certificates shall have been converted pursuant to this
Agree-
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ment. The Company shall have the right to review both the letter of transmittal
and the instructions prior to the Effective Time and provide reasonable comments
thereon. Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of Buyer Common Stock to
which such holder of Company Common Stock shall have become entitled pursuant to
the provisions of Article I hereof and (y) a check representing the amount of
cash in lieu of fractional shares, if any, which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions of
this Article II, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to Buyer Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Cer-
12
tificate in accordance with this Article II. After the surrender of a
Certificate in accordance with this Article II, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Buyer Common Stock represented by such Certificate. No holder of an
unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Buyer Common Stock into which his Company
Common Stock shall have been converted.
(c) If any certificate representing shares of Buyer Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall pay
to the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Buyer Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or required
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for any other reason, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common Stock
which were issued and outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of Buyer Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein,
no certificates or scrip representing fractional shares of Buyer Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Buyer Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Buyer. In lieu of the issuance of any such fractional share, Buyer shall pay to
each former stockholder of the Company who otherwise would be entitled to
receive a fractional share of Buyer
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Common Stock an amount in cash determined by multiplying (i) the average of the
closing sale prices of Buyer Common Stock on the New York Stock Exchange as
reported by The Wall Street Journal for the five trading days immediately
preceding the date on which the Effective Time shall occur by (ii) the fraction
of a share of Buyer Common Stock to which such holder would otherwise be
entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of the Company for six months after the Effective Time shall be
paid to Buyer. Any stockholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to Buyer for payment of their
shares of Buyer Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on the Buyer Common Stock deliverable in respect of
each share of Company Common Stock such stockholder holds as determined pursuant
to this Agreement, in each case, without any interest thereon. Notwithstanding
the foregoing, none of Buyer, the Company, the Exchange Agent or any other
person shall be liable to any former holder of shares of Company Common Stock
for any amount properly delivered to a
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public official pursuant to applicable abandoned proper-
ty, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Buyer, the posting by such person of a bond in such amount as Buyer may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Buyer Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE II-A
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
2A.1 Disclosure Schedules. Prior to the execution and delivery
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hereof, the Company has delivered to Buyer, and Buyer has delivered to the
Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Buyer, the "Buyer Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate
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either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more of such party's representations or
warranties contained in Article III, in the case of the Company, or Article IV,
in the case of Buyer, or to one or more of its covenants contained in Article V;
provided, however, that (a) no such item is required to be set forth in the
Disclosure Schedule as an exception to a representation or warranty if its
absence would not result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 2A.2, and (b) the
mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is reasonably likely to result in a Material Adverse Effect (as defined
herein) with respect to either the Company or Buyer, respectively.
2A.2 Standards. (a) No representation or warranty of the Company
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contained in Article III or of Buyer contained in Article IV shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, as a consequence
17
of the existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or warranties
contained in Article III, in the case of the Company, or Article IV, in the case
of Buyer, has had or would have a Material Adverse Effect with respect to the
Company or Buyer, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Buyer or the Company, as the case may be, a material
adverse effect on (i) the business, results of operations or financial condition
of such party and its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from a change in law, rule, regulation, GAAP (as
defined below), regulatory accounting principles, or the prevailing level of
interest rates, which in each case affects banking institutions or their holding
companies generally, except to the extent any such condition or change affects
the referenced party to a materially greater extent than banking institutions or
their holding companies generally or (ii) the ability of such party and its
Subsidiaries to consummate the transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Sections 2A.1 and 2A.2, the Company hereby represents
and warrants to Buyer as follows:
3.1. Corporate Organization. (a) The Company is a corporation
----------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The Company is duly registered as a
unitary savings and loan holding company under the Home Owners' Loan Act of
1933, as amended. The Restated Certificate of Incorporation and By-laws of the
Company, copies of which have previously been made available to Buyer, are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement. As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation, partnership or other organization,
whether incorporated
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or unincorporated, which is consolidated with such party for financial reporting
purposes.
(b) The Company Bank is a savings bank duly organized, validly
existing and in good standing under the laws of the United States of America.
The deposit accounts of the Company Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund and the
Savings Association Insurance Fund to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid when due by the Company Bank. Each of the Company's other Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. Each of the Company's
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. Except as set forth on Section 3.1(b) of the Company
Disclosure Schedule, the articles
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of incorporation, by-laws and similar governing documents of each Subsidiary of
the Company, copies of which have previously been made available to Buyer, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
(c) The minute books of the Company and each of its
Subsidiaries contain true, complete and accurate records of all meetings and
other corporate actions held or taken since December 31, 1994 of their
respective stockholders and Boards of Directors (including committees of their
respective Boards of Directors).
3.2. Capitalization. (a) The authorized capital stock of the Company
--------------
consists of 30,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock"). As of
September 30, 1997, there were 21,318,644 shares of Company Common Stock
outstanding and 8,174,522 shares of Company Common Stock held in the Company's
treasury. As of the date of this Agreement, there were no shares of Company
Common Stock reserved for issuance upon exercise of outstanding stock options or
otherwise except for (i) 1,501,394 shares of Company Common Stock reserved for
use from the Company's treasury pursuant to the Company Option Plans and
described in Section 3.2(a)
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of the Company Disclosure Schedule and (ii) 4,261,000 shares of Company Common
Stock reserved for use from the Company's treasury upon exercise of the option
(the "Option") issued to Buyer pursuant to the Stock Option Agreement, dated
October 7, 1997, between Buyer and the Company (the "Company Option Agreement")
and (z) no shares of Company Preferred Stock issued or outstanding, held in the
Company's treasury or reserved for issuance upon exercise of outstanding stock
options or otherwise. All of the issued and outstanding shares of Company Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as referred to above or reflected in
Section 3.2(a) of the Company Disclosure Schedule, and except for the Company
Option Agreement, the Company does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Company Common
Stock or Company Preferred Stock or any other equity security of the Company or
any securities representing the right to purchase or otherwise receive any
shares of Company Common Stock or any other equity security of the
22
Company. The names of the optionees, the date of each option to purchase Company
Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, and the price at which each such option may
be exercised under the Company Plans are set forth in Section 3.2(a) of the
Company Disclosure Schedule.
(b) Section 3.2(b) of the Company Disclosure Schedule sets
forth a true and correct list of all of the Subsidiaries of the Company. Except
as set forth in Section 3.2(b) of the Company Disclosure Schedule, the Company
owns, directly or indirectly, all of the issued and outstanding shares of the
capital stock of each of such Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. No Subsidiary of the Company has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to
23
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary. Assuming compliance by Buyer with Section 1.5
hereof, and except as provided in Section 3.2(b) of the Company Disclosure
Schedule, at the Effective Time, there will not be any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character by which the Company or any of its Subsidiaries will be bound calling
for the purchase or issuance of any shares of the capital stock of the Company
or any of its Subsidiaries.
3.3. Authority; No Violation. (a) The Company has full corporate
-----------------------
power and authority to execute and deliver this Agreement and the Company Option
Agreement (this Agreement and the Company Option Agreement, collectively, the
"Company Documents") and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of each of the Company Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of the Company. The Board of
Directors of the Company has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company's stockholders for approval at a
meeting of such
24
stockholders and, except for the adoption of this Agreement by the requisite
vote of the Company's stockholders, no other corporate proceedings on the part
of the Company are necessary to approve the Company Documents and to consummate
the transactions contemplated hereby and thereby. Each of the Company Documents
has been duly and validly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Buyer) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) The Company Bank has full corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of the Company Bank. Upon the due and
valid approval of the Bank Merger Agreement by the Company as the sole
stockholder of the Compa-
25
ny Bank and by the Board of Directors of the Company Bank, no other corporate
proceedings on the part of the Company Bank will be necessary to consummate the
transactions contemplated thereby. The Bank Merger Agreement, upon execution and
delivery by the Company Bank, will be duly and validly executed and delivered by
the Company Bank and will (assuming due authorization, execution and delivery by
Buyer Bank) constitute a valid and binding obligation of the Company Bank,
enforceable against the Company Bank in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Except as set forth in Section 3.3(c) of the Company
Disclosure Schedule, neither the execution and delivery of the Company Documents
by the Company or the Bank Merger Agreement by the Company Bank, nor the
consummation by the Company or the Company Bank, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by the Company or
the Company Bank, as the case may be, with any of the terms or provisions hereof
or thereof, will (i) violate any provision of the Restated Certificate of
Incorporation or By-Laws
26
of the Company or the certificate of incorporation, by-laws or similar governing
documents of any of its Subsidiaries, or (ii) assuming that the consents and
approvals referred to in Section 3.4 hereof are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries, or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets may
be bound or affected.
27
3.4. Consents and Approvals. Except for (a) the filing of
----------------------
applications and notices, as applicable, with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the Bank Holding
Company Act of 1956, as amended (the "BHC Act") and approval of such
applications and notices, (b) the filing of applications with the FDIC under the
Bank Merger Act and approval of such applications, (c) the filing of
applications and notices with the Office of Thrift Supervision (the "OTS") and
approval of such applications and notices, (d) the filing of an application with
the New York State Banking Department (the "Banking Department"), (e) the filing
with the Securities and Exchange Commission (the "SEC") of a joint proxy
statement in definitive form relating to the meetings of the Company's
stockholders and Buyer's stockholders to be held in connection with this
Agreement and the transactions contemplated hereby (the "Proxy Statement") and
the filing and declaration of effectiveness of the registration statement on
Form S-4 (the "S-4") in which the Proxy Statement will be included as a
prospectus, (f) the approval of this Agreement by the requisite vote of the
stockholders of the Company, (g) the filing of the Certificate of Merger with
the Secretary pursuant to the DGCL, (h) the filings re-
28
quired by the Bank Merger Agreement, (i) the approval of the Bank Merger
Agreement by the Company as the sole stockholder of the Company Bank, (j)
approval of the listing of the Buyer Common Stock to be issued in the Merger on
the NYSE, (k) any filings required pursuant to state or local transfer tax laws,
and (l) such filings, authorizations or approvals as may be set forth in Section
3.4 of the Company Disclosure Schedule, no consents or approvals of or filings
or registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or with
any third party are necessary in connection with (1) the execution and delivery
by the Company of the Company Documents, (2) the consummation by the Company of
the Merger and the other transactions contemplated hereby and thereby, (3) the
execution and delivery by the Company Bank of the Bank Merger Agreement, and (4)
the consummation by the Company Bank of the Subsidiary Merger and the
transactions contemplated thereby.
