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Exhibit 1(b)
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE PNC FINANCIAL SERVICES GROUP, INC.,
PNC BANCORP INC.
AND
UNITED NATIONAL BANCORP
DATED AS OF AUGUST 21, 2003
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER.....................................................................................2
SECTION 1.1 The Merger.......................................................................2
SECTION 1.2 Closing..........................................................................2
SECTION 1.3 Effective Time...................................................................2
SECTION 1.4 Effects of the Merger............................................................2
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving Corporation............2
SECTION 1.6 Directors and Officers...........................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.................................................................................3
SECTION 2.1 Effect on Capital Stock..........................................................3
SECTION 2.2 Proration........................................................................6
SECTION 2.3 Company Stock Options............................................................7
SECTION 2.4 Election and Exchange Procedures.................................................7
SECTION 2.5 Certain Adjustments.............................................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES..............................................................13
SECTION 3.1 Representations and Warranties of the Company...................................13
SECTION 3.2 Representations and Warranties of Parent........................................40
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS....................................................49
SECTION 4.1 Conduct of Business by the Company..............................................49
SECTION 4.2 Advice of Changes...............................................................54
SECTION 4.3 No Solicitation by the Company..................................................54
SECTION 4.4 Transition......................................................................56
SECTION 4.5 No Fundamental Changes in the Conduct of Business by Parent.....................56
ARTICLE V ADDITIONAL AGREEMENTS.........................................................................57
SECTION 5.1 Preparation of the Form S-4, Proxy Statement; Shareholders Meeting..............57
SECTION 5.2 Access to Information; Confidentiality..........................................59
SECTION 5.3 Reasonable Best Efforts.........................................................60
SECTION 5.4 Rule 16b-3 Actions..............................................................61
SECTION 5.5 Indemnification, Exculpation and Insurance......................................61
SECTION 5.6 Fees and Expenses...............................................................62
SECTION 5.7 Public Announcements............................................................62
SECTION 5.8 Affiliates......................................................................62
SECTION 5.9 Stock Exchange Listing..........................................................63
SECTION 5.10 Shareholder Litigation..........................................................63
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SECTION 5.11 Standstill Agreements; Confidentiality Agreements...............................63
SECTION 5.12 Employee Benefits...............................................................63
SECTION 5.13 Tax Matters.....................................................................66
SECTION 5.14 Advisory Board of Parent........................................................66
ARTICLE VI CONDITIONS PRECEDENT.........................................................................66
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger......................66
SECTION 6.2 Conditions to Obligations of Parent.............................................67
SECTION 6.3 Conditions to Obligations of the Company........................................68
SECTION 6.4 Frustration of Closing Conditions...............................................69
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...........................................................69
SECTION 7.1 Termination.....................................................................69
SECTION 7.2 Effect of Termination...........................................................71
SECTION 7.3 Amendment.......................................................................72
SECTION 7.4 Extension; Waiver...............................................................72
ARTICLE VIII GENERAL PROVISIONS.........................................................................73
SECTION 8.1 Nonsurvival of Representations and Warranties...................................73
SECTION 8.2 Notices.........................................................................73
SECTION 8.3 Definitions.....................................................................74
SECTION 8.4 Interpretation..................................................................76
SECTION 8.5 Counterparts....................................................................76
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries..................................77
SECTION 8.7 Governing Law...................................................................77
SECTION 8.8 Assignment......................................................................77
SECTION 8.9 Consent to Jurisdiction.........................................................77
SECTION 8.10 Headings........................................................................77
SECTION 8.11 Severability....................................................................77
SECTION 8.12 Enforcement.....................................................................77
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INDEX OF DEFINED TERMS
Term Page
- ---- ----
Affiliate...............................................................................................74
Aggregate Cash Amount....................................................................................4
Aggregate Company Share Amount...........................................................................4
Aggregate Parent Share Amount............................................................................4
Agreement................................................................................................1
Bank....................................................................................................13
Bank Combination........................................................................................61
BHCAct..................................................................................................17
Cash Consideration.......................................................................................3
Cash Election............................................................................................3
Cash Election Shares.....................................................................................3
Certificate of Merger....................................................................................2
Change in the Company Recommendation....................................................................54
Closing..................................................................................................2
Closing Date.............................................................................................2
Closing Parent Share Value...............................................................................5
Closing Transaction Value................................................................................5
Code.....................................................................................................1
Company..................................................................................................1
Company Acquisition Agreement...........................................................................71
Company Common Stock.....................................................................................1
Company DCP.............................................................................................65
Company Disclosure Schedule.............................................................................13
Company ERISA Affiliate.................................................................................28
Company Filed SEC Documents.............................................................................17
Company Material Contracts..............................................................................19
Company Permit Liens....................................................................................14
Company Plans...........................................................................................28
Company Preferred Stock.................................................................................14
Company Recommendation..................................................................................58
Company Regulatory Agreement............................................................................22
Company REIT............................................................................................27
Company Rights Agreement.................................................................................1
Company SEC Documents...................................................................................17
Company Series A Preferred Stock........................................................................14
Company Shareholder Approval............................................................................35
Company Shareholder Meeting..............................................................................8
Company Stock Certificates...............................................................................8
Company Stock Options...................................................................................15
Company Stock Plans.....................................................................................15
Company Takeover Proposal...............................................................................54
Company Title IV Plans..................................................................................28
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Continuing Employees....................................................................................63
Conversion Date.........................................................................................65
Credit Facility.........................................................................................51
Derivative Transactions.................................................................................36
Determination Date......................................................................................75
Determination Date Value................................................................................75
DGCL.....................................................................................................1
Disclosing Party........................................................................................60
Effective Time...........................................................................................2
Election.................................................................................................7
Election Deadline........................................................................................8
Employee................................................................................................19
Environmental Claims....................................................................................32
ERISA...................................................................................................28
Excess Option Shares.....................................................................................4
Exchange Act............................................................................................15
Exchange Agent...........................................................................................8
Exchange Fund............................................................................................9
Exchange Ratio...........................................................................................5
Exchangeable Shares......................................................................................5
Executive Officers......................................................................................75
Federal Reserve.........................................................................................17
Final Parent Share Value.................................................................................6
Finance Laws............................................................................................24
Form of Election.........................................................................................8
Form S-4................................................................................................17
GAAP....................................................................................................18
Governmental Entity.....................................................................................17
Holder...................................................................................................7
Indebtedness............................................................................................20
Indemnified Parties.....................................................................................62
Index Price.............................................................................................75
Index Ratio.............................................................................................71
Initial Value...........................................................................................75
Instruments of Indebtedness.............................................................................18
Intellectual Property...................................................................................33
IRS.....................................................................................................26
Key Employee............................................................................................20
knowledge...............................................................................................75
Leased Properties.......................................................................................39
Leases..................................................................................................38
Letter of Transmittal...................................................................................11
Liens...................................................................................................14
Loans...................................................................................................37
Major Company Shareholder...............................................................................15
Material Adverse Change or Material Adverse Effect......................................................75
Merger...................................................................................................1
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Merger Agreement.........................................................................................1
Merger Consideration.....................................................................................5
Merger Sub...............................................................................................1
New Jersey Banking Department...........................................................................17
NJBCA....................................................................................................1
Non-Election Shares......................................................................................4
NYSE.....................................................................................................5
OCC.....................................................................................................17
Other Company Documents.................................................................................22
Other Parent Documents..................................................................................48
Owned Properties........................................................................................38
Parent...................................................................................................1
Parent Adjustment Event.................................................................................12
Parent Advisory Board...................................................................................66
Parent Authorized Preferred Stock.......................................................................41
Parent Average Price....................................................................................76
Parent Common Stock......................................................................................3
Parent Convertible Securities...........................................................................42
Parent DCP..............................................................................................65
Parent Disclosure Schedule..............................................................................40
Parent ERISA Affiliate..................................................................................46
Parent Permits..........................................................................................47
Parent Plans............................................................................................45
Parent Ratio............................................................................................71
Parent Regulatory Agreement.............................................................................47
Parent Rights Agreement..................................................................................3
Parent SEC Documents....................................................................................43
Parent Series A Preferred Stock.........................................................................41
Parent Series B Preferred Stock.........................................................................41
Parent Series C Preferred Stock.........................................................................41
Parent Series D Preferred Stock.........................................................................41
Parent Series E Preferred Stock.........................................................................41
Parent Series F Preferred Stock.........................................................................41
Parent Series G Preferred Stock.........................................................................41
Parent Stock Certificate................................................................................10
Parent Stock Options....................................................................................42
Parent Stock Plans......................................................................................41
Parent Title IV Plans...................................................................................45
PBGC....................................................................................................30
Peer Equivalent Value...................................................................................76
Per Share Amount.........................................................................................5
Permits.................................................................................................21
Person..................................................................................................76
Policies, Practices and Procedures......................................................................37
Pre-Termination Takeover Proposal Event.................................................................72
Proxy Statement.........................................................................................17
Receiving Party.........................................................................................59
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REIT Preferred Stock....................................................................................14
Representatives.........................................................................................59
Requisite Regulatory Approvals..........................................................................67
Restraints..............................................................................................67
SEC.....................................................................................................75
SERP....................................................................................................66
Securities Act..........................................................................................17
Share Adjustment Amount..................................................................................5
Shortfall Number.........................................................................................6
Software................................................................................................33
Stock Consideration......................................................................................3
Stock Conversion Number..................................................................................6
Stock Election...........................................................................................3
Stock Election Number....................................................................................6
Stock Election Shares....................................................................................3
Subsidiary..............................................................................................76
Surviving Corporation....................................................................................2
Tax.....................................................................................................27
Tax Return..............................................................................................28
Taxes...................................................................................................27
Third Party Leases......................................................................................39
United States...........................................................................................14
Unlawful Gains..........................................................................................24
Wachtell, Lipton.........................................................................................2
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 21, 2003, by and among The PNC Financial Services Group, Inc., a
Pennsylvania corporation ("Parent"), United National Bancorp, a New Jersey
corporation (the "Company"), and PNC Bancorp Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each of Parent, Merger Sub and the Company desire to
enter into a transaction whereby the Company will merge with and into Merger Sub
(the "Merger"), with Merger Sub being the surviving corporation, upon the terms
and subject to the conditions set forth in this Agreement, whereby each issued
and outstanding share of common stock, par value $1.25 per share, of the Company
(together with the rights attached thereto issued pursuant to that certain
Shareholder Rights Plan, dated November 1, 2001, as amended, supplemented,
restated or replaced from time to time, between the Company and Registrar and
Transfer Company, as Rights Agent (the "Company Rights Agreement"), "Company
Common Stock"), will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1(d));
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have each approved this Agreement and the Merger (as defined
below) in accordance with the provisions of the Business Corporation Law of the
Commonwealth of Pennsylvania, the Delaware General Corporation Law (the "DGCL")
and the New Jersey Business Corporation Act (the "NJBCA"), as applicable, and
determined that the Merger is advisable, and Parent has adopted this Agreement
and the Merger as the parent and sole shareholder of Merger Sub;
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent and the Company are entering into Employment, Non-Compete
and Retention Agreements with Thomas C. Gregor, Warren R. Gerleit, Alfred J.
Soles, Richard G. Tappen, Raymond C. Kenwell, John J. Cannon, Joanne F. Herb,
Richard Minette and A. Richard Abrahamian; and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement be, and is hereby, adopted as a plan of
reorganization for purposes of Sections 354 and 361 of the Code.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and intending
to be legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the NJBCA and the
DGCL, the Company shall be merged with and into Merger Sub at the Effective
Time. Following the Effective Time, Merger Sub shall be the surviving
corporation (the "Surviving Corporation"), and shall remain a wholly owned
subsidiary of Parent and shall succeed to and assume all of the rights and
obligations of the Company in accordance with Section 10-6 of the NJBCA.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of
all of the conditions to closing contained in Article VI hereof, the closing of
the Merger (the "Closing") will take place at 4:00 p.m. on a date to be
specified by the parties (the "Closing Date"), which shall be no later than the
fifth business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment or waiver of those conditions),
unless another time or date is agreed to by the parties hereto; provided,
however, that unless otherwise determined by Parent and the Company, the Closing
Date shall not occur prior to January 2, 2004. The Closing will be held at the
offices of Wachtell, Lipton, Rosen & Katz ("Wachtell, Lipton"), 51 West 52nd
Street, New York, New York 10019 or at such other location as is agreed to by
the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, at the Closing, the parties shall cause the Merger to be consummated
by filing a certificate of merger in accordance with the NJBCA and the DGCL (the
"Certificate of Merger") and shall make all other filings or recordings required
under the DGCL and the NJBCA to effectuate the Merger. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of New Jersey and the Secretary of State of the
State of Delaware, or at such subsequent date or time as Parent and the Company
shall agree and specify in the Certificate of Merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 10-6 of the NJBCA.
SECTION 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation. The certificate of incorporation and the by-laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation and the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors of Merger
Sub shall, from and after the Effective Time, become the directors of the
Surviving Corporation until their successors shall have been duly elected,
appointed or qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation. The officers of Merger Sub shall, from and after the
Effective Time, become the officers of the Surviving Corporation until their
successors shall have been duly elected, appointed or qualified or
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until their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof:
(a) Capital Stock of Merger Sub. Each issued and
outstanding share of common stock, without par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
represent the right to receive one fully paid and nonassessable share of common
stock, without par value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock that is owned by the Company shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Subject to the
provisions of this Article II, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares cancelled
and retired pursuant to Section 2.1(b) hereof) shall be converted, at the
election of the holder thereof, in accordance with the procedures set forth in
Section 2.4 below and subject to Sections 2.2 and 2.5, into the right to receive
the following, without interest:
(i) for each share of Company Common Stock with
respect to which an election to receive cash has been effectively made
and not revoked or lost, pursuant to Section 2.4 (a "Cash Election"),
the right to receive in cash from Parent an amount equal to the Per
Share Amount (as defined in Section 2.1(d)) (the "Cash Consideration")
(collectively, "Cash Election Shares");
(ii) for each share of Company Common Stock with
respect to which an election to receive common stock, par value $5.00
per share, of Parent (together with the rights attached thereto issued
pursuant to that certain Rights Agreement, dated May 15, 2000, as
amended, as it may be further amended, supplemented, restated or
replaced from time to time (the "Parent Rights Agreement"), between
Parent and Computershare Investor Services, LLC, as Rights Agent
("Parent Common Stock") has been effectively made and not revoked or
lost, pursuant to Section 2.4 (a "Stock Election"), the right to receive
from Parent the fraction of a share of Parent Common Stock as is equal
to the Exchange Ratio (as defined in Section 2.1(d)) (the "Stock
Consideration") (collectively, the "Stock Election Shares"); and
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(iii) for each share of Company Common Stock other
than shares as to which a Cash Election or a Stock Election has been
effectively made and not revoked or lost, pursuant to Section 2.4
(collectively, "Non-Election Shares"), the right to receive from Parent
such Stock Consideration and/or Cash Consideration as is determined in
accordance with Section 2.2(b).
Each share of Company Common Stock owned by Parent or a
Subsidiary (as defined under Section 8.3) of Parent or of the Company shall be
converted pursuant to the Merger as provided in Section 2.1(c) and Section 2.2.
Notwithstanding Section 2.1(c) and Section 2.2, each share of Company Common
Stock owned by Parent or a Subsidiary of Parent or the Company shall be
converted into Parent Common Stock (as defined below).
(d) Certain Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "Aggregate Cash Amount" means, subject to Section
2.1(e), 50% of the product of (x) the Aggregate Company Share Amount (as
defined in this Section 2.1(d)) less the number of shares of Company
Common Stock cancelled pursuant to Section 2.1(b) hereof (but excluding
from such reduction the 2,180,223 treasury shares as of August 20, 2003)
and (y) $34.00; provided, however, that if, at the Effective Time, the
aggregate number of shares of Company Common Stock issuable upon
exercise of then outstanding Company Stock Options (as defined under
Section 3.1(c)) exceeds the difference between (A) 774,015 less (B) the
aggregate number of shares of Company Common Stock issued upon exercise
of Company Stock Options after August 20, 2003 and prior to the
Effective Time (such excess being referred to herein as the "Excess
Option Shares"), then the "Aggregate Cash Amount" shall be reduced by
the product of (A) the Excess Option Shares and (B) an amount equal to
the excess of $34.00 over the weighted average exercise price of the
Excess Stock Options at the Effective Time.
(ii) "Aggregate Company Share Amount" shall equal
18,822,954 shares of Company Common Stock; provided, however, that the
Aggregate Company Share Amount shall be increased by virtue of the
issuance of any shares of Company Common Stock upon the exercise from
and after August 20, 2003 and prior to the Effective Time of Company
Stock Options outstanding on August 20, 2003.
(iii) "Aggregate Parent Share Amount" shall, subject
to Section 2.1(e) and Section 7.1(f), be equal to 6,551,806 shares of
Parent Common Stock; provided, however, that the "Aggregate Parent Share
Amount" shall be increased by virtue of the issuance of any shares of
Company Common Stock upon the exercise from and after August 20, 2003
and prior to the Effective Time of Company Stock Options outstanding on
August 20, 2003 and shall be decreased in the event any shares of
Company Common Stock are cancelled pursuant to Section 2.1(b) hereof,
other than the 2,180,223 treasury shares as of August 20, 2003, in each
case on a basis of 0.348 additional shares of Parent
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Common Stock for each share of Company Common Stock so issued or
cancelled.
(iv) "Closing Parent Share Value" means the arithmetic
average of the 4:00 p.m. Eastern Time closing sales prices of Parent
Common Stock reported on the New York Stock Exchange (the "NYSE")
Composite Tape for the five consecutive trading days immediately
preceding but not including the trading day prior to the Closing Date.
(v) "Closing Transaction Value" means the sum of (A)
the Aggregate Cash Amount and (B) the product obtained by multiplying
the Aggregate Parent Share Amount by the Closing Parent Share Value.
(vi) "Exchange Ratio" means that fraction of a share
of Parent Common Stock as shall be obtained by dividing the Per Share
Amount by the Closing Parent Share Value.
(vii) "Exchangeable Shares" means the aggregate number
of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, rounded to the nearest one-thousandth of a
share.
(viii) "Per Share Amount" means the amount obtained by
dividing the Closing Transaction Value by the number of Exchangeable
Shares.
The Cash Consideration and Stock Consideration are sometimes
referred to herein collectively as the "Merger Consideration."
(e) Adjustments to Preserve Tax Treatment.
(i) In the event that the quotient obtained by
dividing (x) the product of (i) the Aggregate Parent Share Amount and
(ii) the Final Parent Share Value by (y) the sum of the Aggregate Cash
Amount and the product of (i) the Aggregate Parent Share Amount and (ii)
the Final Parent Share Value is less than 0.425, the Aggregate Parent
Share Amount shall be increased by the Share Adjustment Amount (as
defined in this Section 2.1(e)) and the Aggregate Cash Amount shall be
decreased by the product of (x) the Final Parent Share Value and (y) the
Share Adjustment Amount, where the "Share Adjustment Amount" shall be
equal to the quotient obtained by dividing (x) the difference obtained
by subtracting (i) the product of (a) 0.425 and (b) the sum of the
Aggregate Cash Amount and the product of (1) the Aggregate Parent Share
Amount and (2) the Final Parent Share Value from (ii) the product of (a)
the Aggregate Parent Share Amount and (b) the Final Parent Share Value
by (y) the Final Parent Share Value.
(ii) In the event that the Aggregate Parent Share
Amount and the Aggregate Cash Amount are adjusted as provided for in
this Section 2.1(e), all references in this Agreement to the "Aggregate
Parent Share
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Amount" and the "Aggregate Cash Amount" shall refer to the
Aggregate Parent Share Amount and the Aggregate Cash Amount as adjusted
in this Section 2.1(e).
(iii) For purposes of this Agreement, "Final Parent
Share Value" means the arithmetic average of the high and low sales
prices of Parent Common Stock reported on the NYSE Composite Transaction
Tape on the date of the Effective Time.
SECTION 2.2 Proration.
(a) Notwithstanding any other provision contained in this
Agreement, the total number of shares of Company Common Stock to be converted
into Stock Consideration pursuant to Section 2.1(c) (the "Stock Conversion
Number") shall be equal to the quotient obtained by dividing (x) the Aggregate
Parent Share Amount by (y) the Exchange Ratio. All of the other shares of
Company Common Stock shall be converted into Cash Consideration (in each case,
excluding shares of Company Common Stock to be canceled as provided in Section
2.1(b) ).
(b) Within five business days after the Effective Time (as
defined in Section 1.3), Parent shall cause the Exchange Agent (as defined in
Section 2.4) to effect the allocation among holders of Company Common Stock of
rights to receive the Cash Consideration and the Stock Consideration as follows:
(i) If the aggregate number of shares of Company
Common Stock with respect to which Stock Elections shall have been made
(the "Stock Election Number") exceeds the Stock Conversion Number, then
all Cash Election Shares and all Non-Election Shares of each holder
thereof shall be converted into the right to receive the Cash
Consideration, and Stock Election Shares of each holder thereof will be
converted into the right to receive the Stock Consideration in respect
of that number of Stock Election Shares equal to the product obtained by
multiplying (x) the number of Stock Election Shares held by such holder
by (y) a fraction, the numerator of which is the Stock Conversion Number
and the denominator of which is the Stock Election Number, with the
remaining number of such holder's Stock Election Shares being converted
into the right to receive the Cash Consideration; and
(ii) If the Stock Election Number is less than the
Stock Conversion Number (the amount by which the Stock Conversion Number
exceeds the Stock Election Number being referred to herein as the
"Shortfall Number"), then all Stock Election Shares shall be converted
into the right to receive the Stock Consideration and the Non-Election
Shares and Cash Election Shares shall be treated in the following
manner:
(A) If the Shortfall Number is less than or equal to
the number of Non-Election Shares, then all Cash Election
Shares shall be converted into the right to receive the Cash
Consideration and the Non-Election Shares of each holder
thereof shall convert into the right to
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receive the Stock Consideration in respect of that number of
Non-Election Shares equal to the product obtained by multiplying (x) the
number of Non-Election Shares held by such holder by (y) a fraction, the
numerator of which is the Shortfall Number and the denominator of which
is the total number of Non-Election Shares, with the remaining number of
such holder's Non-Election Shares being converted into the right to
receive the Cash Consideration; or
(B) If the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be converted
into the right to receive the Stock Consideration and Cash Election
Shares of each holder thereof shall convert into the right to receive
the Stock Consideration in respect of that number of Cash Election
Shares equal to the product obtained by multiplying (x) the number of
Cash Election Shares held by such holder by (y) a fraction, the
numerator of which is the amount by which (1) the Shortfall Number
exceeds (2) the total number of Non-Election Shares and the denominator
of which is the total number of Cash Election Shares, with the remaining
number of such holder's Cash Election Shares being converted into the
right to receive the Cash Consideration.
