Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FIRST NIAGARA FINANCIAL GROUP, INC.
AND
HUDSON RIVER BANCORP, INC.
April 1, 2004
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS..................................................2
1.1. Certain Definitions..........................................2
ARTICLE II THE MERGER..........................................................8
2.1. Merger.......................................................8
2.2. Effective Time...............................................9
2.3. Certificate of Incorporation and Bylaws......................9
2.4. Directors and Officers of Surviving Corporation..............9
2.5. Additional Directors and Officer of FNFG; Advisory Board.....9
2.6. Effects of the Merger.......................................10
2.7. Tax Consequences............................................10
2.8. Possible Alternative Structures.............................10
2.9. Bank Mergers................................................11
2.10. Additional Actions..........................................11
ARTICLE III CONVERSION OF SHARES..............................................11
3.1. Conversion of HRB Common Stock; Merger Consideration........11
3.2. Election Procedures.........................................14
3.3. Procedures for Exchange of HRB Common Stock.................17
3.4. Treatment of HRB Options....................................20
3.5. Reservation of Shares.......................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HRB..............................20
4.1. Standard....................................................20
4.2. Organization................................................21
4.3. Capitalization..............................................21
4.4. Authority; No Violation.....................................22
4.5. Consents....................................................23
4.6. Financial Statements........................................23
4.7. Taxes.......................................................24
4.8. No Material Adverse Effect..................................25
4.9. Material Contracts; Leases; Defaults........................25
4.10. Ownership of Property; Insurance Coverage...................26
4.11. Legal Proceedings...........................................27
4.12. Compliance With Applicable Law..............................28
4.13. Employee Benefit Plans......................................29
4.14. Brokers, Finders and Financial Advisors.....................32
4.15. Environmental Matters.......................................32
4.16. Loan Portfolio..............................................33
4.17. Securities Documents........................................35
4.18. Related Party Transactions..................................35
4.19. Deposits....................................................35
4.20. Antitakeover Provisions Inapplicable; Required Vote.........35
4.21. Registration Obligations....................................35
4.22. Risk Management Instruments.................................36
4.23. Fairness Opinion............................................36
4.24. Trust Accounts..............................................36
4.25. Intellectual Property.......................................36
(i)
4.26. Labor Matters...............................................37
4.27. HRB Information Supplied....................................37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FNFG..............................37
5.1. Standard....................................................38
5.2. Organization................................................38
5.3. Capitalization..............................................39
5.4. Authority; No Violation.....................................39
5.5. Consents....................................................40
5.6. Financial Statements........................................40
5.7. Taxes.......................................................41
5.8. No Material Adverse Effect..................................41
5.9. Ownership of Property; Insurance Coverage...................41
5.10. Legal Proceedings...........................................42
5.11. Compliance With Applicable Law..............................42
5.12. Employee Benefit Plans......................................43
5.13. Environmental Matters.......................................45
5.14. Loan Portfolio..............................................45
5.15. Securities Documents........................................46
5.16. Deposits....................................................46
5.17. Antitakeover Provisions Inapplicable........................46
5.18. Risk Management Instruments.................................47
5.19. Brokers, Finders and Financial Advisors.....................47
5.20. FNFG Common Stock...........................................47
5.21. Material Contracts..........................................47
5.22. FNFG Information Supplied...................................47
5.23. Trust Accounts..............................................48
5.24. Fairness Opinion............................................48
ARTICLE VI COVENANTS OF HRB...................................................48
6.1. Conduct of Business.........................................48
6.2. Current Information.........................................53
6.3. Access to Properties and Records............................54
6.4. Financial and Other Statements..............................54
6.5. Maintenance of Insurance....................................55
6.6. Disclosure Supplements......................................55
6.7. Consents and Approvals of Third Parties.....................55
6.8. All Reasonable Efforts......................................55
6.9. Failure to Fulfill Conditions...............................55
6.10. No Solicitation.............................................56
6.11. Reserves and Merger-Related Costs...........................57
6.12. Board of Directors and Committee Meetings...................57
ARTICLE VII COVENANTS OF FNFG.................................................57
7.1. Conduct of Business.........................................57
7.2. Current Information.........................................57
7.3. Financial and Other Statements..............................58
7.4. Disclosure Supplements......................................58
7.5. Consents and Approvals of Third Parties.....................58
(ii)
7.6. All Reasonable Efforts......................................59
7.7. Failure to Fulfill Conditions...............................59
7.8. Employee Benefits...........................................59
7.9. Directors and Officers Indemnification and Insurance........63
7.10. Stock Listing...............................................64
7.11. Stock and Cash Reserve......................................64
7.12. Section 16(b) Exemption.....................................65
ARTICLE VIII REGULATORY AND OTHER MATTERS.....................................65
8.1. HRB and FNFG Shareholder Meetings...........................65
8.2. Joint Proxy Statement-Prospectus............................66
8.3. Regulatory Approvals........................................67
8.4. Affiliates..................................................67
ARTICLE IX CLOSING CONDITIONS.................................................68
9.1. Conditions to Each Party's Obligations under this
Agreement...................................................68
9.2. Conditions to the Obligations of FNFG under this
Agreement...................................................69
9.3. Conditions to the Obligations of HRB and HRBT under this
Agreement...................................................69
ARTICLE X THE CLOSING.........................................................70
10.1. Time and Place..............................................70
10.2. Deliveries at the Pre-Closing and the Closing...............70
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER..................................71
11.1. Termination.................................................71
11.2. Effect of Termination.......................................75
11.3. Amendment, Extension and Waiver.............................76
ARTICLE XII MISCELLANEOUS.....................................................76
12.1. Confidentiality.............................................76
12.2. Public Announcements........................................77
12.3. Survival....................................................77
12.4. Notices.....................................................77
12.5. Parties in Interest.........................................78
12.6. Complete Agreement..........................................78
12.7. Counterparts................................................78
12.8. Severability................................................78
12.9. Governing Law...............................................79
12.10. Interpretation..............................................79
12.11. Specific Performance........................................79
Exhibit A Form of Bank Merger Agreement
Exhibit B Form of Bank Merger Agreement
Exhibit C Form of HRB Voting Agreement
Exhibit D Form of FNFG Voting Agreement
Exhibit E Affiliates Agreement
(iii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of April
1, 2004, by and between First Niagara Financial Group, Inc., a Delaware
corporation ("FNFG"), and Hudson River Bancorp, Inc., a Delaware corporation
("HRB").
WHEREAS, the Board of Directors of each of FNFG and HRB (i) has determined
that this Agreement and the business combination and related transactions
contemplated hereby are in the best interests of their respective companies and
shareholders and (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with and in furtherance of their respective
business strategies, and (iii) has adopted a resolution approving this Agreement
and declaring its advisability; and
WHEREAS, in accordance with the terms of this Agreement, HRB will merge
with and into FNFG (the "Merger"), and immediately thereafter Hudson River Bank
& Trust Company, a New York chartered stock savings bank and wholly owned
subsidiary of HRB ("HRBT"), will be merged with and into First Niagara Bank, a
federally chartered stock savings bank and wholly owned subsidiary of FNFG
("First Niagara Bank"), and immediately thereafter Hudson River Commercial Bank,
a wholly owned subsidiary of HRBT ("HR Bank"), will be merged with and into
First Niagara Commercial Bank, a wholly owned subsidiary of First Niagara Bank;
and
WHEREAS, as a condition to the willingness of FNFG to enter into this
Agreement, each of the directors of HRB has entered into a Voting Agreement,
substantially in the form of Exhibit C hereto, dated as of the date hereof, with
FNFG (the "HRB Voting Agreement"), pursuant to which each such director has
agreed, among other things, to vote all shares of common stock of HRB owned by
such person in favor of the approval of this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth in
such Voting Agreements;
WHEREAS, as a condition to the willingness of HRB to enter into this
Agreement, each of the directors of FNFG has entered into a Voting Agreement or
promptly hereafter will enter into a Voting Agreement, substantially in the form
of Exhibit D hereto, dated as of the date hereof, with HRB (the "FNFG Voting
Agreement"), pursuant to which each such director has agreed, among other
things, to vote all shares of common stock of FNFG owned by such person in favor
of the approval of this Agreement and the transactions contemplated hereby, upon
the terms and subject to the conditions set forth in such Voting Agreements;
WHEREAS, the parties intend the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that this Agreement be and is hereby adopted as a
"plan of reorganization" within the meaning of Sections 354 and 361 of the Code;
and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
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NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms have the following meanings
(unless the context otherwise requires, references to Articles and Sections
refer to Articles and Sections of this Agreement).
"Affiliate" means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person and any Affiliate of
such executive officer or director.
"Agreement" means this agreement, and any amendment hereto.
"Applications" means the applications for regulatory approval that are
required by the transactions contemplated hereby.
"Bank Mergers" shall mean the merger of HRBT with and into First Niagara
Bank, with First Niagara Bank as the surviving institution, which merger shall
occur immediately following the Merger, and the Municipal Bank Merger.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the OTS, FDIC and the Department, which regulates
First Niagara Bank or HRBT, or any of their respective holding companies or
subsidiaries, as the case may be.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" shall mean the Bank Insurance Fund as administered by the FDIC.
"Cash Consideration" shall have the meaning set forth in Section 3.1.3.
"Cash Election" shall have the meaning set forth in Section 3.1.3.
"Cash Election Shares" shall have the meaning set forth in Section 3.1.3.
"Certificate" shall mean certificates evidencing shares of HRB Common
Stock.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean the confidentiality agreement
referred to in Section 12.1 of this Agreement.
"Department" shall mean the Banking Department of the State of New York,
and where appropriate shall include the Superintendent of Banks of the State of
New York and the Banking Board of the State of New York.
"DGCL" shall mean the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning set forth in Section 3.1.5.
"Dissenting Shareholder" shall have the meaning set forth in Section
3.1.5.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Election Deadline" shall have the meaning set forth in Section 3.2.3.
"Election Form" shall have the meaning set forth in Section 3.2.2.
"Election Form Record Date" shall have the meaning set forth in Section
3.2.2.
"Environmental Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
3
"Exchange Agent" shall mean Mellon Investor Services, LLC, or such other
bank or trust company or other agent designated by FNFG, and reasonably
acceptable to HRB, which shall act as agent for FNFG in connection with the
exchange procedures for converting Certificates into the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.3.1.