3.5. Reports. The Company and each of its Subsidiaries have timely
-------
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
29
file since December 31, 1995 with (i) the OTS, (ii) the FDIC, (iii) any state
banking commissions or any other state regulatory authority (each a "State
Regulator") and (iv) any other self-regulatory organization ("SRO")
(collectively with the Federal Reserve Board, the "Regulatory Agencies"), and
all other reports and statements required to be filed by them since December 31,
1995, including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, the OTS,
the FDIC, any State Regulator or any SRO, and have paid all fees and assessments
due and payable in connection therewith. Except for normal examinations
conducted by a Regulatory Agency in the regular course of the business of the
Company and its Subsidiaries, and except as set forth in Section 3.5 of the
Company Disclosure Schedule, no Regulatory Agency has initiated any proceeding
or, to the best knowledge of the Company, investigation into the business or
operations of the Company or any of its Subsidiaries since December 31, 1995.
There is no unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
the Company or any of its Subsidiaries.
30
3.6. Financial Statements. The Company has previously made available
--------------------
to Buyer copies of (a) the consolidated statements of financial condition of the
Company and its Subsidiaries as of September 30 for the fiscal years 1995 and
1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years 1994 through 1996,
inclusive, as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 filed with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied
by the audit report of KPMG Peat Marwick LLP, independent public accountants
with respect to the Company, and (b) the unaudited consolidated statements of
financial condition of the Company and its Subsidiaries as of June 30, 1997 and
June 30, 1996 and the related unaudited consolidated statements of income, cash
flows and changes in stockholders' equity for the nine-month periods then ended
as reported in the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997 filed with the SEC under the Exchange Act. The September 30, 1996
consolidated statement of financial condition of the Company (including the
related notes, where applicable) fairly presents the consolidated financial
position of
31
the Company and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 3.6 (including the related notes, where
applicable) fairly present, and the financial statements referred to in Section
6.9 hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and consolidated financial position of
the Company and its Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply, and the financial statements referred
to in Section 6.9 hereof will comply, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements referred to in Section
6.9 hereof will be, prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of the Company and its
32
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements.
3.7. Broker's Fees. Neither the Company nor any Subsidiary of the
-------------
Company nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by the
Company Documents or the Bank Merger Agreement, except that the Company has
engaged, and will pay a fee or commission to, Sandler O'Neill & Partners, L.P.
("Sandler O'Neill") and Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette") in
accordance with the terms of letter agreements between Sandler O'Neill and the
Company and Keefe Bruyette and the Company, respectively, true, complete and
correct copies of which have been previously made available by the Company to
Buyer.
3.8. Absence of Certain Changes or Events. (a) Except as may be set
------------------------------------
forth in Section 3.8(a) of the Company Disclosure Schedule, or as disclosed in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
(a true, complete and correct copy of which has previously been made available
to Buyer), since
33
September 30, 1996, (i) neither the Company nor any of its Subsidiaries has
incurred any liability, except in the ordinary course of their business
consistent with their past practices, and (ii) there has been no change or
development or combination of changes or developments which, individually or in
the aggregate, has had or would have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.8(b) of the Company
Disclosure Schedule, since September 30, 1996, the Company and its Subsidiaries
have carried on their respective businesses in the ordinary course consistent
with their past practices.
(c) Except as set forth in Section 3.8(c) of the Company
Disclosure Schedule, since June 30, 1997, neither the Company nor any of its
Subsidiaries has (i) increased the wages, salaries, compensation, pension, or
other fringe benefits or perquisites payable to any executive officer, employee,
or director from the amount thereof in effect as of June 30, 1997 (which amounts
have been previously disclosed to Buyer), granted any severance or termination
pay, entered into any contract to make or grant any severance or termination
pay, or paid any bonus (except (x) for salary increases and normal monthly
cross-selling and performance bonus payments made
34
to lending and depository personnel in the ordinary course of business
consistent with past practices and (y) the Company may adopt the severance plan
described in Section 5.1(k) of the Company Disclosure Schedule), (ii) suffered
any strike, work stoppage, slow-down, or other labor disturbance, (iii) been a
party to a collective bargaining agreement, contract or other agreement or
understanding with a labor union or organization, or (iv) had any union
organizing activities.
3.9. Legal Proceedings. (a) Except as set forth in Section 3.9 of
-----------------
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to any, and there are no pending or, to the best of the Company's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against the Company or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by any of the Company Documents or
the Bank Merger Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company, any of its Subsidiaries or the
assets of the Company or any of its Subsidiaries.
35
3.10. Taxes. (a) Except as set forth in Section 3.10(a) of the
-----
Company Disclosure Schedule, each of the Company and its Subsidiaries has (i)
duly and timely filed (including applicable extensions granted without penalty)
all Tax Returns (as hereinafter defined) required to be filed at or prior to the
Effective Time, and such Tax Returns are true, correct and complete, and (ii)
paid in full or made adequate provision in the financial statements of the
Company (in accordance with GAAP) for all Taxes (as hereinafter defined). Except
as set forth in Section 3.10(a) of the Company Disclosure Schedule, no
deficiencies for any Taxes have been proposed, asserted, assessed or, to the
best knowledge of the Company, threatened against or with respect to the Company
or any of its Subsidiaries. Except as set forth in Section 3.10(a) of the
Company Disclosure Schedule, (i) there are no liens for Taxes upon the assets of
either the Company or its Subsidiaries except for statutory liens for current
Taxes not yet due or which are being contested in good faith by appropriate
proceedings, (ii) as of the date hereof neither the Company nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Returns in respect of any fiscal year which have not since been filed and no re-
36
quest for waivers of the time to assess any Taxes are pending or outstanding,
(iii) as of the date hereof, the federal and state income Tax Returns of the
Company and its Subsidiaries have been audited by the Internal Revenue Service
as set forth in such Section of the Company Disclosure Schedule and the Company
has not agreed to extend the time for assessing and collecting income Tax with
respect to such taxable period, (iv) neither the Company nor any of its
Subsidiaries has filed or been included in a combined, consolidated or unitary
income Tax Return other than one in which the Company was the parent of the
group filing such Tax Return, (v) neither the Company nor any of its
Subsidiaries is a party to any agreement providing for the allocation or sharing
of Taxes (other than the allocation of federal income taxes as provided by
Regulation 1.1552-1(a)(1) under the Code), (vi) neither the Company nor any of
its Subsidiaries is required to include in income any adjustment pursuant to
Section 481(a) of the Code (or any similar or corresponding provision or
requirement of state, local or foreign income Tax law), by reason of the
voluntary change in accounting method (nor has any taxing authority proposed in
writing any such adjustment or change of accounting method), (vii) neither the
Company nor any of its Subsid-
37
iaries has filed a consent pursuant to Section 341(f) of the Code, and (viii)
neither the Company nor any of its Subsidiaries has made any payment or will be
obligated to make any payment (by contract or otherwise) which will not be
deductible by reason of Section 280G of the Code.
(b) For the purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto.
For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any related or
supporting information) with respect to Taxes.
3.11. Employees. (a) Section 3.11(a) of the Company Disclosure
---------
Schedule sets forth a true and complete list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
38
(within the meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to (the "Plans") by the Company,
any of its Subsidiaries or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), all of which together with the Company would be deemed a
"single employer" within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the benefit of any
employee or former employee of the Company, any Subsidiary or any ERISA
Affiliate.
(b) The Company has heretofore made available to Buyer with
respect to each of the Plans true and complete copies of each of the following
documents if applicable: (i) the Plan document; (ii) the actuarial report for
such Plan for each of the last two years, (iii) the most recent determination
letter from the Internal Revenue Service for such Plan and (iv) the most recent
summary plan description and related summaries of material modifications.
(c) Except as set forth in Section 3.11(c) of the Company
Disclosure Schedule, (i) each of
39
the Plans has been operated and administered in accordance with its terms and
applicable law, including but not limited to ERISA and the Code, (ii) each of
the Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code either (1) has received a favorable determination letter from the IRS, or
(2) is or will be the subject of an application for a favorable determination
letter, and the Company is not aware of any circumstances reasonably likely to
result in the revocation or denial of any such favorable determination letter,
(iii) no Plan provides post-employment benefit coverage for death or medical
benefits (whether or not insured) with respect to current or former employees of
the Company, its Subsidiaries or any ERISA Affiliate beyond the last day of the
month following the date of any such employee's termination of employment, other
than (w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the
books of the Company, its Subsidiaries or the ERISA Affiliates or (z) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary), (iv) no liability under Title IV of ERISA
40
(other than premiums payable to the Pension Benefit Guaranty Corporation) has
been incurred by the Company, its Subsidiaries or any ERISA Affiliate that has
not been satisfied in full, and no condition exists that presents a risk to the
Company, its Subsidiaries or an ERISA Affiliate of incurring a liability under
such Title, (v) no Plan is a "multiemployer pension plan," as such term is
defined in Section 3(37) of ERISA, (vi) neither the Company, its Subsidiaries
nor any ERISA Affiliate has engaged in a transaction in connection with the
Plans which the Company, its Subsidiaries or any ERISA Affiliate would or would
be reasonably likely to be subject to either a civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or
4976 of the Code, (vii) there are no pending, or, to the best knowledge of the
Company, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto and (viii) other than in respect of equity and other incentive
compensation plans set forth in Section 3.11(a) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement or
the Bank Merger Agreement will not (y) entitle any current or former employee or
officer of the
41
Company or any ERISA Affiliate to severance pay, termination pay or any other
payment or benefit, except as expressly provided in this Agreement or (z)
accelerate the time of payment or vesting or increase the amount or value of
compensation or benefits due any such employee or officer.
3.12. SEC Reports. The Company has previously made available to
-----------
Buyer an accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
September 30, 1995 by the Company with the SEC pursuant to the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act (the "Company
Reports") and (b) communication mailed by the Company to its stockholders since
September 30, 1995, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier date.
The Company has timely filed all Company Reports and other documents
42
required to be filed by it under the Securities Act and the Exchange Act, and,
as of their respective dates, all Company Reports complied with the published
rules and regulations of the SEC with respect thereto.
3.13. Company Information. The information relating to the Company
-------------------
and its Subsidiaries to be contained in the Proxy Statement and the S-4, or in
any other document filed with any other regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Buyer or any of its
Subsidiaries) will comply with the provisions of the Exchange Act and the rules
and regulations thereunder.
3.14. Compliance with Applicable Law. The Company and each of its
------------------------------
Subsidiaries hold, and have at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relat-
43
ing to the Company or any of its Subsidiaries, and neither the Company nor any
of its Subsidiaries has received notice of any violations of any of the above.
