EXECUTION VERSION
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement"), dated as of September 26, 2002, by and among Allied Irish Banks,
p.l.c. ("Seller"), a limited liability company incorporated under the laws of
Ireland having its registered office at Bankcentre, Ballsbridge, Dublin 4,
Ireland, Allfirst Financial Inc. ("Company"), a Delaware corporation having its
principal executive office at The Allfirst Building, 25 South Charles Street,
Baltimore, Maryland 21201, and M&T Bank Corporation ("Purchaser"), a New York
corporation having its principal executive office at One M&T Plaza, Buffalo, New
York 14229.
WITNESSETH
WHEREAS, the parties hereto desire that the Company shall be acquired
by Purchaser from Seller (the "Exchange"); and
WHEREAS, immediately following the consummation of the Exchange, the
Company will merge with and into Purchaser, with Purchaser as the surviving
entity ("Upstream Merger"); and
WHEREAS, following the consummation of the Exchange and the Upstream
Merger, Allfirst Bank ("Company Bank"), a banking subsidiary of the Company,
which shall be a wholly-owned subsidiary of Purchaser following the Upstream
Merger, shall merge with and into Manufacturers and Traders Trust Company
("Purchaser Bank"), a bank subsidiary of Purchaser, with Purchaser Bank as the
surviving entity ("Bank Merger"); and
WHEREAS, the persons listed on EXHIBIT A have, or will have within five
(5) business days after the date hereof, entered into Voting Support Agreements
in the form set forth as EXHIBIT B; and
WHEREAS, the parties hereto intend that the combination of the Exchange
and the Upstream Merger shall qualify as a reorganization under Section 368(a)
of the United States Internal Revenue Code of 1986, as amended ("Code") and that
the Exchange shall qualify for the Irish tax treatment provided for in Section
584 Taxes Consolidation Act 1997, as applied by Sections 586 and 587; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 "Acquisition Proposal" is defined in Section 5.13 hereof.
1.2 "Agreement" is defined in the preamble hereto.
1.3 "Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
1.4 "Bank Merger" is defined in the recitals hereto.
1.5 "Cash Consideration" shall mean $886,107,000.
1.6 "Claim Notice" is defined in Section 9.2(a) hereof.
1.7 "Closing" is defined in Section 5.8 hereof.
1.8 "Closing Date" shall mean the date specified pursuant to Section
5.8 hereof as the date on which the parties hereto shall close the Exchange.
1.9 "Code" is defined in the recitals hereto.
1.10 "Commission" or "SEC" shall mean the Securities and Exchange
Commission.
1.11 "Company" is defined in the preamble to this Agreement.
1.12 "Company Bank" is defined in the recitals hereto.
1.13 "Company Common Stock" is defined in Section 3.1 hereof.
1.14 "Company Employees" is defined in Section 5.17(a) hereof.
1.15 "Company ERISA Affiliate" is defined in Section 3.13(a) hereof.
1.16 "Company Financial Statements" shall mean (i) the consolidated
statements of financial condition of the Company as of June 30, 2002 and 2001
and as of December 31, 2001 and 2000 and the related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) for the six (6) months ended June 30, 2002 and 2001 and each of the
three years ended December 31, 2001, 2000 and 1999; respectively, as restated
prior to the date hereof and filed by the Company in SEC Documents; and (ii) the
consolidated statements of financial condition of the Company and related
consolidated statements of income, cash flows and changes in shareholders'
equity (including related notes, if any) as filed by the Company in SEC
Documents as of dates or with respect to periods ended subsequent to June 30,
2002.
1.17 "Company Plan" is defined in Section 3.13(a) hereof.
1.18 "Company Preferred Stock" is defined in Section 3.1 hereof.
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1.19 "Company Subsidiary" shall mean a Subsidiary of the Company.
1.20 "Confidentiality Agreement" is defined in Section 5.5 hereof.
1.21 "Consideration" shall mean the Cash Consideration and the Stock
Consideration.
1.22 "Cure Period" is defined in Section 7.1(b) hereof.
1.23 "Damages" is defined in Section 9.1(a) hereof.
1.24 "Employee Issuance" is defined in Section 1.42.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.26 "Excess Shares" is defined in Section 7.2(a)(i) hereof.
1.27 "Exchange" is defined in the recitals hereto.
1.28 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.29 "FDIA" shall mean the Federal Deposit Insurance Act.
1.30 "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.31 "Fair Market Value" shall mean, with respect to any share of
Purchaser Common Stock, as of any date of determination, the arithmetic average
of the closing prices of the Purchaser Common Stock for the ten consecutive
trading days immediately preceding such date of determination. The closing price
for such trading day shall be the reported last sale price, regular way, or, in
case no such reported sale takes place on such trading day, the average of the
reported closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Transactions List or, if the Purchaser
Common Stock is not listed or admitted to trading on the New York Stock Exchange
at such time, on the principal national securities exchange on which the
Purchaser Common Stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, on The Nasdaq National
Market or, if the Purchaser Common Stock is not quoted on The Nasdaq National
Market, the average of the closing bid and asked prices on such trading day in
the over-the-counter market as reported by Nasdaq or, if bid and asked prices
for the Purchaser Common Stock on such trading day shall not have been reported
through Nasdaq, the average of the closing bid and asked prices for such trading
day as furnished by any New York Stock Exchange member firm regularly making a
market in the Purchaser Common Stock selected by Purchaser for such purpose and
reasonably acceptable to Seller or, if no such quotations are available, the
fair market value of the Purchaser Common Stock as determined by a nationally
recognized investment banking firm selected by Purchaser for such purpose and
reasonably acceptable to Seller.
1.32 "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
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1.33 "Financial Holding Company" is defined in Section 2.1 hereof.
1.34 "General Meeting Circular" is defined in Section 5.2 hereof.
1.35 "Incumbent Purchaser Board" is defined in Section 1.56 hereof.
1.36 "Indemnified Parties" is defined in Section 9.1(b) hereof.
1.37 "Indemnified Purchaser Parties" is defined in Section 9.1(a)
hereof.
1.38 "Indemnified Seller Parties" is defined in Section 9.1(b) hereof.
1.39 "Indemnifying Party" is defined in Section 9.2(a) hereof.
1.40 "Information Statement" shall mean the information statement (or
similar documents), together with any supplements thereto, filed by the Company
in connection with shareholder approval of this Agreement.
1.41 "Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned,
know-how licenses, trade names, common law and other trademarks, service marks,
licenses of trademarks, trade names and/or service marks, trademark
registrations and applications, service mark registrations and applications and
copyright registrations and applications.
1.42 "Issuance Event" shall mean any issuance or sale by Purchaser of
Purchaser Common Stock or securities of Purchaser entitled to vote generally in
the election of directors of Purchaser or any such issuance upon the conversion
of securities of Purchaser convertible into either Purchaser Common Stock or
securities of Purchaser entitled to vote generally in the election of directors
of Purchaser subsequent to the Closing Date but prior to the Sunset Date, other
than (a) any issuance of Purchaser Common Stock or restricted Purchaser Common
Stock pursuant to the exercise of Purchaser Stock Options, any Purchaser Stock
Plan, any other benefit plan of Purchaser or any Purchaser Subsidiary or any
other employee, director or shareholder purchase plan of Purchaser
(collectively, an "Employee Issuance") or (b) any issuance solely to Seller or
pro rata to all holders of Purchaser Common Stock if (i) immediately prior to
such issuance Seller was the beneficial owner of at least fifteen percent (15%)
or more of the issued and outstanding shares of Purchaser Common Stock
(calculated in accordance with Section 5.9(e)); and (ii) immediately after such
issuance Seller was the beneficial owner of less than twenty-two and one half
percent (22.5%) of the issued and outstanding shares of Purchaser Common Stock.
If for any reason Purchaser has not repurchased shares as required by Section
7.2(c) within the time frame contemplated therein, then, without limiting any
other rights with respect thereto Seller may have under this Agreement, any
shares of Purchaser Common Stock or restricted Purchaser Common Stock issued
pursuant to an Employee Issuance during the period from the date hereof to the
Closing shall be deemed to be shares issued pursuant to an Issuance Event
occurring on January 1, 2004. If for any reason Purchaser has not repurchased
shares as required by Section 7.2(e) within one year following the Employee
Issuance, then, without limiting any other rights with respect thereto Seller
may have under this Agreement, the shares of Purchaser Common Stock or
restricted Purchaser Common Stock issued pursuant to
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such Employee Issuance shall be deemed to be shares issued pursuant to an
Issuance Event occurring on the last day of such one year period.
1.43 "Material Adverse Effect" shall mean (1) with respect to Seller, a
material adverse effect on the ability of Seller to consummate the transactions
contemplated hereby; and (2) with respect to the Company or Purchaser, as the
case may be, a material adverse effect on the business, results of operations or
financial condition of such party and its Subsidiaries, taken as a whole, or a
material adverse effect on such party's ability to consummate the transactions
contemplated hereby; PROVIDED, HOWEVER, that in determining whether a Material
Adverse Effect with respect to the Company or Purchaser has occurred there shall
be excluded any effect on the referenced party to the extent the cause of which
is (w) any change in banking or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities;
(x) any change in generally accepted accounting principles or regulatory
accounting requirements applicable to banks or their holding companies
generally; (y) general changes in conditions, including interest rates, in the
banking industry or in the global or United States economy or financial markets;
and (z) the announcement or public disclosure of this Agreement and the
transactions contemplated hereby, with respect to clauses (w), (x) or (y) to the
extent that a change does not materially affect the referenced party to a
materially different extent than other similarly situated banking organizations;
or any action or omission of the Company or Purchaser or any Subsidiary of
either of them required by this Agreement or taken with the prior written
consent of Purchaser or Seller, as applicable, in contemplation of the Exchange.
1.44 "Material Regulatory Event" shall mean any administrative
enforcement action under Section 8 of the FDIA, memorandum of understanding,
written agreement, supervisory letter, or any other action or determination of
any regulatory agency relating to the status or conduct of Purchaser or any
Purchaser Subsidiary, or any fact, event or circumstance affecting Purchaser's
regulatory status or compliance, that would be reasonably likely to create a
material burden on Purchaser or any Purchaser Subsidiary or cause any material
adverse economic or operating consequences to Purchaser or such Purchaser
Subsidiary.
1.45 "Non-Profit Subsidiaries" is defined in Section 5.12 hereof.
1.46 "Notice Period" is defined in Section 9.2(b) hereof.
1.47 "NYSE" shall mean the New York Stock Exchange.
1.48 "Offer Notice" is defined in Section 7.3(b) hereof.
1.49 "PBGC" is defined in Section 3.13(c) hereof.
1.50 "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization.
1.51 "Previously Disclosed" shall mean disclosed prior to the execution
hereof in (i) an SEC Document filed publicly with the SEC subsequent to June 30,
2002 and prior to the date hereof; or (ii) a letter dated of even date herewith
from the party making such disclosure and delivered to the other parties prior
to the execution hereof.
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1.52 "Proxy Statement" shall mean the proxy statement (or similar
documents) together with any supplements thereto sent to the shareholders of
Purchaser to solicit their votes in connection with the amendment to the
Purchaser Bylaws and Certificate of Incorporation and issuance of Purchaser
Common Stock pursuant to this Agreement.
1.53 "Purchaser" is defined in the preamble to this Agreement.
1.54 "Purchaser Advisor" is defined in Section 4.18 hereof.
1.55 "Purchaser Bank" is defined in the recitals hereof.
1.56 "Purchaser Change in Control" shall mean (i) any reorganization,
merger, consolidation, recapitalization, or purchase or other acquisition of all
or substantially all of the assets of or equity interest of Purchaser or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X under the
Securities Laws), or any comparable business combination transaction, whether in
one transaction or in a series of related transactions, as a result of which the
individuals and entities who were the beneficial owners (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of the outstanding Purchaser
Common Stock and the combined voting power of the then outstanding voting
securities of Purchaser entitled to vote generally in the election of directors
immediately prior to such transaction cease to beneficially own, directly or
indirectly, at least a majority of the outstanding shares of the common stock
and the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors of the Person resulting from such
transaction (including, without limitation, a Person which as a result of such
transaction owns Purchaser or all or substantially all of Purchaser's assets
either directly or through one or more subsidiaries) immediately following
consummation of such transaction or series of related transactions, (ii) any
acquisition by any single Person or any "group" of Persons (within the meaning
of Section 13(d)(3) of the Exchange Act) of beneficial ownership of twenty
percent (20%) or more of the then outstanding shares of Purchaser Common Stock
or the combined voting power of the then outstanding voting securities of
Purchaser entitled to vote generally in the election of directors, or (iii)
individuals who, as of the Closing Date, constitute Purchaser's Board of
Directors (the "Incumbent Purchaser Board") cease for any reason to constitute
at least a majority of Purchaser's Board of Directors (PROVIDED that any
individual becoming a director subsequent to such date whose election, or
nomination for election by the stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Purchaser Board shall
be considered as though such individual were a member of the Incumbent Purchaser
Board), but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the board of directors.
1.57 "Purchaser Common Stock" is defined in Section 4.1(a) hereof.
1.58 "Purchaser ERISA Affiliate" is defined in Section 4.13(a) hereof.
1.59 "Purchaser Financial Statements" shall mean (i) the consolidated
balance sheets of Purchaser as of June 30, 2002 and 2001 and as of December 31,
2001 and 2000 and the
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related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) for the six (6) months
ended June 30, 2002 and 2001 and each of the three years ended December 31,
2001, 2000 and 1999, respectively, as filed by Purchaser in SEC Documents; and
(ii) the consolidated balance sheets of Purchaser and related consolidated
statements of income, cash flows and changes in shareholders' equity (including
related notes, if any) as filed by Purchaser in SEC Documents as of dates or
with respect to periods ended subsequent to June 30, 2002.
1.60 "Purchaser Plan" is defined in Section 4.13(a) hereof.
1.61 "Purchaser Stock Options" is defined in Section 4.1(b) hereof.
1.62 "Purchaser Stock Plans" is defined in Section 4.1(b) hereof.
1.63 "Purchaser Subsidiary" shall mean a Subsidiary of Purchaser.
1.64 "Reorganization Agreement" is defined in the preamble to this
Agreement.
1.65 "Registration Rights Agreement" shall mean the Registration Rights
Agreement in the form attached as EXHIBIT C.
1.66 "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate a Person to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units and other similar stock-based rights whether they obligate the
issuer thereof to issue stock or other securities or to pay cash.
1.67 "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
1.68 "Section 5.12 Taxes" is defined in Section 7.5(b) hereof.
1.69 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.70 "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
1.71 "Seller" is defined in the preamble to this Agreement.
1.72 "Seller Advisor" is defined in Section 2.10 hereof.
1.73 "Seller Committee Representation" is defined in Section 5.9(a)
hereof.
1.74 "Seller Designees" is defined in Section 5.9(a) hereof.
1.75 "Seller Maintenance Rights" is defined in Section 7.2(d) hereof.
1.76 "Seller Shareholder Approval" is defined in Section 2.3(a) hereof.
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1.77 "Seller Subsidiary" shall mean a Subsidiary of Seller.
1.78 "Significant Shareholder" is defined in Section 4.1(e) hereof.
1.79 "Special Dividend" is defined in Section 5.8(c).
1.80 "Stock Consideration" shall mean 26,700,000 shares of Purchaser
Common Stock, subject to appropriate adjustment in the event that prior to the
Closing Date the outstanding shares of Purchaser Common Stock have been
increased, decreased or changed into or exchange for a different number of
shares by reorganization, recapitalization, reclassification, stock dividend,
stock split or like changes in Purchaser's capitalization.
1.81 "Subsidiary" or "Subsidiaries" shall mean with respect to any
party, any bank, corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes; PROVIDED, HOWEVER, that "Subsidiary" or
"Subsidiaries" shall not include any subsidiary trust formed for the purpose of
issuing trust preferred or similar securities, nor shall either such term
include, with respect to either of Seller or the Company, the Non-Profit
Subsidiaries.
1.82 "Sunset Date" is defined in Section 5.9(b) hereof.
1.83 "Takeover Laws" is defined in Section 3.27 hereof.
1.84 "Tax," collectively, "Taxes" shall mean all taxes, however
denominated, including any interest, penalties, or additions to tax (including,
without limitation, any underpayment penalties for insufficient estimated tax
payments) or other additional amounts that may become payable in respect thereof
(or in respect of a failure to file any Tax Return when and as required),
imposed by any federal, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income taxes, payroll and
employment taxes, withholding taxes (including withholding taxes in connection
with amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other Person), unemployment insurance taxes, social security (or
similar) taxes, sales and use taxes, excise taxes, franchise taxes, gross
receipts taxes, occupation taxes, real and personal property taxes, stamp taxes,
value added taxes, transfer taxes, profits or windfall profits taxes, licenses
in the nature of taxes, estimated taxes, severance taxes, duties (custom and
others), workers' compensation taxes, premium taxes, environmental taxes
(including taxes under Section 59A of the Code), disability taxes, registration
taxes, alternative or add-on minimum taxes, estimated taxes, and other fees,
assessments, charges or obligations of the same or of a similar nature.
1.85 "Tax Benefit" is defined in Section 9.1(c) hereof.
1.86 "Tax Proceeding" is defined in Section 7.5(b) hereof.
1.87 "Tax Return," collectively, "Tax Returns" shall mean all returns,
reports, estimates, information statements or other written submissions, and any
schedules or attachments thereto, required or permitted to be filed pursuant to
the statutes, rules and regulations of any federal, state, local or foreign
government Tax authority, including, but not limited to, original
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returns and filings, amended returns, claims for refunds, information returns
and accounting method change requests.
1.88 "transactions contemplated hereby" shall mean the Exchange, the
Upstream Merger and the Bank Merger.
1.89 "Upstream Merger" is defined in the recitals hereto.
1.90 "Written Agreement" is defined in Section 5.4(a) hereof.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as Previously Disclosed, Seller hereby represents and warrants
to Purchaser as follows:
2.1. ORGANIZATION, STANDING AND AUTHORITY OF SELLER
Seller is a duly incorporated limited liability company validly
existing under the laws of Ireland with full corporate power and authority to
carry on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on Seller. Seller is registered as a bank holding
company under the Bank Holding Company Act and is not registered as a "financial
holding company," as defined in the Bank Holding Company Act ("Financial Holding
Company").
2.2. OWNERSHIP OF THE COMPANY
The outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and (except as provided by
applicable law) nonassessable and all such shares are directly owned by Seller
free and clear of all liens, claims and encumbrances, other than any that may be
deemed to result from this Reorganization Agreement. Except for this
Reorganization Agreement, the Company does not have and is not bound by any
Rights which are authorized, issued or outstanding with respect to the capital
stock of the Company and, except as Previously Disclosed, there are no
agreements, understandings or commitments relating to the right of Seller to
vote or to dispose of such shares. None of the shares of capital stock of the
Company has been issued in violation of the preemptive rights of any Person.
2.3. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Seller has all requisite corporate power and authority to enter
into and perform all of its obligations under this Reorganization Agreement,
subject to receipt of approval of the transaction contemplated hereby by the
holders of the capital stock of Seller acting by the affirmative vote of the
holders of a majority of the capital stock of Seller in accordance with the
rules of the London Stock Exchange and the Irish Stock Exchange (the "Seller
Shareholder Approval"). The execution and delivery of this Reorganization
Agreement and the
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consummation of the transactions contemplated hereby (to the extent Seller is a
party thereto) have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of Seller, other than the Seller
Shareholder Approval.
(b) Assuming the accuracy of the representation contained in Section
4.5(b) hereof, this Reorganization Agreement constitutes legal, valid and
binding obligations of Seller, enforceable against it in accordance with its
terms, subject as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights, to the
supervisory and enforcement powers of applicable regulatory agencies, and to
general equity principles.
(c) Neither the execution and delivery of this Reorganization Agreement
nor consummation of the transactions contemplated hereby or thereby, nor
compliance by Seller with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the articles or
certificate of incorporation or association, charter or bylaws (or equivalent
organizational documents) of Seller; (ii) assuming the consents and approvals
Previously Disclosed by Seller and the Company are duly obtained, constitute or
result in a breach of any term, condition or provision of, or constitute a
default under, or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any lien, charge or
encumbrance upon any property or asset of Seller pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation; or
(iii) assuming the consents and approvals Previously Disclosed by Seller and the
Company are duly obtained, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Seller, except (in the case of clauses (ii) and
(iii) above) for such violations, rights, conflicts, breaches, creations or
defaults which, either individually or in the aggregate, would not have a
Material Adverse Effect on Seller.
(d) Except as Previously Disclosed and for the Seller Shareholder
Approval, no consent, approval or authorization of, or declaration, notice,
filing or registration with, any governmental or regulatory authority, or any
other Person, is required to be made or obtained by Seller on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. As of the
date hereof, the Company is not aware of any reason that the condition set forth
in Section 6.1(b) of this Agreement would not be satisfied.
2.4. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, Seller has not, on a consolidated
basis, suffered any change in its financial condition, results of operations or
business since June 30, 2002 which, individually or in the aggregate with any
other such changes, would have or would reasonably be likely to have a Material
Adverse Effect on Seller.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES
Except as Previously Disclosed, Seller has no liability (contingent or
otherwise), that, when combined with all similar liabilities, would have a
Material Adverse Effect on Seller.
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2.6. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of Seller, threatened
against Seller or against any asset, interest or right of Seller which would,
individually or in the aggregate, have a Material Adverse Effect on Seller.
2.7. COMPLIANCE WITH LAWS
Except as Previously Disclosed, Seller is in compliance in all material
respects with all statutes and regulations applicable to the conduct of its
business, and Seller has not received notification from any agency or department
of foreign, federal, state or local government (i) asserting a material
violation of any such statute or regulation; (ii) threatening to revoke any
license, franchise, permit or government authorization; or (iii) restricting or
in any way limiting its operations, except for such noncompliance, violations,
revocations and restrictions which would not, individually or in the aggregate,
have a Material Adverse Effect on Seller. Except as Previously Disclosed,
neither Seller nor any Seller Subsidiary is subject to any supervisory
agreement, memorandum of understanding, cease-and-desist order, consent decree,
assistance agreement or similar agreement or arrangement or any board resolution
or written commitments with respect to any of the foregoing at the request of
any federal, state, local or foreign regulatory agency that currently restricts
or will in the future restrict the conduct of its business or relates or will
relate to its capital adequacy, its credit policies, its management or its
business, and none of them has been advised by any regulatory agency that such
regulatory agency contemplates issuing or requesting any of the foregoing.