"Exchange Ratio" shall have the meaning set forth in Section 3.1.4.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of New York.
"First Niagara Bank" shall mean First Niagara Bank, a federally chartered
stock savings association, with its principal offices located at 6950 South
Transit Road, P.O. Box 514, Lockport, New York, which is a wholly owned
subsidiary of FNFG.
"First Niagara Commercial Bank" shall mean the wholly owned, commercial
bank subsidiary of First Niagara Bank that is chartered under the laws of the
State of New York and is limited to those activities set forth in Section
2(a)(5)(E)(ii) of the BHCA.
"FNFG" shall mean First Niagara Financial Group, Inc., a Delaware
corporation, with its principal executive offices located at 6950 South Transit
Road, Lockport, New York 14095.
"FNFG Common Stock" shall mean the common stock, par value $.01 per share,
of FNFG.
"FNFG DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by FNFG to HRB specifically referring to the appropriate section of
this Agreement.
"FNFG Financial Statements" shall mean the (i) the audited consolidated
statements of condition (including related notes and schedules) of FNFG and
subsidiaries as of December 31, 2003 and 2002 and the consolidated statements of
income, comprehensive income, changes in stockholders' equity and cash flows
(including related notes and schedules, if any) of FNFG and subsidiaries for
each of the three years ended December 31, 2003, 2002 and 2001, as set forth in
FNFG's annual report for the year ended December 31, 2003, and (ii) the
unaudited interim consolidated financial statements of FNFG and subsidiaries as
of the end of each calendar quarter following December 31, 2003, and for the
periods then ended, as filed by FNFG in its Securities Documents.
"FNFG Regulatory Agreement" shall have the meaning set forth in Section
5.11.3.
"FNFG Stock Benefit Plans" shall mean the 1999 Stock Option Plan, the 1999
Recognition and Retention Plan and the 2002 Long-Term Incentive Stock Benefit
Plan.
"FNFG Shareholders Meeting" shall have the meaning set forth in Section
8.1.2.
4
"FNFG Subsidiary" means any corporation, of which more than 50% of the
capital stock is owned, either directly or indirectly, by FNFG or First Niagara
Bank, except any corporation the stock of which is held in the ordinary course
of the lending activities of First Niagara Bank.
"GAAP" shall mean accounting principles generally accepted in the United
States of America, consistently applied with prior practice.
"Governmental Entity" shall mean any Federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HRB" shall mean Hudson River Bancorp, Inc., a Delaware corporation, with
its principal offices located at One Hudson City Centre, Hudson, New York,
12534.
"HR Bank" shall mean the wholly owned, commercial bank subsidiary of HRBT
that is chartered under the laws of the State of New York and is limited to
those activities set forth Section 2(a)(5)(E)(ii) of the BHCA.
"HRB Common Stock" shall mean the common stock, par value $0.01 per share,
of HRB.
"HRB DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by HRB to FNFG specifically referring to the appropriate section of
this Agreement.
"HRB Financial Statements" shall mean (i) the audited consolidated balance
sheets (including related notes and schedules, if any) of HRB and subsidiaries
as of March 31, 2003 and 2002 and the consolidated statements of income, changes
in stockholders' equity and cash flows (including related notes and schedules,
if any) of HRB and subsidiaries for each of the three years ended March 31,
2003, 2002 and 2001, and (ii) the unaudited interim consolidated financial
statements of HRB and subsidiaries as of the end of each calendar quarter
following March 31, 2003 and for the periods then ended.
"HRB Option Plan" shall mean the HRB 1998 Stock Option and Incentive Plan
and any amendments thereto.
"HRB Option" shall mean an option to purchase shares of HRB Common Stock
granted pursuant to the HRB Option Plan and as set forth in HRB DISCLOSURE
SCHEDULE 4.3.1.
"HRB Recognition Plan" shall mean the HRB Recognition and Retention Plan
and any and all amendments thereto.
"HRB Regulatory Agreement" shall have the meaning set forth in Section
4.12.3.
"HRB Regulatory Reports" means the Call Reports of HRBT and accompanying
schedules, as filed with the FDIC, for each calendar quarter beginning with the
quarter ended June 30, 2003, through the Closing Date, and all Reports filed
with the OTS by HRB from June 30, 2003 through the Closing Date.
"HRB Shareholders Meeting" shall have the meaning set forth in Section
8.1.1.
5
"HRB Subsidiary" means any corporation, of which more than 50% of the
capital stock is owned, either directly or indirectly, by HRB or HRBT, except
any corporation the stock of which is held in the ordinary course of the lending
activities of HRBT.
"HRBT" shall mean Hudson River Bank and Trust Company, a New York
chartered stock savings bank, with its principal offices located at One Hudson
City Centre, Hudson, New York, 12534, which is a wholly owned subsidiary of HRB.
"HR REIT" shall have the meaning set forth in Section 4.12.4.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Joint Proxy Statement-Prospectus" shall have the meaning set forth in
Section 8.2.1.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) means those facts that are known or
should have been known by the executive officers and directors of such Person,
and includes any facts, matters or circumstances set forth in any written notice
from any Bank Regulator or any other material written notice received by that
Person.
"Material Adverse Effect" shall mean, with respect to FNFG or HRB,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of FNFG and its Subsidiaries taken
as a whole, or HRB and its Subsidiaries taken as a whole, respectively, or (ii)
does or would materially impair the ability of either HRB, on the one hand, or
FNFG, on the other hand, to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
transactions contemplated by this Agreement; provided that "Material Adverse
Effect" shall not be deemed to include the impact of (a) changes in laws and
regulations affecting banks or thrift institutions or their holding companies
generally, or interpretations thereof by courts or governmental agencies, (b)
changes in GAAP or regulatory accounting principles generally applicable to
financial institutions and their holding companies, (c) actions and omissions of
a party hereto (or any of its Subsidiaries) taken with the prior written consent
of the other party, (d) the impact of the announcement of this Agreement and the
transactions contemplated hereby, and compliance with this Agreement on the
business, financial condition or results of operations of the parties and their
respective subsidiaries, including the expenses incurred by the parties hereto
in consummating the transactions contemplated by this Agreement, (e) changes in
national or international political or social conditions including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon or within the United States, or any of its territories,
possessions or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States, unless it uniquely affects either
or both of the parties or any of their Subsidiaries (f) any change in the value
of the securities or loan portfolio, or any change in the value of the deposits
or borrowings, of FNFG or HRB, or any of their Subsidiaries, respectively,
resulting from a change in interest rates generally, (g) any charge or reserve
taken by HRB at the request of FNFG pursuant to Section 6.11 of this Agreement;
or (h) the payment of any amounts due to, or the provision of any other benefits
to, any directors, officers or employees of HRB and its Subsidiaries pursuant to
the employment agreements, plans and other arrangements described in Section 7.8
of this Agreement.
6
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of HRB with and into FNFG (or a subsidiary
thereof) pursuant to the terms hereof.
"Merger Consideration" shall mean the cash or FNFG Common Stock, or
combination thereof, in an aggregate per share amount to be paid by FNFG for
each share of HRB Common Stock, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of FNFG Common Stock to be offered to holders
of HRB Common Stock in connection with the Merger.
"Municipal Bank Merger" shall mean the merger of HR Bank with and into
First Niagara Commercial Bank, with First Niagara Commercial Bank as the
surviving institution, which merger shall occur immediately following the
Merger.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq National Market.
"OTS" shall mean the Office of Thrift Supervision or any successor
thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall have the meaning set forth in Section 4.13.2.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Regulatory Approvals" means the approval of any Bank Regulator that is
necessary in connection with the consummation of the Merger, the Bank Mergers
and the related transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC.
7
"SBA" shall mean the Small Business Administration or any successor
thereto.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"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 SEC promulgated thereunder.
"Shortfall Number" shall have the meaning set forth in Section 3.2.6.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Stock Consideration" shall have the meaning set forth in Section 3.1.3.
"Stock Conversion Number" shall have the meaning set forth in Section
3.2.4.
"Stock Election Shares" shall have the meaning set forth in Section 3.1.3.
"Stock Election Number" shall have the meaning set forth in Section 3.2.5.
"Stock Election" shall have the meaning set forth in Section 3.1.3.
"Stock Exchange" shall mean the Nasdaq Stock Market.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination Date" shall mean January 31, 2005.
"Treasury Stock" shall have the meaning set forth in Section 3.1.2.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1. Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time: (a) HRB shall merge with and into FNFG, with FNFG as the resulting or
surviving corporation (the "Surviving Corporation"); and (b) the separate
existence of HRB shall cease and all of the rights, privileges, powers,
franchises, properties, assets, liabilities and obligations of HRB shall be
vested in and assumed by FNFG. As part of the Merger, each share of HRB Common
8
Stock (other than Dissenting Shares and Treasury Stock) will be converted into
the right to receive the Merger Consideration pursuant to the terms of Article
III hereof. Immediately after the Merger, HRBT shall merge with and into First
Niagara Bank, with First Niagara Bank as the resulting institution.
2.2. Effective Time.
The Closing shall occur no later than the close of business on the fifth
business day following the latest to occur of (i) Department approval relating
to the Municipal Bank Merger, (ii) OTS approval of the Merger and the Bank
Merger, (iii) HRB shareholder approval of the Merger, (iv) FNFG shareholder
approval of the Merger; (v) the passing of any applicable waiting periods; or
(vi) at FNFG's sole discretion, January 7, 2005; or at such other date or time
upon which FNFG and HRB mutually agree (the "Closing"). The Merger shall be
effected by the filing of a certificate of merger with the Delaware Office of
the Secretary of State on the day of the Closing (the "Closing Date"), in
accordance with the DGCL. The "Effective Time" means the date and time upon
which the certificate of merger is filed with the Delaware Office of the
Secretary of State, or as otherwise stated in the certificate of merger, in
accordance with the DGCL.
2.3. Certificate of Incorporation and Bylaws.
The Certificate of Incorporation and Bylaws of FNFG as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until thereafter amended
as provided therein and by applicable law.