SECTION 2.3 Company Stock Options. As of the Effective Time,
each Company Stock Option representing a right to receive Company Common Stock
upon exercise of such Company Stock Option outstanding at the Effective Time,
whether or not exercisable or vested, shall be canceled and converted into the
right to receive from Parent, subject to required withholding taxes, if any,
cash in an amount equal to the excess, if any, of (x) the Cash Consideration
over (y) the per share exercise price of such Company Stock Option for each
share of Company Common Stock subject to such Company Stock Option. The Board of
Directors of the Company has taken action pursuant to Article XII of the
Company's 2001 Non-Employee Director Long Term Equity Plan, Article XIII of the
Company's 2001 Officer Long-Term Equity Plan, Article I of the Company's
Long-Term Stock Based Incentive Plan, and Article VIII of the Company's 1995
Stock Option Plan for Non-Employee Directors to provide for the termination of
such plans as of the Effective Time and the payments contemplated by the
preceding sentence of this Section 2.3.
SECTION 2.4 Election and Exchange Procedures. Each holder of
record of shares of Company Common Stock ("Holder") shall have the right,
subject to the limitations set forth in this Article II, to submit an election
in accordance with the following procedures:
(a) Each Holder may specify in a request made in
accordance with the provisions of this Section 2.4 (herein called an "Election")
(x) the number of shares of Company Common Stock owned by such Holder with
respect to which such
7
Holder desires to make a Stock Election and (y) the number of shares of Company
Common Stock owned by such Holder with respect to which such Holder desires to
make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to
the Company (the "Form of Election") which shall be mailed to the Company's
shareholders entitled to vote at the meeting of the shareholders of the Company
at which the shareholders of the Company consider and vote on this Agreement
(the "Company Shareholders Meeting") so as to permit the Company's shareholders
to exercise their right to make an Election prior to the Election Deadline.
(c) Parent shall make the Form of Election initially
available at the time that the Proxy Statement (as defined herein) is made
available to the shareholders of the Company, to such shareholders, and shall
use all reasonable efforts to make available as promptly as possible a Form of
Election to any shareholder of the Company who requests such Form of Election
following the initial mailing of the Forms of Election and prior to the Election
Deadline. In no event shall the Form of Election be made available less than
twenty (20) days prior to the Election Deadline.
(d) Any Election shall have been made properly only if the
Person (as defined under Section 8.3) authorized to receive Elections and to act
as exchange agent under this Agreement, which Person shall be designated by
Parent and reasonably acceptable to the Company (the "Exchange Agent"), pursuant
to an agreement (the "Exchange Agent Agreement") entered into prior to Closing
and reasonably acceptable to the Company, shall have received, by 5:00 p.m.
local time in the city in which the principal office of such Exchange Agent is
located, on the date of the Election Deadline, a Form of Election properly
completed and signed and accompanied by certificates of the shares of Company
Common Stock (the "Company Stock Certificates") to which such Form of Election
relates or by an appropriate customary guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or a commercial bank or trust company in
the United States; provided, that such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery. Failure to
deliver shares of Company Common Stock covered by such a guarantee of delivery
within the time set forth on such guarantee shall be deemed to invalidate any
otherwise properly made Election, unless otherwise determined by Parent, in its
sole discretion. As used herein, "Election Deadline" means 5:00 p.m. on the date
that is the day prior to the date of the Company Shareholder Meeting. The
Company and Parent shall cooperate to issue a press release reasonably
satisfactory to each of them announcing the date of the Election Deadline not
more than fifteen (15) business days before, and at least five (5) business days
prior to, the Election Deadline.
(e) Any Company shareholder may, at any time prior to the
Election Deadline, change or revoke his or her Election by written notice
received by the Exchange Agent prior to the Election Deadline accompanied by a
properly completed and signed, revised Form of Election. Subject to the terms of
the Exchange Agent Agreement, if Parent shall determine in its reasonable
discretion that any Election is not properly made with respect to any shares of
Company Common Stock, such Election
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shall be deemed to be not in effect, and the shares of Company Common Stock
covered by such Election shall, for purposes hereof, be deemed to be
Non-Election Shares, unless a proper Election is thereafter timely made.
(f) Any Company shareholder may, at any time prior to the
Election Deadline, revoke his or her Election by written notice received by the
Exchange Agent prior to the Election Deadline or by withdrawal prior to the
Election Deadline of his or her Company Stock Certificate, or of the guarantee
of delivery of such certificates, previously deposited with the Exchange Agent.
All Elections shall be revoked automatically if the Exchange Agent is notified
in writing by Parent or the Company that this Agreement has been terminated in
accordance with Article VII.
(g) If any portion of the Merger Consideration is to be
paid to a Person other than the Person in whose name a Company Stock Certificate
so surrendered is registered, it shall be a condition to such payment that such
Company Stock Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the Person requesting such payment shall pay to the
Exchange Agent any transfer or other similar Taxes (as defined in Section
3.1(j)(xx)) required as a result of such payment to a Person other than the
registered holder of such Company Stock Certificate, or establish to the
reasonable satisfaction of the Exchange Agent that such Tax has been paid or is
not payable. The Exchange Agent (or, subsequent to the first anniversary of the
Effective Time, Parent) shall be entitled to deduct and withhold from the Merger
Consideration (including cash in lieu of fractional shares of Parent Common
Stock) otherwise payable pursuant to this Agreement to any holder of Company
Common Stock such amounts as the Exchange Agent or Parent, as the case may be,
is required to deduct and withhold under the Code, or any provision of state,
local or foreign Tax law, with respect to the making of such payment. To the
extent the amounts are so withheld by the Exchange Agent or Parent, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of shares of Company Common Stock in
respect of whom such deduction and withholding was made by the Exchange Agent or
Parent, as the case may be.
(h) After the Effective Time there shall be no further
registration or transfers of shares of Company Common Stock. If after the
Effective Time, Company Stock Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the Merger Consideration
in accordance with the procedures set forth in this Article II.
(i) At any time following the first anniversary of the
Effective Time, Parent shall be entitled to require the Exchange Agent to
deliver to it any remaining portion of the Merger Consideration not distributed
to Holders of shares of Company Common Stock that was deposited with the
Exchange Agent at the Effective Time (the "Exchange Fund") (including any
interest received with respect thereto and other income resulting from
investments by the Exchange Agent, as directed by Parent), and Holders shall be
entitled to look only to the Parent (subject to abandoned property, escheat or
other similar laws) with respect to the Merger Consideration, any cash in lieu
of fractional shares of Parent Common Stock and any dividends or other
distributions with respect to Parent Common Stock payable upon due surrender of
their Company
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Stock Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Parent nor the Exchange Agent shall be liable to any Holder of a
Company Stock Certificate for Merger Consideration (or dividends or
distributions with respect thereto) or cash from the Exchange Fund in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(j) In the event any Company Stock Certificates shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Company Stock Certificate(s) to be lost, stolen or
destroyed and, if required by Parent or the Exchange Agent, the posting by such
Person of a bond in such sum as Parent may reasonably direct as indemnity
against any claim that may be made against it or the Surviving Corporation with
respect to such Company Stock Certificate(s), the Exchange Agent will issue the
Merger Consideration deliverable in respect of the shares of Company Common
Stock represented by such lost, stolen or destroyed Company Stock Certificates.
(k) No dividends or other distributions with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to subsection (l)
below, and all such dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by Parent to the Exchange
Agent and shall be included in the Exchange Fund, in each case until the
surrender of such Company Stock Certificate in accordance with subsection (l)
below. Subject to the effect of applicable abandoned property, escheat or
similar laws, following surrender of any such Company Stock Certificate there
shall be paid to the Holder of a certificate for Parent Common Stock (a "Parent
Stock Certificate") representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such Holder is entitled pursuant to subsection (l),
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock. Parent shall make available
to the Exchange Agent cash for these purposes, if necessary.
(l) No Parent Stock Certificates representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Company Stock Certificates; no dividend or distribution by Parent shall relate
to such fractional share interests; and such fractional share interests will not
entitle the owner thereof to vote or to any rights as a shareholder of Parent.
In lieu of any such fractional shares, each Holder of a Company Stock
Certificate who would otherwise have been entitled to receive a fractional share
interest in exchange for such Company Stock Certificate shall receive from the
Exchange Agent an amount in cash equal to the product obtained by multiplying
(A) the fractional share interest to which such Holder (after taking into
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account all shares of Company Common Stock held by such holder at the Effective
Time) would otherwise be entitled by (B) the Closing Parent Share Value.
Notwithstanding any other provision contained in this Agreement, funds utilized
to acquire fractional shares as aforesaid shall be furnished by Parent on a
timely basis and shall in no event be derived from or diminish the Cash
Consideration available for distribution as part of the Merger Consideration.
(m) Subject to the terms of the Exchange Agent Agreement,
Parent, in the exercise of its reasonable discretion, shall have the right to
make all determinations, not inconsistent with the terms of this Agreement,
governing (A) the validity of the Forms of Election and compliance by any
Company Shareholder with the Election procedures set forth herein, (B) the
manner and extent to which Elections are to be taken into account in making the
determinations prescribed by Section 2.4, (C) the issuance and delivery of
Parent Stock Certificates into which shares of Company Common Stock are
converted in the Merger and (D) the method of payment of cash for shares of
Company Common Stock converted into the right to receive the Cash Consideration
and cash in lieu of fractional shares of Parent Common Stock where the holder of
the applicable Company Stock Certificate has no right to receive whole shares of
Parent Common Stock.
(n) As soon as reasonably practicable following the
Effective Time (and in any event within five business days following the
Closing), Parent will deposit with the Exchange Agent (i) certificates
representing the number of shares of Parent Common Stock sufficient to deliver
in a timely manner, and the Parent shall instruct the Exchange Agent to timely
deliver, the aggregate Stock Consideration, and (ii) immediately available funds
equal to the aggregate Cash Consideration and Parent shall instruct the Exchange
Agent to timely pay the Cash Consideration, and cash in lieu of fractional
shares of Parent Common Stock where the holder of the applicable Company Stock
Certificate has no right to receive whole shares of Parent Common Stock.
(o) As soon as reasonably practicable, but no later than
seven business days after the Effective Time, the Exchange Agent shall mail to
each holder of record of a Company Stock Certificate(s) which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1 and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor who did not complete
an Election Form, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Company Stock
Certificate(s) shall pass, only upon delivery of the Company Stock
Certificate(s) (or affidavits of loss in lieu of such certificates) (the "Letter
of Transmittal") to the Exchange Agent and shall be substantially in such form
and have such other provisions as shall be prescribed by the Exchange Agent
Agreement and (ii) instructions for use in surrendering the Company Stock
Certificate(s) in exchange for the Merger Consideration and any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.4(k)
and any dividends or distributions to which such holder is entitled pursuant to
Section 2.4(j).
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(p) Upon surrender to the Exchange Agent of its Company
Stock Certificate or Company Stock Certificates, accompanied by a properly
completed Form of Election or a properly completed Letter of Transmittal a
Holder of Company Common Stock will be entitled to receive promptly after the
Effective Time the Merger Consideration (elected or deemed elected by it,
subject to Sections 2.1 and 2.2) in respect of the shares of Company Common
Stock represented by its Company Stock Certificate. Until so surrendered, each
such Company Stock Certificate shall represent after the Effective Time, for all
purposes, only the right to receive the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.4(k) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.3(l).
SECTION 2.5 Certain Adjustments. If after the date hereof and
on or prior to the Effective Time the outstanding shares of Parent Common Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization or combination, stock split, reverse stock
split, stock dividend or rights issued in respect of such stock, or any similar
event shall occur (any such action, a "Parent Adjustment Event"), the Exchange
Ratio shall be proportionately adjusted so that each Holder of Company Common
Stock shall receive at the Effective Time, in exchange for his Stock Election
Shares and, if applicable, his Cash Election Shares and Non-Election Shares
which have been converted into the right to receive the Stock Consideration
pursuant to Section 2.2(b), such number of shares of Parent Common Stock as such
Holder would be entitled to receive if the Effective Time had occurred
immediately prior to the consummation of such Parent Adjustment Event. In
addition, if Parent enters into an agreement pursuant to which shares of Parent
Common Stock would be converted, prior to the Effective Time, into shares or
other securities or obligations of another corporation, proper provision shall
be made in such agreement so that each holder of Company Common Stock shall be
entitled to receive, in exchange for his Stock Election shares and, if
applicable, his Cash Election Shares and Non-Election Shares which have been
converted into the right to receive the Stock Consideration pursuant to Section
2.2(b), such number of shares or other securities or amount of obligations of
such other corporation as such holder of Company Common Stock would have been
entitled to receive if the Effective Time had occurred immediately prior to the
consummation of such conversion.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") and making reference to the particular subsection of this Agreement
to which exception is being taken, the Company represents and warrants to Parent
as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its Subsidiaries is a
corporation or other legal entity duly organized, validly existing and
in good standing (with respect to jurisdictions which recognize such
concept) under the laws of the jurisdiction in which it is organized and
has the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified, or licensed or
to be in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company.
(ii) The Company has delivered or made available to
Parent prior to the execution of this Agreement complete and correct
copies of the certificate of incorporation and by-laws or other
organizational documents, as amended to date, of the Company and its
Subsidiaries.
(iii) Except as set forth in Section 3.1(a) of the
Company Disclosure Schedule, the minute books of the Company and its
Subsidiaries, in all material respects, contain accurate records of all
meetings and accurately reflect all other material actions taken by the
shareholders of the Company and its Subsidiaries, the boards of
directors of the Company and its Subsidiaries and all standing
committees of the boards of directors of the Company and its
Subsidiaries.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure
Schedule lists all the Subsidiaries of the Company, whether consolidated or
unconsolidated. The issued and outstanding securities of UnitedTrust Bank (the
"Bank") consists solely of 4,651,193 issued and outstanding shares of common
stock, par value $2.50 per share. Except for the securities of the Bank
identified above, the issued and outstanding securities of the Subsidiaries of
the Company consist of such securities as are set forth in Section 3.1(b) of the
Company Disclosure Schedule. Except as set forth in Section 3.1(b) of the
Company Disclosure Schedule, all outstanding shares of capital stock of, or
other equity interests in, each such Subsidiary: (i) have been validly issued
and are fully paid and nonassessable; (ii) are owned directly or indirectly by
the
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Company (other than the preferred stock of the Company REIT (as defined in
Section 3.1(j)(xviii)) (the "REIT Preferred Stock"), which is owned by the
Persons and in the amounts set forth in Section 3.1(b) of the Company Disclosure
Schedule), free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens"),
other than Company Permitted Liens (as defined in this Section 3.1(b)); and
(iii) other than Company Permitted Liens, are free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests) that would prevent the
operation by the Surviving Corporation of such Subsidiary's business as
currently conducted. Neither the Company nor any of its Subsidiaries conducts
any operations outside of the United States (as defined in this Section 3.1(b))
nor conducts any operations that are subject to any regulatory oversight by
Governmental Entities (as defined below in Section 3.1(d)) outside of the United
States. Other than the Subsidiaries of the Company, the Company does not own or
control, directly or indirectly, a 5% or greater equity interest in any
corporation, company, association, partnership, joint venture or other entity.
For purpose of this Section 3.1(b) (except as indicated) and elsewhere through
this Agreement: (i) "Company Permitted Liens" shall mean (A) Liens described in
Section 3.1(b) of the Company Disclosure Schedule; (B) restrictions on
transferability pursuant to federal and state securities laws; (C) Liens for
Taxes not yet due or delinquent or being contested in good faith and for which
reserves appropriate in all material respects have been established in
accordance with GAAP (as defined in Section 3.1(e)(ii)); (D) only in the case of
Owned Properties or real property subject to a Lease, Liens consisting of zoning
or planning restrictions, easements, permits, or any other restrictions or
limitations on the use of real property or irregularities in title thereto which
do not materially detract from the value of, or affect the current use of, such
property; and (E) other than for purposes of Section 3.1(b), mechanics,
workers', landlord's, materialmen's and other like Liens arising in the ordinary
course of business consistent with past practice and with respect to
non-material obligations which are not due or which are being contested in good
faith; and (ii) "United States" shall mean the United States of America, its
territories and possessions, any state of the United States and the District of
Columbia.
(c) Capital Structure. The authorized capital stock of the
Company consists of 25,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $1.25 per share, of the Company ("Company
Preferred Stock"), of which 162,000 shares have been designated as Series A
Junior Participating Preferred Stock ("Company Series A Preferred Stock"). As of
August 20, 2003: (i) 18,822,954 shares of Company Common Stock were issued and
outstanding, of which 3,500 shares are restricted shares of Company Common Stock
issued pursuant to the Company Stock Plans (as defined in this Section 3.1(c));
(ii) 2,180,223 shares of Company Common Stock were held by the Company in its
treasury and no shares of Company Common Stock were held by Subsidiaries of the
Company; (iii) no shares of Company Preferred Stock were issued and outstanding;
(iv) no shares of Company Preferred Stock were held by the Company in its
treasury or were held by any Subsidiary of the Company; (v) 1,526,190 shares of
Company Common Stock were reserved for issuance pursuant to all plans,
agreements or arrangements providing for equity-based compensation to any
director, Employee (as defined in Section 3.1(f)), consultant or
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independent contractor of the Company or any of its Subsidiaries (collectively,
the "Company Stock Plans"), of which 774,015 shares are subject to outstanding
Company Stock Options (as defined in this Section 3.1(c)); and (vi) 162,000
shares of Company Series A Preferred Stock were reserved for issuance pursuant
to the Company Rights Agreement. All outstanding shares of capital stock of the
Company are, and all shares thereof which may be issued prior to the Closing
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Company has delivered to
Parent a true and complete list, as of the close of business on August 20, 2003,
of all outstanding stock options to purchase or receive Company Common Stock and
all other rights to purchase or receive Company Common Stock granted under the
Company Stock Plans (collectively, the "Company Stock Options"), the number of
shares subject to each such Company Stock Option, the grant dates, the vesting
schedule and the exercise prices of each such Company Stock Option and the names
of the holders thereof. The Company has not awarded or authorized the award of
any Company Stock Options since August 20, 2003. Except as set forth in this
Section 3.1(c) and except for changes since August 20, 2003 resulting from (i)
the issuance of shares of Company Common Stock pursuant to and in accordance
with Company Stock Options outstanding prior August 20, 2003 or (ii) as
expressly contemplated hereby, (x) there are not issued, reserved for issuance
or outstanding (A) any shares of capital stock or voting securities or other
ownership interests of the Company, (B) any securities of the Company or any
Subsidiary of the Company convertible into or exchangeable or exercisable for
shares of capital stock or voting securities or other ownership interests of the
Company, or (C) any warrants, calls, options or other rights to acquire from the
Company or any Subsidiary of the Company, or any obligation of the Company or
any of its Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or securities convertible into or exchangeable or
exercisable for, capital stock or voting securities or other ownership interests
of the Company, and (y) there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities, other than pursuant to any "cashless exercise"
provision of any Company Stock Options. Except as set forth in Section 3.1(c) of
the Company Disclosure Schedule, there are no outstanding (A) securities of the
Company or any of its Subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other ownership
interests in any Subsidiary of the Company, (B) warrants, calls, options or
other rights to acquire from the Company or any of its Subsidiaries, or any
obligation of the Company or any of its Subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for, any capital stock, voting
securities or other ownership interests in, any Subsidiary of the Company or (C)
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any such outstanding securities of Subsidiaries of the Company
or to issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. Neither the Company nor any of its Subsidiaries is a party and, to
the knowledge of the Company, no other Person having beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of 5% or more of the outstanding Company Common
Stock (a "Major Company Shareholder") is a party to any agreement restricting
the transfer of, relating to the voting of, requiring registration of, or
granting
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any preemptive or antidilutive rights with respect to any of the securities of
the Company or any of its Subsidiaries. There are no voting trusts or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party or, to the knowledge of the Company, any Major Company Shareholder is a
party with respect to the voting of the capital stock of the Company or any of
the Subsidiaries.