3.15. Certain Contracts. (a) Except as set forth in Section 3.15(a)
-----------------
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by any contract (whether written or oral)
(i) with respect to the employment of any directors or consultants, (ii) which,
upon the consummation of the transactions contemplated by this Agreement or the
Bank Merger Agreement, will (either alone or upon the occurrence of any
additional acts or events) result in any payment or benefits (whether of
severance pay or otherwise) becoming due, or the acceleration or vesting of any
rights to any payment or benefits, from Buyer, the Company, the Surviving
Corporation, the Surviving Bank or any of their respective Subsidiaries to any
director or consultant thereof, (iii) which is a material contract (as defined
in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date
of this Agreement that has not been filed or incorporated by reference in the
Company Reports, (iv) which is a consulting agreement (including data
processing, software programming and licensing contracts) not terminable on 60
days or less
44
notice involving the payment of more than $250,000 per annum, or (v) which
materially restricts the conduct of any line of business by the Company or any
of its Subsidiaries. Each contract, arrangement, commitment or understanding of
the type described in this Section 3.15(a), whether or not set forth in Section
3.15(a) of the Company Disclosure Schedule, is referred to herein as a "Company
Contract". The Company has previously delivered or made available to Buyer true
and correct copies of each Company Contract.
(b) Except as set forth in Section 3.15(b) of the Company
Disclosure Schedule, (i) each Company Contract is valid and binding and in full
force and effect, (ii) the Company and each of its Subsidiaries have performed
all obligations required to be performed by it to date under each Company
Contract, (iii) no event or condition exists which constitutes or, after notice
or lapse of time or both, would constitute, a default on the part of the Company
or any of its Subsidiaries under any such Company Contract, and (iv) no other
party to such Company Contract is, to the best knowledge of the Company, in
default in any respect thereunder.
3.16. Agreements with Regulatory Agencies.
-----------------------------------
Except as set forth in Section 3.16 of the Company Dis-
45
closure Schedule, neither the Company nor any of its Subsidiaries is subject to
any cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of (each, whether or not set
forth on Section 3.16 of the Company Disclosure Schedule, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has the
Company or any of its Subsidiaries been advised by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
3.17. Investment Securities. Section 3.17 of the Company Disclosure
---------------------
Schedule sets forth the book and estimated market value as of September 30, 1997
of the investment securities, mortgage backed securities and securities held for
sale of the Company and its Subsidiaries. Section 3.17 of the Company Disclosure
Schedule sets forth, with respect to such securities, descriptions
46
thereof, CUSIP numbers, pool face values and coupon rates.
3.18. Intellectual Property. The Company and each of its
---------------------
Subsidiaries owns or possesses valid and binding licenses and other rights to
use without payment all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in its businesses; and neither the Company nor
any of its Subsidiaries has received any notice of conflict with respect thereto
that asserts the right of others.
3.19. State Takeover Laws. The provisions of Section 203 of the DGCL
-------------------
and Article Eighth of the Company's Restated Certificate of Incorporation will
not, assuming the accuracy of the representations contained in Section 4.15
hereof, apply to this Agreement, the Bank Merger Agreement or the Company Option
Agreement or any of the transactions contemplated hereby or thereby.
3.20. Administration of Fiduciary Accounts. The Company and each of
------------------------------------
its Subsidiaries has properly administered all accounts for which it acts as a
fiduciary, 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
47
applicable state and federal law and regulation and common law. Neither the
Company nor any of its Subsidiaries nor any of their respective directors,
officers or employees has committed any breach of trust with respect to any such
fiduciary account, and the accountings for each such fiduciary account are true
and correct and accurately reflect the assets of such fiduciary account.
3.21. Environmental Matters. Except as set
---------------------
forth in Section 3.21 of the Company Disclosure Schedule:
(a) Each of the Company, its Subsidiaries, the Participation
Facilities and the Loan Properties (each as hereinafter defined) are in
compliance with all applicable federal, state and local laws including common
law, regulations and ordinances and with all applicable decrees, orders and
contractual obligations relating to pollution or the discharge of, or exposure
to Hazardous Materials (as hereinafter defined) in the environment or workplace
("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or,
to the best knowledge of the Company, threatened, before any Governmental Entity
or other forum in which the Company, any of its Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be,
48
named as a defendant (x) for alleged noncompliance (including by any
predecessor), with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by the Company or any of its
Subsidiaries, any Participation Facility or any Loan Property;
(c) To the best knowledge of the Company, during the period of
(x) the Company's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' holding of a security interest in
a Loan Property, there has been no release of Hazardous Materials in, on, under
or affecting any such property. To the best knowledge of the Company, prior to
the period of (x) the Company's or any of its Subsidiaries' ownership or
operation of any of their respective current or former properties, (y) the
Company's or any of its Subsidiaries' participation in the management of any
Participation Facility, or (z) the Company's or any of its Subsidiaries' holding
of a security interest in a Loan Property, there was no release or
49
threatened release of Hazardous Materials in, on, under or affecting any such
property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
Section 3.21: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated substances
or materials, (y) "Loan Property" means any property in which the Company or any
of its Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; and (z)
"Participation Facility" means any facility in which the Company or any of its
Subsidiaries participates in the management and, where required by the context,
said term means the owner or operator of such property.
3.22. Derivative Transactions. Except as set forth in Section 3.22
-----------------------
of the Company Disclosure Schedule, since September 30, 1996, neither Company
nor any of its Subsidiaries has engaged in transactions in or involving
forwards, futures, options on futures, swaps or other derivative instruments
except (i) as agent on the order and for the account of others, or (ii) as
principal for purposes of hedging interest rate risk on U.S. dollar-denominated
securities and other financial instruments.
50
None of the counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no such
contract or agreement, were it to be a Loan (as defined below) held by the
Company or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or words of
similar import. The financial position of the Company and its Subsidiaries on a
consolidated basis under or with respect to each such instrument has been
reflected in the books and records of the Company and such Subsidiaries in
accordance with GAAP consistently applied, and except as disclosed in such books
and records, no open exposure of the Company or any of its Subsidiaries with
respect to any such instrument (or with respect to multiple instruments with
respect to any single counterparty) exceeds $500,000.
3.23. Opinion. The Company has received an opinion, dated the date
-------
hereof, from each of Sandler O'Neill and Keefe Bruyette to the effect that as of
the date thereof and based upon and subject to the matters set forth therein,
the consideration to be received by the stockholders of the Company pursuant to
this Agree-
51
ment is fair to such stockholders from a financial point of view. Such opinion
has not been amended or rescinded as of the date of this Agreement.
3.24. Approvals. As of the date of this Agreement, the Company knows
---------
of no reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger and
the Subsidiary Merger) should not be obtained.
3.25. Loan Portfolio. (a) Except as set forth in Section 3.25 of the
--------------
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any written or oral (i) loan agreement, note or borrowing arrangement
(including, without limitation, leases, credit enhancements, commitments,
guarantees and interest-bearing assets) (collectively, "Loans"), other than
Loans the unpaid principal balance of which does not exceed $50,000, under the
terms of which the obligor is, as of the date of this Agreement, over 90 days
delinquent in payment of principal or interest or in default of any other
provision, or (ii) Loan with any director, executive officer or five percent or
greater stockholder of the Company or any of its Subsidiaries, or to the best
knowledge of the Company, any person, corporation or
52
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 3.25 of the Company Disclosure Schedule sets forth (i) all of
the Loans in original principal amount in excess of $50,000 of the Company or
any of its Subsidiaries that as of the date of this Agreement are classified by
any bank examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of
the Company and its Subsidiaries that as of the date of this Agreement are
classified as such, together with the aggregate principal amount of and accrued
and unpaid interest on such Loans by category and (iii) each asset of the
Company that as of the date of this Agreement is classified as "Other Real
Estate Owned" and the book value thereof. The Company shall promptly inform
Buyer in writing of any Loan that becomes classified in the manner described in
the previous sentence, or any
53
Loan the classification of which is changed, at any time after the date of this
Agreement.
(b) Each Loan in original principal amount in excess of
$50,000 (i) is evidenced by notes, agreements or other evidences of indebtedness
which are true, genuine and what they purport to be, (ii) to the extent secured,
has been secured by valid liens and security interests which have been perfected
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
3.26. Property. Each of the Company and its Subsidiaries has good
--------
and marketable title free and clear of all liens, encumbrances, mortgages,
pledges, charges, defaults or equitable interests to all of the properties and
assets, real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Company as of June 30, 1997
or acquired after such date, except (i) liens for taxes not yet due and payable
or contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and
54
other liens incurred in the ordinary course of banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent or (iv) for dispositions and encumbrances of, or
on, such properties or assets for adequate consideration in the ordinary course
of business. All leases pursuant to which the Company or any Subsidiary of the
Company, as lessee, leases real or personal property are valid and enforceable
in accordance with their respective terms and neither the Company nor any of its
Subsidiaries nor any other party thereto is in default thereunder.
3.27. Accounting for the Merger; Reorganization. As of the date of
-----------------------------------------
this Agreement, except as set forth in Section 3.27 of the Company Disclosure
Schedule, the Company has no reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests treatment under GAAP or (ii) as a
reorganization under Section 368(a) of the Code.
3.28. Stock Repurchases. Set forth in Section 3.28 of the Company
-----------------
Disclosure Schedule is a true, correct and complete list of all purchases of
Company Common Stock by the Company or any of its Subsidiaries since July 1,
1995, including the date of each such purchase,
55
the number of shares purchased and the price paid, and all such information is
appropriately adjusted to reflect all stock splits and stock dividends with
respect to the Company Common Stock since July 1, 1995.
3.29. Deposits. No person or entity, either alone or when taken
--------
together with its affiliates and related parties, has deposits in Company Bank
in an aggregate amount greater than $20,000,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Subject to Sections 2A.1 and 2A.2, Buyer hereby represents and
warrants to the Company as follows:
4.1. Corporate Organization. (a) Buyer is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. Buyer is duly registered as a bank holding company
56
under the BHC Act. The Certificate of Incorporation and By-laws of Buyer, copies
of which have previously been made available to the Company, are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(b) Buyer Bank is a bank duly organized, validly existing and
in good standing under the laws of the State of New York. The deposit accounts
of Buyer Bank are insured by the FDIC through the Bank Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments required in
connection therewith have been paid by Buyer Bank. Each of Buyer's other
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary of Buyer has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The articles of organization and by-laws of Buyer Bank, copies of which have
previously been made available to
57
the Company, are true, complete and correct copies of such documents as in
effect as of the date of this Agreement.