2.4. Directors and Officers of Surviving Corporation.
Except as provided in Section 2.5, the directors of FNFG immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. Except as provided in
Section 2.5, the officers of FNFG immediately prior to the Effective Time shall
be the initial officers of Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
2.5. Additional Directors and Officer of FNFG; Advisory Board.
Effective immediately after the Effective Time, the number of persons
constituting the Board of Directors of FNFG and First Niagara Bank shall each be
increased by two persons, and two persons who are directors of HRB (as of the
date hereof and as of the Effective Time) and who are designated by FNFG,
through the Governance/Nominating Committee of the FNFG Board, based on
nominations submitted by HRB, shall be appointed and elected to the FNFG and the
First Niagara Bank Boards of Directors. One person shall be appointed to a term
of office expiring at the annual meeting of shareholders following the year
ending December 31, 2006, and one person shall be appointed to a term of office
expiring at the annual meeting of shareholders following the year ending
December 31, 2004 (and subject to its fiduciary duties, the FNFG Board shall
nominate such person for election by the shareholders to a three year term at
the annual meeting of shareholders to be held in May 2005). One of the HRB
directors so appointed shall be elected as a Vice Chairman of the Board of FNFG.
9
In addition, effective immediately after the Effective Time, each person who
serves on the Board of Directors of HRB both on the date of this Agreement and
as of the Effective Time (except for the two persons who join the FNFG and First
Niagara Bank Board of Directors in accordance with the previous sentences) shall
be appointed to the currently existing Advisory Board for the Eastern Region of
New York State (the "Advisory Board"). The Advisory Board shall be continued for
a period of at least one year following the Effective Time, although it is
FNFG's intention to extend the term of the Advisory for at least two additional
one-year terms. FNFG shall appoint a former director of HRB as the Chairman of
the Advisory Board, and for a period of three years from the date hereof, and
subject to the fiduciary duties of the Board of Directors of FNFG and First
Niagara Bank, such director shall be given first consideration for appointment
to the FNFG or First Niagara Bank Board of Directors if a vacancy occurs on
either Board. The Advisory Board shall meet quarterly, and each advisory board
member shall receive a fee of $2,500 for each quarterly meeting attended during
the first one-year term. Effective immediately after the Effective Time, Carl A.
Florio shall be appointed as the Regional President of the Eastern New York
Region of First Niagara Bank.
2.6. Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects as set
forth in the DGCL.
2.7. Tax Consequences.
It is intended that the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" as that term is used in Sections 354 and
361 of the Code. From and after the date of this Agreement and until the
Closing, each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to
be taken, fail to take any action or cause any action to fail to be taken which
action or failure to act could prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code. Following the Closing, neither
FNFG, HRB nor any of their affiliates shall knowingly take any action, cause any
action to be taken, fail to take any action or cause any action to fail to be
taken, which action or failure to act could cause the Merger to fail to qualify
as a reorganization under Section 368(a) of the Code. FNFG and HRB each hereby
agrees to deliver certificates substantially in compliance with IRS published
advance ruling guidelines, with customary exceptions and modifications thereto,
to enable counsel to deliver the legal opinion contemplated by Section 9.1.6,
which certificates shall be effective as of the date of such opinion.
2.8. Possible Alternative Structures.
Notwithstanding anything to the contrary contained in this Agreement,
prior to the Effective Time FNFG shall be entitled to revise the structure of
the Merger or the Bank Mergers, including without limitation, by substituting a
wholly owned subsidiary for HRB or HRBT, as applicable, provided that (i) any
such subsidiary shall become a party to, and shall agree to be bound by, the
terms of this Agreement (ii) there are no adverse Federal or state income tax
consequences to HRB shareholders as a result of the modification; (iii) the
consideration to be paid to the holders of HRB Common Stock under this Agreement
is not thereby changed in kind, value or reduced in amount; and (iii) such
10
modification will not delay materially or jeopardize the receipt of Regulatory
Approvals or other consents and approvals relating to the consummation of the
Merger and the Bank Mergers or otherwise cause any condition to Closing set
forth in Article IX not to be capable of being fulfilled. The parties hereto
agree to appropriately amend this Agreement and any related documents in order
to reflect any such revised structure.
2.9. Bank Mergers
FNFG and HRB shall use their reasonable best efforts to cause the
following transactions to occur as soon as practicable after the Effective Time:
(i) the merger of HRBT with and into First Niagara Bank, with First Niagara Bank
as the surviving institution, and (ii) the merger of HR Bank with and into First
Niagara Commercial Bank, with First Niagara Commercial Bank as the surviving
institution. In addition, following the execution and delivery of this
Agreement: (x) FNFG will cause First Niagara Bank, and HRB will cause HRBT, to
execute and deliver a Plan of Bank Merger substantially in the form attached to
this Agreement as Exhibit A; and (y) First Niagara Bank will cause First Niagara
Commercial Bank, and HRBT will cause HR Bank, to execute and deliver a Plan of
Bank Merger substantially in the form attached to this Agreement as Exhibit B.
2.10. Additional Actions
If, at any time after the Effective Time, FNFG shall consider or be
advised that any further deeds, assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in FNFG its right, title or interest in, to or under any of the
rights, properties or assets of HRB, HRBT, or HR Bank, or (ii) otherwise carry
out the purposes of this Agreement, HRB and its officers and directors shall be
deemed to have granted to FNFG an irrevocable power of attorney to execute and
deliver, in such official corporate capacities, all such deeds, assignments or
assurances in law or any other acts as are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in FNFG its right, title or interest
in, to or under any of the rights, properties or assets of HRB or (b) otherwise
carry out the purposes of this Agreement, and the officers and directors of the
FNFG are authorized in the name of HRB or otherwise to take any and all such
action.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of HRB Common Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger and without any action on
the part of FNFG, HRB or the holders of any of the shares of HRB Common Stock,
the Merger shall be effected in accordance with the following terms:
3.1.1. Each share of FNFG Common Stock that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding following the Effective Time and shall be unchanged by the Merger.
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3.1.2. All shares of HRB Common Stock held in the treasury of HRB
("Treasury Stock") and each share of HRB Common Stock owned by FNFG immediately
prior to the Effective Time (other than shares held in a fiduciary capacity or
in connection with debts previously contracted) shall, at the Effective Time,
cease to exist, and the certificates for such shares shall be canceled as
promptly as practicable thereafter, and no payment or distribution shall be made
in consideration therefor.
3.1.3. Subject to the provisions of this Article III, each share of
HRB Common Stock issued and outstanding immediately prior to the Effective Time
(other than Treasury Stock and Dissenting Shares) shall become and be converted
into, as provided in and subject to the limitations set forth in this Agreement,
the right to receive at the election of the holder thereof as provided in
Section 3.2, the following, without interest:
(A) for each share of HRB Common Stock with respect to which
an election to receive cash has been effectively made and not revoked or lost,
pursuant to Section 3.2 (a "Cash Election"), cash from FNFG in an amount equal
to the Per Share Amount (as defined in Section 3.1.4) (the "Cash Consideration")
(collectively, "Cash Election Shares");
(B) for each share of HRB Common Stock with respect to which
an election to receive FNFG Common Stock has been effectively made and not
revoked or lost, pursuant to Section 3.2 (a "Stock Election"), that number of
shares of FNFG Common Stock as is equal to the Exchange Ratio (as defined in
Section 3.1.4) (the "Stock Consideration") (collectively, the "Stock Election
Shares");
(C) a combination of the Cash Consideration and the Stock
Consideration (a "Mixed Election" and collectively the "Mixed Election Shares");
and
(D) for each share of HRB Common Stock other than shares as to
which a Cash Election, a Stock Election or a Mixed Election has been effectively
made and not revoked or lost, pursuant to Section 3.2 (collectively,
"Non-Election Shares"), such Stock Consideration and/or Cash Consideration as is
determined in accordance with Section 3.2.
3.1.4. For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Aggregate Cash Amount" means, subject to Section 3.2.7
and Section 11.1.10, $124,780,384 plus such additional amount of cash as shall
equal $20.50 multiplied by the product of 20% and the number of shares of HRB
Common Stock that are issued, from and after the date hereof and prior to the
Effective Time, pursuant to the exercise of HRB Options outstanding as of the
date hereof.
(B) "Aggregate HRB Share Amount" shall equal 30,434,240 shares
of HRB Common Stock; provided, however, that the Aggregate HRB Share Amount
shall be increased by virtue of the issuance of any shares of HRB Common Stock
upon the exercise from and after the date hereof and prior to the Effective Time
of HRB Options outstanding as of the date hereof.
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(C) "Aggregate FNFG Share Amount" shall, subject to Section
3.2.7 and Section 11.1.10, be equal to 34,086,349 shares of FNFG Common Stock
plus such additional number of shares of FNFG Common Stock as shall equal 1.40
multiplied by the product of 80% and the number of shares of HRB Common Stock
that are issued, from and after the date hereof and prior to the Effective Time,
pursuant to the exercise of HRB Options outstanding as of the date hereof.
(D) "Closing FNFG Share Value" means the arithmetic average of
the 4:00 p.m. Eastern Time closing sales prices of FNFG Common Stock reported on
the Nasdaq for the five consecutive trading days immediately preceding but not
including the trading day prior to the Closing Date.
(E) "Closing Transaction Value" means the sum of (A) the
Aggregate Cash Amount and (B) the product obtained by multiplying the Aggregate
FNFG Share Amount by the Closing FNFG Share Value.
(F) "Exchange Ratio" means that number of shares of FNFG
Common Stock as shall be obtained by dividing the Per Share Amount by the
Closing FNFG Share Value, rounded to the nearest one ten-thousandth of a share.
(G) "Per Share Amount" means the amount obtained by dividing
the Closing Transaction Value by the Aggregate HRB Share Amount.