(d) Authority; Noncontravention. The Company has all
requisite corporate power and authority to enter into this Agreement and,
subject, in the case of the Merger, to the Company Shareholder Approval (as
defined in Section 3.1(r)) to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
by the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject, in the
case of the Merger, to the Company Shareholder Approval. This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforceability may be subject to
applicable bankruptcy, insolvency or other similar laws now or hereafter in
effect affecting creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought. Except as set
forth in Section 3.1(d) of the Company Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby (including the Bank Combination (as defined in Section 5.3))
and compliance with the provisions of this Agreement will not, conflict with, or
result in any violation, forfeiture or termination of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
forfeiture, termination, cancellation or acceleration (with or without notice or
lapse of time, or both) of any obligation or loss of a benefit or, in the case
of clause (iii) below, any obligation or loss of a benefit, or payment of any
termination or similar fee, under, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under,
(i) the certificate of incorporation or by-laws of the Company, (ii) the
certificate of incorporation or by-laws or the comparable organizational
documents of any of its Subsidiaries, (iii) any loan or credit agreement, note,
bond, mortgage, indenture, lease, vendor agreement, software agreement or other
agreement, instrument, Intellectual Property (as defined in Section 3.1(n))
right, permit, concession, franchise, license or similar authorization
applicable to the Company or any of its Subsidiaries or their respective
properties or assets that is material to the operations of the Company and its
Subsidiaries, taken as a whole, or (iv) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or their respective properties or assets, other than, in
the case of clause (ii), (iii) or (iv) only, any such conflicts, violations,
defaults, rights, losses or Liens that would not, individually or in the
aggregate (x) reasonably be expected to result in a Material Adverse Effect on
the Company or (y) reasonably be expected to materially impair or materially
delay the ability of the Company to perform its obligations under this
Agreement. Except as set forth in Section 3.1(d) of the Company Disclosure
Schedule,
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no consent, approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any (i) Federal, state, local,
municipal or foreign government, (ii) governmental, quasi-governmental authority
(including any governmental agency, commission, branch, department or official,
and any court or other tribunal) or body exercising, or entitled to exercise,
any governmentally-derived administrative, executive, judicial, legislative,
police, regulatory or taxing authority, or (iii) any self-regulatory
organization, administrative or regulatory agency, commission or authority
(each, a "Governmental Entity") is required by or with respect to the Company or
any of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for (1) the filings with the SEC of (A) a proxy
statement relating to the Company Shareholders Meeting (such proxy statement, as
amended or supplemented from time to time, the "Proxy Statement"), and the
clearance thereof by the SEC, and a registration statement on Form S-4 to be
prepared and filed in connection with the issuance of Parent Common Stock in the
Merger (the "Form S-4"), and the declaration of effectiveness thereof by the
SEC, and (B) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement; (2) the filing of the Certificate of Merger with the Secretary of
State of the State of New Jersey and the Secretary of State of the State of
Delaware and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which the Company and its Subsidiaries are
qualified or licensed to do business or state securities or "blue sky" laws; (3)
the approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"); (4) the approval of the New Jersey Department of Banking and
Insurance (the "New Jersey Banking Department"); (5) the approval of the Office
of the Comptroller of the Currency (the "OCC"); and (6) filings required as a
result of the particular status of Parent or Merger Sub. No shareholder of the
Company will have any appraisal or dissenters' or similar rights in connection
with the Merger.
(e) Company Documents; Undisclosed Liabilities.
(i) The Company has filed (A) all required reports
with the SEC and (B) all required schedules, forms, statements and other
documents (including exhibits and all other information incorporated
therein) with the SEC (together with the reports referred to in clause
(A), the "Company SEC Documents"), except in the case of (A) as would
not reasonably be expected to result in a Material Adverse Effect on the
Company. As of their respective filing dates, (i) except as set forth in
Section 3.1(e) of the Company Disclosure Schedule, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Documents, and
(ii) no Company SEC Document, as of its date, except as amended or
supplemented by a subsequent Company Filed SEC Document (as defined in
Section 3.1(g)), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not
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misleading, and no Company SEC Document filed subsequent to the
date hereof will contain as of its date, any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. No subsidiary of the Company is required to file
reports or other materials with the SEC other than reports of the
Bank filed on Form 13F.
(ii) The financial statements of the Company and its
consolidated Subsidiaries included in Company SEC Documents (including
the related notes) complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject in the case of unaudited statements, to normal year-end audit
adjustments and to other adjustments described in the notes to such
unaudited statements).
(iii) Except (A) as reflected in the Company's
unaudited balance sheet as of June 30, 2003 or liabilities described in
any notes thereto (or liabilities for which neither accrual nor footnote
disclosure is required pursuant to GAAP) or (B) for liabilities incurred
in the ordinary course of business since June 30, 2003 consistent with
past practice or in connection with this Agreement or the transactions
contemplated hereby, the Company and its Subsidiaries, taken as a whole,
do not have any material liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise.
(iv) The Company's and its Subsidiaries' books and
records fairly reflect in all material respects the transactions to
which each of the Company and its Subsidiaries are a party or by which
its or its Subsidiaries properties or assets are subject or bound. Such
books and records have been properly kept and maintained and are in
compliance with all applicable legal and accounting requirements.
(f) Certain Contracts. Except as set forth in the exhibit
index for the Company's Annual Report on Form 10-K for the year ended December
31, 2002 or as permitted pursuant to Section 4.1 or as set forth on Section
3.1(f) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by (i) any agreement relating to the
incurring of Indebtedness (as defined in this Section 3.1(f)) by the Company or
any of its Subsidiaries in an amount in excess in the aggregate of $1,000,000,
including any such agreement which contains provisions that restrict, or may
restrict, the conduct of business of the issuer thereof as currently conducted
(collectively, "Instruments of Indebtedness"), (ii) any "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) any
non-
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competition or exclusive dealing agreement, or any other agreement or obligation
which purports to limit or restrict in any respect (A) the ability of the
Company or its businesses to solicit customers or (B) the manner in which, or
the localities in which, all or any portion of the business of the Company and
its Subsidiaries or, following consummation of the transactions contemplated by
this Agreement, Parent and its Subsidiaries, is or would be conducted, (iv) any
agreement providing for the indemnification by the Company or a Subsidiary of
the Company of any Person other than customary agreements with directors or
officers of the Company or its Subsidiaries or with vendors providing goods or
services to the Company or its Subsidiaries where the potential indemnity
obligations thereunder are not reasonably expected to be material to the Company
and its Subsidiaries, taken as a whole, (v) any joint venture or partnership
agreement material to the Company and its Subsidiaries taken as a whole, (vi)
any agreement that grants any right of first refusal or right of first offer or
similar right or that limits or purports to limit the ability of the Company or
any of its Subsidiaries to own, operate, sell, transfer, pledge or otherwise
dispose of any assets or business, (vii) any contract or agreement providing for
any payments that are conditioned, in whole or in part, on a change of control
of the Company or any of its Subsidiaries, (viii) any collective bargaining
agreement, (ix) any employment agreement (other than agreements terminable by
the Company or any Subsidiary of the Company on not more than 30 days' notice
without penalty and which will not in any respect be affected by a change of
control of the Company), with, or any agreement or arrangement that contains any
severance pay or post-employment liabilities or obligations (other than as
required by law) to, any current or former employee of the Company or its
Subsidiaries (any such Person, hereinafter, an "Employee") who is a Key Employee
(as defined under Section 3.1(g)), (x) any agreement regarding any agent bank or
other similar relationships with respect to lines of business, (xi) any
agreement that contains a "most favored nation" clause or other term providing
preferential pricing or treatment to a third party, (xii) any agreement material
to the Company and its Subsidiaries, taken as a whole, pertaining to the use of
or granting any right to use or practice any rights under any Intellectual
Property, whether the Company is the licensee or licensor thereunder, (xiii) any
agreements pursuant to which the Company or any of its Subsidiaries leases any
real property, (xiv) any contract or agreement material to the Company and its
Subsidiaries, taken as a whole, providing for the outsourcing or provision of
servicing of customers, technology or product offerings of the Company or its
Subsidiaries, and (xv) any contract or other agreement not made in the ordinary
course of business which (A) is material to the Company and its Subsidiaries
taken as a whole or (B) which would reasonably be expected to materially delay
the consummation of the Merger or any of the transactions contemplated by this
Agreement (the agreements, contracts and obligations of the type described in
clauses (i) through (xv) being referred to herein as "Company Material
Contracts"). Each Company Material Contract is valid and binding on the Company
(or, to the extent a Subsidiary of the Company is a party, such Subsidiary) and,
to the knowledge of the Company, any other party thereto and is in full force
and effect. Neither the Company nor any of its Subsidiaries is in breach or
default under any Company Material Contract except where any such breach or
default would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company. Neither the Company nor any
Subsidiary of the Company knows of, or has received notice of, any violation or
default under (nor, to the knowledge
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of the Company, does there exist any condition which with the passage of time or
the giving of notice or both would result in such a violation or default under)
any Company Material Contract by any other party thereto except where any such
violation or default would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. Prior to the
date hereof, the Company has made available to Parent true and complete copies
of all Company Material Contracts. There are no provisions in any Instrument of
Indebtedness that provide any restrictions on the repayment of the outstanding
Indebtedness thereunder, or that require that any financial payment (other than
payment of outstanding principal and accrued interest) be made in the event of
the repayment of the outstanding Indebtedness thereunder prior to expiration.
For purposes of this Section 3.1(f) and elsewhere through this Agreement,
"Indebtedness" of a Person shall mean (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes and similar instruments, (iii) all leases of such Person
capitalized in accordance with GAAP, and (iv) all obligations of such Person
under sale-and-lease back transactions, agreements to repurchase securities sold
and other similar financing transactions.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and except as set forth in Section 3.1(g) of the Company
Disclosure Schedule, or as disclosed in the Company SEC Documents filed and
publicly available prior to the date hereof (as amended to the date hereof,
"Company Filed SEC Documents"), since June 30, 2003, the Company and its
Subsidiaries have conducted their respective businesses, in all respects
material to the Company and its Subsidiaries, taken as a whole, only in the
ordinary course and there has not been:
(i) any Material Adverse Change in the Company,
including, but not limited to, any Material Adverse Change arising from
or relating to fraudulent or unauthorized activity,
(ii) any issuance of Company Stock Options or
restricted shares of Company Common Stock to any Employee receiving
aggregate compensation in excess of $100,000 on an annual basis (a "Key
Employee") or member of the board of directors of the Company or any of
its Subsidiaries (in any event identifying in Section 3.1(g)(ii) of the
Company Disclosure Schedule the issue date, exercise price and vesting
schedule, as applicable, for issuances thereto since June 30, 2003),
(iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock, other than regular
quarterly cash dividends not in excess of $0.20 per share on the Company
Common Stock and regular cash dividends on the REIT Preferred Stock and
the other capital stock of the Company REIT in the amounts and at the
times set forth in Section 3.1(g)(iii) of the Company Disclosure
Schedule,
(iv) any split, combination or reclassification of any
of the Company's capital stock or any issuance
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or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of the Company's
capital stock, except for issuances of Company Common Stock
pursuant to the Company Stock Plans or upon the exercise of Company
Stock Options awarded prior to the date hereof in accordance with
their present terms,
(v) (A) any granting by the Company or any of its
Subsidiaries to any current or former director, or any Executive Officer
(as defined in Section 8.3) or Key Employee, of any increase in
compensation, bonus or other benefits, except for (x) increases to
Employees who are not current or former directors, Executive Officers or
Key Employees that were made in the ordinary course of business, (y) as
required from time to time by governmental legislation affecting wages
and (z) as required by the terms of plans or arrangements existing prior
to such date and described in Section 3.1(k) of the Company Disclosure
Schedule, (B) any granting by the Company or any of its Subsidiaries to
any such current or former director, or any Executive Officer or Key
Employee, of any increase in severance or termination pay, or (C) any
entry by the Company or any of its Subsidiaries into, or any amendment
of, any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or former
director, or any Executive Officer or Key Employee, except as required
from time to time by applicable governmental legislation,
(vi) other than as described in the Company's Filed
SEC Documents, any change in any material respect in accounting methods,
principles or practices by the Company affecting its assets, liabilities
or business, including any reserving, renewal or residual method, or
estimate of practice or policy, other than changes after the date hereof
to the extent required by a change in GAAP or regulatory accounting
principles,
(vii) any Tax election or change in or revocation of
any Tax election, amendment to any Tax Return (as defined in Section
3.1(j)), closing agreement with respect to Taxes, or settlement or
compromise of any income Tax liability by the Company or its
Subsidiaries,
(viii) any material change in investment policies, or
(ix) any agreement or commitment (contingent or
otherwise) to do any of the foregoing.
(h) Licenses; Compliance with Applicable Laws
(i) Section 3.1(h) of the Company Disclosure Schedule
sets forth a true and complete listing of all states in which the
Company and its Subsidiaries are licensed to conduct business. The
Company, its Subsidiaries and Employees hold all permits, licenses,
variances, authorizations, exemptions, orders, registrations and
approvals of all Governmental Entities (the "Permits") material to the
Company and its Subsidiaries, taken as a whole, which are required for
the operation of the respective businesses of the Company and its
21
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Subsidiaries as presently conducted. Each of the Company and its
Subsidiaries is, and for the last five years has been, in compliance in
all respects with the terms of such Permits and all such Permits are in
full force and effect and no suspension modification or revocation of
any of them is pending or, to the knowledge of the Company, threatened
nor, to the knowledge of the Company, do grounds exist for any such
action, except where non-compliance or such suspension modification or
revocation would not individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company.
(ii) Except as set forth in the Company SEC Documents
filed and publicly available prior to the date hereof, and except where
failure to comply would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company, each of the Company and its Subsidiaries is, and for the last
five years has been, in compliance with all applicable statutes, laws,
regulations, ordinances, Permits, rules, judgments, orders, decrees or
arbitration awards of any Governmental Entity applicable to the Company
or its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries
is subject to any outstanding order, injunction or decree or is a party
to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any resolutions
at the request of, any Governmental Entity that restricts in any respect
the conduct of its business or that in any respect relates to its
capital adequacy, its policies, its management or its business (each, a
"Company Regulatory Agreement"), nor has the Company or any of its
Subsidiaries or Affiliates (as defined in Section 8.3(a)) (A) to the
Company's knowledge, been advised since January 1, 2000 by any
Governmental Entity that it is considering issuing or requesting any
such Company Regulatory Agreement or (B) have knowledge of any pending
or threatened regulatory investigation. Neither the Company nor any of
its Subsidiaries is in breach or default under any Company Regulatory
Agreement in any material respect. Prior to the date hereof, the Company
has made available to Parent true and complete copies of all Company
Regulatory Agreements that currently have, or may in the future
reasonably be expected to have, a material impact on the conduct of the
business and operations of the Company and its Subsidiaries, taken as a
whole.
(iv) Except for filings with the SEC, which are the
subject of Section 3.1(e), the Company and each of its Subsidiaries have
timely filed all regulatory reports, schedules, forms, registrations and
other documents, together with any amendments required to be made with
respect thereto, that they were required to file with any Governmental
Entity (the "Other Company Documents"), and have timely paid all fees
and assessments due and payable in connection therewith, except where
the failure to make such payments and filings would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect on the Company. There is no unresolved violation or
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exception by any of such Governmental Entities with respect to any
report or statement relating to any examinations of the Company or any
of its Subsidiaries. The Company has delivered or made available to
Parent a true and complete copy of each Other Company Document material
to the Company and its Subsidiaries, taken as a whole, as requested by
Parent.
(v) Neither the Company nor any of its Subsidiaries
has been the subject of any disciplinary proceedings or orders of any
Governmental Entity arising under applicable laws or regulations which
would be required to be disclosed in any Other Company Document except
as disclosed therein, and no such disciplinary proceeding or order is
pending, nor to the knowledge of the Company threatened. None of the
current directors, Executive Officers or Employees of the Company or its
Subsidiaries has been the subject of any disciplinary proceedings or
orders of any Governmental Entity arising under applicable laws or
regulations which would be required to be disclosed in any Other Company
Document except as disclosed therein, and no such disciplinary
proceeding or order is pending, nor to the knowledge of the Company
threatened, except where non-disclosure, or such preceding or order,
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company.
(vi) Neither the Company or any of its Affiliates,
nor, to the knowledge of the Company, any "affiliated person" (as
defined in the Investment Company Act) of the Company or any of its
Affiliates, is ineligible pursuant to Section 9(a) or 9(b) of the
Investment Company Act of 1940 to act as, or subject to any
disqualification which would form a reasonable basis for any denial,
suspension or revocation of the registration of or licenses or for any
limitation on the activities of the Company or any of its Affiliates as,
an investment advisor (or in any other capacity contemplated by said
Act) to a registered investment company and so acts. Neither the Company
or any of its Affiliates, nor to the knowledge of the Company, any
"associated person of a broker or dealer" (as defined in the Exchange
Act) of the Company or any of its Affiliates, is ineligible pursuant to
Section 15(b) of the Exchange Act to act as a broker-dealer or as an
associated person to a registered broker-dealer or is subject to a
"statutory disqualification" as defined in Section 3(a)(39) of the
Exchange Act or otherwise ineligible to serve as a broker-dealer or as
an associated person to a registered broker-dealer and so acts.
(vii) The Bank is "well-capitalized" (as that term is
defined at 12 C.F.R. 225.2(r)(2)(i)) and "well managed" (as that term is
defined at 12 C.F.R. 225.81(c)), and its examination rating under the
Community Reinvestment Act of 1977 is "satisfactory".
(viii) The business and operations of the Company and
of each of the Company's Subsidiaries through which the Company conducts
its finance activities have been conducted in compliance with all
applicable statutes and regulations regulating the business of consumer
lending, including state usury laws, the Truth in Lending Act, the Real
Estate Settlement Procedures Act, the
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Consumer Credit Protection Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Homeowners Ownership and Equity
Protection Act, the Fair Debt Collections Act and other Federal, state,
local and foreign laws regulating lending ("Finance Laws"), and have
complied with all applicable collection practices in seeking payment
under any loan or credit extension of such Subsidiaries, except where
non-compliance would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on the Company. In
addition, there is no pending or, to the knowledge of the Company,
threatened charge by any Governmental Entity that the Company or any of
its Subsidiaries has violated, nor any pending or, to the knowledge of
the Company, threatened investigation by any Governmental Entity with
respect to possible violations of, any applicable Finance Laws.
(ix) Neither the Company nor any of its Subsidiaries,
nor to the knowledge of the Company any other Person acting on behalf of
the Company or any of its Subsidiaries that qualifies as a "financial
institution" under the U.S. Anti-Money Laundering laws has knowingly
acted, by itself or in conjunction with another, in any act in
connection with the concealment of any currency, securities, other
proprietary interest that is the result of a felony as defined in the
U.S. Anti-Money Laundering laws ("Unlawful Gains"), nor knowingly
accepted, transported, stored, dealt in or brokered any sale, purchase
or any transaction of other nature for Unlawful Gains, except insofar as
would not individually or in the aggregate reasonably be expected to
result in a Material Adverse Effect on the Company. The Company and each
of its Subsidiaries that qualifies as a "financial institution" under
the U.S. Anti-Money Laundering laws has, during the past three years,
implemented such anti-money laundry mechanisms and kept and filed all
material reports and other necessary material documents as required by,
and otherwise complied with, the U.S. Anti-Money Laundering laws and the
rules and regulations issued thereunder, except insofar as would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company.
(i) Litigation. Except as set forth in Section 3.1(i) of
the Company Disclosure Schedule, which contains a true and current summary
description of any pending and, to the Company's knowledge, threatened
litigation, action, suit, proceeding, investigation or arbitration material to
the Company and its Subsidiaries, taken as a whole, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedies requested as of the date hereof, no action, demand, charge, requirement
or investigation by any Governmental Entity and no litigation, action, suit,
proceeding, investigation or arbitration by any Person or Governmental Entity
that is material to the Company and its Subsidiaries, taken as a whole, in each
case with respect to the Company or any of its Subsidiaries or any of their
respective properties or Permits, is pending or, to the knowledge of the
Company, threatened.
(j) Taxes. For purposes of this Section 3.1(j) any
reference to the Company or the Company's Subsidiaries shall be deemed to
include a reference to
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the Company's predecessors or the Company's Subsidiaries' predecessors,
respectively, except where inconsistent with the language of this Section
3.1(j).
(i) Each of the Company and each of its Subsidiaries
has (A) timely filed (or there have been timely filed on its behalf)
with the appropriate Governmental Entities all Tax Returns material to
the Company and its Subsidiaries, taken as a whole, required to be filed
by it (giving effect to all extensions) and such Tax Returns are true,
correct and complete in all material respects; (B) timely paid in full
(or there has been timely paid in full on its behalf) all Taxes material
to the Company and its Subsidiaries, taken as a whole, and (C) made
adequate provision in all material respects (or adequate provision in
all material respects has been made on its behalf) for all accrued Taxes
not yet due. The accruals and reserves for Taxes reflected in the
Company's audited consolidated balance sheet as of December 31, 2002
(and the notes thereto) and the most recent quarterly financial
statements (and the notes thereto) are adequate in all material respects
to cover all Taxes accrued or accruable through the date thereof.
(ii) There are no material Liens for Taxes upon any
property or assets of the Company or any Subsidiary of the Company,
except for Company Permitted Liens for Taxes not yet due.
(iii) Each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has,
within the time and in the manner prescribed by law, withheld and paid
over to the proper Governmental Entities all amounts required to be so
withheld and paid over under applicable laws.
(iv) Except as set forth in Section 3.1(j)(iv) of the
Company Disclosure Schedule, no Federal, state, local or foreign audits
or other administrative proceedings or court proceedings material to the
Company and its Subsidiaries, taken as a whole, are presently pending
with regard to any Taxes or Tax Returns of the Company or any of its
Subsidiaries, and neither the Company nor any Subsidiary of the Company
has received a written notice of any pending or proposed claims, audits
or proceedings with respect to Taxes that are material to the Company.
(v) Neither the Company nor any of its Subsidiaries
has granted in writing any power of attorney which is currently in force
with respect to any Taxes or Tax Returns.
(vi) Other than in the ordinary course of business,
neither the Company nor any of its Subsidiaries has requested an
extension of time within which to file any Tax Return which has not
since been filed and no currently effective waivers, extensions, or
comparable consents regarding the application of the statute of
limitations with respect to Taxes or Tax Returns has been given by or on
behalf of the Company or any of its Subsidiaries.
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(vii) Neither the Company nor any of its Subsidiaries
is a party to any agreement providing for the allocation, sharing or
indemnification of Taxes (other than such an agreement exclusively
between or among the Company and any of its Subsidiaries).
(viii) None of the Federal income Tax Returns of the
Company or any of its Subsidiaries has been examined by the Internal
Revenue Service (the "IRS"), and there are no pending disputes with the
IRS regarding the Federal income Tax Returns of the Company or any of
its Subsidiaries.
(ix) Neither the Company nor any of its Subsidiaries
has been included in any "consolidated," "unitary" or "combined" Tax
Return (other than Tax Returns which include only the Company and any of
its Subsidiaries) provided for under the laws of the United States, any
foreign jurisdiction or any state or locality.