2.8. REGULATORY MATTERS
(a) Except as Previously Disclosed, Seller is "well
capitalized" and "well managed" within the meaning of Sections 225.90(b) and
225.90(c) of the Federal Reserve's Regulation Y.
(b) As of the date hereof, Seller has no reason to believe it
would not be approved as a bank holding company for Purchaser and has no reason
to believe that it would not obtain the approval of the Central Bank of Ireland
to consummate the transactions contemplated hereby.
(c) Seller has no commonly controlled insured depository
institutions in the United States within the meaning of Section 5(e)(9) of the
FDIA other than insured depository institutions that are Company Subsidiaries.
(d) Each of the Seller subsidiaries (direct or indirect) that
are insured depository institutions located in the United States has at least a
"satisfactory" rating for compliance with the federal Community Reinvestment Act
and with any comparable applicable state law or regulation.
2.9. INVESTMENT
(a) Seller is acquiring the Purchaser Common Stock to be
issued pursuant to this Agreement for its own account and/or for the account of
one or more of Seller Subsidiaries and
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not for distribution and acknowledges that it may bear the economic risk of the
investment in the Purchaser Common Stock for an indefinite period of time under
applicable Securities Laws. Seller has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquiring the Purchaser Common Stock pursuant to the Agreement; and
Seller has the financial ability to bear the economic risks of acquiring and
holding the Purchaser Common Stock to be acquired by Seller pursuant to this
Agreement for investment. Seller is not a corporation, partnership or other
entity specifically formed for the purpose of consummating this transaction.
Seller has had the opportunity to ask questions and receive answers to Seller's
satisfaction concerning the terms and conditions of the transfer of Purchaser
Common Stock pursuant to this Agreement. Seller is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D, promulgated pursuant to the
Securities Act. Notwithstanding the foregoing, the parties acknowledge that the
representations and warranties made by Seller in this Section 2.9 are made for
the limited purpose of aiding Purchaser in complying with the requirements of
the Securities Act in connection with the issuance of shares of Purchaser Common
Stock to Seller or Seller Subsidiaries in connection with the consummation of
the transactions contemplated hereby, and nothing in this Section 2.9(a) shall
be deemed to limit Seller's rights under any other provision of this
Reorganization Agreement, including without limitation with respect to any
representation or warranty made herein by Purchaser.
(b) Seller understands that the Purchaser Common Stock has not
been registered under the Securities Act and agrees that Seller may only dispose
of the Purchaser Common Stock pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from registration
thereunder and in any event subject to the provisions of this Agreement.
Certificates evidencing the shares of Purchaser Common Stock issued to Seller
pursuant to this Agreement may be endorsed with legends reasonably acceptable to
Seller regarding the foregoing transfer restrictions; PROVIDED, that Purchaser
shall provide Seller, upon request, with certificates not bearing such legends
at such time as such transfer restrictions no longer apply or in connection with
any sale of Purchaser Common Stock registered under the Securities Act as
contemplated by the Registration Rights Agreement or sold in compliance with
Rule 144 of the Securities Act, in each case in compliance with the terms of
this Agreement.
2.10. BROKERS AND FINDERS
Neither Seller nor any Seller Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated hereby, except that Seller has retained Merrill
Lynch, Pierce, Fenner & Smith, Inc. (the "Seller Advisor") to perform certain
financial advisory services in connection with the transactions contemplated
hereby as Previously Disclosed and will be solely responsible for the fees and
expenses of the Seller Advisor. Prior to the execution and delivery of this
Agreement, the Seller Advisor has delivered to the Board of Directors of Seller
an opinion to the effect that the Consideration is fair from a financial point
of view to the shareholders of the Company.
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2.11. OWNERSHIP OF PURCHASER COMMON STOCK
Except as may be held in trust accounts, managed accounts and the like,
or otherwise held in a fiduciary capacity for the benefit of third parties, and
except for the transactions contemplated hereby, neither Seller nor any Seller
Subsidiaries owns, or possesses any Rights, which are authorized, issued or
outstanding, with respect to any shares of Purchaser Common Stock.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
Except as Previously Disclosed, Seller and the Company hereby jointly
and severally represent and warrant to Purchaser as follows:
3.1. CAPITAL STRUCTURE OF THE COMPANY
The authorized capital stock of the Company consists of (i) 90,000
shares of preferred stock, par value $5.00 and 10,000 shares of preferred stock,
par value $1.00 (collectively, "Company Preferred Stock") of which, as of the
date hereof, no shares are issued and outstanding and (ii) 1,200,000 shares of
common stock, without par value ("Company Common Stock"), of which, as of the
date hereof, 597,763 shares are issued and outstanding and no shares are held in
treasury. As of the date hereof, no shares of the Company Preferred Stock or the
Company Common Stock are reserved for issuance. Except as Previously Disclosed,
no director, officer or employee of the Company or any of its Subsidiaries holds
any outstanding Rights, whether or not vested or exercisable, for the purchase
of shares of Company Common Stock. All outstanding shares of the Company Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except for the transactions contemplated hereby, the Company does
not have and is not bound by any Rights which are authorized, issued or
outstanding with respect to the capital stock of the Company. None of the shares
of the Company's capital stock has been issued in violation of the preemptive
rights of any Person. The trust established pursuant to the First Maryland
Bancorp 1997 Stock Option Plan Trust Agreement holds at least such number of
shares of common stock of Seller as are issuable upon exercise of any Rights
which are issued or outstanding with respect to the capital stock of Seller and
held by any director, officer or employee of the Company or any of its
Subsidiaries.
3.2. ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a duly organized corporation, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on the Company. The
Company is registered as a bank holding company under the Bank Holding Company
Act and is not registered as a Financial Holding Company.
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3.3. OWNERSHIP OF THE COMPANY SUBSIDIARIES; CAPITAL STRUCTURE OF THE
COMPANY SUBSIDIARIES
Except as Previously Disclosed, the Company does not own, directly or
indirectly, five percent (5%) or more of the outstanding capital stock or other
voting securities of any corporation, bank or other organization except the
Company Subsidiaries and subsidiary trusts formed for the purpose of issuing
trust preferred or similar securities, in each case as Previously Disclosed. The
Company has Previously Disclosed to Purchaser a list of all of the Company
Subsidiaries. Except as Previously Disclosed, the outstanding shares of capital
stock or other equity interests of each Company Subsidiary have been duly
authorized and validly issued and are fully paid and (except as provided by
applicable law) nonassessable and all such shares or equity interests are
directly or indirectly owned by the Company free and clear of all liens, claims
and encumbrances. No Company Subsidiary has or is bound by any Rights which are
authorized, issued or outstanding with respect to the capital stock or other
equity interests of any Company Subsidiary and, except as Previously Disclosed,
there are no agreements, understandings or commitments relating to the right of
the Company to vote or to dispose of such shares. None of the shares of capital
stock or other equity interests of any Company Subsidiary has been issued in
violation of the preemptive rights of any Person. No Company Subsidiary is a
"financial subsidiary" as defined in the Gramm-Leach-Bliley Act or the rules and
regulations promulgated thereunder, in each case as in effect as of the date
hereof.
3.4. ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each Company Subsidiary is a duly organized corporation, banking
association or other organization, validly existing and in good standing under
applicable laws. Each Company Subsidiary (i) has full power and authority to
carry on its business as now conducted; and (ii) is duly licensed or qualified
to do business in the states of the United States and foreign jurisdictions
where its ownership or leasing of property or the conduct of its business
requires such licensing or qualification, except where failure to be so licensed
or qualified would not have a Material Adverse Effect on the Company. Each
Company Subsidiary has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted, except where the failure to
be so authorized would not have a Material Adverse Effect on the Company. The
Company Bank is a member in good standing of the Federal Reserve Bank of
Richmond and the Federal Home Loan Bank of Atlanta and owns the requisite amount
of shares therein and is a qualified seller and servicer for the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation.
3.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and
authority to enter into and perform all of its obligations under this
Reorganization Agreement. The execution and delivery of this Reorganization
Agreement and the consummation of the Exchange have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Company, other than the Seller Shareholder Approval.
14
(b) Assuming the accuracy of the representation contained in
Section 4.5(b) hereof, this Reorganization Agreement constitutes legal, valid
and binding obligations of the Company, enforceable against it in accordance
with its terms, subject as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights,
to the supervisory and enforcement powers of applicable regulatory agencies, and
to general equity principles.
(c) Neither the execution and delivery of this Reorganization
Agreement nor consummation of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, shall (i) conflict
with or result in a breach of any provision of the articles or certificate of
incorporation or association, charter or bylaws of the Company or any Company
Subsidiary; (ii) assuming the consents and approvals Previously Disclosed by the
Company and Seller are duly obtained, constitute or result in a breach of any
term, condition or provision of, or constitute a default under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property or
asset of the Company or any Company Subsidiary pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation; or
(iii) assuming the consents and approvals Previously Disclosed by the Company
and Seller are duly obtained, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any Company Subsidiary,
except (in the case of clauses (ii) and (iii) above) for such violations,
rights, conflicts, breaches, creations or defaults which, either individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
(d) Except as Previously Disclosed, no consent, approval or
authorization of, or declaration, notice, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by the Company or any Company Subsidiary on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. As of the
date hereof, the Company is not aware of any reason that the condition set forth
in Section 6.1(b) of this Agreement would not be satisfied.
3.6. SEC DOCUMENTS; REGULATORY FILINGS
Except as Previously Disclosed, the Company has filed all SEC Documents
required by the Securities Laws and such SEC Documents complied, as of their
respective dates, in all material respects with the Securities Laws. Except as
Previously Disclosed, the Company and each Company Subsidiary has filed all
reports required by statute or regulation to be filed with any federal or state
bank regulatory agency, except where the failure to so file would not have a
Material Adverse Effect on the Company, and such reports were prepared in
accordance with the applicable statutes, regulations and instructions in
existence as of the date of filing of such reports in all material respects.
3.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
Except as Previously Disclosed, the Company Financial Statements filed
by the Company in SEC Documents prior to the date of this Agreement fairly
present, and the Company Financial Statements filed by the Company after the
date of this Agreement shall fairly present, in all
15
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates indicated and the consolidated income,
changes in shareholders' equity and cash flows of the Company and its
consolidated Subsidiaries for the periods then ended and each such financial
statement has been or shall be, as the case may be, prepared in conformity with
generally accepted accounting principles applicable to financial institutions
applied on a consistent basis, except as disclosed therein and except, in the
case of unaudited statements, as permitted by Form 10-Q. Except as Previously
Disclosed, since June 30, 2002 there has not been (i) any change by the Company
in accounting methods, principles or practices, except as required by applicable
law or official interpretations thereof or except as required by changes in
generally accepted accounting principles applicable to financial institutions;
or (ii) other than in the ordinary course of business of the Company consistent
with past practice, any entry by the Company into any contract, transaction or
commitment, including any loan, lease, purchase or sale of assets, borrowing or
capital expenditure, which would have a Material Adverse Effect on the Company.
Except as Previously Disclosed, the books and records of the Company and each
Company Subsidiary fairly reflect in all material respects the transactions to
which each of the Company and the Company Subsidiaries are a party or by which
its properties are subject or bound. Except as Previously Disclosed, such books
and records have been properly kept and maintained and are in compliance with
all applicable legal and accounting requirements in all material respects. The
minute books of the Company and each Company Subsidiary contain records which
are accurate in all material respects of all corporate actions of the
shareholders and Board of Directors (including committees of the Board of
Directors of the Company or applicable Company Subsidiaries).
3.8. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary has, on a consolidated basis, suffered any change in its financial
condition, results of operations or business since June 30, 2002 which,
individually or in the aggregate with any other such changes, would have, or
would reasonably be likely to have, a Material Adverse Effect with respect to
the Company.
3.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither the Company nor any Company Subsidiary has any liability
(contingent or otherwise), excluding contractually assumed contingencies, that
is material to the Company on a consolidated basis, or that, when combined with
all similar liabilities, would be material to the Company on a consolidated
basis, except as Previously Disclosed in the Company Financial Statements filed
with the SEC prior to the date hereof or in a letter from the Company or Seller
delivered to Purchaser prior to the execution hereof and except for liabilities
incurred in the ordinary course of business subsequent to June 30, 2002.
3.10. PROPERTIES
The Company and the Company Subsidiaries have valid title free and
clear of all liens, encumbrances, charges, defaults or equitable interests to
all of the properties and assets, real and personal, of the Company and the
Company Subsidiaries which are reflected on the Company Financial Statements as
of June 30, 2002 or acquired after such date, except (i) liens for taxes not
16
yet due and payable; (ii) pledges to secure deposits and other liens incurred in
the ordinary course of business; (iii) such imperfections of title, easements
and encumbrances, if any, as do not interfere in any material respect with the
use of such properties and assets as used on the date of this Agreement; (iv)
dispositions and encumbrances for value in the ordinary course of business and
(v) as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. All leases pursuant to which the Company or any Company
Subsidiary, as lessee, leases real and personal property which, individually or
in the aggregate, are material to the business of the Company and the Company
Subsidiaries taken as a whole are valid and enforceable in accordance with their
respective terms except where the failure of such lease or leases to be valid
and enforceable would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company: each of the properties
utilized by any of the Company or the Company Subsidiaries conforms in all
material respects to currently applicable ordinances, regulations, and zoning
requirements and, if required, is occupied pursuant to a certificate of
occupancy authorizing its current use; all tangible property used in the
business of the Company and the Company Subsidiaries is in good condition,
reasonable wear and tear excepted, and is usable in the ordinary course of
business consistent with past practices of the Company and the Company
Subsidiaries; there is no condemnation or similar proceeding pending or
threatened which would preclude or impair the use of such properties as
presently being used in the conduct of, and which are material to, the business
of the Company or any of the Company Subsidiaries; and since June 30, 2002, no
property material to the Company or any of the Company Subsidiaries has been
damaged in any material respect by fire, storm, or other act of God.
3.11. LOANS
Each loan reflected as an asset in the Company Financial Statements (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, in each case other
than loans as to which the failure to satisfy the foregoing standards,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. Except as would not have, individually or in the aggregate, a
Material Adverse Effect on the Company, all such loans and other extensions of
credit which are subject to Regulation O of the Federal Reserve Board comply in
all material respects with the requirements thereof; and all loans and loan
participations sold by the Company or any Company Subsidiary have been sold
without recourse (as such term is defined for purposes of generally accepted
accounting principles).
3.12. TAX MATTERS
(a) All Tax Returns required to be filed by or with respect to the
Company and each Company Subsidiary have been timely filed, except where the
failure to file such Tax Returns would not, in the aggregate, have a Material
Adverse Effect on the Company. All Taxes due by or on behalf of the Company or
any Company Subsidiary have been paid or adequate reserves have been established
on the Company Financial Statements for the payment of such
17
Taxes, except where any such failure to pay or establish adequate reserves would
not, in the aggregate, have a Material Adverse Effect on the Company. Except as
Previously Disclosed, none of Seller, the Company or any Company Subsidiary
shall have any liability for any such Taxes in excess of the amounts so paid or
reserves or accruals so established, except where such liability would not have
a Material Adverse Effect on the Company.
(b) All Tax Returns filed by or with respect to the Company
and each Company Subsidiary are complete and accurate in all material respects.
None of Seller, the Company or any Company Subsidiary is delinquent in the
payment of any Tax with respect to the Company or any Company Subsidiary, and,
except as Previously Disclosed, none of them has requested any extension of time
within which to file any Tax Returns with respect to the Company or any Company
Subsidiary which have not since been filed. Except as Previously Disclosed or as
fully settled and paid or accrued on the Company Financial Statements, no
material audit examination, deficiency, adjustment, refund claim or litigation
with respect to Tax Returns, paid Taxes, unpaid Taxes or Tax attributes with
respect to the Company or any Company Subsidiary has been proposed, asserted or
assessed (tentatively or otherwise). Except as Previously Disclosed, there are
currently no agreements in effect with respect to the Company or any Company
Subsidiary to extend the period of limitations for the assessment or collection
of any Tax.
(c) Neither the transactions contemplated hereby nor the
termination of the employment of any employees of the Company or any Company
Subsidiary prior to or following consummation of the transactions contemplated
hereby shall result in the Company or any Company Subsidiary (or any successor
thereof) making or being required to make any "excess parachute payment" as that
term is defined in Section 280G of the Code.
(d) Neither the Company nor any Company Subsidiary is a party
to any agreement (other than an agreement exclusively among the Company and the
Company Subsidiaries) providing for the allocation or sharing of, or
indemnification for, Taxes.
(e) Neither the Company nor any Company Subsidiary is required
to include in income any adjustment in any taxable period ending after the date
hereof pursuant to Section 481(a) of the Code.
(f) None of the Seller, Company or any Company Subsidiary has
executed or entered into any written agreement with any Tax authority conceding
or agreeing to any treatment of Taxes or Tax attributes with respect to the
Company or any Company Subsidiary, including, without limitation, an Internal
Revenue Service Form 870 or Form 870-AD, closing agreement or special closing
agreement, affecting the Company or any Company Subsidiary pursuant to Section
7121 of the Code or any predecessor provision thereof or any similar provision
of state, local or foreign law, which agreement would have a material impact on
the calculation of the Taxes of Purchaser or any Purchaser Subsidiary after the
Closing Date.
(g) The Company is not, and shall not be as of the Closing
Date, a "United States real property holding corporation" (as that term is
defined under Code Section 897). Further, the Company has not been a United
States real property holding corporation at any time during the five year period
ending on the Closing Date.
18
(h) For purposes of this Section 3.12 and Section 3.26, (i)
references to the Company and any Company Subsidiary shall include predecessors
thereof; and (ii) "Company Subsidiary" shall include each Subsidiary (as defined
in ARTICLE 1 hereof) of the Company, and each corporation, partnership, limited
liability company, joint venture or other entity which the Company controls
directly or indirectly (through one or more intermediaries). For purposes of the
previous sentence, "control" means the possession, direct or indirect, of the
power either (1) to vote fifty percent (50%) or more of the voting interests of
a corporation, partnership, limited liability company, joint venture or other
entity, or (2) to direct or cause the direction of the management and policies
of a corporation, partnership, limited liability company, joint venture or other
entity, whether by contract or otherwise.
3.13. EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed a true and complete
list of each material Company Plan. For purposes of this Section 3.13, the term
"Company Plan" means each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by Seller, the
Company, any Company Subsidiary or by any trade or business, whether or not
incorporated, that together with the Company or any Company Subsidiary would be
deemed a "single employer" under Section 414 of the Code (a "Company ERISA
Affiliate") for the benefit of any employee or director or former employee or
former director of the Company or any Company Subsidiary. There is no formal
plan or commitment, whether legally binding or not, to create any additional
plan or modify or change any existing material Company Plan that would affect
any employee or director or former employee or former director of the Company or
any Company Subsidiary.
(b) With respect to each of the Company Plans, the Company has
made available to Purchaser true and complete copies of (i) each of the material
Company Plans (other than the non-equity incentive plans) and material related
documents (including all amendments thereto); and (ii) the most recent actuarial
reports for the Company's qualified and non-qualified pension plans.
(c) No liability under Title IV of ERISA has been incurred by
the Company or any Company ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to the Company or any
Company ERISA Affiliate of incurring a liability under such Title, other than
liability for premium payments to the Pension Benefit Guaranty Corporation
("PBGC"), which premiums have been or will be paid when due.
(d) None of the Company, any Company ERISA Affiliate, any of
the Company Plans, nor, to the knowledge of the Company, any trust created under
any Company Plan, nor any trustee or administrator of any Company Plan has
engaged in a prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to a Company Plan, in connection with
which the Company or any Company ERISA Affiliate could reasonably be expected
to, either directly or indirectly, incur any material liability or material
cost.
19
(e) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts that the Company or any
Company ERISA Affiliate is required to pay under Section 412 of the Code or
under the terms of the Company Plans, and no accumulated funding deficiency
(within the meaning of Section 412 of the Code), whether or not waived, exists
with respect to any Company Plan.
(f) Except as Previously Disclosed, the fair market value (as
of the valuation date used for purposes of the most recent actuarial report) of
the assets held under each Company Plan that is subject to Title IV of ERISA is
at least equal to the present value of accrued benefits under such Company Plan
under Section 4042(b) of ERISA without the need to make any additional
contributions to such Company Plan. No reportable event under Section 4043 of
ERISA has occurred with respect to any Company Plan other than any reportable
event occurring by reason of the transactions contemplated hereby or a
reportable event for which the requirement of notice to the PBGC has been
waived.
(g) None of the Company Plans is a "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA, a "multiple employer
welfare arrangement," as such term is defined in Section 3(40) of ERISA, or a
single employer plan that has two or more contributing sponsors, at least two of
whom are not under common control, within the meaning of Section 4063(a) of
ERISA.
(h) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each of the Company Plans that is
intended to be "qualified" within the meaning of Section 401(a) of the Code to
the effect that such plan is so qualified, and, to the knowledge of the Company,
no condition exists that could reasonably be expected to adversely affect the
qualified status of any such Company Plan. Each of the Company Plans that is
intended to satisfy the requirements of Section 125 or 501(c)(9) of the Code
satisfies such requirements in all material respects. Except as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
each of the Company Plans has been operated and administered in all material
respects in accordance with its terms and applicable laws, including, but not
limited to, ERISA and the Code.
(i) Except as Previously Disclosed or as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Company Plan, the assets of any Company Plan or against the Company
or any Company ERISA Affiliate with respect to any Company Plan. There is no
judgment, decree, injunction, rule or order of any court, governmental body,
commission, agency or arbitrator outstanding against or in favor of any Company
Plan or any fiduciary thereof (other than rules of general applicability).