3.1.5. Each outstanding share of HRB Common Stock the holder of
which has perfected his right to dissent under the DGCL and has not effectively
withdrawn or lost such right as of the Effective Time (the "Dissenting Shares")
shall not be converted into or represent a right to receive the Merger
Consideration hereunder, and the holder thereof shall be entitled only to such
rights as are granted by the DGCL. HRB shall give FNFG prompt notice upon
receipt by HRB of any such demands for payment of the fair value of such shares
of HRB Common Stock and of withdrawals of such notice and any other instruments
provided pursuant to applicable law (any shareholder duly making such demand
being hereinafter called a "Dissenting Shareholder"), and FNFG shall have the
right to participate in all negotiations and proceedings with respect to any
such demands. HRB shall not, except with the prior written consent of FNFG,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment, or waive any failure to timely deliver a written demand
for appraisal or the taking of any other action by such Dissenting Shareholder
as may be necessary to perfect appraisal rights under the DGCL. Any payments
made in respect of Dissenting Shares shall be made by the Surviving Company.
3.1.6. If any Dissenting Shareholder shall effectively withdraw or
lose (through failure to perfect or otherwise) his right to such payment at or
prior to the Effective Time, such holder's shares of HRB Common Stock shall be
converted into a right to receive cash or FNFG Common Stock in accordance with
the applicable provisions of this Agreement. If such holder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment after the Effective Time (or the Election Deadline), each share of HRB
Common Stock of such holder shall be treated as a Non-Election Share.
13
3.1.7. After the Effective Time, shares of HRB Common Stock shall be
no longer outstanding and shall automatically be canceled and shall cease to
exist, and shall thereafter by operation of this section represent the right to
receive the Merger Consideration (or as to Dissenting Shares, such rights as
provided by the DGCL) and any dividends or distributions with respect thereto or
any dividends or distributions with a record date prior to the Effective Time
that were declared or made by HRB on such shares of HRB Common Stock in
accordance with the terms of this Agreement on or prior to the Effective Time
and which remain unpaid at the Effective Time.
3.1.8. In the event FNFG changes (or establishes a record date for
changing) the number of, or provides for the exchange of, shares of FNFG Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, recapitalization, reclassification, or similar
transaction with respect to the outstanding FNFG Common Stock and the record
date therefor shall be prior to the Effective Time, the Aggregate FNFG Share
Amount shall be proportionately and appropriately adjusted; provided, that no
such adjustment shall be made with regard to FNFG Common Stock if FNFG issues
additional shares of Common Stock and receives fair market value consideration
for such shares.
3.1.9. The consideration that any one HRB shareholder may receive
pursuant to Article III is referred to herein as the "Merger Consideration" and
the consideration that all of the HRB shareholders are entitled to receive
pursuant to Article III is referred to herein as the "Aggregate Merger
Consideration".
3.2. Election Procedures.
3.2.1. Holders of HRB Common Stock may elect to receive shares of
FNFG Common Stock or cash (in either case without interest) in exchange for
their shares of HRB Common Stock in accordance with the procedures set forth
herein. Shares of HRB Common Stock as to which a Cash Election (including,
pursuant to a Mixed Election) has been made are referred to herein as "Cash
Election Shares." Shares of HRB Common Stock as to which a Stock Election has
been made (including, pursuant to a Mixed Election) are referred to as "Stock
Election Shares." Shares of HRB Common Stock as to which no election has been
made (or as to which an Election Form is not returned properly completed) are
referred to herein as "Non-Election Shares." The aggregate number of shares of
HRB Common Stock with respect to which a Stock Election has been made is
referred to herein as the "Stock Election Number." Any Dissenting Shares shall
be deemed to be Cash Election Shares, and the holders thereof shall in no event
receive consideration comprised of FNFG Common Stock with respect to such
shares; provided; however, that for purposes of making the proration
calculations provided for in this Section 3.2, only Dissenting Shares as
existing at the Effective Time shall be deemed Cash Election Shares. The holder
of a Certificate for HRB Common Stock that represents shares of HRB Common Stock
acquired pursuant to the exercise of an "incentive stock option" that have been
held for less than one (1) year as of the Election Deadline (the "ISO
Certificates"), may in his/her Election Form designate the ISO Certificate for
priority allocation in any Stock Election or Mixed Election that is made by such
holder. FNFG and the Exchange Agent shall use reasonable best efforts to honor
such priority allocation under Section 3.2.5 in the event that the Stock
Election Number exceeds the Stock Conversion Number and the holder of such ISO
Certificates is entitled to receive shares of FNFG Common Stock as a result of a
Stock Election or a Mixed Election.
14
3.2.2. An election form and other appropriate and customary
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of such Certificates to the Exchange Agent), in such form as HRB and FNFG shall
mutually agree ("Election Form"), shall be mailed no more than 40 business days
and no less than 20 business days prior to the anticipated Effective Time or on
such earlier date as FNFG and HRB shall mutually agree (the "Mailing Date") to
each holder of record of HRB Common Stock as of five business days prior to the
Mailing Date (the "Election Form Record Date"). Each Election Form shall permit
such holder, subject to the allocation and election procedures set forth in this
Section 3.2, (i) to elect to receive the Cash Consideration for all of the
shares of HRB Common Stock held by such holder, in accordance with Section
3.1.3, (ii) to elect to receive the Stock Consideration for all of such shares,
in accordance with Section 3.1.3, (iii) elect to receive the Stock Consideration
for a part of such holder's HRB Common Stock and the Cash consideration for the
remaining part of such holder's HRB Common Stock, or (iv) to indicate that such
record holder has no preference as to the receipt of cash or FNFG Common Stock
for such shares. A holder of record of shares of HRB Common Stock who holds such
shares as nominee, trustee or in another representative capacity (a
"Representative") may submit multiple Election Forms, provided that each such
Election Form covers all the shares of HRB Common Stock held by such
Representative for a particular beneficial owner. Any shares of HRB Common Stock
with respect to which the holder thereof shall not, as of the Election Deadline,
have made an election by submission to the Exchange Agent of an effective,
properly completed Election Form shall be deemed Non-Election Shares. All
Dissenting Shares shall be deemed shares subject to a Cash Election, and with
respect to such shares the holders thereof shall in no event receive
consideration comprised of FNFG Common Stock, subject to Section 3.1.5 hereof;
provided; however, that for purposes of making the proration calculations
provided for in this Section 3.2, only Dissenting Shares as existing at the
Effective Time shall be deemed Cash Election Shares.
3.2.3. To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m., New York City time, on
the 25th day following the Mailing Date (or such other time and date as FNFG and
HRB may mutually agree) (the "Election Deadline"); provided, however, that the
Election Deadline may not occur on or after the Closing Date. HRB shall use its
reasonable best efforts to make available up to two separate Election Forms, or
such additional Election Forms as FNFG may permit, to all persons who become
holders (or beneficial owners) of HRB Common Stock between the Election Form
Record Date and the close of business on the business day prior to the Election
Deadline. HRB shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein. An election shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more Certificates (or
customary affidavits and indemnification regarding the loss or destruction of
such Certificates or the guaranteed delivery of such Certificates) representing
all shares of HRB Common Stock covered by such Election Form, together with duly
executed transmittal materials included with the Election Form. If an HRB
shareholder either (i) does not submit a properly completed Election Form in a
15
timely fashion or (ii) revokes its Election Form prior to the Election Deadline
(without later submitting a properly completed Election Form prior to the
Election Deadline), the shares of HRB Common Stock held by such shareholder
shall be designated as Non-Election Shares. Any Election Form may be revoked or
changed by the person submitting such Election Form to the Exchange Agent by
written notice to the Exchange Agent only if such notice of revocation or change
is actually received by the Exchange Agent at or prior to the Election Deadline.
FNFG shall cause the Certificate or Certificates relating to any revoked
Election Form to be promptly returned without charge to the person submitting
the Election Form to the Exchange Agent. Subject to the terms of this Agreement
and of the Election Form, the Exchange Agent shall have discretion to determine
when any election, modification or revocation is received and whether any such
election, modification or revocation has been properly made. All Elections shall
be revoked automatically if the Exchange Agent is notified in writing by FNFG or
HRB, upon exercise by FNFG or HRB of its respective or their mutual rights to
terminate this Agreement to the extent provided under Article XI, that this
Agreement has been terminated in accordance with Article XI.
3.2.4. Notwithstanding any other provision contained in this
Agreement, the total number of shares of HRB Common Stock to be converted into
Stock Consideration pursuant to Section 3.1.3 (the "Stock Conversion Number")
shall be equal to the quotient obtained by dividing (x) the Aggregate FNFG Share
Amount by (y) the Exchange Ratio. All of the other shares of HRB Common Stock
shall be converted into Cash Consideration (in each case, excluding shares of
HRB Common Stock to be canceled as provided in Section 3.1.2).
3.2.5. If the aggregate number of shares of HRB Common Stock with
respect to which Stock Elections shall have been made (the "Stock Election
Number") exceeds the Stock Conversion Number, then all Cash Election Shares and
all Non-Election Shares of each holder thereof shall be converted into the right
to receive the Cash Consideration, and Stock Election Shares of each holder
thereof will be converted into the right to receive the Stock Consideration in
respect of that number of Stock Election Shares equal to the product obtained by
multiplying (x) the number of Stock Election Shares held by such holder by (y) a
fraction, the numerator of which is the Stock Conversion Number and the
denominator of which is the Stock Election Number, with the remaining number of
such holder's Stock Election Shares being converted into the right to receive
the Cash Consideration.
3.2.6. If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number exceeds the
Stock Election Number being referred to herein as the "Shortfall Number"), then
all Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A) If the Shortfall Number is less than or equal to the
number of Non-Election Shares, then all Cash Election Shares shall be converted
into the right to receive the Cash Consideration and the Non-Election Shares of
each holder thereof shall convert into the right to receive the Stock
Consideration in respect of that number of Non-Election Shares equal to the
product obtained by multiplying (x) the number of Non-Election Shares held by
such holder by (y) a fraction, the numerator of which is the Shortfall Number
and the denominator of which is the total number of Non-Election Shares, with
the remaining number of such holder's Non-Election Shares being converted into
the right to receive the Cash Consideration; or
16
(B) If the Shortfall Number exceeds the number of Non-Election
Shares, then all Non-Election Shares shall be converted into the right to
receive the Stock Consideration and Cash Election Shares of each holder thereof
shall convert into the right to receive the Stock Consideration in respect of
that number of Cash Election Shares equal to the product obtained by multiplying
(x) the number of Cash Election Shares held by such holder by (y) a fraction,
the numerator of which is the amount by which (1) the Shortfall Number exceeds
(2) the total number of Non-Election Shares and the denominator of which is the
total number of Cash Election Shares, with the remaining number of such holder's
Cash Election Shares being converted into the right to receive the Cash
Consideration.