(x) No election under Section 341(f) of the Code has
been made by the Company or any of its Subsidiaries.
(xi) Neither the Company nor any of its Subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in
a distribution of stock to which Section 355 of the Code (or so much of
Section 356 of the Code as relates to Section 355 of the Code) applies
and which occurred within five years of the date of this Agreement.
(xii) Neither the Company nor any of its Subsidiaries
have agreed, or is required, to make any adjustment under Section 481 of
the Code affecting any taxable year.
(xiii) There have not been, within two years of the
date of this Agreement, any (i) redemptions by the Company or any of its
Subsidiaries, (ii) transfers or dispositions of property by the Company
or any of its Subsidiaries for which the Company or its Subsidiary did
not receive adequate consideration, or (iii) distributions to the
holders of Company Common Stock with respect to their stock other than
distributions of cash in the ordinary course of business.
(xiv) No claim material to the Company and its
Subsidiaries, taken as a whole, has been made by any Governmental
Entities in a jurisdiction where the Company or any of its Subsidiaries
does not file Tax Returns that any such entity is, or may be, subject to
taxation by that jurisdiction.
(xv) Each of the Company and each of its Subsidiaries
has made available to Parent correct and complete copies of (i) all Tax
Returns filed within the past three years material to the Company and
its Subsidiaries, taken as a whole, (ii) all audit reports, letter
rulings, technical advice memoranda and similar documents issued by a
Governmental Entity within the past three years relating to the Federal,
state, local or foreign Taxes due from or with respect
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to the Company or any of its Subsidiaries, and (iii) any closing
letters or agreements entered into by the Company or any of its
Subsidiaries with any Governmental Entities within the past three years
with respect to Taxes.
(xvi) Neither the Company nor any of its Affiliates or
Subsidiaries has taken or agreed to take any action, has failed to take
any action or knows of any fact, agreement, plan or other circumstance
that could reasonably be expected to prevent the Merger from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code.
(xvii) Neither the Company nor any of its Subsidiaries
has received any notice of deficiency or assessment from any
Governmental Entity for any amount of Tax that has not been fully
settled or satisfied, and to the knowledge of the Company and its
Subsidiaries no such deficiency or assessment is proposed.
(xviii) Neither the Company nor any of its
Subsidiaries has been a party to a "listed transaction" within the
meaning of Treasury Regulations Section 1.6011-4(b)(2).
(xix) Bridgewater Mortgage Company, Inc. (the "Company
REIT") (A) was formed in March, 1997, (B) has been at all times since
the date of its formation a "real estate investment trust" as defined in
Section 856(a) of the Code, (C) has met at all times since the date of
its formation the requirements of Section 857(a) of the Code, (D) has
not relied at any time since the date of its formation on Section
856(c)(6) of the Code, (E) has not had at any time since the date of its
formation any "net income derived from prohibited transactions" within
the meaning of Section 857(b)(6) of the Code and (F) has not issued any
stock or securities as part of a multiple party financing transaction
described in IRS Notice 97-21, 1997-11 I.R.B. 2, or Treasury Regulations
Section 1.7701(l)-3.
(xx) For purposes of this Agreement (A) "Tax" or
"Taxes" shall mean (x) any and all taxes, customs, duties, tariffs,
imposts, charges, deficiencies, assessments, levies or other like
governmental charges, including income, gross receipts, excise, real or
personal property, ad valorem, value added, estimated, alternative
minimum, stamp, sales, withholding, social security, occupation, use,
service, service use, license, net worth, payroll, franchise, transfer
and recording taxes and charges, imposed by the IRS or any other taxing
authority (whether domestic or foreign including any state, county,
local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall
include any interest, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such amounts,
(y) any liability for the payment of any amounts described in (x) as a
result of being a member of an affiliated, consolidated, combined,
unitary, or similar group or as a result of transferor or successor
liability, and (z) any liability for the payment of any amounts as a
result
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of being a party to any tax sharing agreement or as a result of
any obligation to indemnify any other Person with respect to the payment
of any amounts of the type described in (x) or (y), and (B) "Tax Return"
shall mean any report, return, document, declaration, election or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including
information returns and any documents with respect to or accompanying
payments of estimated Taxes or requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
(k) Employee Benefit Plans.
(i) Section 3.1(k) of the Company Disclosure Schedule
contains a true and complete list of each (A) deferred compensation and
each bonus or other incentive compensation, stock purchase, stock option
and other equity compensation plan, program, agreement or arrangement
(other than any individual employment agreements with Employees who are
not directors or former directors of the Company or any of its
Subsidiaries, Executive Officers or Key Employees, and which are
terminable without penalty and do not provide for any payments in the
event of a change of control); (B) each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(l) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"));
(C) each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); (D) each
employment, termination or severance agreement or arrangement with any
director or former director of the Company or any of its Subsidiaries,
any Executive Officer or Key Employee 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
by the Company or any of its Subsidiaries, or to which the Company or
any of its Subsidiaries is party, whether written or oral, for the
benefit of any Employee or any director or former director of the
Company or any of its Subsidiaries (the "Company Plans"). Section
3.1(k)(i) of the Company Disclosure Schedule identifies each of the
Company Plans or plans sponsored, maintained or contributed to by any
trade or business, whether or not incorporated, that together with the
Company is a "single employer" within the meaning of Section 4001(b) of
ERISA (a "Company ERISA Affiliate") that is subject to section 302 or
Title IV of ERISA or section 412 of the Code (the "Company Title IV
Plans"). Neither the Company nor any Subsidiary of the Company has any
commitment or formal plan, whether legally binding or not, to create any
additional employee benefit plan or modify or change any existing
Company Plan other than as may be required by the terms of such Company
Plan or applicable law.
(ii) With respect to each Company Plan, the Company
has heretofore delivered or made available to Parent true and complete
copies of each of the following documents:
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(A) a copy of the Company Plan and any amendments
thereto (or if the Plan is not a written Company Plan, a description
thereof);
(B) a copy of the most recent annual report and
actuarial report, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87;
(C) a copy of the most recent Summary Plan
Description, if required under ERISA with respect thereto;
(D) if the Company Plan is funded through a trust
or any third party funding vehicle, a copy of the trust or other
funding agreement and the latest financial statements thereof; and
(E) the most recent determination letter received
from the Internal Revenue Service with respect to each Company Plan
intended to qualify under Section 401 of the Code.
(iii) All contributions required to have been made
with respect to any Company Plan have been paid when due, except where
the failure to make such contributions would not reasonably be expected
to result in a Material Adverse Effect on the Company. There has been no
amendment to, written interpretation of or announcement (whether or not
written) by the Company or any Affiliate or the Company or any
Subsidiary of the Company relating to, or change in the Company Plan
provisions relating to employee participation or coverage under, any
Company Plan that would increase in any material respect the expense of
maintaining such Company Plan above the level or expense incurred in
respect thereof for the most recent fiscal year ended prior to the date
hereof.
(iv) Neither the Company nor any Company ERISA
Affiliate contributes to, or is obligated to contribute to, a
"multiemployer pension plan," as defined in Section 3(37) of ERISA nor
has the Company or any Company ERISA Affiliate, during the five year
period prior to the date hereof been obligated, to contribute to such
plan for which the Company or any of its Subsidiaries could reasonably
be expected to have any liability material to the Company and its
Subsidiaries, taken as a whole.
(v) Neither the Company nor any Subsidiary of the
Company, any Company Plan, any trust created thereunder, nor, to the
knowledge of the Company, any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any
Subsidiary of the Company, any
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Company Plan, any such trust, or any trustee or administrator thereof,
or any party dealing with any Company Plan or any such trust could be
subject to any 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,
except where such penalty or tax would not reasonably be expected to
have a Material Adverse Effect on the Company.
(vi) Each Plan has been operated and administered in
all material respects in accordance with its terms and applicable law in
all material respects, including but not limited to ERISA and the Code.
(vii) The IRS has issued a favorable determination
letter with respect to each Company Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code that has not been
revoked, and, to the knowledge of the Company no circumstances exist
that could adversely affect the qualified status of any such plan and
the exemption under Section 501(a) of the Code of the trust maintained
thereunder. Each Company Plan intended to satisfy the requirements of
Section 501(c)(9) of the Code has satisfied such requirements in all
material respects.
(viii) With respect to any Company Title IV Plan, to
which the Company or any Company ERISA Affiliate made, or was required
to make, contributions on behalf of any Employee or any director or
former director during the five (5)-year period ending on the last day
of the most recent plan year ended prior to the Closing Date, (a) no
liability under Title IV or Section 302 of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been satisfied in full,
and (b) to the knowledge of the Company, no condition exists that
presents a material risk to the Company and its Subsidiaries, taken as a
whole, or any Company ERISA Affiliate of incurring any such liability,
other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due).
(ix) Except as set forth on Schedule 3.1(k)(ix) of the
Company Disclosure Schedule, the PBGC has not, to the knowledge of the
Company, instituted proceedings to terminate any Company Title IV Plan
and, to the knowledge of the Company, no condition exists that presents
a material risk that such proceedings will be instituted. Except as set
forth on Schedule 3.1(k)(ix) of the Company Disclosure Schedule, with
respect to each Company Title IV Plan, the present value of accrued
benefits under such plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such
plan's actuary with respect to such plan did not exceed, as of its
latest valuation date, the then current value of the assets of such plan
allocable to such accrued benefits. No Company Title IV Plan or any
trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recently
ended fiscal year.
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(x) No Company Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
Employees for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits under any "pension plan," (iii) benefits the
full cost of which is borne by the Employee (or his beneficiary) or (iv)
Company Plans that can be amended or terminated by the Company without
consent.
(xi) The Company is not aware of any basis upon which
amounts payable under the Company Plans will fail to be deductible for
Federal income tax purposes by virtue of Section 162(m) of the Code.
(xii) Except as set forth on Schedule 3.1(k)(xii) of
the Company Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not, either alone or in combination
with another event, (i) entitle any Key Employee or officer of the
Company to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such Key Employee or officer.
(xiii) There are no pending or, to the knowledge of
the Company, threatened or anticipated claims by or on behalf of any
Company Plan by any Employee or beneficiary covered under any such
Company Plan, or otherwise involving any such Company Plan (other than
routine claims for benefits), except for claims which would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company.
(xiv) The Company has provided true and correct copies
of (a) all investment policies utilized in connection with any of the
Company Plans, if in writing, and (b) all fiduciary committee minutes
relating to any of the Company Plans, if any.
(xv) Except as set forth on Section 3.1(k)(xv) of the
Company Disclosure Schedule, no Person will be entitled to a "gross up"
or other similar payment in respect of excise taxes under Section 4999
of the Code with respect to the transactions contemplated by this
Agreement.
(xvi) To the extent that the Company or any of its
Subsidiaries is deemed to be a fiduciary with respect to any Plan that
is subject to ERISA, the Company or such Subsidiary (1) during the past
five years has complied in all material respects with the requirements
of ERISA and the Code in the performance of its duties and
responsibilities with respect to such employee benefit plan and (2) has
not knowingly caused any of the trusts for which it serves as an
investment manager, as defined in Section 3(38) of ERISA, to enter into
any transaction that would constitute a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code, with respect to any
such trusts, except for transactions that are the subject of a statutory
or administrative exemption.
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(l) Labor Matters. There are no labor or collective
bargaining agreements to which the Company or any Subsidiary of the Company is a
party. There is no union organizing effort pending or, the Company's knowledge,
threatened against the Company or any Subsidiary of the Company. There is no
labor strike, labor dispute (other than routine employee grievances that are not
related to union Employees), work slowdown, stoppage or lockout pending or, to
the Company's knowledge, threatened against the Company or any Subsidiary of the
Company. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary of the Company (other than routine employee grievances) which
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company. The Company and its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not,
to the knowledge of the Company, engaged in any unfair labor practice, except
insofar as would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect on the Company.
(m) Environmental Liability. There are no pending or
threatened legal, administrative, arbitral or other proceedings, claims,
actions, causes of action, notices, private environmental investigations or
remediation activities or governmental investigations of any nature (including
claims of alleging potential liability for investigating costs, cleanup costs,
governmental response costs, natural resources damage, property damages,
personal injuries or penalties) by any Person (collectively, "Environmental
Claims"), or any conditions or circumstances that could form the basis of any
Environmental Claim, in each case seeking to impose on the Company or any of its
Subsidiaries, or that reasonably would be expected to result in the imposition
on the Company or any of its Subsidiaries of, any liability or obligation that
would reasonably be expect to result in a Material Adverse Effect on the Company
arising under applicable common law standards relating to pollution or
protection of the environment, human health or safety, or under any local, state
or Federal environmental statute, regulation, ordinance, decree, judgment or
order relating to pollution or protection of the environment, human health or
safety including the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
(n) Intellectual Property.
(i) Section 3.1(n)(i) of the Company Disclosure
Schedule sets forth, for the Intellectual Property (as defined below)
owned by the Company or any of its Subsidiaries, a complete and accurate
list of all U.S. and foreign (A) patents and patent applications, (B)
trademark or service mark registrations and applications, (C) copyright
registrations and applications, and (D) Internet domain names, material
to the Company and its Subsidiaries, taken as a whole. The Company or
one of its Subsidiaries owns or has the valid right to use all such
patents and patent applications, trademarks, service marks, trademark or
service mark registrations and applications, trade names, logos,
designs, Internet domain names, slogans and general intangibles of like
nature, together with all goodwill related to the foregoing, copyrights,
copyright registrations,
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renewals and applications, Software (as defined in this Section 3.1(n)),
hardware, technology, trade secrets and other confidential information,
know-how, proprietary processes, formulae, algorithms, models and
methodologies, licenses, agreements and other proprietary rights
material to the Company and its Subsidiaries, taken as a whole
(collectively, the "Intellectual Property"), used in the business of the
Company as it currently is conducted. "Software" means any and all (A)
computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object
code, (B) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (C)
descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing, (D) the technology supporting
and content contained on any owned or operated Internet site(s), and (E)
all documentation, including user manuals and training materials,
relating to any of the foregoing.
(ii) All of the Intellectual Property owned by the
Company or one of its Subsidiaries and material to the Company and its
Subsidiaries, taken as a whole, is free and clear of all Liens other
than Company Permitted Liens. The Company or one of its Subsidiaries is
listed in the records of the appropriate United States, state or foreign
agency as, the sole owner of record for each application and
registration listed in Section 3.1(n)(i) of the Company Disclosure
Schedule.
(iii) All of the registrations listed in Section
3.1(n)(i) of the Company Disclosure Schedule and material to the Company
and its Subsidiaries, taken as a whole, are valid, subsisting,
enforceable, in full force and effect, and have not been cancelled,
expired, abandoned or otherwise terminated and all renewal fees in
respect thereof have been duly paid, except insofar as non-payment would
not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the Company. There is no pending or, to
the Company's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in
any jurisdiction against the registrations and applications listed in
Section 3.1(n)(i) of the Company Disclosure Schedule or, to the
Company's knowledge, against any other Intellectual Property used by the
Company or its Subsidiaries, other than any such proceeding which would
not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the Company.
(iv) To the Company's knowledge, the conduct of the
Company's and its Subsidiaries' business as currently conducted or
planned by the Company to be conducted does not, in any respect,
infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe), dilute,
misappropriate or otherwise violate any Intellectual Property owned or
controlled by any third party, except insofar as would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company, and neither the Company nor its
Subsidiaries have received written notice alleging such infringement,
dilution, misappropriation or violation.
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(v) To the Company's knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual
Property material to the Company and its Subsidiaries, taken as a whole,
owned by or licensed to or by the Company or its Subsidiaries and no
such claims have been made against a third party by the Company or its
Subsidiaries.
(vi) Each item of Software material to the Company and
its Subsidiaries, taken as a whole, which is used by the Company or its
Subsidiaries in connection with the operation of their businesses as
currently conducted, is either (A) owned by the Company or its
Subsidiaries, (B) currently in the public domain or otherwise available
to the Company without the need of a license, lease or consent of any
third party, or (C) used under rights granted to the Company or its
Subsidiaries pursuant to a written agreement, license or lease from a
third party.
(vii) Except in the ordinary course of business,
neither the Company nor its Subsidiaries have agreed to indemnify any
Person for or against any infringement, misappropriation or other
conflict with respect to any Intellectual Property, which agreements
would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company.
(o) Insurance Matters. Except as set forth in Section
3.1(o) of the Company Disclosure Schedule, the Company and its Subsidiaries have
all primary, excess and umbrella policies of general liability, fire, workers'
compensation, products liability, completed operations, employers, liability,
health, bonds, earthquake and other forms of insurance providing insurance
coverage that is customary in amount and scope for other companies in the
industry in which they operate. Each of such policies and other forms of
insurance is in full force and effect on the date hereof and shall (or
comparable replacements or substitutions therefor) be kept in full force and
effect by the Company through the Effective Time. All such policies, considered
collectively with other such policies providing the same type of coverage, are
sufficient for compliance with all requirements of law and of all requirements
under contracts or leases to which the Company is a party, except where
non-compliance would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. All premiums
currently payable or previously due and payable with respect to all periods up
to and including the Effective Time have been paid to the extent such premiums
are due and payable on or prior to the date hereof and, with respect to premiums
not due or payable at or prior to the date hereof, subject to Section 4.1 of
this Agreement, all premiums due and payable prior to the Effective Time, will
have been paid prior to the Effective Time and no notice of cancellation or
termination has been received with respect to any such policy material to the
Company and its Subsidiaries, taken as a whole.
(p) Information Supplied. None of the information supplied
or to be supplied by the Company in writing specifically for inclusion or
incorporation by reference in (i) the Form S-4, or the prospectus therein, will,
at the time the Form S-4 and any post-effective amendment or supplement thereto,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not
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misleading or (ii) the Proxy Statement will, at the date it is first mailed to
the Company's shareholders or at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent specifically for inclusion or incorporation by
reference in the Proxy Statement. The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder.
(q) Transactions with Affiliates. Except as set forth in
Section 3.1(q) of the Company Disclosure Schedule there are no outstanding
amounts payable to or receivable from, or advances by the Company or any of its
Subsidiaries to, and neither the Company nor any of its Subsidiaries is
otherwise a creditor or debtor to, any Major Company Shareholder, or director or
Executive Officer of the Company, other than as part of the normal and customary
terms of such Persons' respective employment or service as a director with the
Company or any of its Subsidiaries. Except as set forth in Section 3.1(q) or
Section 3.1(k) of the Company Disclosure Schedule neither the Company nor any
Subsidiary of the Company is a party to any transaction or agreement with any
Major Company Shareholder, or any director or Executive Officer of the Company,
other than the terms of such Person's respective employment or service as a
director with the Company or any of its Subsidiaries.
(r) Voting Requirements. The affirmative vote at the
Company Shareholders Meeting (the "Company Shareholder Approval") of a majority
of the outstanding shares of Company Common Stock voting at the Company
Shareholders Meeting to approve and adopt this Agreement is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby,
including the Merger.
(s) Opinions of Financial Advisor. The Company has
received the opinion of Keefe, Bruyette & Woods, Inc., dated the date hereof, to
the effect that, as of such date, the Merger Consideration is fair from a
financial point of view to the shareholders of the Company.
(t) Brokers. Except for Keefe, Bruyette & Woods, Inc.,
whose fees in connection with the transactions contemplated hereby shall not
exceed the amount set forth on Section 3.1(t) of the Company Disclosure
Schedule, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
delivered to Parent complete and correct copies of such arrangements set forth
on Section 3.1(t) of the Company Disclosure Schedule.
(u) Takeover Laws. The approval of this Agreement and the
Merger by the Board of Directors of the Company constitutes approval of this
Agreement and the Merger and the transactions contemplated hereby for purposes
of Chapter 10A of
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the NJBCA and Section 2 of Article 5 of the Company's Certificate of
Incorporation. No "moratorium", "control share", "fair price" or other
antitakeover laws and regulations of any state are applicable to the Merger or
other transactions contemplated by this Agreement. None of the execution and
delivery of this Agreement, the approval of this Agreement and the Merger by the
Board of Directors of the Company, the Company Shareholder Approval or the
consummation of the transactions contemplated hereby, including the Merger, will
result in the ability of any Person to exercise any rights under the Company
Rights Agreement or enable or require such rights to separate from the shares of
Company Common Stock to which they are attached or to be triggered or become
exercisable or unredeemable. No "Triggering Event" or "Stock Acquisition Date"
(as such terms are defined in the Company Rights Agreement) has occurred or will
occur as a result of any of the approvals or actions referenced in the preceding
sentence.
(v) Derivative Transactions.
(i) Except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect
on the Company, all Derivative Transactions (as defined in this Section
3.1(v)) entered into by the Company or any of its Subsidiaries were
entered into in accordance with applicable rules, regulations and
policies of any regulatory authority, and in accordance with the
investment, securities, commodities, risk management and other policies,
practices and procedures employed by the Company and its Subsidiaries,
and were entered into with counter parties believed at the time to be
financially responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks of such
Derivative Transactions; and the Company and each of its Subsidiaries
have duly performed in all material respects all of their obligations
under the Derivative Transactions to the extent that such obligations to
perform have accrued, and, to the Company's knowledge, there are no
material breaches, violations or defaults or allegations or assertions
of such by any party thereunder.
(ii) For purposes of this Section 3.1(v), "Derivative
Transactions" means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction,
floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest
rates, credit-related events or conditions or any indexes, or any other
similar transaction or combination of any of these transactions,
including collateralized mortgage obligations or other similar
instruments or any debt or equity instruments evidencing or embedding
any such types of transactions, and any related credit support,
collateral or other similar arrangements related to such transactions.
(w) Investment Securities and Commodities.
(i) Except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect
on the Company, each of the Company and its Subsidiaries has good title
to all securities and commodities owned by it (except those sold under
repurchase agreements or
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held in any fiduciary or agency capacity), free and clear of any Lien,
except for Company Permitted Liens and except to the extent such
securities or commodities are pledged in the ordinary course of
business to secure obligations of the Company or its Subsidiaries.