(c) The minute books of Buyer and each of its Subsidiaries
contain true, complete and accurate records of all meetings and other corporate
actions held or taken since December 31, 1994 of their respective stockholders
and Boards of Directors (including committees of their respective Boards of
Directors).
4.2. Capitalization. (a) As of the date of this Agreement, the
--------------
authorized capital stock of Buyer consists of 200,000,000 shares of Buyer Common
Stock and 10,000,000 shares of preferred stock, par value $1.00 per share
("Buyer Preferred Stock"). As of September 30, 1997, there were 66,044,201
shares of Buyer Common Stock and no shares of Buyer Preferred Stock issued and
outstanding, and 57,268 shares of Buyer Common Stock held in Buyer's treasury.
As of the date of this Agreement, no shares of Buyer Common Stock or Buyer
Preferred Stock were reserved for issuance, except that (i) 624,763 shares of
Buyer Common Stock were reserved for issuance pursuant to the Buyer's dividend
reinvestment and stock purchase plans, (ii) 1,827,502 shares of Buyer Common
Stock were reserved for issuance upon the exercise of
58
stock options pursuant to the Buyer 1985 Incentive Stock Option Plan and the
Buyer 1987 Long Term Incentive Plan; the Buyer's 1989 Executive Stock Option
Plan and the Buyer's 1994 Key Employee Stock Plan (collectively, the "Buyer
Stock Plans"), (iii) 1,350,000 shares of Buyer Common Stock were reserved for
issuance upon consummation of the acquisition of Branford Savings Bank and (iv)
not more than 2,000,000 shares of Buyer Series A Junior Participating Preferred
Stock were reserved for issuance upon exercise of the rights (the "Buyer
Rights") distributed to holders of Buyer Common Stock pursuant to the
Shareholder Rights Agreement, dated as of February 28, 1989, between Buyer and
The North Fork Bank, as Rights Agent (the "Buyer Shareholder Rights Agreement").
All of the issued and outstanding shares of Buyer Common Stock and Buyer
Preferred Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except as
referred to above or reflected in Section 4.2(a) of the Buyer Disclosure
Schedule and the Buyer Shareholder Rights Agreement, Buyer does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any
59
character calling for the purchase or issuance of any shares of Buyer Common
Stock or Buyer Preferred Stock or any other equity securities of Buyer or any
securities representing the right to purchase or otherwise receive any shares of
Buyer Common Stock or Buyer Preferred Stock. The shares of Buyer Common Stock to
be issued pursuant to the Merger will be duly authorized and validly issued and,
at the Effective Time, all such shares will be fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof.
(b) Section 4.2(b) of the Buyer Disclosure Schedule sets forth
a true and correct list of all of the Buyer Subsidiaries as of the date of this
Agreement. Except as set forth in Section 4.2(b) of the Buyer Disclosure
Schedule, as of the date of this Agreement, Buyer owns, directly or indirectly,
all of the issued and outstanding shares of capital stock of each of the
Subsidiaries of Buyer, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. As of the date of
this Agreement, no
60
Subsidiary of Buyer has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character with any party that
is not a direct or indirect Subsidiary of Buyer calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary.
4.3. Authority; No Violation. (a) Buyer has full corporate power and
-----------------------
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Buyer. The Board of Directors of
Buyer has directed that this Agreement and the transactions contemplated hereby
be submitted to Buyer's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of Buyer's stockholders, no other corporate proceedings on the part of
Buyer are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and
61
validly executed and delivered by Buyer and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(b) Buyer Bank has full corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of Buyer Bank. Upon the due and valid
approval of the Bank Merger Agreement by Buyer as the sole stockholder of Buyer
Bank, and by the Board of Directors of Buyer Bank, no other corporate
proceedings on the part of Buyer Bank will be necessary to consummate the
transactions contemplated thereby. The Bank Merger Agreement, upon execution and
delivery by Buyer Bank, will be duly and validly executed and delivered by Buyer
Bank and will (assuming due authorization, execution and
62
delivery by the Company Bank) constitute a valid and binding obligation of Buyer
Bank, enforceable against Buyer Bank in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Except as set forth in Section 4.3(c) of the Buyer
Disclosure Schedule, neither the execution and delivery of this Agreement by
Buyer or the Bank Merger Agreement by Buyer Bank, nor the consummation by Buyer
or Buyer Bank, as the case may be, of the transactions contemplated hereby or
thereby, nor compliance by Buyer or Buyer Bank, as the case may be, with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or ByLaws of Buyer, or the articles of
incorporation or by-laws or similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Buyer or
any of its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result
63
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Buyer or any of
its Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets may be bound or
affected.
4.4. Consents and Approvals. Except for (a) the filing of
----------------------
applications and notices, as applicable, with the Federal Reserve Board under
the BHC Act, and approval of such applications and notices, (b) the filing of
applications with the FDIC under the Bank Merger Act and approval of such
applications, (c) the filing of applications and notices with the OTS and
approval of such applications and notices, (d) the State Banking Approvals, (e)
the filing with the SEC of the Proxy State-
64
ment and the filing and declaration of effectiveness of the S-4, (f) the
approval of this Agreement by the requisite vote of the stockholders of Buyer,
(g) the filing of the Certificate of Merger with the Secretary, (h) such filings
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the shares
of Buyer Common Stock pursuant to this Agreement, (i) filings required by the
Bank Merger Agreement, (j) the approval of the Bank Merger Agreement by the
stockholder of Buyer Bank, (k) approval of the listing of the Buyer Common Stock
to be issued in the Merger on the NYSE, and (l) such filings, authorizations or
approvals as may be set forth in Section 4.4 of the Buyer Disclosure Schedule,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with (1) the
execution and delivery by Buyer of this Agreement, (2) the consummation by Buyer
of the Merger and the other transactions contemplated hereby, (3) the execution
and delivery by Buyer Bank of the Bank Merger Agreement, and (4) the
consummation of Buyer Bank of the transactions contemplated by the Bank Merger
Agreement.
65
4.5. Reports. Buyer and each of its Subsidiaries have timely filed
-------
all reports, registrations and statements, together with any amendments required
to be made with respect thereto, that they were required to file since December
31, 1995 with any Regulatory Agency, and all other reports and statements
required to be filed by them since December 31, 1995, including, without
limitation, any report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, the Federal Reserve Board, the FDIC,
any State Regulator or any SRO, and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Buyer and its
Subsidiaries, and except as set forth in Section 4.5 of Buyer Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of Buyer, investigation into the business or operations of Buyer or
any of its Subsidiaries since December 31, 1995. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of Buyer or any of its
Subsidiaries.
66
4.6. Financial Statements. Buyer has previously made available to
--------------------
the Company copies of (a) the consolidated balance sheets of Buyer and its
Subsidiaries as of December 31 for the fiscal years 1995 and 1996 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1994 through 1996, inclusive, as reported in
Buyer's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of KPMG Peat Marwick LLP, independent public accountants with respect to
Buyer, and (b) the unaudited consolidated balance sheet of Buyer and its
Subsidiaries as of June 30, 1997 and June 30, 1996 and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows for the six-month periods then ended as reported in Buyer's Quarterly
Report on Form 10- Q for the period ended June 30, 1997 filed with the SEC under
the Exchange Act. The December 31, 1996 consolidated balance sheet of Buyer
(including the related notes, where applicable) fairly presents the consolidated
financial position of Buyer and its Subsidiaries as of the date thereof, and the
other financial statements referred to in this Section 4.6 (including the
related
67
notes, where applicable) fairly present and the financial statements referred to
in Section 6.9 hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and changes in shareholders' equity and
consolidated financial position of Buyer and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; each of such
statements (including the related notes, where applicable) comply, and the
financial statements referred to in Section 6.9 hereof will comply, in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has been, and the
financial statements referred to in Section 6.9 hereof will be, prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of Buyer and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements.
68
4.7. Broker's Fees. Neither Buyer nor any Subsidiary of Buyer, nor
-------------
any of their respective officers or directors, has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, the
Company Option Agreement or the Bank Merger Agreement, except that Buyer has
engaged, and will pay a fee or commission to, Goldman, Sachs & Co. ("Goldman
Sachs").
4.8. Absence of Certain Changes or Events. Except as may be set
------------------------------------
forth in Section 4.8 of the Buyer Disclosure Schedule, or as disclosed in
Buyer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (a
true, complete and correct copy of which has previously been made available to
the Company), since December 31, 1996, (i) neither Buyer nor any of its
Subsidiaries has incurred any liability, except in the ordinary course of their
business consistent with their past practices, and (ii) there has been no change
or development or combination of changes or developments which, individually or
in the aggregate, has had or would have a Material Adverse Effect on Buyer.
4.9. Legal Proceedings. (a) Except as set forth in Section 4.9
-----------------
of the Buyer Disclosure Schedule or
69
in Buyer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
neither Buyer nor any of its Subsidiaries is a party to any and there are no
pending or, to the best of Buyer's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Buyer or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by this
Agreement or the Bank Merger Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Buyer, any of its Subsidiaries or the assets
of Buyer or any of its Subsidiaries.
4.10. Taxes. Except as set forth in Section 4.10 of the Buyer
-----
Disclosure Schedule, each of Buyer and its Subsidiaries has (i) duly and timely
filed (including applicable extensions granted without penalty) all Tax Returns
required to be filed at or prior to the Effective Time, and such Tax Returns are
true, correct and complete, and (ii) paid in full or made adequate provision in
the financial statements of Buyer (in accordance with GAAP) for all Taxes. No
deficiencies for any Taxes have been proposed, asserted, assessed or, to the
best knowl-
70
edge of Buyer, threatened against or with respect to Buyer or any of its
Subsidiaries. Except as set forth in Section 4.10 of the Buyer Disclosure
Schedule, (i) there are no liens for Taxes upon the assets of either Buyer or
its Subsidiaries except for statutory liens for current Taxes not yet due or
which are being contested in good faith by appropriate proceedings, (ii) as of
the date hereof, neither Buyer nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, (iii) as of the date hereof, with
respect to each taxable period of Buyer and its Subsidiaries, the federal and
state income Tax Returns of Buyer and its Subsidiaries have been audited by the
Internal Revenue Service or appropriate state tax authorities or the time for
assessing and collecting income Tax with respect to such taxable period has
closed and such taxable period is not subject to review, (iv) neither Buyer nor
any of its Subsidiaries has filed or been included in a combined, consolidated
or unitary income Tax Return other than one in which Buyer was the parent of the
group filing such Tax Return, (v) neither Buyer nor any of its Subsidiaries is a
party to
71
any agreement providing for the allocation or sharing of Taxes (other than the
allocation of federal income taxes as provided by Regulation 1.1552-1(a)(1)
under the Code), (vi) neither Buyer nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or any
similar or corresponding provision or requirement of state, local or foreign
income Tax law), by reason of the voluntary change in accounting method (nor has
any taxing authority proposed in writing any such adjustment or change of
accounting method), (vii) neither Buyer nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code, and (viii) neither Buyer nor any
of its Subsidiaries has made any payment or will be obligated to make any
payment (by contract or otherwise) which will not be deductible by reason of
Section 280G of the Code.