Except as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company or as Previously Disclosed, there are no pending or, to
the knowledge of the Company, threatened audits, examinations or investigations
by any governmental body, commission or agency involving any Company Plan.
(j) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, or as Previously Disclosed, the
consummation of the transactions contemplated hereby will not result in, and is
not a precondition to, (i) any current or former
20
employee or director of the Company or any Company ERISA Affiliate becoming
entitled to severance pay, unemployment compensation or any similar payment;
(ii) any acceleration in the time of payment or vesting, or increase in the
amount, of any compensation due to any such current or former employee or
director; or (iii) any renewal or extension of the term of any agreement
regarding compensation for any such current or former employee or director.
3.14. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor
any Company Subsidiary is a party to, or is bound by, (i) any material contract
as defined in Item 601(b)(10) of Regulation S-K of the SEC or any other material
contract or similar arrangement whether or not made in the ordinary course of
business (other than loans or loan commitments and funding transactions in the
ordinary course of business of any Company Subsidiary) or any agreement
restricting the geographic scope of its business activities or the business
activities in which it may engage in any material respect; (ii) any agreement,
indenture or other instrument relating to the borrowing of money by the Company
or any Company Subsidiary or the guarantee by the Company or any Company
Subsidiary of any such obligation, other than instruments relating to
transactions entered into in the ordinary course of business; (iii) any
agreement, arrangement or commitment relating to the employment of a consultant
who was formerly a director or executive officer or the employment, election,
retention in office or severance of any present or former director or officer;
or (iv) any contract, agreement or understanding with a labor union, in each
case contemplated by this Section 3.14. whether written or oral.
(b) Neither the Company nor any Company Subsidiary is in
default under any material agreement, commitment, arrangement, lease, insurance
policy or other instrument whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not to the
knowledge of the Company occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default, except for such
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(c) The Company has Previously Disclosed each contract,
agreement or other arrangement by and between Seller or any of the Seller
Subsidiaries (other than the Company or any of the Company Subsidiaries), on the
one hand, and the Company or any of the Company Subsidiaries, on the other.
3.15. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or against any asset, interest or
right of the Company or any Company Subsidiary which would, individually or in
the aggregate, have a Material Adverse Effect on the Company. There are no
actual or, to the knowledge of the Company or any Company Subsidiary, threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated hereby or to impose any material liability in
connection therewith that would, individually or in the aggregate, have a
Material Adverse Effect on the Company. There are no actions, suits or
proceedings instituted, pending or, to the knowledge of the Company, threatened
against any present or, to the Company's knowledge, former director or officer
of the Company
21
or any Company Subsidiary, that would, individually or in the aggregate, have a
Material Adverse Effect on the Company.
3.16. COMPLIANCE WITH LAWS
(a) Except as Previously Disclosed, the Company and each
Company Subsidiary is in compliance in all material respects with all statutes
and regulations applicable to the conduct of its business, and neither the
Company nor any Company Subsidiary has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation; (ii) threatening to revoke any
license, franchise, permit or government authorization; or (iii) restricting or
in any way limiting its operations, except for such noncompliance, violations,
revocations and restrictions which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(b) Except as Previously Disclosed, neither the Company nor
any Company Subsidiary is subject to any supervisory agreement, memorandum of
understanding, cease-and-desist order, consent decree, assistance agreement or
similar agreement or arrangement or any board resolution or written commitments
with respect to any of the foregoing at the request of any federal, state, local
or foreign regulatory agency that currently restricts or will in the future
restrict the conduct of its business or relates will relate to its capital
adequacy, its credit policies, its management or its business, and none of them
has been advised by any regulatory agency that such regulatory agency
contemplates issuing or requesting any of the foregoing.
(c) Except for normal examinations conducted by any court,
administrative agency or commission or other governmental authority or
instrumentality or self-regulatory organization in the ordinary course of the
business of the Company and the Company Subsidiaries or as Previously Disclosed,
no court, administrative agency or commission or other governmental authority or
instrumentality or self-regulatory organization has initiated any proceeding or,
to the knowledge of Seller, threatened an investigation into the business or
operations of the Company or any of the Company Subsidiaries since January 1,
2001. Except as Previously Disclosed, there is no material unresolved finding of
a violation by any court, administrative agency or commission or other
governmental authority or instrumentality or self-regulatory organization with
respect to any report or statement or relating to any examinations of the
Company or any of the Company Subsidiaries.
3.17. LABOR MATTERS
With respect to their employees, neither the Company nor any Company
Subsidiary is a party to any labor agreement with any labor organization, group
or association and, except as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, has not engaged in any unfair labor
practice. Since January 1, 2001, the Company and the Company Subsidiaries have
not experienced any attempt by organized labor or its representatives to make
the Company or any Company Subsidiary conform to demands of organized labor
relating to their employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company or any Company Subsidiary,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. To the knowledge of the
22
Company, there is no unfair labor practice charge or other complaint by any
employee or former employee of the Company or any Company Subsidiary against any
of them pending before any court, arbitrator or governmental agency arising out
of the Company's or such Company Subsidiary's activities,; there is no labor
strike or labor disturbance pending or, to the knowledge of the Company,
threatened against any of them; and neither the Company nor any Company
Subsidiary has experienced a work stoppage or other material labor difficulty
since January 1, 2000; in any case that would, individually or in the aggregate,
have a Material Adverse Effect on the Company.
3.18. BROKERS AND FINDERS
Neither the Company nor any Company Subsidiary, nor any of their
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability thereto for any fees or commissions
in connection with the transactions contemplated hereby, other than fees or
commissions that are solely the responsibility of Seller.
3.19. INSURANCE
Each of the Company and the Company Subsidiaries currently maintains
insurance in amounts considered by the Company and any Company Subsidiary as
applicable, to be reasonably necessary for their operations. Except as
Previously Disclosed, neither the Company nor any Company Subsidiary has
received any notice of a material premium increase over current rates or
cancellation with respect to any of its insurance policies or bonds, and within
the last three (3) years, neither the Company nor any Company Subsidiary has
been refused any insurance coverage sought or applied for and, except as
Previously Disclosed, the Company has no reason to believe that existing
insurance coverage cannot be renewed as and when the same shall expire, upon
terms and conditions as favorable as those presently in effect, other than
possible increases in premiums or unavailability in coverage that have not
resulted from any extraordinary loss experience of the Company or any Company
Subsidiary. The deposits of the Company Bank are insured by the FDIC in
accordance with the FDIA, and the Company Bank and its predecessors have paid
all assessments and filed all reports required by the FDIA.
3.20. ENVIRONMENTAL LIABILITY
Except as Previously Disclosed, (x) neither the Company nor any Company
Subsidiary has received any written notice of any legal, administrative,
arbitral or other proceeding, claim or action and, to the knowledge of the
Company, there is no governmental investigation of any nature ongoing, in each
case that would reasonably be expected to result in the imposition, on the
Company or any Company Subsidiary of any liability arising under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; (y) to the knowledge of the Company there are
no facts or circumstances which would reasonably be expected to form the basis
for any such proceeding, claim, action or governmental investigation that would
impose any such liability; and (z) neither the Company nor any Company
Subsidiary is subject to any agreement, order, judgment, decree or memorandum by
or with any court, governmental authority, regulatory agency or third party
imposing any such liability; in the case
23
of each of the foregoing clauses (x), (y) and (z) which liability would have a
Material Adverse Effect on the Company.
3.21. ADMINISTRATION OF TRUST ACCOUNTS
Each Company Subsidiary has properly administered all common trust
funds and collective investment funds and 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, have a
Material Adverse Effect on the Company. Neither the Company, any Company
Subsidiary, nor any director, officer or employee of the Company or any Company
Subsidiary acting on behalf of the Company or a Company Subsidiary, has
committed any breach of trust with respect to any such common trust fund or
collective investment fund or fiduciary or agency account, and the accountings
for each such common trust fund or collective investment fund or fiduciary or
agency account are true and correct in all material respects and accurately
reflect the assets of such common trust fund or collective investment fund or
fiduciary or agency account, except for such breaches and failures to be true,
correct and accurate which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
3.22. INTELLECTUAL PROPERTY
Except as Previously Disclosed, the Company or a Company Subsidiary
owns the entire right, title and interest in and to, or has valid licenses with
respect to, all of the Intellectual Property necessary in all material respects
to conduct the business and operations of the Company and the Company
Subsidiaries as presently conducted, except where the failure to do so would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The ownership, licensing or use of Intellectual Property by the Company
or any of the Company Subsidiaries does not conflict with, infringe,
misappropriate or otherwise violate the Intellectual Property rights of any
other Person, except as would not have a Material Adverse Effect on the Company.
Except as would not have a Material Adverse Effect on the Company, no Person,
other than the Company or a Company Subsidiary, has a right to receive a royalty
or similar payment in respect of any such Intellectual Property pursuant to any
contractual arrangements entered into by or binding upon the Company or any
Company Subsidiary, and no Person, other than the Company and a Company
Subsidiary, otherwise has a right to receive a royalty or similar payment in
respect of any such Intellectual property. Except as Previously Disclosed, the
Company and the Company Subsidiaries have no material licenses granted by or to
them or no other material agreements, to which they are a party, relating in
whole or in part to any of the Company's material Intellectual Property. None of
the Intellectual Property owned or, to the knowledge of the Company, licensed by
the Company or any Company Subsidiary is subject to any outstanding order,
decree, judgment, stipulation, settlement, lien, charge, encumbrance or
attachment, which order, decree, judgment, stipulation, settlement, lien,
charge, encumbrance or attachment would have a Material Adverse Effect on the
Company. Except as Previously Disclosed, upon consummation of the transactions
contemplated hereby, Purchaser and the Purchaser Subsidiaries shall be entitled
to continue to use all such Intellectual Property without the payment of any
fees, licenses or other payments (other than ongoing payments required
24
under license agreements for software used by the Company or the Company
Subsidiaries) in amounts consistent with past practice.
3.23. RISK MANAGEMENT INSTRUMENTS
Except as Previously Disclosed and as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, all interest rate
swaps, caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements to which the Company or a Company
Subsidiary is a party, whether entered into for the Company's own account, or
for the account of one or more of the Company Subsidiaries or their customers,
were entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies; and (ii) with
counterparties reasonably believed to be financially responsible at the time;
and each of them constitutes the valid and legally binding obligation of the
Company or one of the Company Subsidiaries, enforceable against it in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general equity principles), and neither the Company nor any
Company Subsidiary nor, to knowledge of the Company, any other party thereto, is
in breach of any of its obligations under any such agreement or arrangement.
3.24. REPURCHASE AGREEMENTS
Except as Previously Disclosed and as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, with respect to all
agreements pursuant to which the Company or any Company Subsidiary has purchased
securities subject to an agreement to resell, if any, the Company or such
Company Subsidiary, as the case may be, has a valid, perfected first lien or
security interest in or evidence of ownership in book entry form of the
government securities or other collateral securing the repurchase agreements,
and the value of such collateral equals or exceeds the amount of the debt
secured thereby.
3.25. CERTAIN INFORMATION
When the Information Statement or any amendment or supplement thereto
is first filed with the SEC, such Information Statement and all amendments or
supplements thereto, with respect to all information set forth or incorporated
by reference therein, (i) shall comply in all material respects with the
applicable provisions of the Securities Laws; and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading; PROVIDED 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 Purchaser specifically for inclusion or incorporation by
reference therein. All information concerning Seller, the Company and their
respective directors, officers, shareholders and any Subsidiaries included (or
submitted for inclusion) in any application and furnished by it pursuant to
Section 5.3 of this Agreement shall be true, correct and complete in all
material respects.
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3.26. TAX TREATMENT
As of the date of this Agreement, neither Seller nor the Company knows
of any reason relating to it or any of the Company Subsidiaries which would
reasonably cause Seller or the Company to believe that the combination of the
Exchange and Upstream Merger shall not qualify as a reorganization under Section
368(a) of the Code.
3.27. TAKEOVER LAWS
The Company has taken all action required to by taken by it in order to
exempt this Reorganization Agreement and the transactions contemplated hereby
from, and this Reorganization Agreement and the transactions contemplated hereby
are exempt from, the requirements of any "moratorium," "control share," "fair
price," "affiliate transaction," "business combination," or other antitakeover
laws and regulations of any state that may apply to the Company (collectively,
"Takeover Laws"), including, without limitation, Section 203 of the Delaware
General Corporation Law.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Except as Previously Disclosed, Purchaser hereby represents and
warrants to Seller and the Company as follows:
4.1. CAPITAL STRUCTURE OF PURCHASER
(a) The authorized capital stock of Purchaser consisted as of
the close of business on September 25, 2002 of (i) 1,000,000 shares of preferred
stock, par value $1.00 per share, none of which were issued and outstanding or
held in treasury; and (ii) 150,000,000 shares of common stock, par value $0.50
per share ("Purchaser Common Stock"), of which, as of the date hereof,
91,863,963 shares were issued and outstanding, 5,275,384 shares were held in
treasury and no shares were held by any Purchaser Subsidiary except as may be
held in trust accounts, managed accounts and the like, or otherwise held in a
fiduciary capacity for the benefit of third parties.
(b) As of the close of business on September 24, 2002,
20,931,486 shares of Purchaser Common Stock were reserved for issuance pursuant
to stock option plans administered or acquired by Purchaser and all other plans,
agreements or arrangements providing for equity-based compensation to any
director, employee, consultant or independent contractor of Purchaser or any of
its subsidiaries (collectively, the "Purchaser Stock Plans"), of which
10,474,046 shares are subject to outstanding stock options to purchase or
receive Purchaser Common Stock and all other rights to purchase or receive
Purchaser Common Stock granted under Purchaser Stock Plans (collectively, the
"Purchaser Stock Options").
(c) Except as set forth above, and except for changes since
September 24, 2002 resulting from the issuance of shares of Purchaser Common
Stock pursuant to and in accordance with Purchaser Stock Options outstanding
prior to September 24, 2002 and Purchaser Stock Options issued after September
24, 2002 in compliance with Section 5.7 or pursuant to any other benefit plans
or director, employee or shareholder purchase programs, (i) there are not
issued,
26
reserved for issuance or outstanding (A) any shares of capital stock or voting
securities or other ownership interests of Purchaser, (B) any securities of
Purchaser or any Purchaser subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other ownership
interests of Purchaser, or (C) any Rights to acquire from Purchaser or any
Purchaser Subsidiary, or any obligation of Purchaser or any Purchaser
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 Purchaser,
and (ii) there are no outstanding obligations of Purchaser 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
Purchaser Stock Options.
(d) All outstanding shares of Purchaser capital stock have
been duly authorized and validly issued and are fully paid and nonassessable.
None of the shares of Purchaser's capital stock has been issued in violation of
the preemptive rights of any Person. The shares of Purchaser Common Stock to be
issued in connection with the Exchange have been duly authorized and, when
issued in accordance with the terms of this Reorganization Agreement, shall be
validly issued, fully paid, nonassessable and free and clear of any preemptive
rights.
(e) Neither Purchaser nor any of its subsidiaries is a party
and, to the knowledge of Purchaser, as of the date hereof, no other person
having beneficial ownership (within the meaning of Rule 13d-3) of more than 5%
of the outstanding Purchaser Common Stock (a "Significant Shareholder") is a
party to any agreement restricting the transfer of, relating to the voting of,
requiring registration of, or granting any preemptive or antidilutive rights
with respect to any of the securities of Purchaser or any Purchaser Subsidiary.
There are no voting trusts or other agreements or understandings to which
Purchaser or any Purchaser Subsidiaries is a party or to the knowledge of
Purchaser, as of the date hereof, any Significant Shareholder is a party with
respect to the voting of the capital stock of Purchaser or any of the
subsidiaries.
4.2. ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER
Purchaser is a duly organized corporation, validly existing and in good
standing under the laws of New York, with full corporate power and authority to
carry on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on Purchaser. Purchaser is registered as a bank
holding company under the Bank Holding Company Act and is not registered as a
Financial Holding Company.
4.3. OWNERSHIP OF PURCHASER SUBSIDIARIES; CAPITAL STRUCTURE OF
PURCHASER SUBSIDIARIES
Purchaser has no Subsidiary other than those disclosed in its Annual
Report on Form 10-K for the year ended December 31, 2001 or any Subsidiary that
is not a significant subsidiary under the SEC's Regulation S-X. Except as
Previously Disclosed, the outstanding shares of capital stock of the Purchaser
Subsidiaries have been duly authorized and validly issued and are fully paid and
(except as provided in 12 U.S.C. ss. 55 or Section 114 of the New York Banking
27
Law) nonassessable and all such shares are directly or indirectly owned by
Purchaser free and clear of all liens, claims and encumbrances. No Purchaser
Subsidiary has or is bound by any Rights which are authorized, issued or
outstanding with respect to the capital stock of any Purchaser Subsidiary and,
except as Previously Disclosed, there are no agreements, understandings or
commitments relating to the right of Purchaser to vote or to dispose of said
shares. None of the shares of capital stock of any Purchaser Subsidiary has been
issued in violation of the preemptive rights of any Person. No Purchaser
Subsidiary is a "financial subsidiary" as defined in the Gramm-Leach-Blilely Act
or the rules and regulations promulgated thereunder.
4.4. ORGANIZATION, STANDING AND AUTHORITY OF PURCHASER SUBSIDIARIES
Each Purchaser Subsidiary is a duly organized corporation or banking
corporation, validly existing and in good standing under applicable laws. Each
Purchaser Subsidiary (i) has full power and authority to carry on its business
as now conducted; and (ii) is duly licensed or qualified to do business in the
states of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification and where failure to be licensed or qualified would have a
Material Adverse Effect on Purchaser. Each Purchaser Subsidiary has all federal,
state, local and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, except where the failure to be so authorized would not have a
Material Adverse Effect on Purchaser. Purchaser Bank is a member in good
standing of the Federal Reserve Bank of New York and the Federal Home Loan Bank
of New York and owns the requisite amount of shares therein.
4.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Purchaser has all requisite corporate power and authority
to enter into and perform all of its obligations under this Reorganization
Agreement. The execution and delivery of this Reorganization Agreement and the
consummation of the transactions contemplated hereby (to the extent such party
is a party thereto) has been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Purchaser, except that the
affirmative vote of the holders of a majority of the votes cast at a meeting of
Purchaser shareholders at which a quorum is present is required to authorize the
issuance of Purchaser Common Stock pursuant to this Reorganization Agreement in
accordance with the rules of the NYSE. The Board of Directors of Purchaser has
directed that the issuance of Purchaser Common Stock pursuant to this
Reorganization Agreement be submitted to shareholders of Purchaser for approval
at a special meeting to be held as soon as practicable.
(b) Assuming the accuracy of the representation contained in
Sections 2.3(b) and 3.5(b) hereof, this Reorganization Agreement constitutes
legal, valid and binding obligations of of Purchaser, enforceable against it in
accordance with its terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights, to the supervisory and enforcement powers of applicable
regulatory agencies, and to general equity principles.
28
(c) Neither the execution and delivery of this Reorganization
Agreement, nor consummation of the transactions contemplated hereby, nor
compliance by Purchaser with any of the provisions hereof shall (i) conflict
with or result in a breach of any provision of the articles or certificate of
incorporation or association, charter or bylaws of Purchaser or any Purchaser
Subsidiary; (ii) assuming the consents and approvals Previously Disclosed by
Purchaser are duly obtained, constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon any property or asset of
Purchaser or any Purchaser Subsidiary pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation; or (iii)
assuming the consents and approvals Previously Disclosed by Purchaser are duly
obtained, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any Purchaser Subsidiary, except (in the
case of clauses (ii) and (iii) above) for such violations, rights, conflicts,
breaches, creations or defaults which, either individually or in the aggregate,
shall not have a Material Adverse Effect on Purchaser.
(d) Except as Previously Disclosed, no consent, approval or
authorization of, or declaration, notice, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by Purchaser on or prior to the Closing Date in connection with
the execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby. As of the date hereof, Purchaser is not
aware of any reason that the condition set forth in Section 6.1(b) of this
Agreement would not be satisfied.
4.6. SEC DOCUMENTS; REGULATORY FILINGS
Except as Previously Disclosed, Purchaser has filed all SEC Documents
required by the Securities Laws and such SEC Documents complied, as of their
respective dates, in all material respects with the Securities Laws. Purchaser
and each of the Purchaser Subsidiaries has filed all reports required by statute
or regulation to be filed with any federal or state bank regulatory agency,
except where the failure to so file would not have a Material Adverse Effect on
Purchaser, and such reports were prepared in accordance with the applicable
statutes, regulations and instructions in existence as of the date of filing of
such reports in all material respects.
4.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
Except as Previously Disclosed, the Purchaser Financial Statements
filed by Purchaser in SEC documents prior to the date of this Agreement fairly
present, and the Purchaser Financial Statements filed by Purchaser in SEC
Documents after the date of the Agreement shall fairly present the consolidated
financial position of Purchaser and its consolidated Subsidiaries as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity and cash flows of Purchaser and its consolidated
Subsidiaries for the periods then ended and each such financial statement has
been or shall be, as the case may be, prepared in conformity with generally
accepted accounting principles applicable to financial institutions applied on a
consistent basis except as disclosed therein and except in the case of unaudited
statements, as permitted by Form 10-Q. Except as Previously Disclosed, since
June 30, 2002 there has not been (i) any change by Purchaser in accounting
methods, principles or practices, except as required by applicable law or
official interpretations thereof or except as required by changes in
29
generally accepted accounting principles applicable to financial institutions;
or (ii) other than in the ordinary course of business of Purchaser consistent
with past practice, any entry by Purchaser into any contract, transaction or
commitment, including any loan, lease, purchase or sale of assets, borrowing or
capital expenditure, which would have a Material Adverse Effect on Purchaser.
The books and records of Purchaser and each Purchaser Subsidiary fairly reflect
in all material respects the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of Purchaser and
the Purchaser Subsidiaries contain records which are accurate in all material
respects of all corporate actions of their respective shareholders and Board of
Directors (including committees of their Board of Directors).