Such securities and commodities are valued on the books of the Company
in accordance with GAAP in all material respects.
(ii) The Company and its Subsidiaries and their
respective businesses employ investment, securities, commodities, risk
management and other policies, practices and procedures (the "Policies,
Practices and Procedures") which the Company believes are prudent and
reasonable in the context of such businesses. Prior to the date hereof,
the Company has made available to Parent in writing the material
Policies, Practices and Procedures.
(x) Loan Portfolio; Servicing.
(i) Section 3.1(x)(i) of the Company Disclosure
Schedule sets forth (A) the aggregate outstanding principal amount, as
of the date hereof, of all written or oral loan agreements, notes or
borrowing arrangements (including leases, credit enhancements,
commitments, guarantees and interest-bearing assets), taken as a whole,
payable to the Company or its Subsidiaries (collectively, "Loans"),
other than "non-accrual" Loans, and (B) the aggregate outstanding
principal amount, as of July 31, 2003, of all "non-accrual" Loans, taken
as a whole. Section 3.1(x)(ii) of the Company Disclosure Schedule sets
forth (A) a summary of each outstanding Loan and asset classified as
"Other Real Estate Owned," that were designated by the Company as
"Special Mention", "Substandard", "Doubtful", "Loss", or words of
similar import as of July 31, 2003, by category of Loan (e.g.,
commercial, consumer, etc.), together with the aggregate principal
amount of such Loans by category and (B) each asset of the Company that,
as of July 31, 2003, is classified as "Other Real Estate Owned" and the
book value thereof.
(ii) Each Loan (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. All Loans originated by the Company or its
Subsidiaries, and all such Loans purchased by the Company or its
Subsidiaries, were made or purchased in accordance with customary
lending and leasing standards of the Company or its Subsidiaries, as
applicable. Except as set forth in Section 3.1(x) of the Company
Disclosure Schedule, all such Loans (and any related guarantees) and
payments due thereunder are, and on the Closing Date will be, free and
clear of any Lien, other than Company Permitted Liens, and the Company
or its Subsidiaries has complied, and on the Closing Date will have
complied, with all laws and regulations relating to such Loans except
where non-compliance would not,
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individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the Company.
(iii) The Company has not sold any Loans or any
participations in any Loans except for such sales as were made without
recourse to the Company (with respect to the repayment thereof,
servicing thereof or otherwise) and where the Company has no continuing
obligation or right with respect to the servicing of any such Loans, and
no claims, actions or demands have been brought by any third party in
connection with any such sales except for claims, actions and demands
which would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company.
(iv) Except as set forth in Section 3.1(x)(iv) of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries services any loan agreements, notes or borrowing
arrangements (including leases, credit enhancements, commitments,
guarantees and interest-bearing assets) on behalf of any third party.
(y) Real Property.
(i) Each of the Company and its Subsidiaries has good
title free and clear of all Liens to all real property owned by such
entities (the "Owned Properties"), except for Company Permitted Liens.
(ii) A true and complete copy of each agreement
pursuant to which the Company or any of its Subsidiaries leases any real
property (such agreements, together with any amendments, modifications
and other supplements thereto, collectively, the "Leases") has
heretofore been made available to Parent, except as set forth in Section
3.1(y) of the Company Disclosure Schedule. Each Lease is valid, binding
and enforceable against the Company or its applicable Subsidiary in
accordance with its terms and is in full force and effect, except that
(x) such enforceability may be subject to applicable bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting
creditors' rights generally and (y) the availability of the remedy of
specific performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be
brought. There are no defaults by the Company or any of its
Subsidiaries, as applicable, under any of the Leases which, in the
aggregate, would result in the termination of such Leases and a Material
Adverse Effect on the Company. The consummation of the transactions
contemplated by this Agreement will not cause defaults under the Leases,
except for any such default which would not individually or in the
aggregate, have a Material Adverse Effect on the Company.
(iii) The Owned Properties and the properties (the
"Leased Properties") leased pursuant to the Leases constitute all of the
real estate on which the Company and its Subsidiaries maintain their
facilities or conduct their business as of the date of this Agreement,
except for locations the
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loss of which would not constitute a Material Adverse Effect on the
Company. The Owned Properties and the Leased Properties are in
compliance with all laws, except where non-compliance would not,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the Company. Neither any agreement
relating to the Owned Properties nor any of the Leases requires
consent of any third party for the consummation of the transactions
contemplated hereby except for such consents which will be
obtained prior to Closing.
(iv) A true and complete copy of each agreement
pursuant to which the Company or any of its Subsidiaries leases real
property to a third party (such agreements, together with any
amendments, modifications and other supplements thereto, collectively,
the "Third Party Leases") has heretofore been made available to Parent.
Each Third Party Lease is valid, binding and enforceable in accordance
with its terms and is in full force and effect, except that (x) such
enforceability may be subject to applicable bankruptcy, insolvency or
other similar laws now or hereafter in effect affecting creditors'
rights generally and (y) the availability of the remedy of specific
performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought. There are
no existing defaults by the tenant under any Third Party Lease which, in
the aggregate, would result in the termination of such Third Party
Leases except for any such default which would not reasonably be
expected to result in a Material Adverse Effect on the Company. The
consummation of the transactions contemplated by this Agreement will not
cause defaults under the Third Party Leases, except for any such default
which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(z) Administration of Accounts. The Company and each of
its Subsidiaries has properly administered all accounts for which it acts as a
fiduciary or agent, including but not limited to accounts for which it serves as
a trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law, except where the
failure to do so would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries, nor any of their directors, officers,
agents or employees, has committed any breach of trust with respect to any such
fiduciary or agency account, and the accountings for each such fiduciary or
agency account are true and correct and accurately reflect the assets of such
fiduciary or agency account, except for such breaches and failures to be true,
correct and accurate which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Company.
(aa) Internal Controls. None of the Company or its
Subsidiaries' records, systems, controls, data or information are recorded,
stored, maintained, operated or otherwise wholly or partly dependent on or held
by any means (including any electronic, mechanical or photographic process,
whether computerized or
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not) which (including all means of access thereto and therefrom) are not under
the exclusive ownership and direct control of it or its Subsidiaries or
accountants except as would not, individually or in the aggregate, reasonably be
expected to result in a materially adverse effect on the system of internal
accounting controls described in the next sentence. The Company and its
Subsidiaries have devised and maintain a system of internal accounting controls
sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
SECTION 3.2 Representations and Warranties of Parent. Except
as set forth on the Disclosure Schedule delivered by Parent to the Company prior
to the execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of Parent and its Subsidiaries (including,
without limitation, Merger Sub is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business
as now being conducted except, as to Subsidiaries, for those
jurisdictions where the failure to be duly organized, validly existing
and in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent.
Each of Parent and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or licensed or
to be in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent.
(ii) The Parent has delivered or made available to the
Company prior to the execution of this Agreement complete and correct
copies of the articles of incorporation and by-laws, as amended to the
date hereof of Parent.
(b) Subsidiaries. Exhibit 21 of Parent's most recent
Annual Report on Form 10-K included in the Parent Filed SEC Documents (as
defined in Section 3.2(g)) lists all the Subsidiaries of the Parent, whether
consolidated or unconsolidated, required to be listed therein in accordance with
Item 601 of Regulation S-K promulgated by the SEC. Except as set forth in said
Exhibit or Section 3.2(b) of the Parent Disclosure Schedule, all outstanding
shares of capital stock of, or other equity interests in, each such Subsidiary:
(i) have been validly issued and are fully paid and nonassessable; (ii) are
owned directly or indirectly by Parent, free and clear of all Liens other than
(A) Liens described in Section 3.2(b) of the Parent Disclosure Schedule; (B)
restrictions on transferability pursuant to federal and state securities laws;
and (C) Liens for Taxes not
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yet due or delinquent or being contested in good faith and for which reserves
appropriate in all material respects have been established in accordance with
GAAP; and (iii) are free of any other restriction (including any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests) that would prevent the operation by the Surviving
Corporation of such Subsidiary's business as currently conducted.
(c) Capital Structure. The authorized capital stock of
Parent consists of 800,000,000 shares of Parent Common Stock and 20,000,000
shares of preferred stock, par value $1.00 per share, of Parent ("Parent
Authorized Preferred Stock"), of which, as of August 20, 2003, 98,583 shares
have been designated as $1.80 Cumulative Convertible Preferred Stock - Series A
("Parent Series A Preferred Stock"), and 38,542 shares have been designated as
$1.80 Cumulative Convertible Preferred Stock - Series B ("Parent Series B
Preferred Stock"), 1,433,935 shares have been designated as $1.60 Cumulative
Convertible Preferred Stock-Series C ("Parent Series C Preferred Stock"),
1,766,140 shares have been designated as $1.80 Cumulative Convertible Preferred
Stock-Series D ("Parent Series D Preferred Stock"), 338,100 shares have been
designated as $2.60 Cumulative Nonvoting Preferred Stock, Series E ("Parent
Series E Preferred Stock"), 6,000 shares have been designated as
Fixed/Adjustable Rate Noncumulative Preferred Stock, Series F ("Parent Series F
Preferred Stock"), and 450,000 shares have been designated as Series G Junior
Participating Preferred Share Purchase Rights ("Parent Series G Preferred
Stock"). As of August 20, 2003: (i) 279,738,578 shares of Parent Common Stock
were issued and outstanding, 73,084,189 shares of Parent Common Stock were held
by Parent in its treasury; (ii) 9,093 shares of Parent Series A Preferred Stock
were issued and outstanding, no shares of Parent Series A Preferred Stock were
held by Parent in its treasury; (iii) 2,356 shares of Parent Series B Preferred
Stock were issued and outstanding, no shares of Parent Series B Preferred Stock
were held by Parent in its treasury; (iv) 179,641 shares of Parent Series C
Preferred Stock were issued and outstanding, no shares of Parent Series C
Preferred Stock were held by Parent in its treasury; (v) 255,863 shares of
Parent Series D Preferred Stock were issued and outstanding, no shares of Parent
Series D Preferred Stock were held by Parent in its treasury; (vi) no shares of
Parent Series E Preferred Stock were issued and outstanding, no shares of Parent
Series E Preferred Stock were held by Parent in its treasury; (vii) no shares
of Parent Series F Preferred Stock were issued and outstanding, no shares of
Parent Series F Preferred Stock were held by Parent in its treasury; (viii) no
shares of Parent Series G Preferred Stock were issued and outstanding, no shares
of Parent Series G Preferred Stock were held by Parent in its treasury;
(ix) 25,320,603 shares of Parent Common Stock were reserved for issuance (as of
July 31, 2003) pursuant to the stock-based plans identified in Section 3.2(c) of
the Parent Disclosure Schedule and all other plans, agreements or arrangements
providing for equity-based compensation to any director, employee, consultant
or independent contractor of Parent or any of its Subsidiaries (such plans,
collectively, the "Parent Stock Plans"), of which 18,825,298 shares are subject
to outstanding employee stock options or other rights to purchase or receive
Parent Common Stock (as of July 31, 2003) granted under the Parent Stock Plans
(collectively, "Parent Stock Options"); (x) no shares of Parent Common Stock are
reserved for issuance pursuant to securities convertible into or exchangeable
for shares of Parent Common Stock ("Parent
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Convertible Securities"); (xi) 450,000 shares of Parent Series G Preferred Stock
were reserved for issuance pursuant to the Parent Rights Agreement; and (xi)
other than as set forth above, no other shares of Parent Authorized Preferred
Stock have been designated. All outstanding shares of capital stock of Parent
are, and all shares thereof which may be issued prior to the Closing, and all
shares thereof which may be issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in this Section 3.2(b) and
except for changes since July 31, 2003 resulting from the issuance of shares of
Parent Common Stock pursuant to the Parent Stock Plans, Parent Employee Stock
Options or Parent Convertible Securities and other rights referred to in this
Section 3.2(b), as of the date hereof, (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of other ownership interests of Parent, (B) any securities of Parent
or any Subsidiary of Parent convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of other ownership interests of
Parent, (C) any warrants, calls, options or other rights to acquire from Parent
or any Subsidiary of Parent, and any obligation of Parent or any Subsidiary of
Parent to issue, any capital stock, voting securities or other ownership
interests or securities convertible into or exchangeable or exercisable for
capital stock or voting securities of other ownership interests of Parent, and
(y) there are no outstanding obligations of Parent or any Subsidiary of Parent
to repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such securities.
As of the date hereof, there are no outstanding (A) securities of Parent or any
of its Subsidiaries convertible into or exchangeable or exercisable for shares
of capital stock or voting securities or other ownership interests in any
Subsidiary of Parent, (B) warrants, calls, options or other rights to acquire
from Parent or any Subsidiary of Parent, or any obligation of Parent or any
Subsidiary of Parent to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or other ownership
interests in, any Subsidiary of Parent or (C) obligations of Parent or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any such outstanding
securities of Subsidiaries of Parent or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities.
(d) Authority; Noncontravention. Each of Parent and Merger
Sub has all requisite corporate power and authority to enter into this
Agreement, and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate and shareholder action on the
part of Parent and Merger Sub, respectively. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub, and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligations of Parent and Merger Sub, respectively,
enforceable against Parent and Merger Sub, respectively, in accordance with
their terms except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the availability of the remedy of
specific performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject
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to the discretion of the courts for which any proceeding therefor may be
brought. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation, forfeiture or termination of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of forfeiture,
termination, cancellation or acceleration (with or without notice or lapse of
time or both) of any obligation or loss of a benefit, or payment of any
termination or similar fee, under, or result in the creation of any Lien upon
any of the properties or assets of Parent or any of its Subsidiaries under, (i)
the certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws or the comparable organizational documents of any of
its Subsidiaries (including, without limitation, Merger Sub), (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, software agreement or
other agreement, instrument, Intellectual Property, right, permit, concession,
franchise, license or similar authorization applicable to Parent or any of its
Subsidiaries or their respective properties or assets or (iv) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or their respective properties
or assets, other than, in the case of clauses (ii), (iii) and (iv), any such
conflicts, violations, defaults, rights, losses or Liens that individually or in
the aggregate would not (x) reasonably be expected to result in a Material
Adverse Effect on Parent or (y) reasonably be expected to materially impair or
materially delay the ability of Parent or Merger Sub to perform its obligations
under this Agreement. No consent, approval, order or authorization of, action
by, or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement, except for (1) the filings with the
SEC of (A) the Proxy Statement, and the clearance thereof by the SEC, and the
Form S-4, and the declaration of effectiveness thereof, by the SEC, and (B) such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (2) the filing of
the Certificate of Merger with the Secretary of State of the State of New Jersey
and the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which the Company and its Subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (3) the approval of the Federal
Reserve under the BHC Act; (4) the approval of the New Jersey Banking
Department; (5) the approval of the OCC; (6) such filings with and approvals of
the NYSE to permit the shares of Parent Common Stock to be issued in the Merger
and under the Company Stock Plan to be listed on the NYSE; and (7) filings
required as a result of the particular status of the Company or its
Subsidiaries.
(e) Parent Documents.
(i) Parent and each of its Subsidiaries subject to
reporting under Section 13 or Section 15(d) of the Exchange Act have (A)
filed all required reports with the SEC and (B) all required schedules,
forms, statements and other documents (including exhibits and all other
information incorporated
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therein) with the SEC (together with the reports referred to in clause
(A), the "Parent SEC Documents"), except in the case of (A) as would not
reasonably be expected to have a Material Adverse Effect on Parent. As
of their respective filing dates, (i) the Parent SEC Documents complied
in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Parent SEC Documents,
and (ii) none of the Parent SEC Documents as of its date, except as
amended or supplemented by a subsequent Parent Filed SEC Document,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and no Parent SEC Document filed
subsequent to the date hereof will contain as of its date, any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(ii) The financial statements of Parent and its
consolidated Subsidiaries included in the Parent SEC Documents
(including the related notes) complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial
position of Parent and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to other
adjustments described in the notes to such unaudited statements).
(iii) Except (A) as reflected in Parent's unaudited
balance sheet as of June 30, 2003 or liabilities described in any notes
thereto (or liabilities for which neither accrual nor footnote
disclosure is required pursuant to GAAP) or (B) for liabilities incurred
in the ordinary course of business since June 30, 2003 consistent with
past practice or in connection with this Agreement or the transactions
contemplated hereby, Parent and its Subsidiaries, taken as a whole, do
not have any material liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise.
(f) Information Supplied. None of the information supplied
or to be supplied by Parent specifically for inclusion or incorporation by
reference in (i) the Form S-4, or the prospectus therein, will, at the time the
Form S-4, and any post-effective amendment thereto, becomes effective under the
Securities Act and through the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's
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shareholders or at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by Parent with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference in the Form S-4
or the prospectus therein. The Form S-4, and the prospectus therein. will comply
as to form in all material respects with the requirements of the Securities Act
and the rules and regulations thereunder.
(g) Brokers. No broker, investment broker, financial
advisor or other Person is entitled to a broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent, except a fee to be paid to Citigroup Global Markets, Inc. as financial
advisor to Parent.
(h) Tax Matters. Neither Parent nor any of its Affiliates
or Subsidiaries has taken or agreed to take any action, has failed to take any
action or knows of any fact, agreement, plan or other circumstance that could
reasonably be expected to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(i) Employee Benefit Plans
(i) For purposes of this Section 3.2(i), "Parent
Plans" shall mean its deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan or program, or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and
other "welfare" plan, fund or program (within the meaning of Section
3(l) of ERISA; each profit-sharing, stock bonus or other "pension" plan,
fund or program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement or arrangement with any
director or former director of the Parent or any of its Subsidiaries or
any executive officer thereof and each other employee benefit plan, fund
or program, or arrangement applicable to identified groups of employees,
in each case that is sponsored, maintained or contributed to or required
to be contributed to by Parent or any of its Subsidiaries, or to or
which Parent or any of its Subsidiaries is a party, whether written or
oral, for the benefit of any current or former employee or director of
Parent or any of its Subsidiaries; each Parent Plan that is subject to
Section 302 or Title IV of ERISA or Section 412 of the Code, being the
"Parent Title IV Plans".
(ii) All contributions required to have been made with
respect to any Parent Plan have been paid when due, except insofar as
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Parent.
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(iii) Each Parent Plan has been operated and
administered in accordance with its terms and applicable law, including
but not limited to ERISA and the Code, except insofar as the failure to
do so would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Parent.
(iv) The IRS has issued a favorable determination
letter with respect to each Parent Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code that has not been
revoked, and, to the knowledge of Parent no circumstances exist that
could adversely affect the qualified status of any such plan and the
exemption under Section 501(a) of the Code of the trust maintained
thereunder. Each Parent Plan intended to satisfy the requirements of
Section 501(c)(9) of the Code has satisfied such requirements in all
material respects.
(v) With respect to any Parent Title IV Plan to which
Parent or any trade or business, whether or not incorporated, that
together with Parent is a "single employer" within the meaning of
Section 4001(b) of ERISA (a "Parent ERISA Affiliate") made, or was
required to make, contributions on behalf of any current or former
employee or director during the five (5)-year period ending on the last
day of the most recent plan year ended prior to the Closing Date, (a) no
liability under Title IV or Section 302 of ERISA has been incurred by
Parent or any Parent ERISA Affiliate that has not been satisfied in
full, except where failure to satisfy such liability would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Parent, and (b) to the knowledge of Parent,
no condition exists that presents a risk to Parent or any Parent ERISA
Affiliate of incurring any such liability, other than liability for
premiums due the PBGC) (which premiums have been paid when due), except
insofar as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.
(vi) The PBGC has not, to the knowledge of Parent,
instituted proceedings to terminate any Parent Title IV Plan and, to the
knowledge of Parent, no condition exists that presents a material risk
that such proceedings will be instituted, except insofar as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. No Parent Title IV Plan or any trust
established thereunder has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recently ended
fiscal year, except insofar as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
(vii) There are no pending or, to the knowledge of
Parent, threatened or anticipated claims by or on behalf of any Parent
Plan by any employee or beneficiary covered under any such parent Plan,
or otherwise involving any such Parent Plan (other than routine claims
for benefits), except for claims which, individually or in the
aggregate, would not reasonably be expected to result in a Material
Adverse Effect on Parent.
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(j) Compliance with Laws.
(i) Parent, its Subsidiaries and employees hold all
permits, licenses, variances, authorizations, exemptions, orders,
registrations and approvals of all Governmental Entities ("Parent
Permits") material to Parent and its Subsidiaries, taken as a whole,
which are required for the operation of the respective businesses of
Parent and its Subsidiaries as presently conducted, except insofar as
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Parent. Each of Parent and its
Subsidiaries is, and for the last five years has been, in compliance
with the terms of such Parent Permits and all such Parent Permits are in
full force and effect and no suspension, modification or revocation of
any of them is pending or, to the knowledge of Parent, threatened nor,
to the knowledge of Parent, do grounds exist for any such action, except
where non-compliance or such suspension, modification or revocation
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Parent.
(ii) Except as set forth in the Parent SEC Documents
filed and publicly available prior to the date hereof, and except where
failure to comply would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent,
each of Parent and its Subsidiaries is, and for the last five years has
been, in compliance with all applicable statutes, laws, regulations,
ordinances, permits, rules, judgments, orders, decrees or arbitration
awards of any Governmental Entity applicable to Parent or its
Subsidiaries.
(iii) Neither Parent nor any of its Subsidiaries is
subject to any outstanding order, injunction or decree or is a party to
any written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to,
or, is subject to any order or directive by, or is a recipient of any
supervisory letter from or has adopted any resolutions at the request of
any Governmental Entity that restricts in any respect the conduct of its
business or, that in any manner currently relates to its capital
adequacy, its policies, its management or its business (each, a "Parent
Regulatory Agreement"), nor has Parent or any of its Subsidiaries or
Affiliates (A) to its knowledge, been advised since January 1, 2001 by
any Governmental Entity that it is considering issuing or requesting any
Parent Regulatory Agreement or (B) have knowledge of any pending or
threatened regulatory investigation. Neither Parent nor any of its
Subsidiaries is in breach or default under any Parent Regulatory
Agreement in any material respect. Prior to the date hereof, Parent has
made available to the Company true and complete copies of all Parent
Regulatory Agreements that currently have, or may in the future
reasonably be expected to have, a material impact on the conduct of the
business and operations of Parent and its Subsidiaries, taken as a
whole.