4.11. Employees. (a) Section 4.11(a) of the Buyer Disclosure
---------
Schedule sets forth a true and complete list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the ERISA); "pension" plan, fund
or program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other em-
72
ployee benefit plan, fund, program, agreement or arrangement, in each case, that
is sponsored, maintained or contributed to or required to be contributed to as
of the date of this Agreement (the "Buyer Plans") by Buyer, any of its
Subsidiaries or by any trade or business, whether or not incorporated (a "Buyer
ERISA Affiliate"), all of which together with Buyer would be deemed a "single
employer" within the meaning of Section 4001 of ERISA, for the benefit of any
employee or former employee of Buyer, any Subsidiary or any ERISA Affiliate.
(b) Except as set forth in Section 4.11(b) of the Buyer Disclosure
Schedule, (i) each of the Buyer Plans has been operated and administered in
accordance with its terms and applicable law, including but not limited to ERISA
and the Code, (ii) each of the Buyer Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has either (1) received a favorable
determination letter from the IRS, or (2) is or will be the subject of an
application for a favorable determination letter, and Buyer is not aware of any
circumstances reasonably likely to result in the revocation or denial of any
such favorable determination letter, (iii) with respect to each Buyer Plan which
is subject to Title IV of ERISA, the present value of ac-
73
crued benefits under such Buyer Plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared by such Buyer
Plan's actuary with respect to such Buyer Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of such Buyer Plan
allocable to such accrued benefits, (iv) no Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees of Buyer, its Subsidiaries or any ERISA
Affiliate beyond their retirement or other termination of service, other than
(w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the
books of Buyer, its Subsidiaries or the ERISA Affiliates or (z) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary), (v) no liability under Title IV of ERISA has been incurred by
Buyer, its Subsidiaries or any Buyer ERISA Affiliate that has not been satisfied
in full, (vi) no Buyer Plan is a "multiemployer pension plan," as such term is
defined in Section 3(37) of ERISA, (vii) all contributions or other amounts
payable by Buyer, its
74
Subsidiaries or any ERISA Affiliate as of the Effective Time with respect to
each Plan in respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section 412 of the
Code, (viii) neither Buyer, its Subsidiaries nor any ERISA Affiliate has engaged
in a transaction in connection with which Buyer, its Subsidiaries or any ERISA
Affiliate could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976
of the Code, (ix) there are no pending, or, to the best knowledge of Buyer,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Buyer Plans or any trusts related thereto and
(x) the consummation of the transactions contemplated by this Agreement or the
Bank Merger Agreement will not (y) entitle any current or former employee or
officer of Buyer or any ERISA Affiliate to severance pay, termination pay or any
other payment or benefit, except as expressly provided in this Agreement or (z)
accelerate the time of payment or vesting or increase in the amount or value of
compensation or benefits due any such employee or officer.
75
4.12. SEC Reports. Buyer has previously made available to the
-----------
Company an accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since January
1, 1995 by Buyer with the SEC pursuant to the Securities Act or the Exchange Act
(the "Buyer Reports") and (b) communication mailed by Buyer to its shareholders
since January 1, 1995, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier date.
Buyer has timely filed all Buyer Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Buyer Reports complied with the published rules and
regulations of the SEC with respect thereto.
4.13. Buyer Information. The information relating to Buyer and its
-----------------
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other
document
76
filed with any other regulatory agency in connection herewith, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The S-4 (except for such portions thereof that
relate only to the Company or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
4.14. Compliance with Applicable Law. Buyer and each of its
------------------------------
Subsidiaries holds, and has at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to Buyer
or any of its Subsidiaries and neither Buyer nor any of its Subsidiaries knows
of, or has received notice of violation of, any violations of any of the above.
4.15. Ownership of Company Common Stock; Affiliates and Associates.
------------------------------------------------------------
(a) Except for the Company Option Agreement, neither Buyer nor any of its
affiliates
77
or associates (as such terms are defined under the Exchange Act), (i)
beneficially owns, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of the Company (other
than Trust Account Shares and DPC Shares); and
(b) Neither Buyer nor any of its Subsidiaries is an
"affiliate" (as such term is defined in DGCL ss. 203(c)(1)) or an "associate"
(as such term is defined in DGCL ss. 203(c)(2)) of the Company or an "Interested
Stockholder" (as such term is defined in Article Eighth of the Company's
Restated Certificate of Incorporation).
4.16. Agreements with Regulatory Agencies. Except as set forth in
-----------------------------------
Section 4.16 of the Buyer Disclosure Schedule or as disclosed in Buyer's Annual
Report on Form 10-K for the year ended December 31, 1996, neither Buyer nor any
of its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board
78
resolutions at the request of (each, whether or not set forth in Section 4.16 of
the Buyer Disclosure Schedule, a "Buyer Regulatory Agreement"), any Regulatory
Agency or other Governmental Entity that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has Buyer or any of its Subsidiaries been
advised by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
4.17. Approvals. As of the date of this Agreement, Buyer knows of no
---------
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger and
the Subsidiary Merger) should not be obtained.
4.18. Accounting for the Merger; Reorganization. As of the date
-----------------------------------------
hereof, Buyer has no reason to believe that the Merger will fail to qualify (i)
for pool- ing-of-interests treatment under GAAP or (ii) as a reorganization
under Section 368(a) of the Code.
4.19. Intellectual Property. Buyer and each of its Subsidiaries
---------------------
owns or possesses valid and binding licenses and other rights to use without
payment all
79
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses; and neither Buyer nor any of its Subsidiaries has
received any notice of conflict with respect thereto that asserts the right of
others.
4.20. Environmental Matters. Except as set forth in Section 4.20
---------------------
of the Buyer Disclosure Schedule:
(a) Each of Buyer, its Subsidiaries, the Participation
Facilities and the Loan Properties (each as hereinafter defined) are in
compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or,
to the best knowledge of Buyer, threatened, before any Governmental Entity or
other forum in which Buyer, any of its Subsidiaries, any Participation Facility
or any Loan Property, has been or, with respect to threatened proceedings, may
be, named as a defendant (x) for alleged noncompliance (including by any
predecessor), with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Buyer or any of its
Subsidiaries, any Participation Facility or any Loan Property;
80
(c) To the best knowledge of Buyer during the period of (x)
Buyer's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) Buyer's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) Buyer's or
any of its Subsidiaries' holding of a security interest in a Loan Property,
there has been no release of Hazardous Materials in, on, under or affecting any
such property. To the best knowledge of Buyer, prior to the period of (x)
Buyer's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) Buyer's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) Buyer's or
any of its Subsidiaries' holding of a security interest in a Loan Property,
there was no release or threatened release of Hazardous Materials in, on, under
or affecting any such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
Section 4.20: (x) "Loan Property" means any property in which Buyer or any of
its Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such
81
property; and (y) "Participation Facility" means any facility in which Buyer or
any of its Subsidiaries participates in the management and, where required by
the context, said term means the owner or operator of such property.
4.21. Derivative Transactions. Except as set forth in Section 4.21
-----------------------
of the Buyer Disclosure Schedule, as of the date hereof, neither Buyer nor any
of its Subsidiaries is a party to any transaction in or involving forwards,
futures, options on futures, swaps or other derivative instruments except (i) as
agent on the order and for the account of others, or (ii) as principal for
purposes of hedging interest rate risk on U.S. dollar-denominated securities and
other financial instruments. None of the counterparties to any contract or
agreement with respect to any such instrument is in default with respect to such
contract or agreement and no such contract or agreement, were it to be a Loan
held by Buyer or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or words of
similar import. As of the date hereof, the financial position of Buyer and its
Subsidiaries on a consolidated
82
basis under or with respect to each such instrument has been reflected in the
books and records of Buyer and such Subsidiaries in accordance with GAAP
consistently applied, and except as disclosed in such books and records, no open
exposure of Buyer or any of its Subsidiaries with respect to any such instrument
(or with respect to multiple instruments with respect to any single
counterparty) exceeds $500,000.
4.22. Opinion. Buyer has received an opinion, dated the date hereof,
-------
from Goldman Sachs to the effect that as of the date thereof and based upon and
subject to the matters set forth therein, the consideration to be received by
the stockholders of Buyer pursuant to this Agreement is fair to such
stockholders from a financial point of view. Such opinion has not been amended
or rescinded as of the date of this Agreement.
4.23. Loan Portfolio. (a) Except as set forth in Section 4.23 of
--------------
Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries is a party
to any written or oral (i) Loan, other than Loans the unpaid principal balance
of which does not exceed $100,000, under the terms of which the obligor is, as
of the date of this Agreement, over 90 days delinquent in payment of principal
or interest or in default of any other provi-
83
sion, or (ii) Loan with any director, executive officer or five percent or
greater stockholder of Buyer or any of its Subsidiaries, or to the best
knowledge of Buyer, any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing. Section 4.23 of
Buyer Disclosure Schedule sets forth (i) all of the Loans in original principal
amount in excess of $100,000 of Buyer or any of its Subsidiaries (other than
1-to-4 family residential mortgage loans and consumer loans) that as of the date
of this Agreement are classified by any bank examiner (whether regulatory or
internal) as "Other Loans Specially Mentioned", "Special Mention",
"Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans", "Watch List" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the borrower thereunder, (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the other Loans of Buyer and its
Subsidiaries that as of the date of this Agreement are classified as such,
together with the aggregate principal amount of and accrued and unpaid interest
on such Loans by category and (iii) each asset of Buyer that
84
as of the date of this Agreement is classified as "Other Real Estate Owned" and
the book value thereof.