3.2.7. Adjustment to Preserve Tax Treatment. In the event that the
quotient obtained by dividing (x) the product of (i) the Aggregate FNFG Share
Amount and (ii) the Final FNFG Share Value by (y) the sum of the Aggregate Cash
Amount and the product of (i) the Aggregate FNFG Share Amount and (ii) the Final
FNFG Share Value, is less than 0.45, the Aggregate FNFG Share Amount shall be
increased by the Share Adjustment Amount (as defined in this Section 3.2.7) and
the Aggregate Cash Amount shall be decreased by the product of (x) the Final
FNFG Share Value and (y) the Share Adjustment Amount, where the "Share
Adjustment Amount" shall be equal to the quotient obtained by dividing (x) the
difference obtained by subtracting (i) the product of (a) 0.45 and (b) the sum
of the Aggregate Cash Amount and the product of (1) the Aggregate FNFG Share
Amount and (2) the Final FNFG Share Value from (ii) the product of (a) the
Aggregate FNFG Share Amount and (b) the Final FNFG Share Value by (y) the Final
FNFG Share Value. In the event that the Aggregate FNFG Share Amount and the
Aggregate Cash Amount are adjusted as provided for in this Section 3.2.7, all
references in this Agreement to the "Aggregate FNFG Share Amount" and the
"Aggregate Cash Amount" shall refer to the Aggregate FNFG Share Amount and the
Aggregate Cash Amount as adjusted in this Section 3.2.6.
3.2.8. No Fractional Shares. Notwithstanding anything to the
contrary contained herein, no certificates or scrip representing fractional
shares of FNFG Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to FNFG Common Stock
shall be payable on or with respect to any fractional share interest, and such
fractional share interests shall not entitle the owner thereof to vote or to any
other rights of a shareholder of FNFG. In lieu of the issuance of any such
fractional share, FNFG shall pay to each former holder of HRB Common Stock who
otherwise would be entitled to receive a fractional share of FNFG Common Stock,
an amount in cash, rounded to the nearest cent and without interest, equal to
the product of (i) the fraction of a share to which such holder would otherwise
have been entitled and (ii) the average of the daily closing sales prices of a
share of FNFG Common Stock as reported on the Nasdaq for the five consecutive
trading days immediately preceding the Closing Date. For purposes of determining
any fractional share interest, all shares of HRB Common Stock owned by a HRB
shareholder shall be combined so as to calculate the maximum number of whole
shares of FNFG Common Stock issuable to such HRB shareholder.
3.3. Procedures for Exchange of HRB Common Stock.
3.3.1. FNFG to Make Merger Consideration Available. After the
Election Deadline and no later than the Closing Date, FNFG shall deposit, or
shall cause to be deposited, with the Exchange Agent for the benefit of the
17
holders of HRB Common Stock, for exchange in accordance with this Section 3.3,
certificates representing the shares of FNFG Common Stock and an aggregate
amount of cash sufficient to pay the aggregate amount of cash payable pursuant
to this Article III (including any cash that may be payable in lieu of any
fractional shares of HRB Common Stock) (such cash and certificates for shares of
FNFG Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
3.3.2. Exchange of Certificates. FNFG shall take all steps necessary
to cause the Exchange Agent, within five (5) business days after the Effective
Time, to mail to each holder of a Certificate or Certificates, a form letter of
transmittal for return to the Exchange Agent and instructions for use in
effecting the surrender of the Certificates for the Merger Consideration and
cash in lieu of fractional shares, if any, into which the HRB Common Stock
represented by such Certificates shall have been converted as a result of the
Merger. The letter of transmittal (which shall be subject to the reasonable
approval of HRB) shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the Certificates
to the Exchange Agent. Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with a properly completed letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor, as applicable, (i) a certificate representing that
number of shares of FNFG Common Stock (if any) to which such former holder of
HRB Common Stock shall have become entitled pursuant to the provisions of
Section 3.1 or 3.2 hereof, (ii) a check representing that amount of cash (if
any) to which such former holder of HRB Common Stock shall have become entitled
pursuant to the provisions of Section 3.1 or 3.2 hereof and (iii) a check
representing the amount of cash (if any) payable in lieu of fractional shares of
FNFG Common Stock, which such former holder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of Section 3.2, and
the Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash payable in lieu of fractional shares. Certificates
surrendered for exchange by any person who is an "affiliate" of HRB for purposes
of Rule 145(c) under the Securities Act shall not be exchanged for certificates
representing shares of FNFG Common Stock until FNFG has received the written
agreement of such person contemplated by Section 8.4 hereof.
3.3.3. Rights of Certificate Holders after the Effective Time. The
holder of a Certificate that prior to the Merger represented issued and
outstanding HRB Common Stock shall have no rights, after the Effective Time,
with respect to such HRB Common Stock except to surrender the Certificate in
exchange for the Merger Consideration as provided in this Agreement (or as to
Dissenting Shares, such rights as provided by the DGCL). No dividends or other
distributions declared after the Effective Time with respect to FNFG Common
Stock shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Section
3.3. After the surrender of a Certificate in accordance with this Section 3.3,
the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of FNFG Common Stock represented by such
Certificate.
3.3.4. Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the accompanying letter of transmittal is
not the record holder thereof, then it shall be a condition of the payment of
the Merger Consideration that: (i) such Certificate is properly endorsed to such
Person or is accompanied by appropriate stock powers, in either case signed
exactly as the name of the record holder appears on such Certificate, and is
otherwise in proper form for transfer, or is accompanied by appropriate evidence
18
of the authority of the Person surrendering such Certificate and signing the
letter of transmittal to do so on behalf of the record holder; and (ii) the
person requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
3.3.5. Closing of Transfer Books. From and after the Effective Time,
there shall be no transfers on the stock transfer books of HRB of the HRB Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be exchanged for the Merger
Consideration and canceled as provided in this Section 3.3.
3.3.6. Return of Exchange Fund. At any time following the six (6)
month period after the Effective Time, FNFG shall be entitled to require the
Exchange Agent to deliver to it any portions of the Exchange Fund which had been
made available to the Exchange Agent and not disbursed to holders of
Certificates (including, without limitation, all interest and other income
received by the Exchange Agent in respect of all funds made available to it),
and thereafter such holders shall be entitled to look to FNFG (subject to
abandoned property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither FNFG nor the Exchange Agent shall
be liable to any holder of a Certificate for any Merger Consideration delivered
in respect of such Certificate to a public official pursuant to any abandoned
property, escheat or other similar law.
3.3.7. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by FNFG, the posting by such person of a
bond in such amount as FNFG may reasonably direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof.
3.3.8. Withholding. FNFG or the Exchange Agent will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement or the transactions contemplated hereby to any holder of HRB Common
Stock such amounts as FNFG (or any Affiliate thereof) or the Exchange Agent are
required to deduct and withhold with respect to the making of such payment under
the Code, or any applicable provision of U.S. federal, state, local or non-U.S.
tax law. To the extent that such amounts are properly withheld by FNFG or the
Exchange Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the HRB Common Stock in respect
of whom such deduction and withholding were made by FNFG or the Exchange Agent.
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3.4. Treatment of HRB Options.
HRB DISCLOSURE SCHEDULE 3.4 sets forth all of the outstanding HRB Options
as of the date hereof. Prior to and effective as of the Effective Time, HRB
shall take all actions necessary to terminate the HRB Option Plan. All issued
and outstanding HRB Options outstanding as of the Effective Time, whether or not
exercisable, shall become immediately exercisable. Holders of all HRB Options as
of the Effective Time will receive, in cancellation of their HRB Options, a
number of shares of FNFG Common Stock for each underlying option share as shall
be equal to the quotient of (x) the Per Share Amount, minus the exercise price
of the HRB Option, divided by (y) the Closing FNFG Share Value. The shares of
FNFG Common Stock to be issued to the holders of HRB Options shall be registered
with the SEC under the Merger Registration Statement.
3.5. Reservation of Shares.
FNFG shall reserve for issuance a sufficient number of shares of the FNFG
Common Stock for the purpose of issuing shares of FNFG Common Stock to the HRB
shareholders in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HRB
HRB represents and warrants to FNFG that the statements contained in this
Article IV are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article IV), subject to the standard set forth in Section 4.1 and except as set
forth in the HRB DISCLOSURE SCHEDULE delivered by HRB to FNFG on the date
hereof, and except as to any representation or warranty which specifically
relates to an earlier date, which only need be so correct as of such earlier
date. HRB has made a good faith effort to ensure that the disclosure on each
schedule of the HRB DISCLOSURE SCHEDULE corresponds to the section referenced
herein. However, for purposes of the HRB DISCLOSURE SCHEDULE, any item disclosed
on any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant as and to the extent that it is
reasonably clear on the face of such schedule that such item applies to such
other schedule. References to the Knowledge of HRB shall include the Knowledge
of HRBT and HR Bank.
4.1. Standard.
No representation or warranty of HRB contained in this Article IV shall be
deemed untrue or incorrect, and HRB shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Article IV, has had or is reasonably expected to have a
Material Adverse Effect, disregarding for these purposes (x) any qualification
or exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material", "materially", "in all material
respects", "Material Adverse Effect" or similar terms or phrases in any such
representation or warranty. The foregoing standard shall not apply to
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representations and warranties contained in Sections 4.2 (other than the last
sentence of Sections 4.2.1 and 4.2.2, and Sections 4.2.5 and 4.2.6), 4.3, 4.4,
4.13.5, 4.13.8, 4.13.10 and 4.13.11, which shall be deemed untrue, incorrect and
breached if they are not true and correct in all material respects based on the
qualifications and standards therein contained. Provided further, that as to the
representations contained in Sections 4.13.5, 4.13.8, 4.13.10, 4.13.11, if there
is a breach that relates to an undisclosed payment, expense accrual or cost in
excess of $500,000, such breach shall be considered material.
4.2. Organization.
4.2.1. HRB is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly registered as
a savings and loan holding company under the HOLA. HRB has 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.