4.8. MATERIAL ADVERSE CHANGE
Purchaser has not, on a consolidated basis, suffered any change in its
financial condition, results of operations or business since December 31, 2001
which, individually or in the aggregate with any other such changes, would have,
or would reasonably be likely to have, a Material Adverse Effect on Purchaser.
4.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither Purchaser nor any Purchaser Subsidiary has any liability
(contingent or otherwise), excluding contractually assumed contingencies, that
is material to Purchaser on a consolidated basis, or that, when combined with
all similar liabilities, would be material to Purchaser on a consolidated basis,
except as Previously Disclosed, as disclosed in the Purchaser Financial
Statements filed with the SEC prior to the date hereof or in a letter from
Purchaser delivered to Seller prior to the execution hereof and except for
liabilities incurred in the ordinary course of business subsequent to June 30,
2002.
4.10. PROPERTIES
The Purchaser and the Purchaser Subsidiaries have valid title free and
clear of all liens, encumbrances, charges, defaults or equitable interests to
all of the properties and assets, real and personal, of Purchaser and the
Purchaser Subsidiaries which are reflected on the Purchaser Financial Statements
as of June 30, 2002 or acquired after such date, except (i) liens for taxes not
yet due and payable; (ii) pledges to secure deposits and other liens incurred in
the ordinary course of business; (iii) such imperfections of title, easements
and encumbrances, if any, as do not interfere in any material respect with the
use of such properties and assets as used on the date of this Agreement; (iv)
dispositions and encumbrances for value in the ordinary course of business and
(v) as would not, individually or in the aggregate, have a Material Adverse
Effect on Purchaser. All leases pursuant to which Purchaser or any Purchaser
Subsidiary, as lessee, leases real and personal property which, individually or
in the aggregate, are material to the business of Purchaser and the Purchaser
Subsidiaries taken as a whole are valid and enforceable in accordance with their
respective terms except where the failure of such lease or leases to be valid
and enforceable would not, individually or in the aggregate, have a Material
Adverse Effect on Purchaser. Except as would not, individually or in the
aggregate, have a Material Adverse
30
Effect on Purchaser: each of the properties utilized by any of Purchaser or the
Purchaser Subsidiaries conforms in all material respects to currently applicable
ordinances, regulations, and zoning requirements and, if required, is occupied
pursuant to a certificate of occupancy authorizing its current use; all tangible
property used in the business of Purchaser and the Purchaser Subsidiaries is in
good condition, reasonable wear and tear excepted, and is usable in the ordinary
course of business consistent with past practices of Purchaser and the Purchaser
Subsidiaries; there is no condemnation or similar proceeding pending or
threatened which would preclude or impair the use of such properties as
presently being used in the conduct of, and which are material to, the business
of Purchaser or any of the Purchaser Subsidiaries; and since June 30, 2002, no
property material to Purchaser or any of the Purchaser Subsidiaries has been
damaged in any material respect by fire, storm, or other act of God.
4.11. LOANS
Each loan reflected as an asset in the Purchaser Financial Statements
(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, in
each case other than loans as to which the failure to satisfy the foregoing
standards, individually or in the aggregate, would not have a Material Adverse
Effect on Purchaser. Except as would not have, individually or in the aggregate,
a Material Adverse Effect on Purchaser, all such loans and other extensions of
credit which are subject to Regulation O of the Federal Reserve Board comply in
all material respects with the requirements thereof; and all loans and loan
participations sold by Purchaser or any Purchaser Subsidiary have been sold
without recourse (as such term is defined for purposes of generally accepted
accounting principles).
4.12. TAX MATTERS
(a) All Tax Returns required to be filed by or with respect to
Purchaser and each Purchaser Subsidiary have been timely filed, except where the
failure to file such Tax Returns would not, in the aggregate, have a Material
Adverse Effect on Purchaser. All Taxes due by or on behalf of Purchaser or any
Purchaser Subsidiary have been paid or adequate reserves have been established
on the Purchaser Financial Statements for the payment of such Taxes, except
where any such failure to pay or establish adequate reserves would not, in the
aggregate, have a Material Adverse Effect on Purchaser. Except as Previously
Disclosed, neither Purchaser nor any Purchaser Subsidiary shall have any
liability for any such Taxes in excess of the amounts so paid or reserves or
accruals so established, except where such liability would not have a Material
Adverse Effect on Purchaser.
(b) All Tax Returns filed by or with respect to Purchaser and
each Purchaser Subsidiary are complete and accurate in all material respects.
Neither Purchaser nor any Purchaser Subsidiary is delinquent in the payment of
any Tax, and, except as Previously Disclosed, none of them has requested any
extension of time within which to file any Tax Returns which have not since been
filed. Except as Previously Disclosed or as fully settled and
31
paid or accrued on the Purchaser Financial Statements, no material audit
examination, deficiency, adjustment, refund claim or litigation with respect to
Tax Returns, paid Taxes, unpaid Taxes or Tax attributes with respect to
Purchaser or any Purchaser Subsidiary has been proposed, asserted or assessed
(tentatively or otherwise). Except as Previously Disclosed, there are currently
no agreements in effect with respect to Purchaser or any Purchaser Subsidiary to
extend the period of limitations for the assessment or collection of any Tax.
(c) Neither the transactions contemplated hereby nor the
termination of the employment of any employees of Purchaser or any Purchaser
Subsidiary prior to or following consummation of the transactions contemplated
hereby shall result in Purchaser or any Purchaser Subsidiary (or any successor
thereof) making or being required to make any "excess parachute payment" as that
term is defined in Section 280G of the Code.
(d) Neither Purchaser nor any Purchaser Subsidiary is a party
to any agreement (other than an agreement exclusively among Purchaser and the
Purchaser Subsidiaries) providing for the allocation or sharing of, or
indemnification for, Taxes.
(e) Neither Purchaser nor any Purchaser Subsidiary is required
to include in income any adjustment in any taxable period ending after the date
hereof pursuant to Section 481(a) of the Code.
(f) Neither Purchaser nor any Purchaser Subsidiary has
executed or entered into any written agreement with any Tax authority conceding
or agreeing to any treatment of Taxes or Tax attributes with respect to
Purchaser or any Purchaser Subsidiary, including, without limitation, an
Internal Revenue Service Form 870 or Form 870-AD, closing agreement or special
closing agreement, affecting Purchaser or any Purchaser Subsidiary pursuant to
Section 7121 of the Code or any predecessor provision thereof or any similar
provision of state, local or foreign law, which agreement would have a material
impact on the calculation of the Taxes of Purchaser or any Purchaser Subsidiary
after the Closing Date.
(g) Purchaser is not, and shall not be as of the Closing Date,
a "United States real property holding corporation" (as that term is defined
under Code Section 897).
(h) For purposes of this Section 4.12 and Section 4.27, (i)
references to Purchaser and any Purchaser Subsidiary shall include predecessors
thereof; and (ii) "Purchaser Subsidiary" shall include each Subsidiary (as
defined in ARTICLE 1 hereof) of Purchaser, and each corporation, partnership,
limited liability company, joint venture or other entity which Purchaser
controls directly or indirectly (through one or more intermediaries). For
purposes of the previous sentence, "control" means the possession, direct or
indirect, of the power either (1) to vote fifty percent (50%) or more of the
voting interests of a corporation, partnership, limited liability company, joint
venture or other entity, or (2) to direct or cause the direction of the
management and policies of a corporation, partnership, limited liability
company, joint venture or other entity, whether by contract or otherwise.
4.13. EMPLOYEE BENEFIT PLANS
(a) The Purchaser has Previously Disclosed a true and complete
list of each material Purchaser Plan. For purposes of this Section 4.13, the
term "Purchaser Plan" means
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each bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, medical, life or other insurance, profit-sharing, or
pension plan, program, agreement or arrangement, and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or contributed to
or required to be contributed to by Purchaser, any Purchaser Subsidiary or by
any trade or business, whether or not incorporated, that together with Purchaser
or any Purchaser Subsidiary would be deemed a "single employer" under Section
414 of the Code (a "Purchaser ERISA Affiliate") for the benefit of any employee
or director or former employee or former director of Purchaser or any Purchaser
Subsidiary. There is no formal plan or commitment, whether legally binding or
not, to create any additional plan or modify or change any existing material
Purchaser Plan that would affect any employee or director or former employee or
former director of Purchaser or any Purchaser Subsidiary.
(b) With respect to each of the Purchaser Plans, Purchaser has
made available to Purchaser true and complete copies of (i) each of the material
Purchaser Plans (other than non-equity incentive plans) and material related
documents (including all amendments thereto) and (ii) the most recent actuarial
reports for Purchaser's qualified and non-qualifed pension plans.
(c) No liability under Title IV of ERISA has been incurred by
Purchaser or any Purchaser ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Purchaser or any
Purchaser ERISA Affiliate of incurring a liability under such Title, other than
liability for premium payments to the PBGC, which premiums have been or will be
paid when due.
(d) None of Purchaser, any Purchaser ERISA Affiliate, any of
the Purchaser Plans, nor, to the knowledge of Purchaser, any trust created under
any Purchaser Plan, nor any trustee or administrator of any Purchaser Plan has
engaged in a prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to a Purchaser Plan, in connection
with which Purchaser or any Purchaser ERISA Affiliate could reasonably be
expected to, either directly or indirectly, incur any material liability or
material cost.
(e) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts that Purchaser or any
Purchaser ERISA Affiliate is required to pay under Section 412 of the Code or
under the terms of the Purchaser Plans, and no accumulated funding deficiency
(within the meaning of Section 412 of the Code), whether or not waived, exists
with respect to any Purchaser Plan.
(f) Except as previously disclosed, the fair market value (as
of the valuation date used for purposes of the most recent actuarial report) of
the assets held under each Purchaser Plan that is subject to Title IV of ERISA
is at least equal to the present value of accrued benefits under such Purchaser
Plan under Section 4042(b) of ERISA without the need to make any additional
contributions to such Purchaser Plan. No reportable event under Section 4043 of
ERISA has occurred with respect to any Purchaser Plan other than any reportable
event occurring by reason of the transactions contemplated hereby or a
reportable event for which the requirement of notice to the PBGC has been
waived.
(g) None of the Purchaser Plans is a "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA, a "multiple employer
welfare arrangement," as such term
33
is defined in Section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
(h) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each of the Purchaser Plans that is
intended to be "qualified" within the meaning of Section 401(a) of the Code to
the effect that such plan is so qualified, and, to the knowledge of Purchaser,
no condition exists that could reasonably be expected to adversely affect the
qualified status of any such Purchaser Plan. Each of the Purchaser Plans that is
intended to satisfy the requirements of Section 125 or 501(c)(9) of the Code
satisfies such requirements in all material respects. Except as would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser,
each of the Purchaser Plans has been operated and administered in all material
respects in accordance with its terms and applicable laws, including, but not
limited to, ERISA and the Code.
(i) Except as Previously Disclosed or as would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser,
there are no actions, suits or claims pending, or, to the knowledge of
Purchaser, threatened or anticipated (other than routine claims for benefits)
against any Purchaser Plan, the assets of any Purchaser Plan or against
Purchaser or any Purchaser ERISA Affiliate with respect to any Purchaser Plan.
There is no judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding against or in
favor of any Purchaser Plan or any fiduciary thereof (other than rules of
general applicability). Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Purchaser or as Previously Disclosed, there
are no pending or, to the knowledge of Purchaser, threatened audits,
examinations or investigations by any governmental body, commission or agency
involving any Purchaser Plan.
(j) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Purchaser, or as Previously Disclosed, the
consummation of the transactions contemplated hereby will not result in, and is
not a precondition to, (i) any current or former employee or director of
Purchaser or any Purchaser ERISA Affiliate becoming entitled to severance pay,
unemployment compensation or any similar payment; (ii) any acceleration in the
time of payment or vesting, or increase in the amount, of any compensation due
to any such current or former employee or director; or (iii) any renewal or
extension of the term of any agreement regarding compensation for any such
current or former employee or director.
4.14. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither Purchaser nor any
Purchaser Subsidiary is a party to, or is bound by, (i) any material contract as
defined in Item 601(b)(10) of Regulation S-K of the SEC or any other material
contract or similar arrangement whether or not made in the ordinary course of
business (other than loans or loan commitments and funding transactions in the
ordinary course of business of any Purchaser Subsidiary) or any agreement
restricting the geographic scope of its business activities or the business
activities in which it may engage in any material respect; (ii) any agreement,
indenture or other instrument relating to the borrowing of money by Purchaser or
any Purchaser Subsidiary or the guarantee by Purchaser or any Purchaser
Subsidiary of any such obligation, other than instruments relating to
34
transactions entered into in the ordinary course of business; (iii) any
agreement, arrangement or commitment relating to the employment of a consultant
who was formerly a director or executive officer or the employment, election,
retention in office or severance of any present or former director or officer;
or (iv) any contract, agreement or understanding with a labor union, in each
case contemplated by this Section 4.14 whether written or oral.
(b) Neither Purchaser nor any Purchaser Subsidiary is in
default under any material agreement, commitment, arrangement, lease, insurance
policy or other instrument whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not to the
knowledge of Purchaser occurred any event that, with the lapse of time or giving
of notice or both, would constitute such a default, except for such defaults
which would not, individually or in the aggregate, have a Material Adverse
Effect on Purchaser.
4.15. LEGAL PROCEEDINGS
There are no actions, suits or proceedings instituted, pending or, to
the knowledge of Purchaser, threatened against Purchaser or any Purchaser
Subsidiary or against any asset, interest or right of Purchaser or any Purchaser
Subsidiary which would, individually or in the aggregate, have a Material
Adverse Effect on Purchaser. There are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated hereby or to impose any material liability in connection therewith
that would, individually or in the aggregate, have a Material Adverse Effect on
Purchaser. There are no actions, suits or proceedings instituted, pending or, to
the knowledge of Purchaser, threatened against any present or, to Purchaser's
knowledge, former director or officer of Purchaser or any Purchaser Subsidiary,
that would, individually or in the aggregate, have a Material Adverse Effect on
Purchaser.
4.16. COMPLIANCE WITH LAWS
(a) Except as Previously Disclosed, Purchaser and each
Purchaser Subsidiary is in compliance in all material respects with all statutes
and regulations applicable to the conduct of its business, and neither Purchaser
nor any Purchaser Subsidiary has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation; (ii) threatening to revoke any
license, franchise, permit or government authorization; or (iii) restricting or
in any way limiting its operations, except for such noncompliance, violations,
revocations and restrictions which would not, individually or in the aggregate,
have a Material Adverse Effect on Purchaser.
(b) Except as Previously Disclosed, neither Purchaser nor any
Purchaser Subsidiary is subject to any supervisory agreement, memorandum of
understanding, cease-and-desist order, consent decree, assistance agreement or
similar agreement or arrangement or any board resolution or written commitments
with respect to any of the foregoing at the request of any federal, state, local
or foreign regulatory agency that currently restricts or will in the future
restrict the conduct of its business or relates will relate to its capital
adequacy, its credit policies, its management or its business, and none of them
has been advised by any regulatory agency that such regulatory agency
contemplates issuing or requesting any of the foregoing.
35
(c) Except for normal examinations conducted by any court,
administrative agency or commission or other governmental authority or
instrumentality or self-regulatory organization in the ordinary course of the
business of Purchaser and the Purchaser Subsidiaries or as Previously Disclosed,
no court, administrative agency or commission or other governmental authority or
instrumentality or self-regulatory organization has initiated any proceeding or,
to the knowledge of Purchaser, threatened an investigation into the business or
operations of Purchaser or any of the Purchaser Subsidiaries since January 1,
2001. Except as Previously Disclosed, there is no material unresolved finding of
a violation by any court, administrative agency or commission or other
governmental authority or instrumentality or self-regulatory organization with
respect to any report or statement or relating to any examinations of Purchaser
or any of the Purchaser Subsidiaries.
4.17. LABOR MATTERS
With respect to their employees, neither Purchaser nor any Purchaser
Subsidiary is a party to any labor agreement with any labor organization, group
or association and, except as would not, individually or in the aggregate, have
a Material Adverse Effect on Purchaser, has not engaged in any unfair labor
practice. Since January 1, 2001, Purchaser and the Purchaser Subsidiaries have
not experienced any attempt by organized labor or its representatives to make
Purchaser or any Purchaser Subsidiary conform to demands of organized labor
relating to their employees or to enter into a binding agreement with organized
labor that would cover the employees of Purchaser or any Purchaser Subsidiary,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on Purchaser. To the knowledge of Purchaser, there is no unfair labor
practice charge or other complaint by any employee or former employee of
Purchaser or any Purchaser Subsidiary against any of them pending before any
court, arbitrator or governmental agency arising out of Purchaser's or such
Purchaser Subsidiary's activities,; there is no labor strike or labor
disturbance pending or, to the knowledge of Purchaser, threatened against any of
them; and neither Purchaser nor any Purchaser Subsidiary has experienced a work
stoppage or other material labor difficulty since January 1, 2000; in any case
that would, individually or in the aggregate, have a Material Adverse Effect on
Purchaser.
4.18. BROKERS AND FINDERS
Neither Purchaser nor any Purchaser Subsidiary, nor any of their
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated hereby, except that Purchaser has
retained Lehman Brothers Inc. ("Purchaser Advisor") to perform certain financial
advisory services in connection with the transactions contemplated hereby as
Previously Disclosed. Prior to the execution and delivery of this Agreement,
Purchaser Advisor has delivered to the Board of Directors of Purchaser an
opinion that the Exchange is fair from a financial point of view to the
shareholders of Purchaser.
4.19. INSURANCE
Purchaser and the Purchaser Subsidiaries each currently maintains
insurance in amounts considered by Purchaser and any Purchaser Subsidiary as
applicable, to be reasonably necessary for their operations. Except as
Previously Disclosed, neither Purchaser nor any Purchaser
36
Subsidiary has received any notice of a material premium increase or
cancellation with respect to any of its insurance policies or bonds, and within
the last three (3) years, neither Purchaser nor any Purchaser Subsidiary has
been refused any insurance coverage sought or applied for, and Purchaser has no
reason to believe that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable as those presently
in effect, other than possible increases in premiums or unavailability in
coverage that have not resulted from any extraordinary loss experience of
Purchaser or any Purchaser Subsidiary. The deposits of Purchaser Bank are
insured by the FDIC in accordance with the FDIA, and Purchaser Bank has paid all
assessments and filed all reports required by the FDIA.
4.20. ENVIRONMENTAL LIABILITY
Except as Previously Disclosed, (x) neither Purchaser nor any Purchaser
Subsidiary has received any written notice of any legal, administrative,
arbitral or other proceeding, claim or action and, to the knowledge of
Purchaser, there is no governmental investigation of any nature ongoing, in each
case that could reasonably be expected to result in the imposition, on Purchaser
or any Purchaser Subsidiary of any liability arising under any local, state or
federal environmental statute, regulation or ordinance including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; (y) to the knowledge of Purchaser, there are no facts
or circumstances which could reasonably be expected to form the basis for any
such proceeding, claim, action or governmental investigation that would impose
any such liability; and (z) neither Purchaser nor any Purchaser Subsidiary is
subject to any agreement, order, judgment, decree or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
such liability; in the case of each of the foregoing clauses (x), (y) and (z)
which liability would have a Material Adverse Effect on Purchaser.
4.21. ADMINISTRATION OF TRUST ACCOUNTS
Each Purchaser Subsidiary has properly administered all common trust
funds and collective investment funds and 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, have a
Material Adverse Effect on Purchaser. Neither Purchaser, any Purchaser
Subsidiary, nor any director, officer or employee of Purchaser or any Purchaser
Subsidiary acting on behalf of Purchaser or a Purchaser Subsidiary, has
committed any breach of trust with respect to any such common trust fund or
collective investment fund or fiduciary or agency account, and the accountings
for each such common trust fund or collective investment fund or fiduciary or
agency account are true and correct in all material respects and accurately
reflect the assets of such common trust fund or collective investment fund or
fiduciary or agency account, except for such breaches and failures to be true,
correct and accurate which would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser.
37
4.22. INTELLECTUAL PROPERTY
Except as Previously Disclosed, Purchaser or a Purchaser Subsidiary
owns the entire right, title and interest in and to, or has valid licenses with
respect to, all of the Intellectual Property necessary in all material respects
to conduct the business and operations of Purchaser and the Purchaser
Subsidiaries as presently conducted, except where the failure to do so would
not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser. The ownership, licensing or use of Intellectual Property by Purchaser
or any of the Purchaser Subsidiaries does not conflict with, infringe,
misappropriate or otherwise violate the Intellectual Property rights of any
other Person, except as would not have a Material Adverse Effect on Purchaser.
Except as would not have a Material Adverse Effect on Purchaser, no Person,
other than Purchaser or a Purchaser Subsidiary, has a right to receive a royalty
or similar payment in respect of any such Intellectual Property pursuant to any
contractual arrangements entered into by or binding upon Purchaser or any
Purchaser Subsidiary, and no Person, other than Purchaser and a Purchaser
Subsidiary, otherwise has a right to receive a royalty or similar payment in
respect of any such Intellectual property. None of the Intellectual Property
owned or, to the knowledge of Purchaser, licensed by Purchaser or any Purchaser
Subsidiary is subject to any outstanding order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment, which order, decree,
judgment, stipulation, settlement, lien, charge, encumbrance or attachment would
have a Material Adverse Effect on Purchaser. Except as Previously Disclosed,
upon consummation of the transactions contemplated hereby, Purchaser and
Purchaser Subsidiaries shall be entitled to continue to use all such
Intellectual Property consistent with past practice.