(iv) Except for filings with the SEC, which are the
subject of Section 3.2(e), Parent and each of its Subsidiaries have
timely filed all regulatory reports, schedules, forms, registrations and
other documents, together
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with any amendments required to be made with respect thereto,
that they were required to file with any Governmental Entity (the
"Other Parent Documents"), except where the failure to make such
filings would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Parent. There is no
unresolved violation or exception by any of such Governmental Entities
with respect to any report or statement relating to any examinations of
Parent or any of its Subsidiaries which would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect
on Parent.
(v) Parent's bank Subsidiaries are "well-capitalized"
(as that term is defined at 12 C.F.R. 225.2(r)(2)(i)) and "well managed"
(as that term is defined at 12 C.F.R. 225.81(c)), and their examination
rating under the Community Reinvestment Act of 1977 is "satisfactory".
(vi) The business and operations of Parent and of each
of Parent's Subsidiaries through which Parent conducts its finance
activities have been conducted in compliance with all applicable Finance
Laws and have complied with all applicable collection practices in
seeking payment under any loan or credit extension of such Subsidiaries,
except where non-compliance would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent.
In addition, there is no pending or, to the knowledge of Parent,
threatened charge by any Governmental Entity that Parent or any of its
Subsidiaries has violated, nor any pending or, to the knowledge of
Parent, threatened investigation by any Governmental Entity with respect
to possible violations of, any applicable Finance Laws, except where
such violation would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on Parent.
(vii) Neither Parent nor any of its Subsidiaries, nor
to the knowledge of Parent any other Person acting on behalf of Parent
or any of its Subsidiaries that qualifies as a "financial institution"
under the U.S. Anti-Money Laundering laws has knowingly acted, by itself
or in conjunction with another, in any act in connection with the
concealment of any Unlawful Gains, nor knowingly accepted, transported,
stored, dealt in or brokered any sale, purchase or any transaction of
other nature for Unlawful Gains except insofar as would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Parent. Parent and each of its Subsidiaries
that qualifies as a "financial institution" under the U.S. Anti-Money
Laundering laws has, during the past three years, implemented such
anti-money laundry mechanisms and kept and filed all material reports
and other necessary material documents as required by, and otherwise
complied with, the U.S. Anti-Money Laundering laws and the rules and
regulations issued thereunder, except insofar as would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Parent.
(k) Litigation. Except as set forth in Section 3.2(k) of
the Parent Disclosure Schedule, no action, demand, charge, requirement or
investigation by
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any Governmental Entity and no litigation, action, suit, proceeding,
investigation or arbitration by any Person or Governmental Entity, in each case
with respect to Parent or any of its Subsidiaries or any of their respective
properties or Permits, is pending or, to the knowledge of Parent, threatened,
except insofar as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Parent.
(l) Absence of Certain Changes. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, and except as disclosed in the Parent SEC Documents filed and publicly
available prior to the date hereof, since June 30, 2003, (A) there has not been
any Material Adverse Change in Parent or (B) there are not, to Parent's
knowledge, any facts, circumstances or events that make it reasonably likely
that Parent will not be able to fulfill its obligations under this Agreement in
all material respects.
(m) Internal Controls. None of Parent or its Subsidiaries'
records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of it or its
Subsidiaries or accountants except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on the
system of internal accounting controls described in the next sentence. Parent
and its Subsidiaries have devised and maintain a system of internal accounting
controls sufficient to provide reasonable assurances regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Company. Except (i) as
set forth in Section 4.1 of the Company Disclosure Schedule, (ii) as otherwise
expressly contemplated by this Agreement, (iii) as consented to by Parent in
writing (which consent shall not be unreasonably withheld or delayed), or (iv)
as required by applicable law or regulation, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations, pay their respective debts
and Taxes when due, pay or perform their other respective obligations when due,
and, use all commercially reasonable efforts consistent with the other terms of
this Agreement to preserve intact their current business organizations, use all
commercially reasonable efforts consistent with the other terms of this
Agreement to keep available the services of their current officers and employees
and preserve their relationships with those Persons having business dealings
with them, all with the goal of preserving unimpaired in all material respects
their goodwill and ongoing businesses at the Effective Time. Without
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limiting the generality of the foregoing, senior officers of Parent and the
Company shall meet on a reasonably regular basis to review the financial and
operational affairs of the Company and its Subsidiaries, in accordance with
applicable law, and the Company shall give due consideration to Parent's input
on such matters, consistent with Section 4.4 hereof, with the understanding
that, notwithstanding any other provision contained in this Agreement, Parent
shall in no event be permitted to exercise control of the Company prior to the
Effective Time. Except as (i) expressly contemplated by this Agreement, (ii) as
disclosed in Section 4.1 of the Company Disclosure Schedule, (iii) as consented
to by Parent in writing or (iv) required by applicable law or regulation, after
the date hereof the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) other than dividends and distributions by a direct
or indirect wholly owned Subsidiary of the Company to its parent, (x)
declare, set aside or pay any dividends on, make any other distributions
in respect of, or enter into any agreement with respect to the voting
of, any of its capital stock (except for regular quarterly cash
dividends not to exceed $0.20 per share on the Company Common Stock and
regular cash dividends on the REIT Preferred Stock of the Company REIT
in the amounts and at the times set forth in Section 3.1(g)(iii) of the
Company Disclosure Schedule and otherwise in accordance with the terms
thereof, (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of, or in substitution for, shares of its capital stock, except
upon the exercise of Company Stock Options that are outstanding as of
the date hereof in accordance with their present terms, or (z) purchase,
redeem or otherwise acquire any shares of capital stock or other
securities of the Company or any of its Subsidiaries, or any rights,
warrants or options to acquire any such shares or other securities
(other than the issuance of Company Common Stock upon the exercise of
Company Stock Options that are outstanding as of the date hereof in
accordance with their present terms);
(ii) issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien (other than Company Permitted Liens) any
shares of its capital stock, any other voting securities, including any
restricted shares of Company Common Stock, or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities, including any Company Stock
Options (other than the issuance of Company Common Stock upon the
exercise of Company Stock Options that are outstanding as of the date
hereof in accordance with their present terms);
(iii) amend its certificate of incorporation, by-laws
or other comparable organizational documents;
(iv) (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any equity securities
of, or by any other manner, any business or any Person, or otherwise
acquire or agree to acquire any assets except in the ordinary course of
business or (B) open, close, sell or acquire any branches;
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(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien (other than Company Permitted Liens), or
otherwise dispose of any of its properties or assets other than
securitizations and other transactions in the ordinary course of
business and consistent with past practices or create any security
interest in such assets or properties (other than Company Permitted
Liens);
(vi) except for borrowings having a maturity of not
more than 30 days under existing credit facilities (or renewals,
extensions or replacements therefor that do not provide for any
termination fees or penalties, prohibit pre-payments or require any
pre-payment penalties, or contain any like provisions limiting or
otherwise affecting the ability of the Company or its applicable
Subsidiaries or successors from terminating or pre-paying such
facilities, or contain financial terms less advantageous than existing
credit facilities, such existing credit facilities, and as they may be
so renewed, extended or replaced, "Credit Facilities") that are incurred
in the ordinary course of business consistent with past practice and
with respect to which the Company consults with Parent on a basis not
less frequently than bi-weekly, or for borrowings under Credit
Facilities or other lines of credit or refinancing of indebtedness
outstanding on the date hereof not to exceed $5,000,000, and except for
the incurring of deposit liabilities in the ordinary course of business,
incur any Indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise become responsible for the
obligations of any Person (other than the Company or any wholly owned
Subsidiary thereof), or, other than in the ordinary course of business,
make any loans, advances or capital contributions to, or investments in,
any Person other than its wholly owned Subsidiaries and as a result of
ordinary advances and reimbursements to employees and endorsements of
banking instruments;
(vii) change in any material respect its accounting
methods (or underlying assumptions), principles or practices affecting
its assets, liabilities or business, including any reserving, renewal or
residual method, practice or policy, in each case, in effect on the date
hereof, except as required by changes in GAAP or regulatory accounting
principles, or change any of its methods of reporting income and
deductions for Federal income tax purposes from those employed in the
preparation of the Federal income tax returns of the Company for the
taxable year ending December 31, 2002, except as required by changes in
law or regulation;
(viii) change in any material respects its investment
or risk management or other similar policies of the Company or any of
its Subsidiaries;
(ix) make, change or revoke any Tax election, file any
amended Tax Return, enter into any closing agreement, settle or
compromise any liability with respect to Taxes, agree to any adjustment
of any Tax attribute, file any claim for a refund of Taxes, or consent
to any extension or waiver of the limitation period applicable to any
Tax claim or assessment;
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(x) create, renew or amend, or take any other action
that may result in the creation, renewal, or amendment, of any agreement
or contract or other binding obligation of the Company or its
Subsidiaries containing (A) any restriction on the ability of the
Company and its Subsidiaries, taken as a whole, to conduct its business
as it is presently being conducted or (B) any restriction on the Company
or its Subsidiaries engaging in any type or activity or business;
(xi) (A) except as set forth in Section 4.1(xi) of the
Company Disclosure Schedule, incur any capital expenditures in excess of
$10,000 individually or $50,000 in the aggregate, (B) enter into any
agreement obligating the Company to spend more than $10,000 individually
or $50,000 in the aggregate, or (C) enter into any agreement, contract,
lease or other arrangement of the type described in Section 3.1(f) or
Section 3.1(y) of this Agreement except for any such agreements,
contracts, leases or other arrangements (w) of the type described in
Section 3.1(f)(i) to the extent not prohibited under Section 4.1(vi) and
to the extent not pursuant to any agreement containing provisions that
restrict, or may restrict, the conduct of the business of the issuer
thereof as currently conducted in a manner more adverse to the Company
than the current Credit Facilities, (x) of the type described in Section
3.1(f)(ii) to the extent not prohibited by Section 4.1(xi)(A) or (B),
(y) of the type described in Section 3.1(f)(xii) or (xiv) and that is
terminable on not less than 30 days notice without penalty, but only
following prior consultation with Parent, or (z) of the type described
in Section 3.1(f)(xiii) to the extent required by the expiration of the
term of an existing lease unless reasonably objected to by Parent;
(xii) terminate, amend or otherwise modify, except in
the ordinary course of business, or knowingly violate the terms of, any
of the Company Material Contracts, any of the leases for the Leased
Properties or the Third Party Leases or any other binding obligations
material to the Company and its Subsidiaries, taken as a whole, and
except for terminations, amendments or other modifications that would
not result in the incurrence of additional costs or expenses, or in the
loss of revenue, in excess of $50,000 on an annual basis in the
aggregate, and are not made with respect to any of the Company Material
Contracts described in Section 3.1(f)(iii), (vi), (vii), (ix), (x), (xi)
or (xv) (B);
(xiii) except as required by agreements or instruments
in effect on the date hereof, alter in any material respect, or enter
into any commitment to alter in any material respect, any interest
material to the Company and its Subsidiaries, taken as a whole, in any
corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any equity or
ownership interest on the date hereof (other than any interest arising
from any foreclosure, settlement in lieu of foreclosure or troubled loan
or debt restructuring in the ordinary course of business consistent with
past practice);
(xiv) Except for payments described in Section 4.1 of
the Company Disclosure Schedule (A) grant to any current or former
director,
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Executive Officer or Key Employee of the Company or its
Subsidiaries any increase in compensation, bonus or other benefits,
except for salary, wage, bonus or benefit increases (x) as required from
time to time by governmental legislation affecting wages, and (y) as
required by the terms existing prior to the date hereof of plans or
arrangements described in Section 3.1(k) the Company Disclosure
Schedule, (B) grant to any such current or former director, or Executive
Officer or Key Employee, any increase in severance or termination pay,
(C) enter into, or amend, or take any action to clarify any provision
of, any Plan or any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such
current or former director, or Executive Officer or Key Employee, except
as required by applicable law, (D) modify any Company Stock Option or
(E) without first consulting with Parent, make any discretionary
contributions to any pension plan;
(xv) except pursuant to agreements or arrangements in
effect on the date hereof and disclosed in writing and provided or made
available to Parent and except for compensation for service as an
officer, employee or director consistent with past practice, pay, loan
or advance any amount to, or sell, transfer or lease any properties or
assets (real, personal or mixed, tangible or intangible) to, or enter
into any agreement or arrangement with, any of its officers or directors
or any affiliate or the immediate family members or associates of any of
its officers or directors other than compensation in the ordinary course
of business consistent with past practice;
(xvi) agree or consent to any material agreement or
material modifications of existing agreements with any Governmental
Entity in respect of the operations of its business, except (i) as
required by law or (ii) to effect the consummation of the transactions
contemplated hereby;
(xvii) pay, discharge, settle or compromise any claim,
action, litigation, arbitration or proceeding, other than any such
payment, discharge, settlement or compromise in the ordinary course of
business consistent with past practice that involves solely money
damages in an amount not in excess of $50,000 individually or $100,000
in the aggregate, and that does not create precedent for other pending
or potential claims, actions, litigation, arbitration or proceedings;
(xviii) issue any broadly distributed communication of
a general nature to Employees (including general communications relating
to benefits and compensation) or customers without the prior approval of
Parent (which will not be unreasonably delayed or withheld), except for
communications in the ordinary course of business that do not relate to
the Merger or other transactions contemplated hereby;
(xix) create, renew, amend or permit to expire, lapse
or terminate or knowingly take any action reasonably likely to result in
the creation, renewal, amendment, expiration, lapse or termination of
any insurance policies referred to in Section 3.1(o) material to the
Company and its Subsidiaries, taken
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as a whole, except that the Company shall be permitted to take
any such action without Parent's consent in the event that Parent
shall fail to reasonably consent to such action; or
(xx) knowingly take any action or knowingly fail to
take any action which would result in any of the conditions of Article
VI not being satisfied; or
(xxi) authorize, or commit or agree to take, any of
the foregoing actions.
SECTION 4.2 Advice of Changes. Except to the extent prohibited
by applicable law or regulation, the Company, Parent and Merger Sub shall
promptly advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could have a Material Adverse Effect on such party or on
the truth of their respective representations and warranties or the ability of
the conditions set forth in Article VI to be satisfied; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; provided further that a
failure to comply with this Section 4.2 shall not constitute a failure to be
satisfied of any condition set forth in Article VI unless the underlying
untruth, inaccuracy, failure to comply or satisfy, or change or event would
independently result in a failure to be satisfied of a condition set forth in
Article VI.
SECTION 4.3 No Solicitation by the Company. (a) Except as
otherwise provided in this Section 4.3, until the earlier of the Effective Time
and the date of termination of this Agreement, neither the Company, nor any of
its Subsidiaries or any of the officers, directors, agents, or representatives
of it or its Subsidiaries (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) shall (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes a Company Takeover Proposal (as defined in this Section 4.3),
(ii) participate in any discussions or negotiations regarding any Company
Takeover Proposal, (iii) enter into any agreement regarding any Company Takeover
Proposal or (iv) make or authorize any statement, recommendation or solicitation
in support of any Company Takeover Proposal. If and only to the extent that (i)
the Company Shareholders Meeting shall not have occurred, (ii) the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law in light of
a bona fide Company Takeover Proposal that has not been withdrawn, (iii) such
Company Takeover Proposal was not solicited by it and did not otherwise result
from a breach of this Section 4.3(a), and (iv) the Company provides prior
written notice to Parent of its
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decision to take such action, the Company shall be permitted to (A) furnish
information with respect to the Company and any of its Subsidiaries to such
Person pursuant to a customary confidentiality agreement, (B) participate in
discussions and negotiations with such Person and (C) effect a Change in the
Company Recommendation (as defined below).
For purposes of this Agreement, "Company Takeover Proposal"
means any proposal or offer from any Person (other than from Parent and its
Affiliates) relating to (A) any direct or indirect acquisition or purchase of
(x) assets of the Company and its Subsidiaries that generate 20% or more of the
net revenues or net income, or that represent 20% or more of the total assets,
of the Company and its Subsidiaries, taken as a whole, or (y) 20% or more of any
class of equity securities of the Company, (B) any tender offer or exchange
offer that if consummated would result in any Person beneficially owning 20% or
more of any class of any equity securities of the Company, or (C) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company (or any one or more Subsidiaries of
the Company, individually or taken together, whose business constitutes 20% or
more of the net revenues, net income or total assets of the Company and its
Subsidiaries, taken as a whole), other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by this Section 4.3 or
Section 5.1(d), neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in a manner adverse to Parent, the approval of the Agreement,
the Merger or the Company Recommendation (as defined in Section 5.1(d)) or take
any action or make any statement in connection with the Company Shareholders
Meeting inconsistent with such approval or Company Recommendation (collectively,
a "Change in the Company Recommendation"), or (ii) approve or recommend, or
propose publicly to approve or recommend, any Company Takeover Proposal. For
purposes of this Agreement, a Change in the Company Recommendation shall include
any approval or recommendation (or public proposal to approve or recommend), by
the Company Board of a Company Takeover Proposal, or any failure by the Company
Board to recommend against a Company Takeover Proposal.
(c) In addition to the obligations of the Company set
forth in paragraphs (a) and (b) of this Section 4.3, the Company shall promptly
(and in any event within 24 hours) advise Parent orally and in writing of any
request for information relating to a Company Takeover Proposal, or of any
Company Takeover Proposal, the material terms and conditions of such request or
Company Takeover Proposal and the identity of the person making such request or
Company Takeover Proposal, and shall promptly (and in any event within 24 hours)
provide a copy of any written request or Company Takeover Proposal to Parent.
The Company will keep Parent promptly informed of the status and details
(including amendments or proposed amendments) of any such request or Company
Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rule
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14e-2(a) promulgated under the Exchange Act or from making any disclosure if,
in the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would violate its
obligations under applicable law; provided, however, any such disclosure
relating to a Company Takeover Proposal shall be deemed to be a Change in the
Company Recommendation unless the Board of Directors of the Company reaffirms
the Company Recommendation in such disclosure.
SECTION 4.4 Transition.
(a) Commencing following the date hereof, Parent and the
Company shall, and shall cause their respective Subsidiaries to, use their
reasonable best efforts to facilitate the integration of the Company and its
Subsidiaries, including the Bank, with the businesses of Parent and its
Subsidiaries to be effective as of the Closing Date or such later date as may be
determined by Parent. Without limiting the generality of the foregoing, from the
date hereof through the Closing Date and consistent with the performance of
their day-to-day operations and the continuous operation of the Company and its
Subsidiaries in the ordinary course of business, the Company shall cause the
employees and officers of the Company and its Subsidiaries, including the Bank,
to use their reasonable best efforts to provide support, including support from
its outside contractors, and to assist Parent in performing all tasks, including
equipment installation, reasonably required to result in a successful
integration at the Closing or such later date as may be determined by Parent.
(b) Parent and the Company agree to consult with respect
to their loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) and the Company shall
make such modifications or changes to its policies and practices, if any, and at
such date prior to the Effective Time, as Parent shall reasonably request.
Parent and the Company shall also consult with respect to the character, amount
and timing of restructuring charges to be taken by each of them in connection
with the transactions contemplated hereby, and shall take such charges as Parent
shall reasonably request. No party's representations, warranties and covenants
contained in this Agreement shall be deemed to be untrue or breached in any
respect for any purpose as a consequence of any modifications or changes to such
policies and practices which may be undertaken on account of this Section
4.4(b).
SECTION 4.5 No Fundamental Changes in the Conduct of Business
by Parent. Except (i) as set forth in Section 4.5 of the Parent Disclosure
Schedule, (ii) as otherwise expressly contemplated by this Agreement, (iii) as
consented to by the Company in writing (which consent shall not be unreasonably
withheld or delayed) or required by applicable law or regulation, during the
period from the date of this Agreement to the Effective Time, Parent shall not,
and shall not permit any of it Subsidiaries to:
(i) except as contemplated hereby, amend its
certificate of incorporation or by-laws in any manner that would
adversely affect the economic benefits of the Merger to the holders of
Company Common Stock; provided that the authorization or issuance of
preferred stock in a manner that
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would not require Parent shareholder approval shall not be deemed to
violate this clause (i);
(ii) knowingly take any action or knowingly fail to
take any action which would result in any of the conditions of Article
VI not being satisfied;
(iii) knowingly take any action that could reasonably
be expected to jeopardize or materially delay the receipt of any
Requisite Regulatory Approval (as defined under Section 6.1(b);
(iv) enter into any agreement directly or indirectly
to acquire or purchase all or substantially all of the capital stock or
assets of any other Person or business (whether by merger,
consolidation, tender offer, exchange offer or otherwise) unless such
transaction would not materially delay completion of, or materially
impair the prospects of completing, the Merger pursuant to this
Agreement;
(v) materially and adversely change the nature of the
business conducted by the Parent and its Subsidiaries, taken as a whole;
(vi) knowingly take or cause to be taken any action
which, individually or in the aggregate, would reasonably be expected to
prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code; or
(vii) authorize, or commit or agree to take, any of
the foregoing actions or any other action that would be reasonably
likely to prevent Parent from performing or would be reasonably likely
to cause Parent not to perform its covenants hereunder in all material
respects.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, Proxy Statement;
Shareholders Meeting.
(a) As promptly as practicable following the date of this
Agreement, Parent and the Company shall prepare, and Parent shall file with the
SEC, the Form S-4, in which the Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use all reasonable efforts to
have the Form S-4 declared effective under the Securities Act, and for the Proxy
Statement to be cleared under the Exchange Act, as promptly as practicable after
such filing. Without limiting any other provision hereinabove contained, the
Form S-4 and the Proxy Statement will contain, without limitation, such
information and disclosure reasonably requested by either Parent or the Company
so that (i) the Form S-4 conforms in both form and substance to the requirements
of the Securities act, and (ii) the Proxy Statement conforms in both form
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and substance to the requirements of the Exchange Act. The Company shall use
reasonable best efforts to cause the Proxy Statement to be mailed to holders
of Company Common Stock as promptly as practicable after the Form S-4 is
declared effective.