4.2.2. HRBT is a New York chartered savings bank duly organized,
validly existing and in good standing (to the extent required) under the laws of
the State of New York. The deposits of HRBT are insured by the FDIC to the
fullest extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid by HRBT when due. HRBT is a member
in good standing of the FHLB and owns the requisite amount of stock therein.
4.2.3. Hudson River Commercial Bank ("HR Bank") is a New York
chartered commercial bank duly organized, validly existing and in good standing
(to the extent required) under the laws of the State of New York. The deposits
of HR Bank are insured by the FDIC to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid by HR Bank when due. The activities of HR Bank have been limited to
those set forth in Section 2(a)(5)(E)(ii) of the BHCA.
4.2.4. HRB DISCLOSURE SCHEDULE 4.2.4 sets forth each HRB Subsidiary.
Each HRB Subsidiary is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization.
4.2.5. The respective minute books of HRB, HRBT, HR Bank and each
other HRB Subsidiary accurately records, in all material respects, all material
corporate actions of their respective shareholders and boards of directors
(including committees).
4.2.6. Prior to the date of this Agreement, HRB has made available
to FNFG true and correct copies of the certificate of incorporation or charter
and bylaws of HRB, HRBT, HR Bank and each other HRB Subsidiary.
4.3. Capitalization.
4.3.1. The authorized capital stock of HRB consists of 40,000,000
shares of common stock, $0.01 par value per share, of which 30,434,240 shares
are outstanding (inclusive of outstanding awards under the HRB Recognition and
Retention Plan or under the Deferred Compensation Agreements), validly issued,
fully paid and nonassessable and free of preemptive rights, and 5,000,000 shares
of preferred stock, $0.01 par value ("HRB Preferred Stock"), none of which are
outstanding. There are 5,273,260 shares of HRB Common Stock held by HRB as
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treasury stock. Neither HRB nor any HRB Subsidiary has or is bound by any Rights
of any character relating to the purchase, sale or issuance or voting of, or
right to receive dividends or other distributions on any shares of HRB Common
Stock, or any other security of HRB or a HRB Subsidiary or any securities
representing the right to vote, purchase or otherwise receive any shares of HRB
Common Stock or any other security of HRB or any HRB Subsidiary, other than
shares issuable under the HRB Option Plan and awards under the HRB Recognition
Plan that become free from further restrictions upon vesting including the right
of the holder, if any, to receive a distribution of accumulated dividends and
earnings thereon. HRB DISCLOSURE SCHEDULE 4.3.1 sets forth the name of each
holder of options to purchase HRB Common Stock, the number of shares each such
individual may acquire pursuant to the exercise of such options, the grant and
vesting dates, and the exercise price relating to the options held, as well as
the names of each holder of an outstanding restricted stock award under the HRB
Recognition Plan, the number of shares subject to each award, the vesting dates
and the accumulated dividends and distribution amounts relating thereto as of
the date hereof, and earnings thereon in the aggregate (not on an individual
holder basis).
4.3.2. HRB owns all of the capital stock of HRBT, free and clear of
any lien or encumbrance. HRB owns all of the capital stock of HR Bank, free and
clear of any lien or encumbrance. Except for the HRB Subsidiaries, HRB does not
possess, directly or indirectly, any material equity interest in any corporate
entity, except for equity interests held in the investment portfolios of HRB
Subsidiaries, equity interests held by HRB Subsidiaries in a fiduciary capacity,
and equity interests held in connection with the lending activities of HRB
Subsidiaries, including stock in the FHLB.
4.3.3. To HRB's Knowledge, no Person or "group" (as that term is
used in Section 13(d)(3) of the Exchange Act), is the beneficial owner (as
defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding
shares of HRB Common Stock.
4.4. Authority; No Violation.
4.4.1. HRB has full corporate power and authority to execute and
deliver this Agreement and, subject to the receipt of the Regulatory Approvals
and the approval of this Agreement by HRB's shareholders, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by HRB and the completion by HRB of the transactions contemplated hereby,
including the Merger, have been duly and validly approved by the Board of
Directors of HRB, and no other corporate proceedings on the part of HRB, except
for the approval of the HRB shareholders, is necessary to complete the
transactions contemplated hereby, including the Merger. This Agreement has been
duly and validly executed and delivered by HRB, and subject to approval by the
shareholders of HRB and receipt of the Regulatory Approvals and due and valid
execution and delivery of this Agreement by FNFG, constitutes the valid and
binding obligation of HRB, enforceable against HRB in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity.
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4.4.2. Subject to receipt of Regulatory Approvals and HRB's and
FNFG's compliance with any conditions contained therein, and to the receipt of
the approval of the shareholders of HRB, (A) the execution and delivery of this
Agreement by HRB, (B) the consummation of the transactions contemplated hereby,
and (C) compliance by HRB with any of the terms or provisions hereof will not
(i) conflict with or result in a breach of any provision of the certificate of
incorporation or bylaws of HRB or any HRB Subsidiary or the charter and bylaws
of HRBT; (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to HRB or any HRB Subsidiary or any
of their respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration or the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of HRB or HRBT under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which HRB or HRBT is a party, or by which they
or any of their respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under clause (ii) or (iii)
hereof which, either individually or in the aggregate, will not have a Material
Adverse Effect on HRB and the HRB Subsidiaries taken as a whole.
4.5. Consents.
Except for (a) filings with Bank Regulators, the receipt of the Regulatory
Approvals, and compliance with any conditions contained therein, (b) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, (c) the filing with the SEC of (i) the Merger Registration Statement
and (ii) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from the SEC of such orders
as may be required in connection therewith, (d) approval of the listing of FNFG
Common Stock to be issued in the Merger on the Nasdaq, (e) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
FNFG Common Stock pursuant to this Agreement, and (f) the approval of this
Agreement by the requisite vote of the shareholders of HRB and FNFG, no
consents, waivers or approvals of, or filings or registrations with, any
Governmental Entity are necessary, and, to HRB's Knowledge, no consents, waivers
or approvals of, or filings or registrations with, any other third parties are
necessary, in connection with (x) the execution and delivery of this Agreement
by HRB, and (y) the completion of the Merger and the Bank Mergers. HRB has no
reason to believe that (i) any Regulatory Approvals or other required consents
or approvals will not be received, or that (ii) any public body or authority,
the consent or approval of which is not required or to which a filing is not
required, will object to the completion of the transactions contemplated by this
Agreement.
4.6. Financial Statements.
4.6.1. HRB has previously made available to FNFG the HRB Regulatory
Reports. The HRB Regulatory Reports have been prepared in all material respects
in accordance with applicable regulatory accounting principles and practices
throughout the periods covered by such statements.
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4.6.2. HRB has previously made available to FNFG the HRB Financial
Statements. The HRB Financial Statements have been prepared in accordance with
GAAP, and (including the related notes where applicable) fairly present in each
case in all material respects (subject in the case of the unaudited interim
statements to normal year-end adjustments), the consolidated financial position,
results of operations and cash flows of HRB and the HRB Subsidiaries on a
consolidated basis as of and for the respective periods ending on the dates
thereof, in accordance with GAAP during the periods involved, except as
indicated in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-Q.
4.6.3. At the date of each balance sheet included in the HRB
Financial Statements or the HRB Regulatory Reports, neither HRB nor HRBT, as
applicable, had any liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type required to be
reflected in such HRB Financial Statements or HRB Regulatory Reports or in the
footnotes thereto which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which are not material individually or in the aggregate or
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
4.7. Taxes.
Except as set forth in HRB DISCLOSURE SCHEDULE 4.7, HRB and the HRB
Subsidiaries that are at least 80 percent owned by HRB are members of the same
affiliated group within the meaning of Code Section 1504(a). HRB has duly filed
all federal, state and material local tax returns required to be filed by or
with respect to HRB and every HRB Subsidiary on or prior to the Closing Date,
taking into account any extensions (all such returns, to HRB's Knowledge, being
accurate and correct in all material respects) and has duly paid or made
provisions for the payment of all material federal, state and local taxes which
have been incurred by or are due or claimed to be due from HRB and any HRB
Subsidiary by any taxing authority or pursuant to any written tax sharing
agreement on or prior to the Closing Date other than taxes or other charges
which (i) are not delinquent, (ii) are being contested in good faith, or (iii)
have not yet been fully determined. Except as set forth in HRB DISCLOSURE
SCHEDULE 4.7, as of the date of this Agreement, HRB has received no written
notice of, and to HRB's Knowledge there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
HRB or any of its Subsidiaries, and no claim has been made by any authority in a
jurisdiction where HRB or any of its Subsidiaries do not file tax returns that
HRB or any such Subsidiary is subject to taxation in that jurisdiction. Except
as set forth in HRB DISCLOSURE SCHEDULE 4.7, HRB and its Subsidiaries have not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect. HRB and each
of its Subsidiaries has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party, and HRB and
each of its Subsidiaries, to HRB's Knowledge, has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements.
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4.8. No Material Adverse Effect.
HRB has not suffered any Material Adverse Effect since March 31, 2003 and
no event has occurred or circumstance arisen since that date which, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
HRB.
4.9. Material Contracts; Leases; Defaults.
4.9.1. Except as set forth in HRB DISCLOSURE SCHEDULE 4.9.1, neither
HRB nor any HRB Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or material arrangement with any past or
present officer, director or employee of HRB or any HRB Subsidiary, except for
"at will" arrangements; (ii) any plan, material arrangement or contract
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or similar material arrangements for or with any past
or present officers, directors or employees of HRB or any HRB Subsidiary; (iii)
any collective bargaining agreement with any labor union relating to employees
of HRB or any HRB Subsidiary; (iv) any agreement which by its terms limits the
payment of dividends by HRB or any HRB Subsidiary; (v) any instrument evidencing
or related to material indebtedness for borrowed money whether directly or
indirectly, by way of purchase money obligation, conditional sale, lease
purchase, guaranty or otherwise, in respect of which HRB or any HRB Subsidiary
is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, FHLB advances, bankers'
acceptances, and "treasury tax and loan" accounts and transactions in "federal
funds" in each case established in the ordinary course of business consistent
with past practice, or which contains financial covenants or other restrictions
(other than those relating to the payment of principal and interest when due)
which would be applicable on or after the Closing Date to FNFG or any FNFG
Subsidiary; (vi) any other agreement, written or oral, that obligates HRB or any
HRB Subsidiary for the payment of more than $50,000 annually or for the payment
of more than $150,000 over its remaining term, which is not terminable without
cause on 60 days' or less notice without penalty or payment, or (vii) any
agreement (other than this Agreement), contract, arrangement, commitment or
understanding (whether written or oral) that restricts or limits in any material
way the conduct of business by HRB or any HRB Subsidiary (it being understood
that any non-compete or similar provision shall be deemed material).