4.23. RISK MANAGEMENT INSTRUMENTS
Except as Previously Disclosed and as would not, individually or in the
aggregate, have a Material Adverse Effect on Purchaser, all interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements to which Purchaser or a Purchaser Subsidiary is a
party, whether entered into for Purchaser's own account, or for the account of
one or more of the Purchaser Subsidiaries or their customers, were entered into
(i) in accordance with prudent business practices and all applicable laws,
rules, regulations and regulatory policies; and (ii) with counterparties
reasonably believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of Purchaser or one of the
Purchaser Subsidiaries, enforceable against it in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
equity principles), and neither Purchaser nor any Purchaser Subsidiary nor, to
knowledge of Purchaser, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
4.24. REPURCHASE AGREEMENTS
Except as Previously Disclosed and as would not, individually or in the
aggregate, have a Material Adverse Effect on Purchaser, with respect to all
agreements pursuant to which Purchaser or any Purchaser Subsidiary has purchased
securities subject to an agreement to resell, if any, Purchaser or such
Purchaser Subsidiary, as the case may be, has a valid, perfected first lien or
security interest in or evidence of ownership in book entry form of the
government
38
securities or other collateral securing the repurchase agreements, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
4.25. CERTAIN INFORMATION
When the Proxy Statement or any amendment or supplement thereto is
first filed with the SEC, such Proxy Statement and all amendments or supplements
thereto, with respect to all information set forth or incorporated by reference
therein furnished, (i) shall comply in all material respects with the applicable
provisions of the Securities Laws; and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; provided that no representation or warranty is made by Purchaser
with respect to statements made or incorporated by reference therein based on
information supplied by Seller, the Company or any Seller Subsidiary
specifically for inclusion or incorporation by reference therein. All
information concerning Purchaser and its directors, officers, shareholders and
any Subsidiaries included (or submitted for inclusion) in any application and
furnished by it pursuant to Section 5.3 of this Agreement shall be true, correct
and complete in all material respects.
4.26. TAKEOVER LAWS
Purchaser has taken all action required to by taken by it in order to
exempt this Reorganization Agreement and the transactions contemplated hereby
from, and this Reorganization Agreement and the transactions contemplated hereby
are exempt from, the requirements of any Takeover Laws, including, without
limitation, Section 912 of the New York Business Corporation Law.
4.27. TAX TREATMENT
As of the date of this Agreement, Purchaser knows of no reason relating
to it or any of the Purchaser Subsidiaries which would reasonably cause it to
believe that the combination of the Exchange and Upstream Merger shall not
qualify as a reorganization under Section 368(a) of the Code.
4.28. CONSIDERATION
Purchaser shall have, at the Closing Date, unissued shares of Purchaser
Common Stock and shares of Purchaser Common Stock held in its treasury that are
not reserved for any other purpose sufficient to provide the Stock Consideration
and also shall have available to it at the Closing Date funds sufficient to
provide the Cash Consideration.
ARTICLE 5.
COVENANTS
5.1. SHAREHOLDERS' MEETINGS
Purchaser shall submit the issuance of Purchaser Common Stock under
this Reorganization Agreement, and the amendments to its Certificate of
Incorporation and Bylaws necessary to implement the matters set forth in Section
5.9, and, if it so elects, to increase the
39
number of authorized shares of Purchaser Common Stock to a number to be
reasonably agreed upon by Seller, to the shareholders of Purchaser for approval
at a special meeting to be held as soon as practicable. The board of directors
of Purchaser shall recommend that the shareholders of Purchaser vote in favor of
such approvals. Seller shall submit the transactions contemplated by this
Agreement to the shareholders of Seller for approval at a meeting of Seller's
shareholders to be held as soon as practicable. The board of directors of Seller
shall recommend that the shareholders of Seller vote in favor of such approval.
5.2. PROXY STATEMENT; INFORMATION STATEMENT; GENERAL MEETING CIRCULAR
As promptly as practicable after the date hereof, Purchaser, Seller and
the Company shall cooperate in the preparation (i) of the Proxy Statement to be
mailed to the shareholders of Purchaser in connection with the issuance of stock
under this Agreement and to be filed by Purchaser; (ii) the Information
Statement to be filed by the Company in connection with this Agreement and the
transactions contemplated hereby if required by applicable law; and (iii) the
circular to shareholders required under the rules and regulations of the London
and Irish stock exchanges to be distributed by Seller in connection with the
Seller's Meeting (the "General Meeting Circular"). Purchaser shall apply for,
and shall use reasonable best efforts to obtain, approval to list the shares of
Purchaser Common Stock to be issued in the Exchange on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
5.3. APPLICATIONS
As soon as practicable after execution and delivery of this Agreement,
Purchaser and Seller shall make all filings required under applicable domestic
and foreign laws and regulations for consummation of the transactions
contemplated hereby. In addition, Purchaser and Seller shall each promptly
furnish all information as may be required by any federal, state or foreign
regulatory agency properly asserting jurisdiction in order that the requisite
approvals for the transactions contemplated hereby may be obtained or to cause
any applicable waiting periods to expire. Seller and Purchaser shall, as soon as
practicable, commence to take all other action required to obtain as promptly as
practicable all necessary permits, consents, approvals, authorizations and
agreements of, and to give all notices and reports and make all other filings
with, any domestic and foreign governmental or regulatory authority, necessary
to authorize, approve or permit the consummation of the transactions
contemplated hereby, and Purchaser and Seller shall cooperate with each other
with respect thereto. Purchaser and Seller shall promptly provide to each other
copies of all applications, documents, correspondence or oral (to the extent
material) or written comments that each of them or any of their Subsidiaries
files with, sends to or receives from any domestic or foreign regulatory or
governmental agency, or the staff or supervisory agents of any of them, relating
to this Agreement and the transactions contemplated hereby, including any
applications filed for the purpose of obtaining any necessary regulatory
consents, approvals or waivers. Seller and the Company, on the one hand, and
Purchaser, on the other, each covenants to the other that all information
concerning it, its Subsidiaries or their respective directors, officers,
shareholders and subsidiaries included (or submitted for inclusion) in any such
application or filing shall be true, correct and (to the extent relevant to the
requirement of the applicable application or filing) complete in all material
respects (PROVIDED that nothing in this sentence shall be deemed to affect any
determination to be made under this
40
Agreement as to the truth or accuracy of any representation or warranty set
forth in Articles 2, 3 or 4).
5.4. REASONABLE BEST EFFORTS
(a) Subject to the terms and conditions of this Agreement,
Purchaser and Seller shall each use, and Seller shall cause the Company to use,
its reasonable best efforts in good faith, and each of them shall cause its
Subsidiaries to use their reasonable best efforts in good faith, to (i) furnish
such information as may be required in connection with the preparation of the
documents referred to in Sections 5.2 and 5.3 above; and (ii) take or cause to
be taken all action necessary or desirable on its part so as to permit
consummation of the transactions contemplated hereby at the earliest possible
date, including, without limitation, (1) obtaining the consent or approval of
each Person whose consent or approval is required for consummation of the
transactions contemplated hereby; PROVIDED, that neither the Company nor any
Company Subsidiary shall agree, and shall not be deemed to be required, to make
any material payments or material modifications to agreements in connection
therewith without the prior written consent of Purchaser (which consent shall
not be unreasonably withheld) and (2) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent auditors. In
connection with the foregoing, Seller and the Company shall use their respective
reasonable best efforts, and Purchaser shall reasonably cooperate therein as
appropriate, to cause that certain Written Agreement, dated as of May 15, 2002,
by and among Seller, the Company, the Company Bank, the Federal Reserve Bank of
Richmond, the Maryland Commissioner of Financial Regulation and the Central Bank
of Ireland (the "Written Agreement") to be terminated in all material respects
effective at or prior to the Closing Date. Subject to the terms and conditions
of this Agreement, no party hereto shall knowingly take or fail to take, or
knowingly cause or permit its Subsidiaries to take or fail to take, or knowingly
fail to use reasonable best efforts to not permit to be taken or omitted to be
taken by any third persons, any action that would substantially impair the
prospects of completing the transactions contemplated hereby pursuant to this
Reorganization Agreement, that would materially delay such completion, or that
would adversely affect the qualification of the combination of the Exchange and
the Upstream Merger as a reorganization within the meaning of Section 368(a) of
the Code or the qualification of the Exchange for the Irish tax treatment
provided for in Section 584 Taxes Consolidation Act 1997, as applied by Sections
586 and 587. In the event that any party has taken any action, whether before,
on or after the date hereof, that would adversely affect such qualification,
each party shall take such action as the other parties may reasonably request to
cure such effect to the extent curable without a Material Adverse Effect on any
of the parties. Notwithstanding anything to the contrary contained herein,
neither Seller nor any of its Subsidiaries shall be required to take any action
that could adversely affect their ability to avail themselves of the Irish tax
treatment provided for in Sections 584, 586 and 587 of the Taxes Consolidation
Act 1997; provided that such failure to take any action does not adversely
affect the qualification of the combination of the Exchange and the Upstream
Merger as a reorganization within the meaning of Section 368(a) of the Code.
(b) Seller shall give prompt notice to Purchaser, and
Purchaser shall give prompt notice to Seller, of (i) the occurrence, or failure
to occur, of any event which occurrence or failure would be reasonably likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing Date such
41
that the condition set forth in Section 6.2(a) or 6.3(a), as applicable, would
not be met if such failure to be true or accurate were to occur or be continuing
on the Closing Date or (ii) any material failure of Seller, the Company or
Purchaser, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by the applicable party hereunder,
and each party shall use all reasonable best efforts to remedy such failure;
PROVIDED, HOWEVER, that a failure to give a notice required by this Section
5.4(b) shall not be deemed to constitute a failure of any condition set forth in
Article VI of this Reorganization Agreement to be satisfied or to give rise to
any right to terminate this Reorganization Agreement pursuant to Article VII
hereof unless the underlying failure of a representation or warranty to be true
or accurate, or of a convenant to be complied with or satisfied, would
independently result in a failure of such condition to be satisfied or give rise
to such a right of termination.
(c) From the date of this Agreement through the Closing Date,
to the extent permitted by law and to the extent that Purchaser and Seller have
agreed in advance in writing as to the amount of and responsibility for expenses
to be incurred in connection therewith, the Company shall, and shall cause the
Company Subsidiaries to, use reasonable best efforts to assist Purchaser in
converting and transferring as soon as practicable after the Closing Date all
information concerning the loans, deposits and other assets and liabilities of
the Company and the Company Subsidiaries into Purchaser's own data processing
system, with a view to facilitating the integration of Purchaser's and the
Company's systems and otherwise combining Purchaser's and the Company's
operations upon consummation of the Exchange and the Company shall provide
Purchaser with computer file instructions with respect to the information in its
data processing system regarding the assets and liabilities of the Company and
the Company Subsidiaries, together with operational procedures designed to
implement the transfer of such information to Purchaser, with a view to
facilitating the integration of Purchaser's and the Company's systems and
otherwise combining Purchaser's and the Company's operations upon consummation
of the transactions contemplated hereby. After execution of this Agreement, the
Company and Purchaser shall each designate an individual to serve as liaison
concerning the transfer of data processing information and other similar
operational matters and to consult as to whether and when the Company shall
proceed with its pending data processing conversion.
(d) Each party shall provide and shall request the auditors of
each party to provide the other party with such historical financial information
regarding such (and related audit reports and consents) as the other party may
reasonably request for disclosure purposes under the Securities Laws.
5.5. INVESTIGATION AND CONFIDENTIALITY
The Company, Seller and Purchaser each shall keep the others advised of
all material developments relevant to its business and to consummation of the
transactions contemplated hereby. Purchaser and Seller each may make or cause to
be made such investigation of the financial and legal condition of the other as
such party reasonably deems necessary or advisable in connection with the
transactions contemplated hereby, PROVIDED, however, that such investigation
shall be reasonably related to such transactions, shall not interfere
unnecessarily with normal operations and, without the prior consent of the party
that is the subject of the investigation, shall be conducted during normal
business hours only. Purchaser, Seller and the
42
Company agree to furnish the others and the others' advisors with such financial
data and other information with respect to its business and properties as such
other parties shall from time to time reasonably request, to the extent
permitted by law. No investigation pursuant to this Section 5.5 shall affect or
be deemed to modify any representation or warranty made by, or the conditions to
the obligations to consummate the transactions contemplated hereby of, any party
hereto. Each party hereto shall hold all information furnished by the other
party or any of such party's Subsidiaries or representatives pursuant to this
Agreement in confidence to the extent required by, and in accordance with, the
provisions of the confidentiality agreement, dated September 5, 2002, between
Seller and Purchaser (the "Confidentiality Agreement").
5.6. PRESS RELEASES
Seller and Purchaser shall agree with each other as to the form and
substance of any press release related to this Reorganization Agreement or the
transactions contemplated hereby, and shall consult each other a reasonable time
in advance as to the form and substance of other public disclosures related
thereto, PROVIDED, HOWEVER, that nothing contained herein shall prohibit any
party, following reasonable advanced notification to the other parties, from
making any disclosure which is required by applicable law (including, without
limitation, rules and regulations promulgated thereunder) or applicable stock
exchange rules.
5.7. ACTIONS PENDING THE CLOSING
(a) Prior to the Closing Date, and except as otherwise
provided for by this Reorganization Agreement, or consented to or approved by
the other party hereto, each of Purchaser and Seller shall, and shall cause each
of the Seller Subsidiaries or Purchaser Subsidiaries, as the case may be, to,
use its reasonable best efforts to preserve its properties, business and
relationships with customers, employees and other Persons.
(b) The Company shall not, and Seller and the Company shall
not permit any of the Company Subsidiaries to, and Purchaser shall not, and
Purchaser shall not permit any of the Purchaser Subsidiaries to, except with the
prior written consent of Purchaser or Seller, as the case may be, and except as
Previously Disclosed or expressly contemplated or permitted by this Agreement:
(i) carry on its business other than in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(ii) in the case of Purchaser and the Company only,
declare, set aside, make or pay any dividend or other distribution in respect of
its capital stock other than, in the case of Purchaser, its regular quarterly
cash dividends on the Purchaser Common Stock at a rate no higher than as
Previously Disclosed;
(iii) issue any shares of its capital stock or permit any
treasury shares to become outstanding;
(iv) incur any additional debt obligation or other
obligation for borrowed money other than in the ordinary course of business
consistent with past practice;
43
(v) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(vi) amend its articles or certificate of incorporation
or association or bylaws;
(vii) in the case of Seller, impose, or suffer the
imposition, on any share of Company Common Stock held by Seller of any lien,
charge or encumbrance, or permit any such lien, charge or encumbrance to exist
except, in each case, for liens, charges and encumbrances which have been
Previously Disclosed or that may be deemed to exist as a result of this
Reorganization Agreement;
(viii) merge with any other corporation, savings
association or bank or permit any other corporation, savings association or bank
to merge into it or consolidate with any other corporation, savings association
or bank; acquire control over any other firm, bank, corporation, savings
association or organization or create any Subsidiary;
(ix) waive or release any material right or cancel or
compromise any material debt or claim;
(x) fail to comply in any material respect with any
material laws, regulations, ordinances or governmental actions applicable to the
Company or Purchaser, as the case may be, and to the business thereof;
(xi) liquidate or sell or dispose of any material assets
or acquire any material assets; except as Previously Disclosed, make any capital
expenditure in excess of $1,000,000 in any instance or $10,000,000 in the
aggregate; or, except as Previously Disclosed, establish new branches or other
similar facilities, close existing branches or similar facilities or enter into
or modify any leases or other contracts relating thereto;
(xii) increase the rate of compensation of, pay or agree
to pay any bonus to, or provide any other employee benefit or incentive to, any
of its directors, officers or employees except as required by law or Previously
Disclosed contractual obligation in effect as of the date hereof or as
Previously Disclosed;
(xiii) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law;
(xiv) change its methods of accounting in effect at
December 31, 2001, except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change in any material respect any of its methods of reporting
income, deductions or other items for federal income tax purposes from those
employed in the preparation of its federal income Tax Returns for the year ended
December 31, 2001, except as required by applicable law;
44
(xv) knowingly take any action or intentionally fail to
take any action that would result in any of the conditions set forth in Article
6 not being satisfied; or
(xvi) agree to do any of the foregoing.
5.8. CLOSING
(a) The transactions contemplated hereby shall be consummated
at a closing ("Closing") to be held at the offices of Arnold & Porter, 399 Park
Avenue, New York, New York on the first business day following the satisfaction
of the conditions to consummate the transactions contemplated hereby (other than
conditions relating to actions to be taken at the Closing) or on such other date
as the parties may mutually agree.
(b) At the Closing, (i) Seller shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall purchase acquire and accept
from Seller, all outstanding shares of capital stock of the Company, (ii) Seller
shall deliver to Purchaser certificates evidencing all outstanding shares of
capital stock of the Company duly endorsed in blank or with stock powers duly
executed by Seller, and (iii) Purchaser shall deliver to Seller the Cash
Consideration, subject to potential adjustment as provided in Section 5.8(c)
below, by wire transfer of immediately available funds to an account designated
by Seller and one or more stock certificates evidencing the Stock Consideration
(as Seller may reasonably request).
(c) Prior to the Closing Date, the Company shall be permitted
to declare a dividend on the shares of Company Common Stock, not in excess of
the amount of the Cash Consideration (payable to shareholders of the Company
prior to the Closing Date) (the "Special Dividend") and, to the extent the
Special Dividend is declared and paid, the amount of the Cash Consideration
payable at the Closing shall be reduced dollar for dollar by the amount of such
Special Dividend; provided, however, that the payment of the Special Dividend
shall not materially impede the transactions contemplated hereby, materially
delay the Closing or adversely affect the economic benefits of the Exchange to
Purchaser.
5.9. DIRECTORS AND MANAGEMENT
(a) Purchaser and Purchaser's Board of Directors shall take
such action as may be necessary to (i) cause the number of directors comprising
the full Board of Directors of Purchaser immediately prior to or at the Closing
Date to be 28 persons, 24 of whom shall be then existing directors of Purchaser
prior to the Closing Date and four (4) of whom shall be designated by Seller
prior to the Closing Date, each of whom is reasonably acceptable to Purchaser
(collectively, the "Seller Designees"); (ii) elect, as of the Closing Date, one
(1) among the Seller Designees to each of the Executive Committee, Nomination
and Compensation Committee and Audit Committee (subject to the proviso to the
second sentence of Section 5.9(b)) (or any committee or committees performing
comparable functions) of the Board of Directors of Purchaser (the "Seller
Committee Representation"), and (iii) cause the number of directors comprising
the full Board of Directors of Purchaser Bank immediately prior to or at the
Closing Date to be 27 persons, 23 of whom shall be then existing directors of
Purchaser Bank prior to the Closing Date and four (4) of whom shall be
designated by Seller prior to the Closing Date, each of whom is reasonably
acceptable to Purchaser.
45
(b) From and after the Closing Date, Seller shall be entitled
to, and Purchaser and the Purchaser Board of Directors shall take all action
necessary or advisable to maintain in place (including nominating, appointing or
electing persons designated by Seller), the Seller Committee Representation
until the date that Seller no longer holds at least fifteen percent (15%) of the
outstanding shares of Purchaser Common Stock (the "Sunset Date"). Seller may,
and shall have the sole right to, remove any Seller Designee from any committee
upon which such Seller Designee is serving and appoint a director to fill any
vacancy, regardless of the cause of such vacancy, on any such committee or the
Purchaser Board of Directors caused by the departure of any such Seller Designee
(other than a vacancy caused by the occurrence of the Sunset Date or one of the
thresholds contemplated by Section 5.9(d) being triggered), PROVIDED that any
replacement committee members shall meet the requisite independence and
expertise requirements prescribed under applicable law or stock exchange rules.
(c) From and after the Closing Date and until the Sunset Date,
the Purchaser Board of Directors shall not take, or make any recommendation to
Purchaser shareholders with respect to, any of the actions or matters specified
in SCHEDULE 5.9(C) unless the Executive Committee or Nomination and Compensation
Committee, as applicable, shall have, by action of the members thereof taken in
accordance with the provisions of SCHEDULE 5.9(C), previously approved and
recommended such action or recommendation to the Purchaser Board of Directors.
(d) From and after the Closing Date:
(i) for so long as Seller holds at least fifteen percent
(15%) of the outstanding shares of Purchaser Common Stock, (A) Purchaser's Board
of Directors shall nominate and recommend for election as directors of Purchaser
at least four (4) persons designated by Seller, each of whom is reasonably
acceptable to Purchaser, and (B) Purchaser shall take such actions as may be
required to elect four (4) persons designated by Seller to be directors of
Purchaser Bank, each of whom is reasonably acceptable to Purchaser; and
(ii) for so long as Seller holds at least ten percent
(10%), but less than fifteen percent (15%), of the outstanding shares of
Purchaser Common Stock, (A) Purchaser's Board of Directors shall nominate and
recommend for election as directors of Purchaser at least two (2) persons
designated by Seller, each of whom is reasonably acceptable to Purchaser, and
(B) Purchaser shall take such actions as may be required to elect two (2)
persons designated by Seller to be directors of Purchaser Bank, each of whom is
reasonably acceptable to Purchaser;
(iii) for so long as Seller holds at least five percent
(5%), but less than ten percent (10%), of the outstanding shares of Purchaser
Common Stock, (A) Purchaser's Board of Directors shall nominate and recommend
for election as a director of Purchaser at least one (1) person designated by
Seller, who is reasonably acceptable to Purchaser, and (B) Purchaser shall take
such actions as may be required to elect one (1) person designated by Seller to
be a director of Purchaser Bank, who is reasonably acceptable to Purchaser; and
(iv) for so long as Seller holds at least fifteen percent
(15%) of the outstanding shares of Purchaser Common Stock, without the consent
of the Seller Designees neither Purchaser's Board of Directors nor Purchaser
Bank's Board of Directors shall consist of more than 28 directors.
46
(e) For purpose of determining the number of outstanding
shares of Purchaser Common Stock under this Section 5.9, there shall be used the
number of shares of Purchaser Common Stock disclosed as outstanding on the cover
page of Purchaser's most recently filed Annual Report on Form 10-K or Report on
Form 10-Q, as the case may be, or the number of shares of Purchaser Common Stock
actually outstanding as of a later date, if requested by either party,
determined on the same basis as the number of shares disclosed on such Reports.