(b) If at any time prior to the Effective Time there shall
occur (i) any event with respect to the Company or any of its Subsidiaries, or
with respect to other information supplied by Company for inclusion in the Form
S-4 or the Proxy Statement or (ii) any event with respect to Parent, or with
respect to information supplied by Parent for inclusion in the Form S-4 or the
Proxy Statement, in either case, which event is required to be described in an
amendment of, or a supplement, to the Form S-4 or the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the shareholders of
Company.
(c) Each of the Company and Parent shall promptly notify
the other of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent shall
use their respective reasonable best efforts to respond to any comments of the
SEC with respect to the Form S-4 and the Proxy Statement as promptly as
practicable. The Company and Parent shall cooperate with each other and provide
to each other all information necessary in order to prepare the Form S-4 and the
Proxy Statement, and shall provide promptly to the other party any information
such party may obtain that could necessitate amending any such document.
(d) The Company shall, as promptly as practicable after
the Form S-4 is declared effective under the Securities Act, duly call, give
notice of, convene and hold the Company Shareholders Meeting in accordance with
the NJBCA for the purpose of obtaining the Company Shareholder Approval and
subject to Section 4.3, the Board of Directors of the Company shall recommend to
the Company's shareholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby (the "Company
Recommendation"); provided, however, that the Company's Board of Directors shall
not be required to make such Company Recommendation to the extent that it is
permitted to effect a Change in the Company Recommendation pursuant to Section
4.3. Without limiting the generality of the foregoing, the Company agrees that
its obligations pursuant to the first sentence of this Section 5.1(d) shall not
be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal. Notwithstanding
any Change in the Company Recommendation, unless otherwise directed in writing
by Parent, this Agreement and the Merger shall be submitted to the shareholders
of the Company at the Company Shareholders Meeting for the purpose of approving
the Agreement and the Merger and nothing contained herein shall be deemed
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to relieve the Company of such obligation, provided, however, that if the Board
of Directors of the Company shall have effected a Change in the Company
Recommendation in accordance with this Agreement, then in submitting this
Agreement to the Company's shareholders, the Board of Directors of the Company
may submit this Agreement to the Company's shareholders without recommendation
(although the resolutions adopting this Agreement and the Plan of Merger as of
the date hereof may not be rescinded or amended), in which event the Board of
Directors of the Company may communicate the basis for its lack of a
recommendation to the Company's shareholders in the Proxy Statement or an
appropriate amendment or supplement thereto to the extent required by law.
(e) The Company shall coordinate and cooperate with Parent
with respect to the timing of the Company Shareholders Meeting.
SECTION 5.2 Access to Information; Confidentiality.
(a) Subject to applicable law, each party shall, and shall
cause its Subsidiaries to, afford each other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
each other party, reasonable access during normal business hours during the
period prior to the Effective Time to all its respective properties, books,
contracts, commitments, personnel and records and, during such period, each
party shall, and shall cause each of its Subsidiaries to, furnish promptly to
each other party all other information concerning its business, properties and
personnel as such other party may reasonably request. In addition, the Company
shall, and shall cause each of its Subsidiaries to, furnish promptly to Parent
(a) a copy of each material report, schedule, registration statement and other
document filed by it with any Governmental Entity and (b) the internal or
external reports prepared by it and/or its Subsidiaries in the ordinary course
that are reasonably required by Parent promptly after such reports are made
available to the Company's personnel. No review pursuant to this Section 5.2
shall affect any representation or warranty given by any party.
(b) Each party will keep, and will cause its Subsidiaries,
Affiliates, directors, officers, employees, agents and advisors (collectively,
such party's "Representatives") to keep, all information and documents obtained
from the other party or its Representatives pursuant to Section 5.2(a) or during
the investigations leading up to the execution of this Agreement confidential
unless such information (i) was already in the possession of the party receiving
the information (the "Receiving Party"), provided that such information is not
known by the Receiving Party to be subject to another confidentiality agreement
with, or other direct or indirect obligation of secrecy to, the party disclosing
the information or documents (the "Disclosing Party"), (ii) becomes generally
available to the public other than as a result of a disclosure by the Receiving
Party or its Representatives or (iii) becomes available to the Receiving Party
from a source other than the Disclosing Party or its Representatives, provided
that such source is not known by the Receiving Party to be bound by a
confidentiality agreement with, or other direct or indirect obligation of
secrecy to, the Disclosing Party. In the event that this Agreement is terminated
or the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of
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documents or extracts thereof containing information and data as to another
party hereto to be returned to the Disclosing Party which furnished the same or,
with respect to information contained in analyses, compilations, studies or
other documents or records prepared by the Receiving Party, destroyed (such
destruction to be confirmed in writing if requested by the Disclosing Party). In
the event that the Receiving Party or any of its Representatives become legally
compelled to disclose any such information or documents, the Receiving Party
agrees to provide, if practicable, the Disclosing Party with reasonable advance
notice under the circumstances prior to any such disclosure to enable the
Disclosing Party to seek a protective order or other appropriate remedy. In
addition, each party may, at any time, with notice (in advance, if practicable)
to the other party, make disclosures of such information and documents as may be
required or requested by such party's applicable regulatory authorities. This
Agreement shall not be construed to limit in any way either party's ability to
consult any tax advisor regarding the tax treatment or tax structure of the
Merger or the Bank Combination. These provisions are meant to be interpreted so
as to prevent the Merger or the Bank Combination from being treated as offered
under "conditions of confidentiality" within the meaning of the Code and the
Treasury Regulations thereunder.
SECTION 5.3 Reasonable Best Efforts. (a) Subject to the terms
and conditions set forth in this Agreement, each of the parties hereto shall use
its reasonable best efforts (subject to, and in accordance with, applicable law)
to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement, including (i) obtaining all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings and the taking of all steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) obtaining all necessary consents,
approvals or waivers from third parties, (iii) defending any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, (iv) publicly supporting this Agreement and the Merger and (iv)
executing and delivering any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) In connection with and without limiting the foregoing,
the Company and Parent shall (i) use their reasonable best efforts to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement or the Merger or any of the other transactions
contemplated hereby, and (ii) if any state takeover statute or similar statute
or regulation becomes applicable to this Agreement or the Merger or any other
transaction contemplated hereby, take all action necessary to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on the Merger and
the other transactions contemplated hereby.
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(c) In connection with and without limiting the foregoing,
the Company shall use its reasonable best efforts to assist Parent's reasonable
efforts to effect, subsequent to the Effective Time, the combination (the "Bank
Combination") of the Bank with Parent Bank, National Association, or another
banking subsidiary of Parent, including causing such banks to enter into a
merger agreement, obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities (including the OCC Approval)
and making all necessary registrations and filings and taking all steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including the OCC Approval), with such
Bank Combination to be effective immediately following the Effective Time or at
such later time as Parent may determine.
SECTION 5.4 Rule 16b-3 Actions. Prior to the Effective Time,
the Company shall take all such steps as may be required to cause any
dispositions of Company Common Stock or acquisitions of Parent Common Stock
(including derivative securities with respect to Company Common Stock or Parent
Common Stock) resulting from the transactions contemplated by Article I and II
of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company or
by each individual, if any, who will be so subject, immediately following the
Effective Time, with respect to Parent, to be exempt under Rule 16b-3
promulgated under the Exchange Act, such steps to be taken in accordance with
the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps,
Slate, Meagher & Flom LLP, in each case to the extent permitted by applicable
law and judicial interpretations thereof.
SECTION 5.5 Indemnification, Exculpation and Insurance. (a)
All rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company and its Subsidiaries
as provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any existing indemnification agreements
or arrangements of the Company and its Subsidiaries shall survive the Merger and
shall continue in full force and effect in accordance with their terms, and
shall not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would adversely affect the rights
thereunder of such individuals for acts or omissions occurring at or prior to
the Effective Time.
(b) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including any such claim, action suit, proceeding or
investigation in which any individual who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of the Company or any of its Subsidiaries (the "Indemnified
Parties"), is, or is threatened to be, made a party based in whole or in part
on, or arising in whole or in part out of, or pertaining to (i) the fact that he
is or was a director, officer or employee of the Company or any of its
Subsidiaries or their respective predecessors or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto.
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(c) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those Persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's directors
and officers currently covered by such insurance than those of such policy in
effect on the date hereof; provided, that the Surviving Corporation may
substitute therefor policies of Parent or its Subsidiaries (including self
insurance) containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided, further, that in no event
shall the Surviving Corporation be required to pay aggregate premiums for
insurance under this Section 5.5(c) in excess of 150% of the aggregate premiums
paid by the Company in 2003 on an annualized basis for such purpose and, if the
annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to use its reasonable best efforts obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
(d) The provisions of this Section 5.5 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and other Person named herein and his or
her heirs and representatives.
SECTION 5.6 Fees and Expenses. Except as otherwise provided in
Section 7.2, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
SECTION 5.7 Public Announcements. Parent and the Company will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with and use reasonable efforts to agree on,
any press release or other public statements and any broadly distributed
internal communications with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as either
party may in good faith determine is required by applicable law, court process
or by obligations pursuant to any listing agreement with any national securities
exchange and except for any discussions with rating agencies. The parties agree
that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.
SECTION 5.8 Affiliates. Concurrently with the execution of
this Agreement, the Company shall deliver to Parent a written agreement
substantially in the form attached as Exhibit A hereto of all of the Persons who
are "affiliates" of the Company for purposes of Rule 145 under the Securities
Act; all of such affiliates, who are affiliates as of the date of this
Agreement, are identified in Section 5.8 of the Company Disclosure Schedule.
Section 5.8 of the Company Disclosure Schedule shall be updated by the Company
as necessary to reflect changes from the date hereof and the Company shall use
reasonable best efforts to cause each Person added to such schedule after the
date hereof to deliver a similar agreement.
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SECTION 5.9 Stock Exchange Listing. Parent shall use best
efforts to cause the Parent Common Stock issuable (i) under Article II or (ii)
upon exercise of the Company Stock Options assumed pursuant to Section 2.3 to be
approved for issuance on the NYSE, in each case subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event on
or prior to the Closing Date.
SECTION 5.10 Shareholder Litigation. Each of the Company and
Parent shall give the other the reasonable opportunity to participate in the
defense of any shareholder litigation against the Company or Parent, as
applicable, and its directors relating to the transactions contemplated by this
Agreement.
SECTION 5.11 Standstill Agreements; Confidentiality
Agreements. During the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its respective Subsidiaries is a party and which relates to the confidentiality
or information regarding the Company or its Subsidiaries or which relate to
securities of the Company, other than client and customer agreements entered
into by the Company or its Subsidiaries in the ordinary course of business.
During such period, the Company shall use reasonably best efforts to enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreement, including by using reasonable best efforts to obtain injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court having jurisdiction.
SECTION 5.12 Employee Benefits. (a) The Surviving Corporation
and its Subsidiaries and/or Parent shall employ as of the Closing Date those
Employees who are employed by the Company and its Subsidiaries as of the
Effective Time (the "Continuing Employees"), at wage or salary levels, as
applicable, at least equal to the wage or salary levels of such Employees as of
the date of this Agreement provided that no Continuing Employee shall be, or
have the authority of, an officer of such Person unless elected or appointed as
such by such Person.
(b) Following the Effective Time, the Continuing Employees
will participate in Parent's Displaced Employee Assistance Plan on the terms and
subject to the conditions of such Plan as in effect from time to time except
that (i) Continuing Employees will receive service credit in connection with
such plan as provided in Section 5.12(c) and (ii) until the first anniversary of
the Closing Date, the amounts payable to Continuing Employees entitled to
benefits thereunder shall be based on the schedule included as Section 5.12(b)
of the Company Disclosure Schedule; provided that the foregoing shall not apply
to any Continuing Employee who as of the Effective Time is covered by a specific
employment agreement that is binding upon Parent or the Surviving Corporation.
The Company shall terminate all severance plans, policies and agreements, other
than those agreements with persons having individual agreements set forth in
Section 3.1(k) of the Company Disclosure Schedule, effective as of the close of
business on the day prior to the Closing Date.
(c) Parent shall, or shall cause the Surviving Corporation
and its Subsidiaries to, give Continuing Employees full credit for purposes of
eligibility,
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vesting and benefit accruals under any employee benefit plans, programs, or
arrangements maintained by Parent, the Surviving Corporation or any Subsidiary
of Parent or the Surviving Corporation (other than any defined benefit pension
plan (except to the extent expressly described in Section 5.12(g)), retiree
medical plan or retiree life insurance plan) for such Continuing Employees'
service with the Company or any Subsidiary of the Company (or any predecessor
entity) to the same extent recognized by the Company and its Subsidiaries,
except as may result in duplication of benefits.
(d) Parent shall, or shall cause the Surviving Corporation
and its Subsidiaries to, waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Continuing Employees under any welfare plan that
such employees may be eligible to participate in after the Effective Time, other
than limitations or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the Effective Time under
any welfare plan maintained for the Continuing Employees immediately prior to
the Effective Time, and provide credit under any such welfare plan for any
co-payments, deductibles and out-of-pocket expenditures for the remainder of the
coverage period during which any transfer of coverage occurs. Furthermore, if
Parent or Surviving Corporation terminates any Company Plan that is a group
health plan, it shall permit Continuing Employees who actively participate in
group health plan to participate immediately in a comparable group health plan
with no gap in coverage, and if Parent or Surviving Corporation terminates any
Company Plan that is a group health plan providing benefits to existing retirees
of the Company and its Subsidiaries, it shall permit such persons to participate
in Parent's retiree medical benefit plans having comparable benefits with no gap
in coverage.
(e) Parent shall provide, or shall cause to be provided,
to the Continuing Employees compensation and employee benefit plans, programs
and arrangements that are, in the aggregate, comparable to those plans, programs
and arrangements in which they currently participate until such time as Parent
transfers and converts (the "Conversion Date") such Continuing Employees to the
compensation and employee benefit plans, programs and arrangements maintained by
Parent or its applicable Subsidiary. If Parent or Surviving Corporation
terminates any Company Plans, it shall permit Continuing Employees to
participate in any then existing comparable Parent Plans as promptly as
practicable, to the extent Continuing Employees meet the eligibility
requirements (taking credited service levels as provided in Section 5.12(c) into
consideration). From and after the Conversion Date, Parent shall provide, or
shall cause to be provided, to the Continuing Employees compensation and
employee benefit plans, programs and arrangements that are no less favorable
than those generally provided to similarly situated employees of Parent or its
applicable Subsidiary.
(f) The Company shall cooperate with Parent in preparing
for the transfer and conversion of compensation and employee benefit plans,
programs and arrangements, for Employees from those of the Company to those of
Parent or its appropriate Subsidiary. Such cooperation shall include, to the
extent requested by Parent, (i) distribution to Employees of new employee
orientation materials of Parent and ensuring participation by Employees in
Parent's orientation meetings, which may be held
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on the premises of the Company or its Subsidiaries, (ii) making best efforts to
merge the Raritan Savings Bank 401(k) Savings Plan in RSI Retirement Trust and
the Vista Bancorp, Inc. Employee Retirement Savings Plan with and into the
UnitedTrust Bank Profit Sharing and 401(k) Plan prior to the Closing Date, (iii)
preparing for the merger of the Company's merged 401(k) plan with the PNC
Incentive Savings Plan, (iv) taking such actions as may be necessary or
desirable to cause, as of the Effective Date, all accrued vested balances of
Elective Contribution Accounts (as defined in the Company's Executive Deferred
Compensation Plan and Executive Deferred Bonus Plans, as amended, (collectively,
the "Company DCP"), to be transferred from the Company DCP to the Parent's
Deferred Compensation Plan (the "Parent DCP"), with such funds so transferred,
and any future income deferrals that may be made after the Effective Date, to be
governed from and after the Effective Date by the terms and conditions of the
Parent DCP, and to terminate all other rights under the Company DCP as of the
Effective Time, and (v) making best efforts to ensure that Continuing Employees
will be in compliance with the applicable employee policies and programs of
Parent.
(g) If Parent or Surviving Corporation freezes or
terminates the Company defined benefit pension plan and/or the Vista defined
benefit pension plan, it shall permit all Continuing Employees who participate
in such plan to participate in Parent's cash balance defined benefit pension
plan as soon as practicable and the terms for their participation in such plan
shall be no less favorable than the terms of participation for similarly
situated employees of the Parent or its Subsidiaries, and such Continuing
Employees shall receive credit for all their years of service with the Company
or any Subsidiary of the Company (or any predecessor entity) solely for purposes
of eligibility and vesting under such plan but not for benefit accrual;
provided, however, that for purposes of calculating any future annual earnings
credits under the terms of Parent's cash balance defined benefit pension plan,
Continuing Employees' prior service with the Company or any Subsidiary of the
Company shall be taken into account.
(h) If Parent or Surviving Corporation freezes or
terminates the Bank's Profit Sharing and 401(k) Plan (or the Raritan Savings
Bank 401(k) Savings Plan or the Vista Bancorp, Inc. Employee Retirement Savings
Plan), or merges such plan into the Parent Incentive Savings Plan, it shall
permit all Continuing Employees who participate in such plan to participate as
soon as practicable in the Parent Incentive Savings Plan, and the terms for
their participation in such plan shall be no less favorable than the terms of
participation for similarly situated employees of the Parent or its
Subsidiaries.
(i) All supplemental retirement income agreements and
similar plans, policies, programs or agreements of the Company and its
Subsidiaries, as amended or supplemented (each, a "SERP"), shall be fully funded
by the Company in accordance with their terms, and, as of the Effective Time,
none of the Company, Parent, the Surviving Corporation or any of their
Affiliates will thereafter have any further obligations whatsoever in connection
with any such SERP.
(j) Parent or the Surviving Corporation shall maintain the
Company's Director Deferred Compensation Plan of United National Bancorp, dated
October 1, 1997, as amended through the date hereof, and the Bank's Director
Deferred
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Compensation Plan of UnitedTrust Bank, dated October 1, 1997, as amended through
the date hereof, and the Restated Director Deferred Compensation Plan for the
Raritan Savings Bank, dated June 1, 1997, as amended through the date hereof, in
each case in accordance with the terms thereof.
(k) Except as otherwise provided in Article V of this
Agreement, Parent and Surviving Corporation shall honor all obligations under
the employment and change-in-control agreements set forth in Company Disclosure
Schedule 5.12(k) and shall make the lump-sum payments also set forth in Company
Disclosure Schedule 5.12(k) in each case, except to the extent superseded by
agreements entered into in connection with entering into this Agreement.
SECTION 5.13 Tax Matters. Parent and the Company shall use
reasonable best efforts to cause the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Code and to obtain the Tax opinions
described in Sections 6.2(d) and 6.3(c) hereof. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Treas. Reg. Sec.
1.368-2(g). Officers of Parent, Merger Sub and the Company shall execute and
deliver to McCarter & English, LLP, counsel to the Company, and Wachtell,
Lipton, counsel to Parent, certificates containing appropriate representations
at such time or times as may be reasonably requested by such law firms,
including the effective date of the Form S-4 and the Closing Date, in connection
with their respective deliveries of opinions, pursuant to Sections 6.2(d) and
6.3(c) hereof, with respect to the Tax treatment of the Merger.
SECTION 5.14 Advisory Board of Parent. Parent shall establish
an advisory board (the "Parent Advisory Board") and, prior to the Closing Date,
shall offer to each of the members of the Board of Directors of the Company as
of the Closing Date an opportunity to become a member of the Parent Advisory
Board, subject to entering into an agreement of the type set forth in Section
5.14 of the Parent Disclosure Schedule, , with service on the Parent Advisory
Board to commence immediately following the Closing Date. The Parent Advisory
Board shall be maintained for a period ending no sooner than two years following
the Closing Date. Each Parent Advisory Board member shall receive annual
compensation for his or her service on the Parent Advisory Board calculated in
accordance with the Advisory Board Charter previously provided to the Company.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver by each of Parent and the Company on or
prior to the Closing Date of the following conditions:
(a) Shareholder Approval. The Company Shareholder Approval
shall have been obtained.
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(b) Governmental and Regulatory Approvals. Other than the
filing provided for under Section 1.3, all consents, approvals and actions of,
filings with and notices to any Governmental Entity required by the Company,
Parent or any of their Subsidiaries under applicable law or regulation to
consummate the Merger and the other transactions contemplated hereby (including,
if so determined by Parent in its sole discretion, the Bank Combination), shall
have been obtained or made, including approval of the Federal Reserve, the New
Jersey Banking Department and, if applicable, the OCC (all such approvals and
the expiration of all such waiting periods, the "Requisite Regulatory
Approvals").
(c) Other Third Party Approvals. All other notices,
consents or waivers from third parties (other than Governmental Employees) with
respect to the transactions contemplated by this Agreement shall have been made
or obtained except as would not reasonably be expected to have a Material
Adverse Effect on Parent or the Company
(d) No Injunctions or Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Merger or,
if so determined by Parent in its sole discretion, the Bank Combination;
provided, however, that each of the parties shall have used its reasonable best
efforts to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become effective
under the Securities Act and no stop order or proceedings seeking a stop order
shall have been entered or be pending by the SEC.
(f) Stock Exchange Listing. The shares of Parent Common
Stock issuable to the Company's shareholders as contemplated by Article II shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
SECTION 6.2 Conditions to Obligations of Parent. The
obligation of Parent to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth herein shall be true and correct at and
as of the date hereof and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such date), provided that no representation or warranty of the
Company shall be deemed untrue or incorrect for purposes hereunder as a
consequence of the existence of any fact, event or circumstance inconsistent
with such representation or warranty, unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty of the Company, has had or
would reasonably be expected to result in a Material Adverse Effect on the
Company, disregarding for these purposes (x) any qualification or exception for,
or reference to,
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materiality in any such representation or warranty and (y) any use of the terms
"material," "materially," "in all material respects," "Material Adverse Change,"
"Material Adverse Effect" or similar terms or phrases in any such representation
or warranty; and Parent shall have received a certificate, dated the Closing
Date, signed on behalf of the Company by the Chief Executive Officer and the
Chief Financial Officer of the Company, to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it at or prior to the Closing Date under this Agreement; and Parent
shall have received a certificate, dated the Closing Date, signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company, to such effect.