4.9.2. Each real estate lease that requires the consent of the
lessor or its agent resulting from the Merger or the Bank Mergers by virtue of
the terms of any such lease, is listed in HRB DISCLOSURE SCHEDULE 4.9.2
identifying the section of the lease that contains such prohibition or
restriction. Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, to its Knowledge, neither HRB nor
any HRB Subsidiary is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its assets, business, or operations
may be bound or affected, or under which it or its assets, business, or
operations receive benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
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4.9.3. True and correct copies of agreements, contracts,
arrangements and instruments referred to in Section 4.9.1 and 4.9.2 have been
made available to FNFG on or before the date hereof, are listed on HRB
DISCLOSURE SCHEDULE 4.9.1 and are in full force and effect on the date hereof
and neither HRB nor any HRB Subsidiary (nor, to the Knowledge of HRB, any other
party to any such contract, arrangement or instrument) has materially breached
any provision of, or is in default in any respect under any term of, any such
contract, arrangement or instrument. Except as listed on HRB DISCLOSURE SCHEDULE
4.9.3, no party to any material contract, arrangement or instrument will have
the right to terminate any or all of the provisions of any such contract,
arrangement or instrument as a result of the execution of, and the consummation
of the transactions contemplated by, this Agreement. Except as set forth in HRB
DISCLOSURE SCHEDULE 4.9.3, no plan, contract, employment agreement, termination
agreement, or similar agreement or arrangement to which HRB or any HRB
Subsidiary is a party or under which HRB or any HRB Subsidiary may be liable
contains provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue future benefits thereunder.
Except as set forth in HRB DISCLOSURE SCHEDULE 4.9.3, no such agreement, plan,
contract, or arrangement (x) provides for acceleration in the vesting of
benefits or payments due thereunder upon the occurrence of a change in ownership
or control of HRB or any HRB Subsidiary or upon the occurrence of a subsequent
event; or (y) requires HRB or any HRB Subsidiary to provide a benefit in the
form of HRB Common Stock or determined by reference to the value of HRB Common
Stock. None of the restrictive covenants contained in Paragraphs 9a.i and 9a.ii
of the Homestead Funding Corporation Shareholders Agreement, dated August 18,
2003 (the "Homestead Shareholders Agreement"), included in HRB DISCLOSURE
SCHEDULE 4.9.3, are in effect and will not be in effect as a result of the
execution of this Agreement or consummation of the transactions contemplated by
this Agreement, including the Merger and the Bank Mergers. HRB authorizes FNFG
on its behalf to issue the written notice to the parties to the Homestead
Shareholders Agreement pursuant to Paragraph 5e thereof. HRB shall use its best
efforts to receive from the parties to the Homestead Shareholders Agreement
written acknowledgements that such shareholders have no right to purchase the
Class A Voting Common Stock of Homestead Funding Corporation owned by HRB
(assuming timely notice is provided pursuant to Paragraph 5e of the Homestead
Shareholders Agreement) and that as a result of the execution of this Agreement
or consummation of the transactions contemplated by this Agreement, including
the Merger and the Bank Mergers, Paragraphs 9a.i and 9a.ii of the Homestead
Shareholders Agreement do not apply.
4.10. Ownership of Property; Insurance Coverage.
4.10.1. Except as set forth in HRB DISCLOSURE SCHEDULE 4.10, HRB and
each HRB Subsidiary has good and, as to real property, marketable title to all
material assets and properties owned by HRB or each HRB Subsidiary in the
conduct of its businesses, whether such assets and properties are real or
personal, tangible or intangible, including assets and property reflected in the
balance sheets contained in the HRB Regulatory Reports and in the HRB Financial
Statements or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of in the ordinary course of business, since
the date of such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure
26
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to FHLB, inter-bank credit facilities, or any
transaction by an HRB Subsidiary acting in a fiduciary capacity, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith,
(iii) non-monetary liens affecting real property which do not adversely affect
the value or use of such real property, and (iv) those described and reflected
in the HRB Financial Statements. HRB and the HRB Subsidiaries, as lessee, have
the right under valid and existing leases of real and personal properties used
by HRB and its Subsidiaries in the conduct of their businesses to occupy or use
all such properties as presently occupied and used by each of them. Such
existing leases and commitments to lease constitute or will constitute operating
leases for both tax and financial accounting purposes and the lease expense and
minimum rental commitments with respect to such leases and lease commitments are
as disclosed in all material respects in the notes to the HRB Financial
Statements.
4.10.2. With respect to all material agreements pursuant to which
HRB or any HRB Subsidiary has purchased securities subject to an agreement to
resell, if any, HRB or such HRB Subsidiary, as the case may be, has a lien or
security interest (which to HRB's Knowledge is a valid, perfected first lien) in
the securities or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby.
4.10.3. HRB and each HRB Subsidiary currently maintain insurance
considered by each of them to be reasonable for their respective operations.
Neither HRB nor any HRB Subsidiary, except as disclosed in HRB DISCLOSURE
SCHEDULE 4.10.3, has received notice from any insurance carrier during the past
five years that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs (other than with respect to
health insurance) with respect to such policies of insurance will be
substantially increased. There are presently no material claims pending under
such policies of insurance and no notices have been given by HRB or any HRB
Subsidiary under such policies. All such insurance is valid and enforceable and
in full force and effect, and within the last three years HRB and each HRB
Subsidiary has received each type of insurance coverage for which it has applied
and during such periods has not been denied indemnification for any material
claims submitted under any of its insurance policies. HRB DISCLOSURE SCHEDULE
4.10.3 identifies all material policies of insurance maintained by HRB and each
HRB Subsidiary as well as the other matters required to be disclosed under this
Section.
4.11. Legal Proceedings.
Except as set forth in HRB DISCLOSURE SCHEDULE 4.11, neither HRB nor any
HRB Subsidiary is a party to any, and there are no pending or, to HRB's
Knowledge, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature (i) against HRB or any HRB Subsidiary, (ii) to which
HRB or any HRB Subsidiary's assets are or may be subject, (iii) challenging the
validity or propriety of any of the transactions contemplated by this Agreement,
or (iv) which could adversely affect the ability of HRB or HRBT to perform under
this Agreement, except for any proceeding, claim, action, investigation or
inquiry which, if adversely determined, individually or in the aggregate, would
not be reasonably expected to have a Material Adverse Effect on HRB.
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4.12. Compliance With Applicable Law.
4.12.1. To HRB's Knowledge, each of HRB and each HRB Subsidiary is
in compliance in all material respects with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to it, its properties, assets and deposits, its business, and
its conduct of business and its relationship with its employees, including,
without limitation, the USA Patriot Act, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act of 1977, the Home Mortgage
Disclosure Act, and all other applicable fair lending laws and other laws
relating to discriminatory business practices and neither HRB nor any HRB
Subsidiary has received any written notice to the contrary.
4.12.2. Each of HRB and each HRB Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities and Bank
Regulators that are required in order to permit it to own or lease its
properties and to conduct its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to the Knowledge of HRB, no suspension or cancellation of any such
permit, license, certificate, order or approval is threatened or will result
from the consummation of the transactions contemplated by this Agreement,
subject to obtaining Regulatory Approvals.
4.12.3. For the period beginning January 1, 2001, neither HRB nor
any HRB Subsidiary has received any written notification or, to HRB's Knowledge,
any other communication from any Bank Regulator (i) asserting that HRB or any
HRB Subsidiary is not in material compliance with any of the statutes,
regulations or ordinances which such Bank Regulator enforces; (ii) threatening
to revoke any license, franchise, permit or governmental authorization which is
material to HRB or any HRB Subsidiary; (iii) requiring, or threatening to
require, HRB or any HRB Subsidiary, or indicating that HRB or any HRB Subsidiary
may be required, to enter into a cease and desist order, agreement or memorandum
of understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of HRB
or any HRB Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting, or purporting
to direct, restrict or limit, in any manner the operations of HRB or any HRB
Subsidiary, including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement or order
described in this sentence is hereinafter referred to as a "HRB Regulatory
Agreement"). Neither HRB nor any HRB Subsidiary has consented to or entered into
any HRB Regulatory Agreement that is currently in effect or that was in effect
since January 1, 1998. The most recent regulatory rating given to HRBT as to
compliance with the Community Reinvestment Act ("CRA") is satisfactory or
better.
4.12.4. Hudson River Funding Corp. (the "HR REIT") (A) was
established in 1997 as a "real estate investment trust" as defined in Section
856(a) of the Code, (B) has met at all times since January 1997 the requirements
of Section 857(a) of the Code, (C) has not relied at any time since January 1999
28
on Section 856(c)(6) of the Code, (D) has not had at any time since January 1997
any "net income derived from prohibited transactions" within the meaning of
Section 857(b)(6) of the Code and (E) has not issued any stock or securities as
part of a multiple party financing transaction described in IRS Notice 97-21,
1997-11 I.R.B. 2, or Treasury Regulations Section 1.7701(1)-3.
4.13. Employee Benefit Plans.
4.13.1. HRB DISCLOSURE SCHEDULE 4.13.1 includes a descriptive list
of all existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare benefit plans, fringe benefit plans, employment, severance
and change in control agreements and all other material benefit practices,
policies and arrangements maintained by HRB or any HRB Subsidiary in which any
employee or former employee, consultant or former consultant or director or
former director of HRB or any HRB Subsidiary participates or to which any such
employee, consultant or director is a party or is otherwise entitled to receive
benefits (the "HRB Compensation and Benefit Plans"). Except as set forth in HRB
DISCLOSURE SCHEDULE 4.13.1, neither HRB nor any of its Subsidiaries has any
commitment to create any additional HRB Compensation and Benefit Plan or to
materially modify, change or renew any existing HRB Compensation and Benefit
Plan (any modification or change that increases the cost of such plans would be
deemed material), except as required to maintain the qualified status thereof,
HRB has made available to FNFG true and correct copies of the HRB Compensation
and Benefit Plans.