Any share held by any direct or indirect Subsidiary of Seller of which Seller
holds 80% or more of the outstanding equity capital or voting shares shall be
deemed held by Seller for purposes of this Section 5.9. In the event that the
transaction that would result in Seller's holdings being below any threshold set
forth herein is a transaction that gives rise to an Issuance Event, no
diminution in the percentage of Purchaser Common Stock held by Seller shall be
deemed to have occurred until the earlier of such time as Seller gives written
notice that it shall not exercise its Seller Maintenance Rights or the deadline
for exercise of such Seller Maintenance Rights has passed without Seller having
provided notice that it shall exercise the same. In the event that Seller's
holdings decrease to less than fifteen percent (15%), but not less than twelve
percent (12%), of the outstanding Purchaser Common Stock, Seller's holdings
shall be deemed to be equal to fifteen percent (15%) for all purposes of the
definition of Sunset Date and of this Section 5.9, including without limitation
Section 5.9(h), unless, not later than one year from the date on which Seller's
holdings decreased to less than fifteen percent (15%), Seller's holdings have
not been restored to at least fifteen percent (15%) of the outstanding shares of
Purchaser Common Stock.
(f) No later than the Closing Date and to remain effective
until Seller is no longer entitled to appoint at least one Seller Designee
hereunder, Purchaser's Certificate of Incorporation and By-Laws shall be amended
in a form to be agreed by the parties and duly approved by the requisite vote of
its shareholders to incorporate the provisions of this Section 5.9, including
SCHEDULE 5.9(c).
(g) Upon the Closing Date, Mr. Eugene Sheehy shall be
appointed Chairman and Chief Executive Officer of the Maryland and Pennsylvania
Divisions of Purchaser Bank and, as such, shall report to the President of
Purchaser Bank, and shall be a member of the management group of Purchaser Bank.
(h) Seller and Seller's Board of Directors shall take such
action as may be necessary to elect, as of the Closing Date, as a director of
Seller one (1) person designated by Purchaser, who is reasonably acceptable to
Seller. From and after the Closing Date, and for so long as Seller holds at
least fifteen percent (15%) of the outstanding shares of Purchaser Common Stock,
Seller's Board of Directors shall continue to have the right to nominate and
recommend for election as directors of Seller one (1) person designated by
Purchaser, who is reasonably acceptable to Seller.
(i) Notwithstanding any other provision hereof, in the event
that Purchaser or Seller, as the case may be, objects to any designee for board
or committee service on the grounds that such designee is not "reasonably
acceptable" under any provision of this Section 5.10, the objecting party shall
fully cooperate and shall use best efforts to work with the other party to
promptly resolve any such objection so that such designee may as promptly as
practicable serve in the capacity for which her or she has been designated or,
in the alternative, to promptly
47
identify a substitute candidate that is reasonably acceptable, in order to give
effect to the intention of the parties regarding board and committee
representation, as applicable, contemplated by this Section 5.9.
5.10. INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Closing Date now
existing in favor of the current or former directors or officers of the Company
and Company Subsidiaries shall survive the transactions contemplated hereby 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 Closing Date in any manner that would adversely affect the rights
thereunder of such individuals for acts or omissions occurring at or prior to
the Closing Date. Following the Closing, with respect to all claims that are
covered by Seller's directors and officers' liability insurance policies against
any current or former director or officer of the Company or a Company Subsidiary
arising out of events prior to the Closing Date, and without duplication of any
amounts otherwise due from Seller to Purchaser under this Agreement, Seller
shall promptly remit to Purchaser any amounts received in respect thereof to the
extent that Purchaser or any Purchaser Subsidiary (including the Company or any
Company Subsidiary) has been required to pay an amount pursuant to the preceding
sentence covered by such insurance.
(b) Purchaser, from and after the Closing Date, shall use its
reasonable best efforts directly or indirectly to cause the persons who served
as directors or officers of the Company on or before the Closing Date to be
covered by the Company's existing directors' and officers' liability insurance
policy (PROVIDED, that Purchaser may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) but in no event shall any insured person be
entitled under this Section 5.10 to insurance coverage more favorable than that
provided to him or her in such capacities as of the date hereof with respect to
acts or omissions resulting from their service as such prior to the Closing
Date. Such insurance coverage shall commence on the Closing Date and shall be
provided for a period of no less than six (6) years after the Closing Date;
PROVIDED, HOWEVER, that in no event shall Purchaser be required to expend more
than one hundred fifty percent (150%) of the current annual amount expended by
the Company (which the Company represents was not more than $957,000 for the
2002 fiscal year) to maintain or procure insurance coverage pursuant hereto. The
Company agrees to renew any such existing insurance or to purchase any
"discovery period" insurance provided for thereunder at request of Purchaser.
(c) From and after the Closing, Purchaser shall cause the
Company and any successor thereto (including Purchaser), whether by
consolidation, merger or transfer of substantially all of its properties or
assets, to comply with its obligations under this Section 5.10. The provisions
of this Section 5.10 shall survive the Closing Date and are intended to be for
the benefit of, and shall be enforceable by, each person named in this Section
5.10 and his or her heirs and representatives.
48
5.11. THE COMPANY SUBSIDIARIES
The Company undertakes and agrees that, if so requested by Purchaser,
it shall take all necessary action to facilitate the merger of the Company
Subsidiaries with Subsidiaries of Purchaser or the dissolution of such Company
Subsidiaries effective at or after the Closing Date; PROVIDED HOWEVER, that in
no event shall the Closing be delayed in order to facilitate any such merger or
dissolution; and PROVIDED, FURTHER, HOWEVER, that the Company shall not be
required to take any action that could adversely affect the qualification of the
combination of the Exchange and the Upstream Merger as a reorganization within
the meaning of Section 368(a) of the Code.
5.12. NON-PROFIT SUBSIDIARIES
Prior to Closing, the Company shall transfer to Seller or a designated
Seller Subsidiary all of the outstanding equity interests in the entities set
forth on SCHEDULE 5.12 (or their successors) (the "Non-Profit Subsidiaries")
then owned by the Company for cash at tangible book value as of the date of
transfer (which at June 30, 2002 was approximately $8.2 million) or as set forth
in SCHEDULE 5.12.
5.13. NO SOLICITATION
(a) Neither Seller, the Company nor any of their respective
Subsidiaries or affiliates shall (and Seller and the Company shall each cause
its and each of its Subsidiaries' officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly (i) solicit, initiate
or encourage any inquiries or proposals that constitute, or could lead to, a
proposal or offer for a merger, consolidation, business combination, tender
offer, exchange offer, recapitalization, sale of assets, sale of shares of
capital stock or similar transactions involving the Company or any of its
Subsidiaries, divisions or operating or business units, other than a transaction
with Purchaser and/or its affiliates (any of the foregoing inquiries or
proposals being referred to herein as an "Acquisition Proposal"); (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal; or (iii) recommend
or endorse any Acquisition Proposal. Seller and the Company further agree that
they will immediately cease any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing and,
to the extent they are able to do so, require the return (or if permitted by the
terms of the applicable confidentiality agreement, the destruction) of all
confidential information previously provided to such parties. Seller and the
Company will promptly (no later than twenty-four (24) hours after receipt by
Seller or the Company of any Acquisition Proposal) notify Purchaser of any
Acquisition Proposal and will promptly provide to Purchaser a description of all
relevant details regarding the terms of the Acquisition Proposal, including the
identity of the party making any Acquisition Proposal. Nothing in this Section
5.13 shall restrict Seller or any of its Subsidiaries or affiliates, other than
the Company and the Company Subsidiaries, or their respective officers,
directors, employees, agents and representatives, from engaging in any activity
not involving the Company or the Company Subsidiaries or the assets thereof
(other than the Non-Profit Subsidiaries) and that would not materially impede or
delay the transactions contemplated by this Reorganization Agreement.
49
(b) Purchaser agrees that neither it nor any of its
Subsidiaries or affiliates shall (and Purchaser shall each cause its and each of
its Subsidiaries' officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, take any action with respect to Purchaser or
any of its Subsidiaries, divisions or operating or business units of the type
specified in clauses (i) - (iii) of Section 5.13(a) to the extent relating to an
Acquisition Proposal of Purchaser or any of its Subsidiaries, divisions or
operating or business units where such Proposal is (i) conditioned upon or
proposed to be conditioned upon non-consummation or modification, in whole or
part, of the transactions contemplated hereby or (ii) would be reasonably
expected to prohibit or materially impede or delay the transactions contemplated
hereby. Purchaser further agrees that it will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing and, to the extent it is able to do so,
require the return (or if permitted by the terms of the applicable
confidentiality agreement, the destruction) of all confidential information
previously provided to such parties. Purchaser will promptly (no later than
twenty-four (24) hours after receipt by Purchaser of any such Acquisition
Proposal) notify Seller thereof and will promptly provide to Seller a
description of all relevant details regarding the terms of such Acquisition
Proposal, including the identity of the party making such Acquisition Proposal.
5.14. TAKEOVER LAWS
No party hereto shall take any action that would cause the transactions
contemplated hereby to be subject to the requirements imposed by any Takeover
Law, and each of them shall take all necessary steps within its control to
exempt (or ensure the continued exemption of) the transactions contemplated
hereby from, or if necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect.
5.15. NO CLAIMS BY SELLER
From and after the Closing Date, Seller shall not assert or pursue
against any present or former officer, director, agent or employee of the
Company or any of the Company Subsidiaries, or any insurer thereof, any claim to
the extent that such Person is entitled to indemnification from the Company or
any of the Company Subsidiaries with respect thereto unless Seller provides
equivalent indemnification to the Company or such Company Subsidiary in respect
of such claim.
5.16. ASSIGNMENT OF CONFIDENTIALITY AGREEMENT
At the Closing, Seller shall assign to the Company all of its
assignable rights (i) under the Confidentiality Agreement other than with
respect to confidential information relating to Seller or the Non-Profit
Subsidiaries; and (ii) under any confidentiality agreements with any Persons
(other than Purchaser) insofar as the rights relate to confidential information
of, or regarding, the Company and/or any of the Company Subsidiaries.
5.17. THE COMPANY EMPLOYEES
(a) From and after the Closing Date, Purchaser shall provide
to the individuals who are employees of the Company and the Company Subsidiaries
as of the Closing Date (the
50
"Company Employees") while they are employed by Purchaser and the Purchaser
Subsidiaries compensation and employee benefits that in the aggregate are not
less favorable than those provided to similarly situated employees of Purchaser
and the Purchaser Subsidiaries. The continued coverage of Company Employees
under one or more employee benefit plans maintained by Company and/or any
Company Subsidiary immediately prior to the Closing Date (the "Company Plans")
during a transition period of no more than six months from the Closing Date
shall be deemed to provide the Company Employees with benefits that in the
aggregate are no less favorable than those provided to similarly situated
employees of Purchaser and the Purchaser Subsidiaries.
(b) From and after the Closing Date, Purchaser will recognize
the prior service with the Company and the Company Subsidiaries (and any
predecesor entity to the extent such service was recognized by the Company or
the Company Subsidiaries) of each Company Employee in connection with all
Purchaser compensation and employee benefit plans in which such Company
Employees are eligible to participate following the Closing Date for all
purposes (other than for benefit accrual purposes under a defined benefit
pension plan) to the same extent as if each such Company Employee had been an
employee of Purchaser and the Purchaser Subsidiaries during the period of such
prior service. From and after the Closing Date, Purchaser will (A) cause any
pre-existing conditions or limitations and eligibility waiting periods under any
group health plans of Purchaser to be waived with respect to the Company
Employees and their eligible dependents, and (B) give each Company Employee
credit for the plan year in which the Closing Date (or transition from Company
Plans to plans of Purchaser) occurs towards applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the Closing Date.
(c) From and after the Closing Date, Purchaser shall assume
and honor, in accordance with their terms, all benefit obligations to, and
contractual rights of, current and former employees of the Company and the
Company Subsidiaries; provided, however, that the foregoing shall not prevent
Purchaser from amending or terminating any plan, contract or agreement in
accordance with its terms and applicable law. Notwithstanding anything contained
herein to the contrary, Purchaser shall provide to any Company Employee whose
employment with Purchaser or any Purchaser Subsidiary is terminated on, or
within one year of, the Closing Date, with severance pay and severance benefits
equal to the greater of the severance pay and severance benefits provided under
(i) the severance practices of Purchaser, or (ii) the Previously Disclosed
severance benefit plan of the Company; provided, however, that if the Previously
Disclosed severance benefit plan of the Company provides continued coverage
under (A) a medical or other welfare plan as a severance benefit, such continued
coverage shall be provided only if, and to the extent that, a corresponding
medical or welfare plan is sponsored or maintained by Purchaser or Purchaser
Subsidiaries for the benefit of similarly situated employees who are actively
employed with Purchaser and the Purchaser Subsididaries or (B) a qualified or
nonqualified retirement plan, Purchaser shall have the discretion to provide
such continued coverage under a qualified or nonqualified retirement plan
offered to similarly situated employees who are actively employed with Purchaser
and the Purchaser Subsidiaries or to compensate Company Employees in cash for
the value of such continued coverage.
(d) No provision of this Section 5.17 shall be construed (i)
to limit the ability of Purchaser and the Purchaser Subsidiaries to terminate
the employment of any employee at any
51
time for any reason or to review employee benefit programs from time to time and
to make such changes as they deem appropriate and (ii) to create any third party
beneficiary rights in any employee or former employee of the Company or any
Company Subsidiary (including any beneficiary or dependent thereof) in respect
of continued employment (or resumed employment) or any other matter.
(e) Prior to the Closing Date, subject to Purchaser's
reasonable cooperation, the terms of the applicable Company Plan and applicable
law, the Company shall use its best reasonable efforts to take all reasonable
actions that may be timely requested by Purchaser in writing with respect to (i)
causing one or more Company Plans to terminate as of the Closing Date or for
benefit accrual and entitlements to cease as of the Closing Date, provided that
in no event will the Company be required to terminate any tax-qualified
retirement plan, non-qualified retirement plan or its severance plan, (ii)
causing the continuation on and after the Closing Date of any contract,
arrangement or insurance policy relating to any Company Plan for such period as
may be requested by Purchaser, or (iii) cooperating with Purchaser to facilitate
the merger of any Company Plan into any employee benefit plan maintained by
Purchaser on or following the Closing Date.
ARTICLE 6.
CONDITIONS PRECEDENT
6.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER, SELLER AND THE
COMPANY
The respective obligations of the parties to effect the transactions
contemplated hereby shall be subject to satisfaction or waiver of the following
conditions at or prior to the Closing Date:
(a) The shareholder approvals contemplated by Sections 2.3,
3.5 and 4.5 hereof, shall have been duly and validly taken;
(b) The parties hereto shall have received all regulatory
approvals required or mutually deemed necessary in connection with the
transactions contemplated hereby, all notice periods and waiting periods
required after the granting of any such approvals shall have passed and all
conditions contained in any such approval required to have been satisfied prior
to consummation of such transactions shall have been satisfied; PROVIDED,
HOWEVER, that no such approval shall have imposed any condition or requirement
that, in the reasonable good faith opinion of the Board of Directors of
Purchaser, or in the case of Seller, the board of directors of Seller, so
materially and adversely affects the anticipated economic benefits to Purchaser
or Seller, respectively, of the transactions contemplated hereby as to render
consummation of such transactions inadvisable;
(c) To the extent that any lease, license, loan, financing
agreement or other contract or agreement to which the Company or any Company
Subsidiary is a party requires the consent of or waiver from the other party
thereto as a result of the transactions contemplated hereby, such consent or
waiver shall have been obtained, unless the failure to obtain such consents or
waivers, individually or in the aggregate, would not have a Material Adverse
Effect on the Company;
52
(d) None of the parties hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the transactions contemplated hereby;
(e) The shares of Purchaser Common Stock to be issued in the
Exchange shall have been approved for listing on the NYSE, subject to official
notice of issuance; and
(f) Purchaser shall have received an opinion of Arnold &
Porter, and Seller shall have received an opinion of Wachtell, Lipton, Rosen &
Katz, in each case in form and substance reasonably satisfactory to Purchaser
and the Company, as the case may be, dated as of the Closing Date, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth or referred to in such opinion, the combination of the Exchange and the
Upstream Merger shall be treated for United States federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code. In
rendering the opinion described in this Section 6.1(f), Arnold & Porter and
Wachtell, Lipton, Rosen & Katz, as applicable, may rely on representations and
facts as provided by Purchaser, Seller and the Company, including, without
limitation, the relevant representations set forth in Revenue Procedure 86-42,
1986-2 C.B. 722.
6.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE COMPANY
The obligations of Seller and the Company to effect the Exchange shall
be subject to satisfaction of the following additional conditions at or prior to
the Closing Date unless waived by Seller and the Company pursuant to Section 8.3
hereof:
(a) The representations and warranties of Purchaser set forth
in Article 4 hereof shall be true and correct in all material respects as of the
date of this Reorganization Agreement and as of the Closing Date as though made
on and as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or consented
to in writing by the Company; PROVIDED, HOWEVER, that (i) in determining whether
or not the condition contained in this paragraph (a) shall be satisfied, no
effect shall be given to any exceptions in such representations and warranties
relating to materiality or Material Adverse Effect; and (ii) the condition
contained in this paragraph (a) shall be deemed to be satisfied unless the
failure of such representations and warranties to be so true and correct
constitute, individually or in the aggregate, a Material Adverse Effect on
Purchaser;
(b) Purchaser shall have in all material respects performed
all obligations and complied with all covenants required by this Reorganization
Agreement to be performed or complied with at or prior to the Closing Date;
(c) Purchaser shall have delivered to the Company a
certificate, dated the Closing Date and signed by its Chairman, CEO, Executive
Vice President or Senior Vice President to the effect that the conditions set
forth in paragraphs (a) and (b) of this section have been satisfied;
(d) Seller shall have received an opinion of KPMG Dublin, in
form and substance reasonably acceptable to Seller, dated as of the Closing
Date, substantially to the effect that, on the basis of facts, representations
or assumptions set forth or referred to in such opinion, the
53
Exchange will qualify for the Irish tax treatment provided for in Section 584
Taxes Consolidation Act 1997, as applied by Sections 586 and 587; and
(e) Purchaser shall have duly executed and delivered the
Registration Rights Agreement.
6.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the Exchange shall be subject to
satisfaction of the following additional conditions at or prior to the Closing
Date unless waived by Purchaser pursuant to Section 8.3 hereof:
(a) The representations and warranties of Seller and the
Company set forth in Articles 2 and 3 hereof shall be true and correct in all
material respects as of the date of this Reorganization Agreement and as of the
Closing Date as though made on and as of the Closing Date (or on the date when
made in the case of any representation and warranty which specifically relates
to an earlier date), except as otherwise contemplated by this Reorganization
Agreement or consented to in writing by Purchaser; PROVIDED, HOWEVER, that (i)
in determining whether or not the condition contained in this paragraph (a)
shall be satisfied, no effect shall be given to any exceptions in such
representations and warranties relating to materiality or Material Adverse
Effect; and (ii) the condition contained in this paragraph (a) shall be deemed
to be satisfied unless the failure of such representations and warranties to be
so true and correct constitute, individually or in the aggregate, a Material
Adverse Effect on Seller or the Company;
(b) Seller and the Company shall have in all material respects
performed all obligations and complied with all covenants required by this
Reorganization Agreement to be performed or complied with at or prior to the
Closing Date; and
(c) Seller shall have delivered to Purchaser a certificate,
dated the Closing Date and signed by its Chairman, President and Chief Executive
Officer or any Executive Vice President to the effect that the conditions set
forth in paragraphs (a) and (b) of this section have been satisfied.
6.4. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Reorganization
Agreement or in any instrument delivered pursuant hereto shall expire on, and be
terminated and extinguished at, the Closing Date other than covenants that by
their terms are to survive or be performed after the Closing Date.
ARTICLE 7.
CERTAIN POST-CLOSING MATTERS
7.1. SELLER ACTIONS AFTER THE CLOSING DATE
(a) From and for as long after the Closing Date as Seller
shall be a registered bank holding company of Purchaser or is deemed to control
Purchaser for purposes of the federal Change in Bank Control Act, Seller shall:
54
(i) not enter into any transaction or activity that could
reasonably be expected to have a Material Adverse Effect on Purchaser;
(ii) advise Purchaser prior to entering into any material
transaction or activity;
(iii) file any application, notice or other filing with
any financial institutions or other regulatory agency that Purchaser determines
is necessary or advisable in connection with any transaction or activity
contemplated by Purchaser; provided, however, that Seller shall not be required
to incur any expense or make any commitment, or to make or give any such
application, notice or other filing with respect to the acquisition by Purchaser
of a banking institution headquartered in Ireland or Poland; and
(iv) provide Purchaser with access to examination reports
prepared by any regulator of Seller, correspondence between Seller and any such
regulator and any other documents or materials relating to the ongoing
regulation and supervision of Seller.
(b) If, as a result of any administrative enforcement action
under Section 8 of the FDIA, memorandum of understanding, written agreement,
supervisory letter or any other action or determination of any regulatory agency
relating to the status or conduct of Seller (but not relating to the conduct of
Purchaser or any Purchaser Subsidiary), Purchaser or Purchaser Bank shall
experience a Material Regulatory Event, then Purchaser shall notify Seller
thereof in writing as promptly as practicable. Should Seller fail to cure the
Material Regulatory Event within 90 days following the receipt of such notice
(the "Cure Period"), Seller shall, as promptly as practicable but in no event
later than 30 days from the end of the cure period, take any and all such
actions (with the reasonable cooperation of Purchaser as requested by Seller) as
may be necessary or advisable in order that it no longer has "control" of
Purchaser for purposes of the Bank Holding Company Act, including, if necessary
by selling some or all of its shares of Purchaser Common Stock (subject to the
provisions of Section 7.3 of this Agreement) and divesting itself as required of
its board and committee representation and governance rights as set forth in
this Agreement. If, at the end of such 30-day period, the Material Regulatory
Event is continuing and Seller has not terminated its control of Purchaser, then
Purchaser shall have the right to repurchase such amount of the Purchaser Common
Stock owned by Seller as would result in Seller holding no less than 4.9% of the
Purchaser Common Stock, pursuant to the procedures set forth in Section 7.1(c)
of this Agreement.