(c) Regulatory Condition. No condition or requirement has
been imposed by one or more Governmental Entities in connection with any
required approval by them of the Merger or, if so determined by Parent in its
sole discretion, the Bank Combination that requires the Company or its
Subsidiaries to be operated in a manner that, in the good faith belief of the
Board of Directors of Parent, would have a Material Adverse Effect on the
Company or Parent.
(d) Tax Opinion. Parent shall have received the opinion of
Wachtell, Lipton, in form and substance reasonably satisfactory to Parent, dated
the Closing Date, rendered on the basis of facts, representations and
assumptions set forth in such opinion and certificates obtained from officers of
Parent, Merger Sub and the Company, all of which are consistent with the state
of facts existing as of the Effective Time, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code. In
rendering the tax opinion described in this Section 6.2(d), Wachtell, Lipton may
require and rely upon representations contained in certificates of officers of
Parent, Merger Sub and the Company.
SECTION 6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Parent set forth herein shall be true and correct at and as of
the date hereof and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date), provided that no representation or warranty of Parent shall be
deemed untrue or incorrect for purposes hereunder as a consequence of the
existence of any fact, event or circumstance inconsistent with such
representation or warranty, unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty of Parent, has had or would
result in a Material Adverse Effect on Parent, disregarding for these purposes
(x) any qualification or exception for, or reference to, materiality in any such
representation or warranty and (y) any use of the terms "material,"
"materially," "in all material respects," "Material Adverse Change," "Material
Adverse Effect" or similar terms or phrases in any such
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representation or warranty; and the Company shall have received a certificate,
dated the Closing Date, signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent, to such effect.
(b) Performance of Obligations of Parent. Parent shall
have performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement; and the Company
shall have received a certificate, dated the Closing Date, signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of Parent,
to such effect.
(c) Tax Opinion. The Company shall have received the
opinion of McCarter & English, LLP, in form and substance reasonably
satisfactory to the Company, dated the Closing Date, rendered on the basis of
facts, representations and assumptions set forth in such opinion and the
certificates obtained from officers of Parent, Merger Sub and the Company, all
of which are consistent with the state of facts existing as of the Effective
Time, to the effect that the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code. In rendering the tax opinion described in
this Section 6.2(d), McCarter & English, LLP may require and rely upon
representations contained in certificates of officers of Parent, Merger Sub and
the Company.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent
nor the Company may rely on the failure of any condition set forth in Section
6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was caused
by such party's failure to use reasonable best efforts to consummate the Merger
and the other transactions contemplated by this Agreement, as required by and
subject to Section 5.3.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, and whether before or after the Company
Shareholder Approval (the party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e) or (f) below shall give written notice of such
termination to the other party in accordance with Section 8.2, specifying the
provision hereof pursuant to which such termination is effected):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
the date that is twelve months following the date hereof, provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.1(b) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
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(ii) if the Company Shareholder Approval shall not
have been obtained at the Company Shareholders Meeting duly convened
therefor or at any adjournment or postponement thereof;
(iii) if any Restraint having any of the effects set
forth in Section 6.1(d) shall be in effect and shall have become final
and nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iii) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint; or
(iv) if any Governmental Entity that must grant a
Requisite Regulatory Approval has denied the applicable Requisite
Regulatory Approval and such denial has become final and nonappealable;
(c) by Parent, if (i) the Company shall have failed to
make the Company Recommendation in the Proxy Statement, (ii) the Company shall
have effected a Change in the Company Recommendation or (iii) the Company shall
have breached its obligations under this Agreement by reason of a failure to
call or convene the Company Shareholders Meeting in accordance with Section
5.1(d);
(d) by Parent, if the Company shall have breached any of
its representations, warranties, covenants or other agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (ii) is incapable of being cured by the
Company or is not cured within 30 days of written notice thereof; or
(e) by the Company, if Parent shall have breached any of
its representations, warranties, covenants or other agreements contained in this
Agreement, which breach (A) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (B) is incapable of being cured by Parent or
is not cured within 30 days of written notice thereof.
(f) By the Company, if (either before or after the
approval of this Agreement by the shareholders of the Company) its Board of
Directors so determines at any time during the three business day period
commencing with (and including) the Determination Date (as defined in Section
8.3), if both of the following conditions are satisfied:
(x) the Determination Date Value (as defined in
Section 8.3) is less than the product of 0.85 and the Initial Value (as
defined in Section 8.3); and
(y) (i) the number obtained by dividing the Parent
Average Price (as defined in Section 8.3) by $48.84 (such number, the
"Parent Ratio") shall be less than (ii) the number obtained by dividing
the Index Price (as defined in Section 8.3) as of the Determination Date
by $38.70 and subtracting 0.15 from such number (such number less 0.15,
the "Index Ratio").
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Notwithstanding the foregoing, if the Company elects to
exercise its termination right pursuant to this Section 7.1(f), then during the
seventy-two hour period commencing with the receipt by Parent of the notice
required pursuant to the last paragraph of this Section 7.1, Parent shall have
the option of adjusting the consideration to be paid to the Company shareholders
under Section 2.1 by increasing the Aggregate Parent Share Amount by that number
of shares of Parent Common Stock equal to the lesser of (i) the quotient
obtained by dividing (x) (A) the product of 0.85 and the Initial Value less (B)
the Determination Date Value by (y) the Parent Average Price and (ii) the
quotient obtained by dividing (x) the Peer Equivalent Value (as defined in
Section 8.3) less the Determination Date Value by (y) the Parent Average Price,
in each case, rounded up to the nearest whole share.
If Parent makes an election contemplated by the preceding
sentence within such seventy-two hour period, it shall give prompt written
notice to the Company of such election and the revised Aggregate Parent Share
Amount, whereupon no termination shall have occurred pursuant to this Section
7.1(f) and this Agreement shall remain in effect in accordance with its terms
(except as Aggregate Parent Share Amount shall have been so modified), and any
references in this Agreement to Aggregate Parent Share Amount shall thereafter
be deemed to refer to the Aggregate Parent Share Amount as adjusted pursuant to
this Section 7.1(f) (together with any additional adjustments pursuant to
Section 2.1(e)).
SECTION 7.2 Effect of Termination(a) .
(a) In the event of termination of this Agreement by
either the Company or Parent as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent or the Company, other than that the provisions of Section 5.2
(other than the first sentence thereof), Section 5.6, this Section 7.2 and
Article VIII shall survive such termination, provided, however, that nothing
herein shall relieve any party from any liability for any willful breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
(b) (i) In the event that (A) a Company Pre-Termination
Takeover Proposal Event (as defined below) shall occur after the date of this
Agreement and thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 7.1(b)(ii), by Parent pursuant to Section 7.1(c) or
by Parent pursuant to Section 7.1(d) as a result of a willful breach by the
Company and (B) prior to the date that is twelve (12) months after the date of
such termination the Company consummates a Company Takeover Proposal or enters
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal, then the Company shall (1) on the date such Company
Takeover Proposal is consummated or such Company Acquisition Agreement is
entered into, pay Parent a fee equal to $25 million by wire transfer of same day
funds, and (2) within two business days following a written request by Parent,
reimburse Parent for all out-of-pocket expenses incurred by Parent in connection
with this Agreement and the transactions contemplated hereby (including all
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costs (excluding the fees and disbursements of counsel and accountants) incurred
in connection with the preparation (including copying and printing) of the Form
S-4 and the Proxy Statement and applications to Governmental Entities for the
approval of the Merger and the Bank Combination and all listing, filing or
registration fees, including fees paid for filing the Form S-4 and the Proxy
Statement with the SEC and fees paid for filings with Governmental Entities), by
wire transfer of same day funds.
(ii) For purposes of this Section 5.6(b), a
"Pre-Termination Takeover Proposal Event" shall be deemed to occur if, prior to
the event giving rise to the right to terminate this Agreement, a bona fide
Company Takeover Proposal shall have been made known to the Company or any of
its Subsidiaries or has been made directly to its shareholders generally or any
person shall have publicly announced an intention (whether or not conditional)
to make a Company Takeover Proposal, and such Company Takeover Proposal or
public announcement shall not have been irrevocably withdrawn not less than five
business days prior to the Company Shareholders Meeting. The Company
acknowledges that the agreements contained in this Section 5.6(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amount due pursuant to
this Section 5.6(b), and, in order to obtain such payment, Parent commences a
suit which results in a judgment against the Company for the fee set forth in
this Section 5.6(b), the Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the fee at the rate on six-month U.S. Treasury
obligations plus 300 basis points in effect on the date such payment was
required to be made.
SECTION 7.3 Amendment. This Agreement may be amended by the
parties at any time before or after the Company Shareholder Approval; provided,
however, that after such approval, there shall not be made any amendment that by
law requires further approval by the shareholders of the Company without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.3, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, and shall expire at the Effective Time and be of no further effect
thereafter. This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to
The PNC Financial Services Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Attention: Mergers & Acquisitions Department
Telecopy No.: (412) 762-6238
and
Attention: General Counsel
Telecopy: (412) 705-2679
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
Attention: Edward D. Herlihy, Esq.
if to the Company, to
United National Bancorp
1130 Route 22 East
Bridgewater, New Jersey 08807
Telecopy No.: (908) 429-0357
Attention: Thomas C. Gregor
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with a copy to:
McCarter & English, LLP
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Telecopy No.: (973) 624-7070
Attention: Todd M. Poland, Esq.
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, that (x) any investment account advised or managed by such
Person or one of its Subsidiaries or Affiliates on behalf of third parties, or
(y) any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which such
Person acts as the general partner, managing member, manager, investment
advisor, principal underwriter or the equivalent shall not be deemed an
Affiliate of such Person.
(b) "Closing Parent Share Value" shall have the meaning
set forth in Section 2.1(d)(iv) hereof; provided, however, if necessary to
comply with any requirements of the Securities and Exchange Commission (the
"SEC"), the term Closing Parent Share Value shall be deemed to mean the date
which is the closest in time but prior to the Closing Date which complies with
such rules and regulations.
(c) "Determination Date" means the fifth business day
prior to the first date on which receipt of the approval of the Federal reserve
of the Merger and, if a condition to Closing, the approval of the Bank
Combination, without regard to any waiting period in respect thereof; provided,
however, that if the Determination Date would occur more than fifteen days prior
to the Closing Date, the Determination Date shall mean the third business day
prior to the Closing Date. For the avoidance of doubt, there shall be only one
Determination Date.
(d) "Determination Date Value" means the "Closing
Transaction Value" determined in accordance with Section 2.1, but (i) without
regard to any adjustments under Section 2.1(e), (ii) calculating such Value
using a deemed Closing Parent Share Value equal to the Parent Average Price, and
(iii) calculating such Value using deemed share numbers of 18,822,954 shares of
Company Common Stock and 6,551,806 shares of Parent Common Stock.
(e) "Executive Officers" shall mean those Persons
identified in Section 8.3(d) of the Company Disclosure Schedule.
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(f) "Index Price" means the weighted average (weighted in
accordance with the factors listed on Exhibit B hereto) of the closing prices
of the companies listed on such Exhibit B, calculated in accordance with such
Exhibit B, for the five consecutive trading days ending at the close of trading
on the Determination Date.
(g) "Initial Value" shall mean $639,980,436.
(h) "knowledge" means, (i) with respect to the Company,
the knowledge of the individuals listed on Section 8.3(f) of the Company
Disclosure Schedule and (ii) with respect to Parent, the knowledge of Parent's
executive officers.
(i) "Material Adverse Change" or "Material Adverse Effect"
means, when used in connection with the Company or Parent, any change, effect,
event, occurrence or state of facts that is, or would reasonably be expected to
be, materially adverse to the business, financial condition or results of
operations of such party and its consolidated subsidiaries taken as a whole,
other than (i) any change, effect, event or occurrence relating to the United
States economy or financial or securities markets in general, (ii) any change,
effect, event or occurrence relating to the financial services industry to the
extent not affecting such Person to a materially greater extent than it affects
other Persons in industries in which such Person competes, (iii) any change,
effect, event or occurrence relating to the announcement hereof, (iv) any change
in banking, savings association and similar laws, rules or regulations of
general applicability or interpretations thereof by courts or governmental
authorities and (v) any change in GAAP or regulatory accounting requirements
applicable to banks, savings associations or their holding companies generally.
(j) "Parent Average Price" means the arithmetic average of
the 4:00 p.m. Eastern Time closing sales prices of Parent Common Stock reported
on the NYSE Composite Transaction Tape for the five consecutive NYSE trading
days ending at the close of trading on the Determination Date, taking into
account any Parent Adjustment Event.
(k) "Peer Equivalent Value" means the "Closing Transaction
Value" determined in accordance with Section 2.1, but (i) without regard to any
adjustments under Section 2.1(e), (ii) calculating such Value using a deemed
Closing Parent Share Value equal to (x) the Parent Average Price multiplied by
(y) the quotient obtained by dividing (A) the Index Ratio by (B) the Parent
Ratio, rounded to the nearest one-ten-thousandth, and (iii) calculating such
Value using deemed share numbers of 18,822,954 shares of Company Common Stock
and 6,551,806 shares of Parent Common Stock.
(l) "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(m) a "Subsidiary" of any Person means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing
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body (or, if there are no such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by such first Person;
provided, however, that (i) any investment account advised or managed by such
Person or one of its subsidiaries or Affiliates on behalf of third parties, and
(ii) any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which such
Person acts as the general partner, managing member, manager, investment
advisor, principal underwriter or the equivalent, shall not be deemed a
subsidiary of such Person; provided further that, in the case of Parent,
"Subsidiary" shall not include any Subsidiary (other than Merger Sub) that would
not constitute a "significant subsidiary" within the meaning of Rule 1-02 of
Regulation S-X promulgated pursuant to the Securities Act.
SECTION 8.4 Interpretation. Any reference herein to any
requirement of performance by Merger Sub shall be deemed to include the
undertaking of Parent to cause such performance. When a reference is made in
this Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means, in the case of any agreement or
instrument, such agreement or instrument as from time to time amended, modified
or supplemented, including by waiver or consent and, in the case of statutes,
such statutes as in effect on the date of this Agreement. References to a person
are also to its permitted successors and assigns. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
Federal, state, local or foreign statute or law shall be deemed to also refer to
any amendments thereto and all rules and regulations promulgated thereunder,
unless the context requires otherwise.
SECTION 8.5 Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. A facsimile
copy of a signature page shall be deemed to be an original signature page.
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SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents and instruments referred
to herein) (a) constitutes the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement (including the Confidentiality
Agreement dated as of July 18, 2003 between Parent and the Company) and (b)
except for the provisions of Section 5.5, which shall inure to the benefit of
and be enforceable by the Persons referred to therein, is not intended to confer
upon any Person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, provided, however, that
Parent may assign Merger Sub's rights and obligations, in whole or in part,
under this Agreement to Parent or any other, wholly-owned, direct subsidiary of
Parent. Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties
hereto (a) consents to submit itself to the non-exclusive personal jurisdiction
of any Federal court located in the Commonwealth of Pennsylvania or any court of
the Commonwealth of Pennsylvania in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
SECTION 8.10 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly
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agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this being in addition to any other remedy to
which they are entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, the Company and Merger Sub have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
The PNC Financial Services Group, Inc.
By /s/ James E. Rohr
-----------------
Name: James E. Rohr
Title: Chairman and Chief Executive Officer
PNC Bancorp Inc.
By /s/ James E. Rohr
-----------------
Name: James E. Rohr
Title: President
United National Bancorp
By /s/ Thomas C. Gregor
--------------------
Name: Thomas C. Gregor
Title: Chairman of the Board,
Chief Executive Officer and President
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EXHIBIT A
Form of Affiliate Letter
______________, 2003
The PNC Financial Services Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Attention: General Counsel
Ladies and Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of United
National Bancorp, a New Jersey corporation (the "Company"), as that term is
defined in Rule 145 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"). I
understand that pursuant to the terms of the Agreement and Plan of Merger dated
as of August 20, 2003 (the "Merger Agreement"), by and among The PNC Financial
Services Group, Inc., a Pennsylvania corporation ("Parent"), PNC Bancorp Inc., a
Delaware corporation and a subsidiary of Parent ("Merger Sub") and the Company,
the Company plans to merge with and into Merger Sub (the "Merger") with Merger
Sub being the surviving corporation. Capitalized terms used herein but not
otherwise defined shall have the meanings given to such terms in the Merger
Agreement.
I further understand that, as a result of the Merger, in exchange for
shares of common stock, par value $1.25 per share, of the Company ("Company
Common Stock") I may receive common stock, par value $5.00 per share, of Parent
("Parent Common Stock").
I have read this letter and discussed the requirements hereof to the
extent I felt necessary with my counsel or counsel for the Company.
I represent, warrant and covenant with and to Parent that in the event
I receive any Parent Common Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such
Parent Common Stock unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Parent, or
under a "no-action" letter or interpretive letter from the staff of
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the SEC, such sale, transfer or other disposition will not violate or is
otherwise exempt from registration under the Securities Act, or (iii) I have the
right to have the legend set forth in Sections 3 and 4 below removed pursuant to
Section 4 below.
2. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Parent Common Stock by me or on my behalf
under the Securities Act or, other than as set forth below, to take any other
action necessary in order to make compliance with an exemption from such
registration available.
3. I understand that stop transfer instructions will be given to
Parent's transfer agent with respect to the Parent Common Stock issued to me as
a result of the Merger and that there will be placed on the certificates, if
any, for such shares, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares represented by this
certificate may be transferred only in accordance with the
terms of a letter agreement between the registered holder
hereof and The PNC Financial Services Group, Inc., a copy of
which agreement is on file at the principal offices of PNC"
4. I understand that, unless the transfer by me of the Parent Common
Stock issued to me as a result of the Merger has been registered under the
Securities Act or such transfer is made in conformity with the provisions of
Rule 145(d) under the Securities Act, Parent reserves the right, in its sole
discretion, to place the following legend on the certificates, if any, issued to
my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired
from a person who received such shares in a transaction to
which Rule 145 under the Securities Act of 1933 applies. The
shares may not be sold, transferred or otherwise disposed of
except pursuant to an effective registration statement under,
or in accordance with an exemption from the registration
requirements of, the Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs
(3) and (4) above shall be removed by delivery of substitute certificates
without such legend and/or any stop transfer instructions will be lifted (A) if
one year (or such other period as may be required by Rule 145(d)(2) or any
successor thereto) shall have elapsed from the date I acquired the Parent Common
Stock received in the Merger and the provisions of Rule 145(d)(2) (or any
successor thereto) are then available to me, (B) if two years (or such other
period as may be required by Rule 145(d)(3) or any successor thereto) shall have
elapsed from the date I acquired the Parent Common Stock received in the Merger
and the provisions of Rule 145(d)(3) (or any successor thereto) are then
available to me or (C) if I shall have delivered to Parent (i) a copy of a
"no-action" letter or interpretative letter from the staff of the SEC, or an
opinion of counsel in form and substance
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reasonably satisfactory to Parent, to the effect that such legend is not
required for purposes of the Securities Act or (ii) a written statement from me
representing that that the Parent Common Stock represented by such certificates
are being or have been sold in conformity with the provisions of Rule 145(d) or
pursuant to an effective registration statement under the Securities Act.
Execution of this letter should not be considered an admission on my
part of "affiliate" status as described in the first paragraph of this letter
agreement, or as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
By: _______________________
Name:
Accepted this ____ day of
________________, 2003.
The PNC Financial Services Group, Inc.
By: _____________________________
Name:
Title:
A-3
EXHIBIT B
DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE DATA.
- ----------------------------------------------------------------------------------------------------------------
INITIAL SHARE PRICE:
08/12/03
------------------------
WTD by
Shares Share Closing Shares
Ticker Company Outstanding Weighting Price Out
- ----------------------------------------------------------------------------------------------------------------
USB U.S. Bancorp 1,926.4 0.22 $24.25 $ 5.25
WFC Wells Fargo & Co. 1,679.5 0.19 50.36 9.51
WB Wachovia Corp. 1,332.2 0.15 43.72 6.55
NCC National City Corp. 614.2 0.07 32.55 2.25
FITB Fifth Third Bancorp 569.8 0.06 54.39 3.48
BBT BB&T Corp. 548.0 0.06 35.50 2.19
KEY KeyCorp 420.8 0.05 27.10 1.28
ASO AmSouth Bancorp. 350.7 0.04 21.40 0.84
SOTR SouthTrust Corp. 337.5 0.04 28.87 1.10
STI SunTrust Banks, Inc. 281.5 0.03 60.04 1.90
MI Marshall & Ilsley Corp. 227.3 0.03 30.89 0.79
RF Regions Financial Corp. 222.7 0.03 35.60 0.89
CMA Comerica Inc. 175.3 0.02 47.19 0.93
MTB M&T Bank Corp. 119.6 0.01 86.62 1.16
ZION Zions Bancorp 89.7 0.01 56.99 0.57
----------------------------------------------------------------------------------------------
WEIGHTED INDEX SHARE PRICE $38.70
- ----------------------------------------------------------------------------------------------------------------
In the event that any of the bank holding companies listed above (1) ceases to
be publicly traded or (2) announces after August 12, 2003 and prior to the
Determination Date, a proposal for such company to be acquired or for such
company to acquire another company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization as of August 12,
2003, such company will be removed from this Exhibit B, and the weights (which
have been determined based on the number of outstanding shares of common stock)
redistributed proportionately for purposes of determining the Index Price. If
any company belonging to this group or Parent declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the August 12, 2003 and the Determination
Date, the prices for the common stock of such company or Parent shall be
appropriately adjusted for the purposes of this Exhibit B.