(b) Each Loan in original principal amount in excess of
$100,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
4.24. Property. Each of Buyer and its Subsidiaries has good and
--------
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, and which are reflected on the
consolidated statement of financial condition of Buyer as of June 30, 1997 or
acquired after such date, except (i) liens for taxes not yet due and payable or
contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and
85
other liens incurred in the ordinary course of banking business, (iii) such
imperfections of title, easements and encumbrances, if any, or (iv) for
dispositions and encumbrances of, or on, such properties or assets for adequate
consideration in the ordinary course of business. All leases pursuant to which
Buyer or any Subsidiary of Buyer, as lessee, leases real or personal property
are valid and enforceable in accordance with their respective terms and neither
Buyer nor any of its Subsidiaries nor any other party thereto is in default
thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants of the Company. During the period from the date of
------------------------
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Bank Merger Agreement or the
Company Option Agreement or with the prior written consent of Buyer, the Company
and its Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice and consistent with prudent banking
practice. The Company will use its reasonable best efforts consistent with past
practice to (x) preserve its business organization and that of its
86
Subsidiaries intact, (y) keep available to itself and Buyer the present services
of the employees of the Company and its Subsidiaries and (z) preserve for itself
and Buyer the goodwill of the customers of the Company and its Subsidiaries and
others with whom business relationships exist. Without limiting the generality
of the foregoing, and except as set forth on Section 5.1 of the Company
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by Buyer, the Company shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of the Company, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than normal quarterly dividends in an amount of no more than $0.15
per share of Company Common Stock;
(b) (i) split, combine or reclassify any shares of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock except
upon the exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, all to the extent
outstanding and in existence on the date of this
87
Agreement and in accordance with their present terms, and except pursuant to the
Company Option Agreement, or (ii) repurchase, redeem or otherwise acquire
(except for the acquisition of Trust Account Shares and DPC Shares, as such
terms are defined in Section 1.4(b) hereof) any shares of the capital stock of
the Company or any Subsidiary of the Company, or any securities convertible into
or exercisable for any shares of the capital stock of the Company or any
Subsidiary of the Company;
(c) except as set forth on Section 5.1(c) of the Company
Disclosure Schedule, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of Company Common Stock pursuant to stock
options or similar rights to acquire Company Common Stock granted pursuant to
the Company Plans and outstanding prior to the date of this Agreement, in each
case in accordance with their present terms and (ii) pursuant to the Company
Option Agreement;
88
(d) amend its Restated Certificate of Incorporation, By-laws
or other similar governing documents;
(e) authorize or permit any of its officers, directors,
employees or agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, a
"takeover proposal" (as defined below), or, except to the extent legally
required for the discharge of the fiduciary duties of the Board of Directors of
the Company as advised by such board's counsel, recommend or endorse any
takeover proposal, or participate in any discussions or negotiations, or provide
third parties with any nonpublic information, relating to any such inquiry or
proposal or otherwise facilitate any effort or attempt to make or implement a
takeover proposal; provided, however, that the Company may communicate
information about any such takeover proposal to its stockholders if, in the
judgment of the Company's Board of Directors, based upon the advice of outside
counsel, such communication is required under applicable law. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations previously conducted with any parties other than
Buyer with respect to
89
any of the foregoing. The Company will take all actions necessary or advisable
to inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 5.1(e). The
Company will notify Buyer immediately if any such inquiries or takeover
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company, and the Company will promptly inform Buyer in writing of all of the
relevant details with respect to the foregoing. As used in this Agreement,
"takeover proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company or any
Subsidiary of the Company or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, the
Company or any Subsidiary of the Company other than the transactions
contemplated or permitted by this Agreement, the Bank Merger Agreement and the
Company Option Agreement;
(f) make any capital expenditures other than those which (i)
are made in the ordinary course of business or are necessary to maintain
existing assets in
90
good repair and (ii) in any event are in an amount of no more than $250,000 in
the aggregate;
(g) enter into any new line of business, which prohibition
shall not apply to the expansion of Company's consumer and residential
businesses, as to which the Company will consult with Buyer;
(h) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Company, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with prudent banking practices;
(i) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VII not being satisfied;
91
(j) change its methods of accounting in effect at June 30,
1997, except as required by changes in GAAP or regulatory accounting principles
as concurred to by the Company's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, or terminate any employee
benefit plan (including, without limitation, any Plan) or any agreement,
arrangement, plan or policy between the Company or any Subsidiary of the Company
and one or more of its current or former directors, officers or employees except
that the Company may adopt the severance and retention policy described in
Section 5.1(k) of the Company Disclosure Schedule or (ii) except for normal
increases in the ordinary course of business consistent with past practice or
except as required by applicable law, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any Plan or agreement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares), it
being agreed that the Company may accrue under its current incentive bonus plan
an aggregate
92
maximum amount of $2.16 million and may pay such amounts, from and after January
1, 1998 but not later than immediately prior to the Effective Time, to any
officer;
(l) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes or a
tax free reorganization under Section 368(a) of the Code, provided, however,
that nothing contained herein shall limit the ability of Buyer to exercise its
rights under the Company Option Agreement;
(m) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(n) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity (it being
understood that loans by the
93
Company to its directors in connection with liabilities resulting from the
exercise of stock options shall not be prohibited by the terms of this Agreement
provided that such loans are made in accordance with the Company's customary
underwriting standards and any applicable banking regulations);
(o) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(p) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
prudent banking practices;
(q) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound;
94
(r) other than in prior consultation with Buyer, restructure
or materially change its investment securities portfolio or its gap position,
through purchases, sales or otherwise, or the manner in which the portfolio is
classified or reported; or
(s) agree to do any of the foregoing.
5.2. Covenants of Buyer. Except as set forth on Section 5.2 of the
------------------
Buyer Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by the Company, Buyer shall not, and shall not permit
any of its Subsidiaries to:
(a) solely in the case of Buyer, declare or pay any dividends
on or make any other distributions in respect of any of its capital stock other
than its current quarterly dividend; provided, however, that nothing contained
herein shall prohibit Buyer from increasing the quarterly cash dividend on the
Buyer Common Stock;
(b) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VII not being satisfied;
95
(c) change its methods of accounting in effect at June 30,
1997, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Buyer's independent auditors;
(d) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes or a
tax free reorganization under Section 368(a) of the Code, provided, however,
that nothing contained herein shall limit the ability of Buyer to exercise its
rights under the Company Option Agreement; or
(e) agree to do any of the foregoing.
5.3. Conduct of Buyer's Business. Buyer shall, and Buyer shall
---------------------------
cause Buyer Bank to, conduct its banking business in substantially the same
manner as heretofore conducted, it being understood and agreed that nothing
contained herein shall prevent Buyer from acquiring another bank or thrift
institution or entering into new lines of business, whether through acquisition
or otherwise.
ARTICLE VI
ADDITIONAL AGREEMENTS
96
6.1. Regulatory Matters. (a) Buyer and the Company shall promptly
------------------
prepare and file with the SEC the Proxy Statement and Buyer shall promptly
prepare and file with the SEC the S-4, in which the Proxy Statement will be
included as a prospectus. Each of the Company and Buyer shall use all reasonable
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and each of the Company and Buyer shall
thereafter mail the Proxy Statement to each of its respective stockholders.
Buyer shall also use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Bank Merger Agreement, and
the Company shall furnish all information concerning the Company and the holders
of Company Common Stock as may be reasonably requested in connection with any
such action.
(b) The parties hereto shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
97
consummate the transactions contemplated by this Agreement (including without
limitation the Merger and the Subsidiary Merger) (it being understood that any
amendments to the S-4 or a resolicitation of proxies as consequence of a
subsequent proposed merger, stock purchase or similar acquisition by Buyer or
any of its Subsidiaries shall not violate this covenant). The Company and Buyer
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the Company or
Buyer, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
ap-
98
prised of the status of matters relating to completion of the transactions
contemplated herein.
(c) Buyer and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Buyer, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) Buyer and the Company shall promptly furnish each other
with copies of written communications received by Buyer or the Company, as the
case may be, or any of their respective Subsidiaries, Affiliates or Associates
(as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on
the date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
6.2. Access to Information. (a) Upon reasonable notice and
---------------------
subject to applicable laws relating to the exchange of information, each party
shall, and shall
99
cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, it
shall, and shall cause its Subsidiaries to, make available to the other party
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
Federal securities laws or Federal or state banking laws (other than reports or
documents which it is not permitted to disclose under applicable law) and (ii)
all other information concerning its business, properties and personnel as the
other party may reasonably request. Neither party nor any of its Subsidiaries
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of its customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate
100
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(b) All information furnished by either party to the other
party or its representatives pursuant hereto shall be treated as the sole
property of the delivering party and, if the Merger shall not occur, the
receiving party and its representatives shall return to the delivering party all
of such written information and all documents, notes, summaries or other
materials containing, reflecting or referring to, or derived from, such
information. The receiving party shall, and shall use its best efforts to cause
its representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for ten years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was already in the receiving party's
possession prior to the disclosure thereof by the delivering party; (y) was then
generally known to the public; or (z) was disclosed to the receiving party by a
third party not bound by an obligation of confidentiality or (ii) disclosures
made as required by law. It is further agreed that, if in the
101
absence of a protective order or the receipt of a waiver hereunder the receiving
party is nonetheless, in the opinion of its counsel, compelled to disclose
information concerning the delivering party to any tribunal or governmental body
or agency or else stand liable for contempt or suffer other censure or penalty,
the receiving party may disclose such information to such tribunal or
governmental body or agency without liability hereunder.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
6.3. Stockholder Meetings. The Company and Buyer each shall take all
--------------------
steps necessary to duly call, give notice of, convene and hold a meeting of its
respective stockholders to be held as soon as is reasonably practicable after
the date on which the S-4 becomes effective for the purpose of voting upon the
approval of this Agreement and the consummation of the transactions contemplated
hereby. The Company and Buyer each will, through its respective Board of
Directors, except, in the case of the Company, to the extent inconsistent with
the fiduciary duties of such board as determined by the Board following the
receipt of advice from such board's inde-
102
pendent counsel, recommend to its respective stockholders approval of this
Agreement and the transactions contemplated hereby and such other matters as may
be submitted to its stockholders in connection with this Agreement. The Company
and Buyer shall coordinate and cooperate with respect to the foregoing matters,
with a view towards, among other things, holding the respective meetings of each
party's stockholders on the same day.
6.4. Legal Conditions to Merger. Each of Buyer and the Company
--------------------------
shall, and shall cause its Subsidiaries to, use their best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger or the Subsidiary Merger and, subject to
the conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by the Company or Buyer or any of their respective
Subsidiaries in connection with the Merger and the Subsidiary Merger and the
other transactions contemplated by this Agree-
103
ment, and to comply with the terms and conditions of such consent,
authorization, order or approval.
6.5. Affiliates. (a) Each of Buyer and the Company shall use its
----------
best efforts to cause each director, executive officer and other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act and for
purposes of qualifying the Merger for "pooling-of-interests" accounting
treatment) of such party to deliver to the other party hereto, as soon as
practicable after the date of this Agreement, a written agreement, in the form
of Exhibit 6.5(a) hereto (in the case of affiliates of Buyer) or 6.5(b) hereto
(in the case of affiliates of the Company).