(c) The purchase price to be paid by Purchaser for any
purchase of Purchaser Common Stock pursuant to this Section 7.1 shall be at the
Fair Market Value of such Purchaser Common Stock as of the date of the written
notice contemplated by the first sentence of Section 7.1(b). Settlement for the
Purchaser Common Stock to be purchased by Purchaser or its designee pursuant to
this Section 7.1 shall be thirty (30) calendar days after the end of the 30-day
period set forth in Section 7.1(b) hereof or such other date as may be agreed
upon by Purchaser and Seller; PROVIDED, HOWEVER, that if prior notification to
or approval of the Federal Reserve Board or any other regulatory agency is
required in connection with such purchase, Purchaser or its designee, as
appropriate, shall promptly file the required notice or application for approval
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification
55
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed and; PROVIDED,
FURTHER, that if, within the 30-day time period, Purchaser notifies Seller of
Purchaser's desire to raise funds to consummate the purchase, the closing shall
be delayed for a reasonable period of time to allow Purchaser to raise such
capital. At such settlement, (i) Purchaser or its designee shall deliver the
consideration for such Purchaser Common Stock to Seller; and (ii) Seller shall
deliver properly endorsed stock certificates representing such Purchaser Common
Stock to Purchaser or its designee.
7.2. INVESTMENT PARAMETERS
(a) Seller agrees that, from the Closing Date through the
second anniversary of the Sunset Date, without prior written consent of the
Board of Directors of Purchaser specifically expressed in a resolution adopted
by a majority of the directors, Seller and the Seller's Subsidiaries shall not
directly or indirectly:
(i) acquire, offer or propose to acquire, or agree to
acquire (except in any case, by way of stock dividends or other distributions or
offerings made available to holders of Purchaser Common Stock, generally, or to
Purchaser's non-employee directors pursuant to any compensatory plan of
Purchaser; PROVIDED, that any such securities so received shall be subject to
the provisions hereof), directly or indirectly, whether by purchase, tender or
exchange offer, through acquisition of control of another Person, by joining a
partnership, limited partnership, syndicate or other "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) or otherwise, any shares Purchaser
Common Stock that would result in Seller and Seller's Subsidiaries holding, in
the aggregate, more than twenty-five percent (25%) of the then outstanding
shares of Purchaser Common Stock; PROVIDED, that in the event Seller at any time
beneficially owns twenty two and one-half percent (22.5%) or more of the
outstanding shares of Purchaser Common Stock and Purchaser engages in a share
buyback excluding any buyback of shares as contemplated by Section 7.2(c) or
7.2(e) then Seller agrees to sell, transfer or otherwise dispose of such
proportionate number of shares (the "Excess Shares") as is required to avoid any
net increase in Seller's proportionate ownership interest in Purchaser Common
Stock as a result of such Purchaser buyback, it being agreed that such sale,
transfer or disposition shall occur as promptly as Seller determines to be
reasonably practicable and in compliance with Sections 7.3(b) through 7.3(e)
hereof, PROVIDED that nothing herein shall be deemed to require Seller or any
Seller Subsidiary to dispose of any Excess Shares at any particular time if to
do so at such time would violate, or expose Seller or such Seller Subsidiary to
liability under, any applicable securities laws; and PROVIDED, FURTHER, that
Purchaser shall provide such assistance as Seller may reasonably request in so
reducing its ownership level; and PROVIDED FURTHER, that Purchaser shall arrange
for any reasonable registration rights which Seller may require to consummate
any such sale, transfer or disposition at Purchaser's sole expense and without
affecting Seller's other rights as set forth under Section 7.4 hereof.
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" (as such term is used in the proxy rules of
the SEC) of proxies or consents, seek to advise, encourage or influence any
Person with respect to the voting of any shares of Purchaser Common Stock,
initiate, propose or otherwise "solicit" (as such term is used in the proxy
rules of the SEC) shareholders of Purchaser for the approval of shareholder
proposals whether made pursuant to Rule 14a-8 under the Exchange Act or
otherwise, induce or attempt to induce any
56
other Person to initiate any such shareholder proposal, or otherwise communicate
with the shareholders of Purchaser or others pursuant to Rule 14a-1(1)(2)(iv)
under the Exchange Act;
(iii) make any public announcement with respect to any
proposal or offer by Seller or any Seller Subsidiary with respect to any merger,
consolidation, business combination, tender or exchange offer, sale or purchase
of securities, dissolution, liquidation, restructuring, recapitalization or
similar transactions of or involving Purchaser or any of the Purchaser
Subsidiaries;
(iv) form or join in any way participate in any "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
shares of Purchaser Common Stock;
(v) deposit any shares of Purchaser Common Stock in any
voting trust or subject any shares of Purchaser Common Stock to any arrangement
or agreement with respect to the voting of any shares of Purchaser Common Stock;
(vi) execute any written consent as a shareholder with
respect to Purchaser or the Purchaser Common Stock;
(vii) otherwise act, alone or in concert with any Person
or Persons, to control or seek to control or influence or seek to influence the
management, the Board of Directors of Purchaser or policies of Purchaser,
including through communications with shareholders of Purchaser or otherwise,
other than through non-public communications with the directors of Purchaser,
including the Seller Designees acting in their capacity as directors of
Purchaser;
(viii) seek, alone or in concert with any other Person or
Persons, (1) to call a meeting of shareholders, (2) representation on the Board
of Directors of Purchaser, except as specifically set forth in Section 5.9(e)
hereof, or (3) the removal of any member of the Board of Directors of Purchaser;
(ix) solicit, initiate or encourage any Person concerning
any merger, tender offer, purchase of assets, purchase of securities, business
combination or strategic transaction involving Purchaser or any of the Purchaser
Subsidiaries;
(x) make any publicly disclosed proposal regarding any
of the foregoing; or
(xi) take or cause others to take any action inconsistent
with the foregoing.
(b) Notwithstanding the foregoing, in the event that (i) a
third party commences, or publicly announces its intention to commence, a tender
offer or exchange offer and, within a reasonable time thereafter, the Board of
Directors of Purchaser has not recommended that the shareholders of Purchaser
not accept such offer or has failed to adopt a shareholder rights plan in
response thereto (PROVIDED that the Seller Designees shall not have opposed the
adoption of such shareholder rights plan) or (ii) Purchaser or Purchaser Bank
becomes subject to any regulatory
57
capital directive or becomes an institution in "troubled" condition under
Regulation Y of Board of Governors of the Federal Reserve or comparable
regulation, the restrictions on Seller set forth in Section 7.2(a) shall no
longer apply; provided, however, that in the event the tender offer or exchange
offer is not commenced or consummated in accordance with its terms, the
restrictions on Seller set forth in Section 7.2(a) shall thereafter continue to
apply.
(c) Subject to applicable law, in the event that, as of the
Closing Date, the Stock Consideration is less than twenty-two and one half
percent (22.5%) of the issued and outstanding shares of Purchaser Common Stock
immediately following such issuance, Purchaser shall repurchase during the
period from the Closing Date to December 31, 2003 such number of outstanding
shares of Purchaser Common Stock as would result in the Stock Consideration
being equal to twenty-two and one half percent (22.5%) of the issued and
outstanding shares of Purchaser Common Stock as of the Closing Date.
(d) After the Closing Date and until the Sunset Date, and
subject to applicable law and receipt by Seller of any required regulatory
approvals (in respect of which Purchaser shall cooperate fully and expeditiously
with Seller), upon the occurrence of any Issuance Event, Purchaser shall give
Seller prompt written notice of such Issuance Event, and upon the receipt by
Purchaser of a written request from Seller delivered within twenty (20) days
after receipt by Seller of such written notice of the Issuance Event, Purchaser
shall sell to Seller such number of shares of Purchaser Common Stock specified
in such written request from Seller; PROVIDED that in no event shall Seller be
entitled to purchase shares of Purchaser Common Stock that would result in
Seller being the beneficial owner of more than twenty-two and one half percent
(22.5%) of the issued and outstanding shares of Purchaser Common Stock (the
"Seller Maintenance Rights"). The per share purchase price for such shares shall
be the Fair Market Value. The determination of whether a Sunset Date has
occurred for purposes of this Section 7.2(d) shall be made without taking into
account the Issuance Event that would be the subject of the notice hereunder, or
any other Issuance Event if (x) Seller has with respect to such Issuance Event
timely delivered and not rescinded to Purchaser a written request to purchase
shares of Purchaser Common Stock (to the extent of such shares of Purchaser
Common Stock covered thereby), or (y) the 20-day period for Seller to give
written notice of its intention to purchase shares of Purchaser Common Stock in
respect of such Issuance Event has not yet expired, except to the extent that
Seller has provided written notice to Purchaser that it will not purchase any
shares of Purchaser Common Stock in respect of such Issuance Event.
(e) While the Seller has Seller Maintenance Rights pursuant to
Section 7.2(d), with respect to issuances of any Purchaser Common Stock or
restricted Purchaser Common Stock pursuant to an Employee Issuance, Purchaser
shall as soon as reasonably practicable taking into account applicable law,
regulatory capital requirements, capital planning and risk management, take such
necessary actions so that Seller's proportionate ownership of Purchaser Common
Stock is not reduced as the result of such issuances, including by funding such
issuances through purchases of Purchaser Common Stock in the open market or by
undertaking share repurchase programs. Notwithstanding any other provision of
this Agreement, no reduction in Seller's percentage ownership of the Purchaser
Common Stock resulting from any issuance of shares that are subject to
Purchaser's repurchase obligation under this Section 7.2(e) or Section 7.2(d)
shall be taken into account in determining whether the Sunset Date has occurred
or
58
whether any of Seller's other rights hereunder have terminated or in measuring
Seller's proportionate interest for purposes of this Section 7.2(e).
7.3. SALE OF PURCHASER COMMON STOCK; RIGHT OF FIRST REFUSAL IN CERTAIN
CIRCUMSTANCES
(a) For so long as Seller holds five percent (5%) or more of
the outstanding shares of Purchaser Common Stock, Seller shall not dispose of
any of its shares of Purchaser Common Stock except, subject to the terms and
conditions of this Agreement (including Section 2.9(b)) and applicable law, (i)
in a widely dispersed public distribution; (ii) a private placement in which no
one party acquires the right to purchase more than two percent (2.0)% of the
outstanding shares of Purchaser Common Stock; (iii) an assignment to a single
party (such as a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Seller's behalf; (iv) pursuant to Rule
144 under the Securities Act; (v) pursuant to a tender or exchange offer to
Purchaser's stockholders not opposed by Purchaser's Board of Directors, or open
market purchase programs made by Purchaser; (vi) with the consent of Purchaser,
which consent shall not be unreasonably withheld, to a Subsidiary of Seller of
which Seller, directly or indirectly, owns at least 80% of the securities
entitled, in the ordinary course, to elect a majority of the directors of such
Subsidiary, and such Subsidiary agrees in writing to be bound by the provisions
of this Agreement and Seller remains bound by the provisions of this Agreement;
or (vii) pursuant to the right of first refusal provisions set forth in Sections
7.3(b) through (e) below;
(b) Until such time as Seller no longer holds at least five
percent (5%) of the outstanding shares of Purchaser Common Stock, if Seller
wishes to sell or otherwise transfer any of its shares of Purchaser Common Stock
other than in accordance with Section 7.3(a)(i) through (vii) above, Seller
shall give written notice ("Offer Notice") of the proposed transaction to
Purchaser (i) identifying the proposed transferee; and (ii) setting forth the
proposed terms of such sale or transfer of the Purchaser Common Stock, which
shall be limited to transactions involving cash, cash equivalents or marketable
securities against delivery of the Purchaser Common Stock. The giving by Seller
of an Offer Notice shall be deemed to be an offer to sell the Purchaser Common
Stock subject to the Offer Notice to Purchaser or its designee for a purchase
price equal to the value proposed to be paid by the proposed purchaser.
(c) Within twenty (20) days of receipt of such Offer Notice,
Purchaser must notify Seller whether Purchaser or a designee (which designee
must be capable of consummatng the acquisition) shall exercise the right to
purchase all (but not less than all) of the shares of Purchaser Common Stock
subject to the Offer Notice. If Purchaser does not respond to the Offer Notice
within the allotted twenty (20) day period, Purchaser shall be deemed to waive
its right to purchase the shares of Purchaser Common Stock subject to such Offer
Notice.
(d) Settlement for the shares of Purchase Common Stock to be
purchased by Purchaser or its designee pursuant to Section 7.3(c) shall be no
later than twenty (20) calendar days after the expiration of the twenty (20) day
period provided for in Section 7.3(c) or such other date as may be agreed to by
Purchaser or its designee and Seller; PROVIDED, HOWEVER, that if (i) prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, (ii) Purchaser or its
designee, as appropriate, promptly files the required notice or application for
approval and expeditiously processes the
59
same, and (iii) Purchaser has entered into a written agreement with Seller
to purchase such shares of Purchaser Common Stock (with consummation by
Purchaser of such purchase conditioned only upon receipt of the applicable
regulatory approval and/or expiration of any applicable notice or waiting period
with respect thereto), then the settlement date that would otherwise occur
pursuant to this sentence shall instead occur on the first date permitted under
applicable law. At such settlement, (i) Purchaser or its designee shall deliver
the consideration for such shares of Purchaser Common Stock to Seller; and (ii)
Seller shall deliver properly endorsed stock certificates representing such
shares of Purchaser Common Stock to Purchaser or its designee.
(e) Seller may within three (3) months from the date of the
Offer Notice, if Purchaser or its designee does not exercise the purchase right,
sell or transfer all or a portion of the shares of Purchaser Common Stock which
were subject to the Offer Notice and not purchased by Purchaser or its designee
pursuant to Section 7.3(d), to the proposed purchaser identified in the Offer
Notice at a purchase price equal to or greater than the purchase price specified
by Seller in the Offer Notice (provided that any purchase price determined
pursuant to a formula based on the market price of Purchaser Common Stock shall
be deemed to be at least equal to the purchase price specified by Seller in the
Offer Notice so long as the same formula is utilized in determining the actual
purchase price at the time of sale or transfer); PROVIDED, HOWEVER, that if
prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such sale or transfer, Seller
shall promptly file the required notice or application for approval and shall
expeditiously process the same and the sale or transfer shall instead occur on
the first date permitted under applicable law. If Seller does not sell or
transfer the shares of Purchaser Common Stock in the period provided for in this
Section 7.3(e), any sale or transfer by Seller of any shares of Purchaser Common
Stock after such period shall again be subject to this Section 7.3.
7.4. REGISTRATION RIGHTS
Purchaser and Seller shall enter into the Registration Rights Agreement
in the form attached as EXHIBIT C effective as of the Closing Date.
7.5. TAX MATTERS
(a) Purchaser shall withhold taxes from the Consideration as
required under Section 1445 of the Code unless Seller shall have provided to
Purchaser a certificate from the Company, dated no more than thirty (30) days
prior to the Closing Date, and signed by a responsible corporate officer of the
Company, under penalties of perjury, to the effect that, to such responsible
corporate officer's knowledge and belief, Seller's interest in Company is not a
"United States real property interest," as that term is defined in Section
897(c) of the Code.
(b) Pursuant to Section 9.1(a) and SCHEDULE 9.1(a) of this
Agreement, Seller shall indemnify Purchaser for, and hold Purchaser harmless
from, all Taxes for which the Company becomes liable as a result of the transfer
of the Non-Profit Subsidiaries pursuant to Section 5.12 of this Agreement (the
"Section 5.12 Taxes"). Purchaser and Seller shall treat the amount reasonably
determined by Seller or a qualified appraiser selected by Seller as the fair
market value of the Non-Profit Subsidiaries for all Tax purposes unless
otherwise required by a determination within the meaning of Section 1313(a) of
the Code (or a comparable provision of
60
state, local or foreign law). Purchaser shall cause the Company to file its Tax
Returns in a manner consistent with the values so determined. Seller shall have
the right to control, at its own expense, any audit, examination, contest,
litigation or other proceeding by or against any taxing authority (a "Tax
Proceeding") relating to Section 5.12 Taxes; provided, however, that Seller
shall not settle or compromise any such Tax Proceeding, if such action could
reasonably be expected to have an adverse impact on Purchaser or any Purchaser
Subsidiary (including the Company and the Company Subsidiaries after the
Closing), without obtaining the prior written consent of Purchaser, which
consent shall not be unreasonably withheld.
(c) After the Closing Date, each of Purchaser and Seller shall
(and shall cause their respective Subsidiaries to) cooperate fully, as and to
the extent reasonably requested by the other party, in connection with filing of
Tax Returns with respect to the Company and its Subsidiaries and in any Tax
Proceeding of the Company and its Subsidiaries. Such assistance and cooperation
shall include, but is not limited to, the following:
(i) assisting the other party in preparing any Tax
Returns which such other party is responsible for preparing and filing;
(ii) cooperating fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns with respect to the
Company and its Subsidiaries; and
(iii) making available to the other party and to any
taxing authority as reasonably requested all information, records, and documents
relating to Taxes with respect to the Company and its Subsidiaries.
(d) Commencing on the Closing Date, Seller shall (and shall
cause its Subsidiaries to) retain until ninety (90) days after the expiration of
any applicable statutes of limitations, and Purchaser shall have access to, and
the right to copy, at its expense, during usual business hours upon reasonable
prior notice to Seller, copies of all Tax Returns, work schedules and other
books, records or information which Seller possesses relating to the Company and
its Subsidiaries and which may be reasonably required by Purchaser in connection
with its Tax matters (including as may be necessary to enable Purchaser to
prepare for or to respond to any Tax audit).
(e) Commencing on the Closing Date, Purchaser shall (and shall
cause its Subsidiaries to) retain until ninety (90) days after the expiration of
any applicable statutes of limitations, and Seller shall have access to, and the
right to copy, at its expense, during usual business hours upon reasonable prior
notice to Purchaser, copies of all Tax Returns, work schedules and other books,
records or information which Purchaser possesses relating to the Company and its
Subsidiaries and which may be reasonably required by Seller in connection with
its Tax matters (including as may be necessary to enable Seller to prepare for
or to respond to any Tax audit).
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7.6. NON COMPETITION AND NON SOLICITATION
(a) Until such time as Seller is no longer deemed to "control"
Purchaser for purposes of the Bank Holding Company Act or the federal Change in
Bank Control Act, if Seller were to directly or indirectly acquire an insured
depository institution that had total assets in excess of 25% of the assets of
the largest insured depository institution Purchaser Subsidiary, then Seller
would within two (2) years following the effective date of such acquisition
either (x) terminate its affiliation with such insured depository institution,
or (y) take such steps as may be necessary (including disposing of shares of
Purchaser Common Stock subject to the provisions of Section 7.3 of this
Agreement and/or surrendering its governance and representation rights) so that,
with respect to such insured depository institution, the insured depository
institutions that were controlled by Purchaser would no longer subject to the
"cross-guarantee" provisions of Section 5(e) of the FDIA as a result of such
institutions being deemed to be under common control of Seller. Notwithstanding
the foregoing, if at any time such depository institution subsidiary under
common control of Seller fails to meet the applicable requirements to be at
least "adequately capitalized" under applicable U.S. banking laws, then, if such
insured depository institution is not sooner returned to at least "adequately
capitalized" status, Seller will take the steps contemplated by the preceding
sentence no later than 180 days after the date that such insured depository
institution fails to meet such requirement.
(b) Seller agrees that, for a period beginning on the date of
this Agreement and ending on the later of the Sunset Date and the date two years
following the Closing Date, neither Seller nor its affiliates will solicit for
employment any of the Company Employees; provided, however, that it is
understood that this Section 7.6(b) shall not prohibit: (i) solicitation of any
Company Employee who contacts Seller or any affiliate of Seller on his or her
own initiative without any solicitation by or encouragement from Seller or any
affiliate of Seller (excluding any solicitation by a professional search firm
where Seller or an affiliate of Seller has not directed such firm to solicit
that person); (ii) generalized solicitations by advertising and the like which
are not directed to the Company Employees; (iii) solicitations of Company
Employees whose employment was terminated by Purchaser or the Company; or (iv)
solicitations of Company Employees who have terminated their employment with the
Company or any Company Subsidiary without any prior solicitation (which would
otherwise violate this Section 7.6(b)) by Seller or any affiliate of Seller.
(c) It is the intent and understanding of each party hereto
that if, in any action before any court or agency legally empowered to enforce
this Section 7.6, any term, restriction, covenant, or promise is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant, or promise shall not thereby be terminated but that it shall be deemed
modified to the extent necessary to make it enforceable by such court or agency
and, if it cannot be so modified, that it shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such modification or amendment in any event to apply only with respect to the
operation of this Section 7.6 in the particular jurisdiction in which such
adjudication is made.
7.7. ADDITIONAL AGREEMENTS
The parties agree to take the further actions set forth in Schedule
7.7.
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ARTICLE 8.
TERMINATION, WAIVER AND AMENDMENT
8.1. TERMINATION
This Reorganization Agreement may be terminated, either before or after
approval by the shareholders of the Company or Purchaser:
(a) At any time on or prior to the Closing Date, by the mutual
consent in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by Purchaser
in writing, if Seller or the Company has, or by Seller in writing, if Purchaser
has, in any material respect, breached (i) any covenant or agreement contained
herein; or (ii) any representation or warranty contained herein, and in either
case if (x) such breach has not been cured by the earlier of forty-five (45)
days after the date on which written notice of such breach is given to the party
committing such breach, and (y) such breach would, assuming its existence or
continuance as of the Closing Date, entitle the non-breaching party not to
consummate the transactions contemplated hereby under Article 6 hereof;
(c) At any time, by any party hereto in writing, if the
applications for prior approval referred to in Section 5.3 hereof have been
finally denied, and the time period for all appeals and requests for
reconsideration has run, or if any governmental entity of competent jurisdiction
shall have issued a final nonappealable order enjoining or otherwise prohibiting
the Exchange;
(d) At any time, by any party hereto in writing, if the
shareholders of Purchaser do not approve the issuance of Purchaser Common Stock
pursuant to this Agreement or the shareholders of Seller do not approve the
transactions contemplated by the Reorganization Agreement, in either case at the
meeting of shareholders duly called for that purpose; or
(e) By any party hereto in writing, if the Closing Date has
not occurred by the close of business on July 1, 2003 unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
set forth herein.