(b) Buyer shall use all reasonable efforts to publish, not later than 21
days after the end of the first full calendar month following the Effective
Time, financial results covering at least 30 days of post- Merger combined
operations as contemplated by SEC Accounting Series Release No. 135.
6.6. Stock Exchange Listing. Buyer shall use all reasonable efforts
----------------------
to cause the shares of Buyer Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, as of
the Effective Time.
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6.7. Employee Benefit Plans; Existing Agreements. (a) As soon as
-------------------------------------------
practicable following the Effective Time, the employees of the Company (the
"Company Employees") shall be eligible to participate in Buyer's employee
benefit plans in which similarly situated employees of Buyer or Buyer Bank
participate, to the same extent as similarly situated employees of Buyer or
Buyer Bank (it being understood that inclusion of Company Employees in Buyer's
employee benefit plans may occur at different times with respect to different
plans).
(b) With respect to each Buyer Plan that is an "employee benefit
plan," as defined in Section 3(3)of ERISA, for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual of pension
benefits), service with the Company (or predecessor employers to the extent the
Company provides past service credit) shall be treated as service with Buyer;
provided however, that such service shall not be recognized to the extent that
such recognition would result in a duplication of benefits. Such service also
shall apply for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting condition
limitations. Each
105
Buyer Plan shall waive pre-existing condition limitations to the same extent
waived under the applicable Company Plan. Company Employees shall be given
credit for amounts paid under a corresponding benefit plan during the same
period for purposes of applying deductibles, copayments and out-of-pocket
maximums as though such amounts had been paid in accordance with the terms and
conditions of the Buyer Plan.
(c) Following the Effective Time, Buyer shall honor and shall cause
the Surviving Bank to honor in accordance with their terms all employment,
severance and other compensation agreements and arrangements existing prior to
the execution of this Agreement which are between the Company and any director,
officer or employee thereof and which have been disclosed in the Company
Disclosure Schedule and previously have been delivered to Buyer.
6.8. Indemnification. (a) In the event of any threatened or actual
---------------
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the
106
Effective Time, a director or officer or employee 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, any of the Subsidiaries of the Company or any of their respective
predecessors or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Buyer shall indemnify and hold harmless, as and to the extent
permitted by Delaware law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened
107
or actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Buyer; provided,
however, that (1) Buyer shall have the right to assume the defense thereof and
upon such assumption Buyer shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
Buyer elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are issues which raise conflicts of interest
between Buyer and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Buyer, and Buyer
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) Buyer shall in all cases be obligated pursuant to this paragraph to
pay for only one firm of counsel for all Indemnified Parties, (3) Buyer shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld) and (4) Buyer shall have no
obligation hereunder to any Indemnified Party when and if a court of
108
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappeal- able, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 6.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify promptly Buyer thereof, provided that the failure to so notify shall not
affect the obligations of Buyer under this Section 6.8 except to the extent such
failure to notify prejudices Buyer. Buyer's obligations under this Section 6.8
shall continue in full force and effect without time limit from and after the
Effective Time.
(b) Buyer shall cause the persons serving as officers and
directors of the Company immediately prior to the Effective Time to be covered
for a period of three years from the Effective Time by the directors' and
officers' liability insurance policy maintained by the Company (provided that
Buyer may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective Time
which were commit-
109
ted by such officers and directors in their capacity as such; provided, however,
that in no event shall Buyer be required to expend on an annual basis more than
200% of the current amount expended by the Company (the "Insurance Amount") to
maintain or procure insurance coverage, and further provided that if Buyer is
unable to maintain or obtain the insurance called for by this Section 6.8(b)
Buyer shall use all reasonable efforts to obtain as much comparable insurance as
available for the Insurance Amount.
(c) In the event Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Buyer
assume the obligations set forth in this section.
(d) The provisions of this Section 6.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
110
6.9. Subsequent Interim and Annual Financial Statements. As soon as
--------------------------------------------------
reasonably available, but in no event later than March 31, 1998 or, in the case
of the Company, December 31, 1997, Buyer will deliver to the Company and the
Company will deliver to Buyer their respective Annual Reports on Form 10-K for,
in the case of Buyer, the fiscal year ended December 31, 1997 and, in the case
of the Company, the fiscal year ended September 30, 1997, as filed with the SEC
under the Exchange Act. As soon as reasonably available, but in no event more
than 45 days after the end of each fiscal quarter ending after the date of this
Agreement, Buyer will deliver to the Company and the Company will deliver to
Buyer their respective Quarterly Reports on Form 10-Q, as filed with the SEC
under the Exchange Act.
6.10. Additional Agreements. In case at any time after the Effective
---------------------
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or the Bank Merger Agreement or to vest the Surviving Corporation
or the Surviving Bank with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger or the
Subsidiary Merger, the proper officers and directors of each party to this
Agreement and their
111
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by Buyer.
6.11. Advice of Changes. Buyer and the Company shall promptly advise
-----------------
the other party of any change or event having a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein. From time to time prior to the Effective Time (and on the date prior to
the Closing Date), each party will promptly supplement or amend the Disclosure
Schedules delivered in connection with the execution of this Agreement to
reflect any matter which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedules or which is necessary to correct any information in such
Disclosure Schedules which has been rendered inaccurate thereby. No supplement
or amendment to such Disclosure Schedules shall have any effect for the purpose
of determining satisfaction of the conditions set forth in Sections 7.2(a) or
7.3(a) hereof, as the case may be, or the compliance by the Company or Buyer, as
the case may be, with the respective covenants and agreements of such parties
contained herein.
112
6.12. Current Information. During the period from the date of this
-------------------
Agreement to the Effective Time, each of the Company and Buyer will cause one or
more of its designated representatives to confer on a regular and frequent basis
(not less than monthly) with representatives of the other party and to report
(i) the general status of its ongoing operations and those of its Subsidiaries
and (ii) with respect to the Company only, the status of, and the action
proposed to be taken with respect to, those Loans held by the Company or any
Subsidiary of the Company which, individually or in combination with one or more
other Loans to the same borrower thereunder, have an original principal amount
of $250,000 or more and are non-performing assets. Each party will promptly
notify the other of any material change in the normal course of business or in
the operation of its properties or those of any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving it or any of its Subsidiaries, and will keep
the other party fully informed of such events.
6.13. Execution and Authorization of Bank Merger Agreement. As
----------------------------------------------------
soon as reasonably practicable
113
after the date of this Agreement, (a) Buyer shall (i) cause the Board of
Directors of Buyer Bank to approve the Bank Merger Agreement, (ii) cause Buyer
Bank to execute and deliver the Bank Merger Agreement, and (iii) approve the
Bank Merger Agreement as the sole stockholder of Buyer Bank, and (b) the Company
shall (i) cause the Board of Directors of the Company Bank to approve the Bank
Merger Agreement, (ii) cause the Company Bank to execute and deliver the Bank
Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole
stockholder of the Company Bank. The Bank Merger Agreement shall contain terms
that are normal and customary in light of the transactions contemplated hereby
and such additional terms as are necessary to carry out the purposes of this
Agreement.
6.14. Directorship. Buyer shall cause its Board of Directors to be
------------
expanded by one member and shall appoint Patrick E. Malloy, III, or any other
person designated by the Board of Directors of the Company and acceptable to
Buyer as a nominee to fill the vacancy on Buyer's Board of Directors created by
such increase as of the Effective Time.
6.15. Coordination of Dividends. From the date of this Agreement
-------------------------
to the Effective Time, Buyer and
114
the Company shall coordinate the declaration, record and payment dates with
respect to dividends on the Buyer Common Stock and the Company Common Stock so
that each such event occurs on the same, or as close as possible to the same,
day for each of Buyer and the Company (provided that nothing contained in this
Section 6.15 shall require either of the parties to take any action that would
materially impair their ability to satisfy the conditions set forth in 7.2(e)
and 7.3(e)).
6.16. Issuance of Treasury Shares. The Company shall use all
---------------------------
reasonable efforts to reissue the requisite number of shares of Company Common
Stock held as treasury stock as of the date of this Agreement so that the Merger
will not fail to qualify for pooling of interests accounting treatment by virtue
of the number of shares of Company Common Stock held in Company's treasury.
6.17. Loans. From the date of this Agreement to the Effective Time,
-----
the Company shall furnish to Buyer, promptly upon its substantial completion,
the information package prepared for the Company's loan committee with respect
to all proposed extensions of credit by the Company and its Subsidiaries
(including purchases, renewals and commitments) to any borrower and
115
its affiliates in an aggregate principal amount in excess of $650,000 (or in an
amount which, when aggregated with any existing indebtedness of and unfunded
commitments to such borrower and its affiliates from the Company and its
Subsidiaries would exceed $650,000).
6.18. SERP Amendment. The Company shall take all action necessary to
--------------
amend its Executives Supplemental Benefits Plan ("SERP") to provide that from
and after January 1, 1998, all benefits under the SERP will be frozen and no
amount of income with respect to the period from and after January 1, 1998 will
be taken into account for purposes of calculating benefits under the SERP.
6.19. Consulting Agreement. At the Effective Time, Buyer shall enter
--------------------
into a consulting agreement with Patrick E. Malloy, III containing the terms set
forth on Section 6.19 of the Company Disclosure Schedule and otherwise in form
and substance reasonably acceptable to
Buyer.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligation of each
116
party to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the affirmative votes of the holders of a majority of
the outstanding shares of Company Common Stock and Buyer Common Stock
entitled to vote thereon.
(b) NYSE Listing. The shares of Buyer Common Stock which shall
be issued to the stockholders of the Company upon consummation of the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger and the
Subsidiary Merger) shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order
117
suspending the effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or the Subsidiary Merger shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which prohibits,
restricts or makes illegal consummation of the Merger or the Subsidiary Merger.
7.2. Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
effect the Merger is also subject to the satisfaction or waiver by Buyer at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
2A.2, the representations and warranties of the Company set forth in this
Agreement (other than those set forth in Sections 3.2 and 3.19) shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as
118
of the Closing Date as though made on and as of the Closing Date; and (ii) the
representations and warranties of the Company set forth in Sections 3.2 and 3.19
of this Agreement shall be true and correct in all material respects (without
giving effect to Section 2A.2 of this Agreement) as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date. Buyer shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Buyer
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) No Pending Governmental Actions. No proceeding initiated
by any Governmental Entity seeking an Injunction shall be pending.