8.2. EFFECT OF TERMINATION
In the event this Reorganization Agreement is terminated pursuant to
Section 8.1 hereof, this Agreement shall become void and have no effect, except
that (i) the provisions relating to confidentiality, takeover laws and expenses
set forth in Sections 5.5, 5.14 and 10.1 hereof, respectively, shall survive any
such termination; and (ii) a termination pursuant to Section 8.1(b)(i) or
8.1(b)(ii) hereof shall not relieve the breaching party from liability for an
uncured willful breach of such covenant or agreement or representation or
warranty giving rise to such termination.
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8.3. WAIVER
Except where prohibited by law, Purchaser and Seller, respectively, by
written instrument signed by an executive officer of such party, may at any time
(whether before or after approval of this Reorganization Agreement by the
shareholders of Purchaser and the Company) extend the time for the performance
of any of the obligations or other acts of Seller or the Company, on the one
hand, or Purchaser, on the other hand, and may waive (i) any inaccuracies of
such parties in the representations or warranties contained in this Agreement or
any document delivered pursuant hereto; (ii) compliance with any of the
covenants, undertakings or agreements of such parties, or satisfaction of any of
the conditions precedent to its obligations, contained herein or (iii) the
performance by such parties of any of its obligations set out herein.
8.4. AMENDMENT OR SUPPLEMENT
This Reorganization Agreement may be amended or supplemented at any
time only by mutual agreement of the parties hereto. Any such amendment or
supplement must be in writing and approved by their respective boards of
directors and/or officers authorized thereby.
ARTICLE 9.
INDEMNIFICATION BY SELLER AND PURCHASER
9.1. INDEMNIFICATION OBLIGATION BY SELLER AND PURCHASER
(a) From and after the Closing Date, Seller hereby agrees to
indemnify Purchaser, its Subsidiaries and affiliates and their respective
officers, directors, employees and agents (collectively, the "Indemnified
Purchaser Parties"), and agrees to hold each of them harmless from and against
any and all actions, suits, proceedings, demands, assessments, judgments,
claims, liabilities, losses, costs, damages or expenses (including, without
limitation, Taxes, interest, penalties, reasonable expenses of investigation and
reasonable attorneys' fees, expenses and disbursements in connection with any
action, suit or proceeding against such Person or in enforcing its rights under
this Agreement) (collectively, the "Damages"), to the extent such Damages are
suffered, paid or incurred by such Person resulting from, caused by, or arising
in connection with the matters set forth in SCHEDULE 9.1(a) hereto; provided,
however, that nothing in this Article 9 shall be deemed to provide rights in
addition to those set forth in Section 5.10 in respect of the persons described
therein.
(b) From and after the Closing Date, Purchaser hereby agrees
to indemnify Seller, its Subsidiaries and affiliates (other than Purchaser and
its Subsidiaries) and their respective officers, directors, employees and agents
(collectively, the "Indemnified Seller Parties" and, together with the
Indemnified Purchaser Parties, the "Indemnified Parties"), and agrees to hold
each of them harmless from and against any and all Damages, to the extent such
Damages are suffered, paid or incurred by such Person resulting from, caused by,
or arising in connection with the matters set forth in SCHEDULE 9.1(b) hereto.
(c) In calculating any amount due hereunder in respect of
Damages, Damages (i) shall be reduced by (x) any amounts actually recovered by
the Indemnified Party under insurance policies or third party indemnification
obligations or other rights of recovery with respect to such Damages, (y) the
amount of any net Tax Benefit realized by the Indemnified
64
Party from the incurrence or payment of such Damages, and (z) the amount of any
identified reserves reflected on the Company Financial Statements as of June 30,
2002 and not utilized prior to the Closing Date in respect of such Damages and
(ii) shall be increased by the amount of any net Tax cost incurred by the
Indemnified Party as a result of the receipt of such indemnity payments (grossed
up for such increase). "Tax Benefit" shall mean the excess of (i) Taxes that
would have been incurred by the Indemnified Party if the Damages had not been
incurred by the Indemnified Party, over (ii) the actual Taxes payable by the
Indemnified Party.
9.2. CLAIMS PROCEDURES
Subject in the case of any Tax Proceeding to the provisions of Section
7.5(c), all claims for indemnification by an Indemnified Party hereunder (other
than with respect to Section 5.12 Taxes, which shall be governed by Section
7.5(b)) shall be asserted and resolved as follows:
(a) In the event that any claim or demand (including, without
limitation, a Tax Proceeding) for which an Indemnified Party may claim indemnity
is asserted against or sought to be collected from an Indemnified Party by a
third party, the Indemnified Party shall notify Seller, or Purchaser, as
applicable (in such capacity, the "Indemnifying Party") promptly following the
receipt by the Indemnified Party of such claim or demand, specifying the nature
of such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such claim and demand) (the "Claim Notice"). Failure of an Indemnified Party
to so notify the Indemnifying Party promptly shall not relieve the Indemnifying
Party of its obligation to indemnify the Indemnified Party for such claim or
demand except to the extent that the Indemnifying Party is in fact prejudiced by
the delay in giving notice. Thereafter, the Indemnified Party shall deliver to
the Indemnifying Party, upon the Indemnified Party's receipt thereof, copies of
all notices and documents (including court Paper) received by such Indemnified
Party relating to the claim that are not separately addressed to the
Indemnifying Party. Any Indemnified Party against whom a claim or demand
(including, without limitation, a Tax Proceeding) is asserted by a third party
shall have the right, without prejudice to any right of indemnification
hereunder, to respond to such claim or demand (whether by answer, denial,
request for extension of time or other action) within any applicable time
period, to the extent necessary to preserve any rights or remedies it or any
other party may have against the Person making such claim or demand. The
Indemnified Party and the Indemnifying Party shall cooperate in the defense of
any claim or demand (including, without limitation, a Tax Proceeding) with
respect to which indemnification is available under this Article 9.
(b) The Indemnifying Party shall have forty-five (45) days
from the date on which the Claim Notice is duly given (the "Notice Period") to
notify the Indemnified Party (A) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such claim
or demand, and (B) whether or not the Indemnifying Party desires, at its sole
cost and expense, to defend the Indemnified Party against such claim or demand.
If the Indemnifying Party does not notify an Indemnified Party within the Notice
Period that it disputes its liability to the Indemnified Party, the Indemnified
Party may, with the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld), resist, settle or otherwise compromise, or
pay such claim or demand.
65
(c) In the event the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such a claim or demand from the Indemnified Party,
then, except as hereinafter provided, the Indemnifying Party shall defend, at
its sole cost and expense, the Indemnified Party by appropriate proceedings,
shall use its reasonable best efforts to settle or prosecute such proceedings to
a final conclusion in such a manner as to avoid any reasonable risk of the
Indemnified Party (and the Company or any of its Subsidiaries) becoming subject
to any injunctive or other equitable order or relief or to liability for any
other matter, and shall control the conduct of such defense; PROVIDED, HOWEVER,
that the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), consent to
the entry of any judgment against the Indemnified Party or enter into any
settlement or compromise that (A) except in the case of a Tax Proceeding, does
not include, as an unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnified Party of a release, in form and substance
reasonably satisfactory to the Indemnified Party, from all liability in respect
of such claim or litigation, or (B) requires the Indemnified Party to admit any
wrongdoing. If the Indemnifying Party has so assumed the defense of the claim or
demand, it shall not be liable to the Indemnified Party for any fees of other
counsel or any other expenses with respect to the defense of such claim or
demand, other than reasonable fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying Party has not
assumed the defense thereof. Prior to the Indemnifying Party's settling any
claim or demand the defense of which it has assumed control, the Indemnifying
Party shall obtain the Indemnified Party's written consent, such consent not to
be unreasonably withheld. If the Indemnifying Party has assumed the defense of
any claim, it shall keep the Indemnified Party fully apprised at all times as to
the status of the defense.
(d) If the Indemnified Party desires to participate in, but
not control, any such defense or settlement, it may do so at its sole cost and
expense. To the extent that the Indemnifying Party elects not to defend such
proceeding, claim or demand, and the Indemnified Party defends against or
otherwise deals with any such proceeding, claim or demand, the Indemnified Party
(i) may retain counsel and control the defense of such proceeding and (ii) shall
keep the Indemnifying Party fully apprised at all times as to the status of the
defense. If the Indemnifying Party does not assume the defense of the applicable
third-party claim, the Indemnifying Party shall be liable for the reasonable
fees and expenses of counsel employed by the Indemnified Party (PROVIDED that
the Indemnifying Party shall not be liable for the fees and expenses of more
than one firm of counsel for all Indemnified Parties, other than local counsel).
(e) In the event an Indemnified Party should have a claim
against an Indemnifying Party hereunder that does not involve a claim or demand
being asserted against or sought to be collected from the Indemnified Party (or
any Subsidiary of the Indemnified Party) by a third party, the Indemnified Party
shall send a Claim Notice with respect to such claim to the Indemnifying Party
promptly of discover of such claim. If the Indemnifying Party does not notify
the Indemnified Party within the Notice Period that it disputes such claim, such
claim specified by the Indemnified Party shall be conclusively deemed a
liability of the Indemnifying Party under Section 9.1(a) or 9.1(b), as the case
may be, if the Indemnifying Party does not notify the Indemnified Party that it
disputes its liability to the Indemnified Party under Section 9.1(a) or 9.1(b),
as the case may be, within twenty (20) days following its receipt of a second
notice delivered (i) in person to the individual serving as the chief legal
officer of Seller or Purchaser, as the case may be, if the amount of such claim
is less than $1.0 million ($1,000,000)
66
and (ii), if the amount of such claim is greater than $1.0 million ($1,000,000),
such notice is also delivered in person to the individual serving as the chief
financial officer of Seller or Purchaser, as the case may be, and at such time
as the second twenty (20) day period ends, the Indemnifying Party shall pay the
amount of such Damages.
(f) All payments made with respect to the rights of indemnity
under this Article 9 shall be treated as purchase price adjustments.
(g) Following the Closing, except in the case of common law
fraud or with respect to matters for which the remedy of specific performance,
injunctive relief or other non-monetary equitable remedies are available, the
sole and exclusive remedy of an Indemnified Party with respect to any and all
claims arising with respect to the matters for which indemnification is provided
in this Article 9 shall be pursuant to the indemnification provisions set forth
in this Article 9.
ARTICLE 10.
MISCELLANEOUS
10.1. EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel, except that
Purchaser and Seller each shall bear and pay fifty percent (50%) of all printing
and applicable mailing costs and filing fees associated with the Information
Statement and the General Meeting Circular, in the case of Seller or the
Company, and the Proxy Statement, in the case of Purchaser, PROVIDED, that
Seller shall bear and pay all costs related to Seller's or the Company's actions
and obligations in connection with the transactions contemplated hereby
(including, but not limited to, transactions costs, investment bank fees, legal
fees and filing fees, but not including expenses relating to actions taken by
the Company after the date hereof at the request of Purchaser or, except as may
otherwise be agreed, pursuant hereto relating to the conversion of systems,
post-closing integration or like matters or costs of the insurance policy
contemplated by Section 5.10(b) hereof) and such costs shall not be borne or
paid by the Company or any Company Subsidiary.
10.2. DISCLOSURE
Neither the specification of any dollar amount in any representation or
warranty contained in this Agreement nor the inclusion of any specific item in
any information Previously Disclosed is intended to imply that such amount, or
higher or lower amounts, or the item so included or other items, are or are not
material, and no party shall use the fact of the setting forth of any such
amount or the inclusion of any such item in any dispute or controversy between
the parties as to whether any obligation, item or matter not described herein or
included in any information Previously Disclosed is or is not material for
purposes of this Agreement. Unless this Agreement specifically provides
otherwise, neither the specification of any item or matter in any representation
or warranty contained in this Agreement nor the inclusion of any specific item
in any information Previously Disclosed is intended to imply that such item or
matter, or other items or matters, are or are not in the ordinary course of
business, and no party shall use the fact
67
of the setting forth or the inclusion of any such item or matter in any dispute
or controversy between the parties as to whether any obligation, item or matter
not described herein or included in any information Previously Disclosed is or
is not in the ordinary course of business for purposes of this Agreement.
10.3. ENTIRE AGREEMENT
This Reorganization Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereby and supersede all
prior arrangements or understandings with respect thereto, written or oral,
other than documents referred to herein and the Confidentiality Agreement. The
terms and conditions of this Reorganization Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors.
Except as specifically set forth herein nothing in this Reorganization
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and thereto, and their respective successors, any
rights, remedies, obligations or liabilities. This Reorganization Agreement, the
Exchange and any Agreement and Plan of Merger applicable to the Upstream Merger,
taken together, shall constitute a plan of reorganization within the meaning of
Sections 354 and 361 of the Code.
10.4. NO ASSIGNMENT
No party hereto may assign any of its rights or obligations under this
Reorganization Agreement to any other Person.
10.5. ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Reorganization Agreement to the
contrary, Purchaser may, with the written consent of Seller, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company and the Company Subsidiaries set
forth herein; PROVIDED, that (i) the Tax consequences of any transactions
created by such modification shall not be other than those contemplated by
Sections 6.1(f) and 6.2(d) hereof; (ii) the consideration to be paid to Seller,
as the sole shareholder of the Company Common Stock, is not thereby changed in
kind or reduced in amount as a result of such modification; and (iii) such
modification; shall not materially delay or jeopardize the consummation of the
transactions contemplated hereby.
10.6. NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
facsimile transmission or overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to Seller:
Allied Irish Banks, plc
Bankcentre, Ballsbridge
Dublin 4, Ireland
68
Attn: Bryan Sheridan
Group Law Agent
Facsimile No: 011-353-1-668-9677
If to the Company:
Allfirst Financial Inc.
The Allfirst Building
25 South Charles Street
Baltimore, Maryland 21201
Attn: Greg Thoreson
Vice President and General Counsel
Facsimile No: (410) 244-3817
With a required copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Edward D. Herlihy, Esq.
Facsimile No: (212) 403-2000
If to Purchaser:
M&T Bank Corporation
One M&T Plaza
Buffalo, New York 14229
Attn: Michael Pinto
Executive Vice President and Chief Financial Officer
Facsimile No: (716) 842-5177
With a required copy to:
M&T Bank Corporation
One M&T Plaza
Buffalo, New York 14229
Attn: Richard A. Lammert, Esquire
Senior Vice President and General Counsel
Facsimile No: (716) 842-5177
69
and to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attn: Steven Kaplan, Esquire
Facsimile No: (202) 942-5999
10.7. CAPTIONS
The captions contained in this Reorganization Agreement are for
reference purposes only and are not part of this Reorganization Agreement.
10.8. COUNTERPARTS
This Reorganization Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10.9. REMEDIES
Each of the parties hereto, in addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of Damages,
shall be entitled to specific performance of its rights under this Agreement.
Each of the parties agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any such party of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
10.10. GOVERNING LAW
(a) This Reorganization Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such jurisdiction, except to
the extent federal law may be applicable.
(b) Any action brought in connection with this Agreement shall
be brought in the courts of the State of New York located in the City of New
York or of the United States of America for the Southern District of New York,
which courts shall have exclusive jurisdiction. The parties further agree, to
the extent permitted by law, that final and unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment.
(c) By the execution and delivery of this Agreement, each of
the parties hereto submits to the personal jurisdiction of any court of the
State of New York located in the City of New York or of the United States of
America for the Southern District of New York in any
70
action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby.
(d) To the extent that Seller or the Company has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Seller and the Company each hereby irrevocably waive such
immunity in respect of its obligations with respect to this Agreement.
(e) Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. Each party certifies that it has been induced
to enter into this Agreement by, among other things, the mutual waivers and
certifications set forth above in this Section 10.10.
[Remainder of this page left intentionally blank, signatures appear
on the following page.]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Reorganization Agreement to be executed in counterparts
by their duly authorized officers and their corporate seal to be hereunto
affixed and attested by their officers thereunto duly authorized, all as of the
day and year first above written.
M&T Bank Corporation
By /s/ Michael P. Pinto
-----------------------------------------------
Name: Michael P. Pinto
Title: Executive Vice President and
Chief Financial Officer
Allied Irish Banks, p.l.c.
By /s/ Michael D. Buckley
-----------------------------------------------
Name: Michael D. Buckley
Title: Group Chief Executive
Allfirst Financial Inc.
By /s/ Eugene J. Sheehy
-----------------------------------------------
Name: Eugene J. Sheehy
Title: Chairman and Chief Executive Officer
72
Schedule 5.9(c)
Veto and Supermajority Provisions
I. From and after the Closing Date and until the Sunset Date, unless
the Executive Committee or Nomination and Compensation Committee, as applicable,
shall have, by the appropriate affirmative vote of the applicable Committee
members, including the affirmative vote of the Seller Designee on such
Committee, previously approved and recommended such action or recommendation to
the Purchaser Board of Directors, the Purchaser Board of Directors shall not
take, or make any recommendation to Purchaser shareholders with respect to, any
of the following:
(i) Any amendment of the Purchaser Certificate of Incorporation, Bylaws
or the Charters that would be inconsistent with this SCHEDULE 5.9(c) or would
otherwise have an adverse effect on the board representation, committee
representation or other rights of Seller contemplated by the Agreement;
(ii) Any activity not permissible for a U.S. bank holding company;
(iii) The adoption of any stockholder rights plan or other measures
having the purpose or effect of preventing or materially delaying completion of
any transaction involving a Purchaser Change in Control; and
(iv) Any public announcement by Purchaser or any affiliate of Purchaser
disclosing Purchaser's desire or intention to take any of the foregoing actions
prior to obtaining the requisite Committee approval.
II. From and after the Closing Date and until the Sunset Date, unless
the Executive Committee or Nomination and Compensation Committee, as applicable,
shall have, by the requisite affirmative vote of the members of such Committee
such that the members not voting in favor of such matter do not include both the
Seller Designee on such Committee and at least one other member thereof,
previously approved and recommended such action or recommendation to the
Purchaser Board of Directors, the Purchaser Board of Directors shall not take,
or make any recommendation to Purchaser shareholders with respect to, any of the
following:
(i) Any reduction in Purchaser's cash dividend policy such that the
ratio of cash dividends to net income is not at least fifteen percent (15%), or
any extraordinary dividends or distributions to holders of Purchaser Common
Stock;
(ii) Any acquisition (in one transaction or a series of related
transactions), directly or indirectly, by Purchaser or any Purchaser Subsidiary
(except from Purchaser or a wholly owned Subsidiary of Purchaser) of any assets
or businesses, in one transaction or a series of related transactions (whether
by merger, tender or exchange offer, asset purchase or otherwise) in which the
consideration paid by Purchaser (A) if in shares of Purchaser Common Stock, will
exceed ten percent (10%) of the aggregate voting power of the outstanding voting
securities of Purchaser as of the date that Purchaser or any such Subsidiary
enters into a definitive agreement to effect such
transaction or, in the case of a series of related transactions, as of the date
that the corporation or any such subsidiary enters into a definitive agreement
to effect the last of such related transactions, or (B) if in cash, property or
Purchaser Common Stock or other securities of the corporation, has a fair market
value at the time of the execution by Purchaser or such Subsidiary of a
definitive agreement to effect such transaction which will exceed ten percent
(10%) of the Fair Market Value of Purchaser Common Stock as of the date that
Purchaser or any such Subsidiary enters into a definitive agreement to effect
such transaction or, in the case of a series of related transactions, at the
time of the execution by Purchaser or such Subsidiary of a definitive agreement
to effect the last of such related transactions, which will exceed ten percent
(10%) of the Fair Market Value of Purchaser Common Stock as of the date that the
corporation or any such subsidiary enters into a definitive agreement to effect
the last of such related transactions;
(iii) Any disposition (in one transaction or a series of related
transactions), directly or indirectly, by Purchaser or any Purchaser Subsidiary
(except to Purchaser or 80% or more owned Subsidiary of Purchaser) of any assets
or businesses, in one transaction or a series of related transactions (whether
by merger, tender or exchange offer, asset purchase or otherwise) in which the
value of the aggregate consideration to be received in respect of the assets
disposed of exceeds ten percent (10%) of the Fair Market Value of Purchaser
Common Stock as of the date that Purchaser or any such Subsidiary enters into a
definitive agreement to effect such transaction or, in the case of a series of
related transactions, as of the date that the corporation or any such subsidiary
enters into a definitive agreement to effect the last of such related
transactions;
(iv) Any voluntary liquidation or dissolution of Purchaser or the
submission of any proposal to Purchaser's stockholders to liquidate or dissolve
Purchaser;
(v) The appointment or election of the Chairman of the Board of
Directors or the Chief Executive Officer of Purchaser; and
(vi) Any public announcement by Purchaser or any affiliate of Purchaser
disclosing Purchaser's desire or intention to take any of the foregoing actions
prior to obtaining the requisite Committee approval.
2
OMITTED SCHEDULES AND SIMILAR ATTACHMENTS
Exhibit A
Signatories of Voting Support Agreement
Exhibit B
Form of Voting Support Agreement
Exhibit C
Form of Registration Rights Agreement
Schedule 5.12
Non-Profit Subsidiaries
Schedule 7.7
Additional Agreements
Schedule 9.1(a)
Seller Indemnification Matters
Schedule 9.1(b)
Purchaser Indemnification Matters
The above listed schedules and similar attachments have been omitted upon
reliance on the instructions set forth in Item 601(b)(2) of Regulation S-K. M&T
Bank Corporation agrees to furnish supplementally a copy of any omitted schedule
and similar attachment to the Commission upon request.