119
(d) Federal Tax Opinion. Buyer shall have received an opinion
of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Buyer ("Buyer's
Counsel"), in form and substance reasonably satisfactory to Buyer, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger and Subsidiary Merger will be treated as
reorganizations within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes no gain or loss will be recognized
by Buyer, the Company, Buyer Bank or the Company Bank as a result of the Merger
and Subsidiary Merger (except to the extent the Company Bank, the Company, Buyer
Bank or the Company Bank may be required to recognize income due to the
recapture of bad debt reserves as a result of the Subsidiary Merger). Subject to
the limitations set forth in Section 7.2(d) of the Buyer Disclosure Schedule, in
rendering such opinion, Buyer's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Buyer, Buyer Bank, the Company, the Company Bank in the form
attached hereto and others reasonably satisfactory in form and substance to such
counsel.
120
(e) Pooling of Interests. Buyer shall have received a letter
from KPMG Peat Marwick LLP addressed to Buyer, to the effect that the Merger
will qualify for "pooling of interests" accounting treatment.
7.3. Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
2A.2, the representations and warranties of Buyer set forth in this Agreement
(other than those set forth in Section 4.2) shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; and (ii) the
representations and warranties of Buyer set forth in Section 4.2 of this
Agreement shall be true and correct in all material respects (without giving
effect to Section 2A.2 of this Agreement) as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing
121
Date. The Company shall have received a certificate signed on behalf of Buyer by
the Chief Executive Officer and the Chief Financial Officer of Buyer to the
foregoing effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Buyer by the Chief Executive
Officer and the Chief Financial Officer of Buyer to such effect.
(c) No Pending Governmental Actions. No proceeding initiated
by any Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. The Company shall have received an
opinion of Weil, Gotshal & Manges LLP (the "Company's Counsel"), in form and
substance reasonably satisfactory to the Company, dated as of the Effective
Time, substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section
122
368(a) of the Code and that accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by the Company as a
result of the Merger; and
(ii) No gain or loss will be recognized by the shareholders of
the Company who exchange all of their Company Common Stock solely for
Buyer Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Buyer Common Stock and,
if any, the payment of any real property transfer taxes on behalf of
stockholders of the Company)
In rendering such opinion, the Company's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Buyer, Buyer Bank, the Company, the Company Bank and others,
including certain shareholders of the Company, reasonably satisfactory in form
and substance to such counsel.
(e) Pooling of Interests. The Company shall have received a
letter from KPMG Peat Marwick LLP ad-
123
dressed to Buyer, to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, whether before or after approval
of the matters presented in connection with the Merger by the stockholders of
both the Company and Buyer (unless otherwise provided below):
(a) by mutual consent of the Company and Buyer in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Buyer or the Company upon written notice to the
other party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to
124
terminate this Agreement pursuant to this Section 8.1(b)(i) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein or (ii) if any Governmental Entity
of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the Merger or the Subsidiary Merger;
(c) by either Buyer or the Company if the Merger shall not
have been consummated on or before September 30, 1998, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Buyer or the Company (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 6.3) if any approval of the stockholders of either of the Company
or Buyer required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such stockholders or at any adjournment or postponement thereof;
125
(e) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty days following written notice to the party committing such breach, or
which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(e) unless the breach of representation or warranty,
together with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby under
Section 7.2(a) (in the case of a breach of representation or warranty by the
Company) or Section 7.3(a) (in the case of a breach of representation or
warranty by Buyer);
(f) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party,
126
which breach shall not have been cured within thirty days following receipt by
the breaching party of written notice of such breach from the other party
hereto;
(g) by Buyer, if the Board of Directors of the Company does
not publicly recommend in the Proxy Statement that the Company's stockholders
approve and adopt this Agreement or if, after recommending in the Proxy
Statement that stockholders approve and adopt this Agreement, the Board of
Directors of the Company shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Buyer;
(h) [reserved]
(i) by the Company, upon the execution by the Company of a
definitive agreement relating to a takeover proposal (as defined in Section
5.1(e)), provided that (i) the Company shall have complied with its obligations
under Section 5.1(e) hereof, (ii) the Board of Directors of the Company shall
have determined, after having received the advice of outside legal counsel to
the Company and the advice of the Company's financial advisor, that such action
is necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law and (iii) concurrent with its notification
of termination, the Company shall have made an irrevocable
127
and unconditional offer to Buyer in writing to repurchase the Option from Buyer
at any time, within thirty days following the date of such offer, at a price
equal to the greater of (x) the Option Repurchase Price set forth in Section 7
of the Company Option Agreement and (y) the Surrender Price set forth in Section
15 of the Company Option Agreement (subject in each case to the limitation set
forth in Section 16 of the Company Option Agreement), with an undertaking to
effect such repurchase by wire transfer of immediately available funds to an
account designated by Buyer within two business days following receipt of
written notice from Buyer pursuant to this Section 8.1(i) of its election to
tender the Option to the Company for repurchase and the applicable repurchase
price elected; provided, however, that notwithstanding the foregoing, if the
Company exercises its right pursuant to this Section 8.1(i) following the
approval by the Company stockholders of this Agreement, then concurrently with
the execution by the Company of a definitive agreement with respect to a
takeover proposal, the Company shall pay or cause to be paid to Buyer by wire
transfer of immediately available funds to an account designated by Buyer $40
million in full satisfaction of the Company's obligations under this Section
8.1(i) and the Company Option Agreement.
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In the case of any termination of this Agreement by the Company pursuant to this
Section 8.1(i) prior to the approval of this Agreement by the Company
stockholders the rights of Buyer set forth in this Section 8.1(i) shall be in
addition to all rights of Buyer contained in the Company Option Agreement; or
(j) by either the Company or Buyer, by action of its Board of
Directors by giving written notice of such election to the other party within
two business days after the Valuation Period (as defined below), in the case of
Buyer, or within four business days after the Valuation Period, in the case of
the Company, in the event the average closing sales price per share of Buyer
Common Stock (the "Buyer Average Closing Price") on the NYSE (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative source)
for the ten consecutive trading days (the "Valuation Period") ending on the date
on which the last of the Requisite Regulatory Approvals is obtained without
regard to any requisite waiting period in respect thereof, is less than $25.50
per share; provided, however, that no right of termination in favor of the
Company shall arise under this Section 8.1(j) if Buyer elects, within two
business days after the Valuation Period, to notify the Company in writing that
it has in-
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creased the Exchange Ratio such that the product of such increased Exchange
Ratio and the Buyer Average Closing Price is not less than $30.35 per share.
8.2. Effect of Termination; Expenses. In the event of
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termination of this Agreement by either Buyer or the Company as provided in
Section 8.1, this Agreement shall forthwith become void and have no effect
except (i) Sections 6.2(b), 8.2 and 9.3, shall survive any termination of this
Agreement, and (ii) that notwithstanding anything to the contrary contained in
this Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement,
except that, in the event that concurrently with or following a termination of
this Agreement, Buyer realizes a "Total Profit" of $32 million or greater
pursuant to its rights under the Company Option Agreement, then Buyer's receipt
of such Total Profit shall constitute the sole and exclusive remedy for Buyer
under this Agreement and there shall be no further liability under this
Agreement on the part of the Company to Buyer other than liability for any
breach by the Company of Section 6.2 hereof.
8.3. Amendment. Subject to compliance with applicable law, this
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Agreement may be amended by the parties hereto, by action taken or authorized by
their
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respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of either
the Company or Buyer; provided, however, that after any approval of the
transactions contemplated by this Agreement by the Company's stockholders, there
may not be, without further approval of such stockholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to the Company stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4. Extension; Waiver. At any time prior to the Effective Time, the
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parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
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extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing. Subject to the terms and conditions of this
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Agreement and the Bank Merger Agreement, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. on the first day which is (a) the last
business day of a month and (b) at least two business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof (other than those conditions which
relate to actions to be taken at the Closing)(the "Closing Date"), at the
offices of Buyer's Counsel unless another time, date or place is agreed to in
writing by the parties hereto.
9.2. Nonsurvival of Representations, Warranties and Agreements.
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None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other than
pursuant to the Company Option Agreement which shall terminate in accordance
with its terms) shall survive the
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Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
9.3. Expenses. All costs and expenses incurred in connection with
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this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Proxy Statement to the stockholders of the Company and
Buyer, and all filing and other fees paid to the SEC or any other Governmental
Entity in connection with the Merger, the Subsidiary Merger and the other
transactions contemplated hereby, shall be borne equally by Buyer and the
Company, provided further, however, that nothing contained herein shall limit
either party's rights to recover any liabilities or damages arising out of the
other party's willful breach of any provision of this Agreement (except as
provided in Section 8.2). Buyer shall be responsible for any corporate level
transfer, sales or similar taxes resulting from the Merger.
9.4. Notices. All notices and other communications hereunder shall
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be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with
133
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Buyer, to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
and
(b) if to the Company, to:
New York Bancorp Inc.
241-02 Northern Boulevard
Douglaston/Flushing, New York 11362
Attention: Chief Executive Officer
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Dennis J. Block, Esq.
9.5. Interpretation. When a reference is made in this Agreement to
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Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
134
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 phrases "the date of this Agreement", "the
date hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to October 7, 1997.
9.6. Counterparts. This Agreement may be executed in counterparts,
------------
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7. Entire Agreement. This Agreement (including the documents and
----------------
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, other than the Bank
Merger Agreement, the Company Option Agreement and the Confidentiality Agreement
between Buyer and the Company.
9.8. Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the
135
State of Delaware, without regard to any applicable conflicts of law.
9.9. Enforcement of Agreement. The parties hereto agree that
------------------------
irreparable damage would occur in the event that the provisions contained in
6.2(b) of this Agreement were not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of Section
6.2(b) of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.10. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforce-
136
able, the provision shall be interpreted to be only so
broad as is enforceable.
9.11. Publicity. Except as otherwise required by law or the rules of
---------
the NYSE, so long as this Agreement is in effect, neither Buyer nor the Company
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.
9.12. Assignment; No Third Party Beneficiaries. Neither this
----------------------------------------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Except
as otherwise expressly provided herein, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
137
IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
NORTH FORK BANCORPORATION, INC.
By /s/ John Adam Kanas
-----------------------
Name: John Adam Kanas
Title:
Attest: /s/ John Bohlsen
--------------------
Name: John Bohlsen
NEW YORK BANCORP INC.
By /s/ Patrick E. Malloy, III
------------------------------------
Name: Patrick E. Malloy, III
Title:
Attest: /s/ Stan I. Cohen
-------------------
Name: Stan I. Cohen
138