4.13.2. To the Knowledge of HRB and except as disclosed in HRB
DISCLOSURE SCHEDULE 4.13.2, each HRB Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
COBRA, the Health Insurance Portability and Accountability Act and any
regulations or rules promulgated thereunder, and all material filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other applicable
law have been timely made or any interest, fines, penalties or other impositions
for late filings have been paid in full. Each HRB Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and HRB is not aware of any circumstances which are reasonably likely to result
in revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of HRB, threatened action, suit or claim relating
to any of the HRB Compensation and Benefit Plans (other than routine claims for
benefits). Neither HRB nor any HRB Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any HRB Compensation and Benefit
Plan that would reasonably be expected to subject HRB or any HRB Subsidiary to
an unpaid tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
4.13.3. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.3, no
liability to any Governmental Entity, other than PBGC premiums arising in the
ordinary course of business, has been or is expected by HRB or any of its
Subsidiaries to be incurred with respect to any HRB Compensation and Benefit
29
Plan which is a defined benefit plan subject to Title IV of ERISA ("Defined
Benefit Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a) of ERISA) currently or formerly maintained by HRB or any entity
which is considered one employer with HRB under Section 4001(b)(1) of ERISA or
Section 414 of the Code (an "ERISA Affiliate") (such plan hereinafter referred
to as an "ERISA Affiliate Plan"). To the Knowledge of HRB, except as set forth
in HRB DISCLOSURE SCHEDULE 4.13.3, no HRB Defined Benefit Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, as of the last day of the end of the most recent plan year ending
prior to the date hereof. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.3,
the fair market value of the assets of each HRB Defined Benefit Plan exceeds the
present value of the benefits guaranteed under Section 4022 of ERISA under such
HRB Defined Benefit Plan as of the end of the most recent plan year with respect
to the respective HRB Defined Benefit Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such HRB Defined Benefit Plan as of the date hereof; and
no notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been required to
be filed for any HRB Defined Benefit Plan within the 12-month period ending on
the date hereof. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.3, neither
HRB nor any of its Subsidiaries has provided, or is required to provide,
security to any HRB Defined Benefit Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Code or has taken any
action, or omitted to take any action, that has resulted, or would reasonably be
expected to result in the imposition of a lien under Section 412(n) of the Code
or pursuant to ERISA. Neither HRB, its Subsidiaries, nor any ERISA Affiliate has
contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA,
on or after January 1, 1998. To the Knowledge of HRB, and except as set forth in
HRB DISCLOSURE SCHEDULE 4.13.3, there is no pending investigation or enforcement
action by any Bank Regulator with respect to any HRB Compensation and Benefit
Plan or any ERISA Affiliate Plan.
4.13.4. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.4, all
material contributions required to be made under the terms of any HRB
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements to which HRB or any HRB Subsidiary is a party or a sponsor have
been timely made, and all anticipated contributions and funding obligations are
accrued on HRB's consolidated financial statements to the extent required by
GAAP. HRB and its Subsidiaries have expensed and accrued as a liability the
present value of future benefits under each applicable HRB Compensation and
Benefit Plan for financial reporting purposes as required by GAAP.
4.13.5. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.5,
neither HRB nor any HRB Subsidiary has any obligations to provide retiree
health, life insurance, disability insurance, or other retiree death benefits
under any HRB Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code. Except as set forth in HRB DISCLOSURE SCHEDULE
4.13.5, there has been no communication to employees by HRB or any HRB
Subsidiary that would reasonably be expected to promise or guarantee such
employees retiree health, life insurance, disability insurance, or other retiree
death benefits.
30
4.13.6. Except as set forth in HRB DISCLOSURE SCHEDULE 4.13.6, HRB
and its Subsidiaries do not maintain any HRB Compensation and Benefit Plans
covering employees who are not United States residents.
4.13.7. With respect to each HRB Compensation and Benefit Plan, if
applicable, HRB has provided or made available to FNFG copies of the: (A) trust
instruments and insurance contracts; (B) two most recent Forms 5500 filed with
the IRS; (C) most recent actuarial report and financial statement; (D) most
recent summary plan description; (E) most recent determination letter issued by
the IRS; (F) any Form 5310 or Form 5330 filed with the IRS within the last two
years; and (G) most recent nondiscrimination tests performed under ERISA and the
Code (including 401(k) and 401(m) tests).
4.13.8. Except as disclosed in HRB DISCLOSURE SCHEDULE 4.13.8, the
consummation of the Merger will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time) (A) entitle any employee, consultant
or director to any payment or benefit (including severance pay, change in
control benefit, or similar compensation) or any increase in compensation, (B)
result in the vesting or acceleration of any benefits under any HRB Compensation
and Benefit Plan or (C) result in any material increase in benefits payable
under any HRB Compensation and Benefit Plan.
4.13.9. Except as disclosed in HRB DISCLOSURE SCHEDULE 4.13.9,
neither HRB nor any HRB Subsidiary maintains any compensation plans, programs or
arrangements under which any payment is reasonably likely to become
non-deductible, in whole or in part, for tax reporting purposes as a result of
the limitations under Section 162(m) of the Code and the regulations issued
thereunder.
4.13.10. To the Knowledge of HRB, the consummation of the Mergers
and the Bank Mergers will not, directly or indirectly (including without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time), entitle any current or former
employee, director or independent contractor of HRB or any HRB Subsidiary to any
actual or deemed payment (or benefit) which could constitute a "parachute
payment" (as such term is defined in Section 280G of the Code), except as set
forth in HRB DISCLOSURE SCHEDULE 4.13.10.
4.13.11. Except as disclosed in HRB DISCLOSURE SCHEDULE 4.13.11,
there are no stock appreciation or similar rights, earned dividends or dividend
equivalents, or shares of restricted stock, outstanding under any of the HRB
Compensation and Benefit Plans or otherwise as of the date hereof and none will
be granted, awarded, or credited after the date hereof.
4.13.12. HRB DISCLOSURE SCHEDULE 4.13.12 sets forth, as of the
payroll date immediately preceding the date of this Agreement, a list of the
full names of all officers, and employees whose annual rate of salary is $75,000
or greater, of HRBT or HRB, their title and rate of salary, and their date of
hire. HRB DISCLOSURE SCHEDULE 4.13.12 also sets forth any changes to any HRB
Compensation and Benefit Plan since March 31, 2003.
31
4.14. Brokers, Finders and Financial Advisors.
Neither HRB nor any HRB Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder or financial
advisor in connection with the transactions contemplated by this Agreement, or
incurred any liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this Agreement except
for the retention of Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") by HRB
and the fee payable pursuant thereto. A true and correct copy of the engagement
agreement with Sandler O'Neill, setting forth the fee payable to Sandler O'Neill
for its services rendered to HRB in connection with the Merger and transactions
contemplated by this Agreement, is attached to HRB DISCLOSURE SCHEDULE 4.14.
4.15. Environmental Matters.
4.15.1. Except as may be set forth in HRB DISCLOSURE SCHEDULE 4.15
and any Phase I Environmental Report identified therein, with respect to HRB and
each HRB Subsidiary:
(A) Each of HRB and the HRB Subsidiaries, the Participation
Facilities, and, to HRB's Knowledge, the Loan Properties are, and have been, in
substantial compliance with, and are not liable under, any Environmental Laws;
(B) HRB has received no written notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to HRB's Knowledge, no such action is
threatened, before any court, governmental agency or other forum against it or
any of the HRB Subsidiaries or any Participation Facility (x) for alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release (as defined
herein) into the environment of any Materials of Environmental Concern (as
defined herein), whether or not occurring at or on a site owned, leased or
operated by it or any of the HRB Subsidiaries or any Participation Facility;
(C) HRB has received no written notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to HRB's Knowledge no such action is
threatened, before any court, governmental agency or other forum relating to or
against any Loan Property (or HRB or any of the HRB Subsidiaries in respect of
such Loan Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release into the environment of any Materials of
Environmental Concern, whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To HRB's Knowledge, the properties currently owned or
operated by HRB or any HRB Subsidiary (including, without limitation, soil,
groundwater or surface water on, or under the properties, and buildings thereon)
are not contaminated with and do not otherwise contain any Materials of
Environmental Concern other than as permitted under applicable Environmental
Law;
32
(E) Neither HRB nor any HRB Subsidiary during the past five
years has received any written notice, demand letter, executive or
administrative order, directive or request for information from any federal,
state, local or foreign governmental entity or any third party indicating that
it may be in violation of, or liable under, any Environmental Law;
(F) To HRB's Knowledge, there are no underground storage tanks
on, in or under any properties owned or operated by HRB or any of the HRB
Subsidiaries or any Participation Facility, and to HRB's Knowledge, no
underground storage tanks have been closed or removed from any properties owned
or operated by HRB or any of the HRB Subsidiaries or any Participation Facility;
and
(G) To HRB's Knowledge, during the period of (s) HRB's or any
of the HRB Subsidiaries' ownership or operation of any of their respective
current properties or (t) HRB's or any of the HRB Subsidiaries' participation in
the management of any Participation Facility, there has been no contamination by
or release of Materials of Environmental Concerns in, on, under or affecting
such properties that could reasonably be expected to result in material
liability under the Environmental Laws. To HRB's Knowledge, prior to the period
of (x) HRB's or any of the HRB Subsidiaries' ownership or operation of any of
their respective current properties or (y) HRB's or any of the HRB Subsidiaries'
participation in the management of any Participation Facility, there was no
contamination by or release of Materials of Environmental Concern in, on, under
or affecting such properties that could reasonably be expected to result in
material liability under the Environmental Laws.
4.15.2. "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property. "Participation Facility" means any facility in which
the applicable party (or a Subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property.
4.16. Loan Portfolio.
4.16.1. The allowance for loan losses reflected in HRB's audited
consolidated balance sheet at March 31, 2003 was, and the allowance for loan
losses shown on the balance sheets in HRB's Securities Documents for periods
ending after March 31, 2003 was or will be, as the case may be, adequate, as of
the dates thereof, under GAAP.
4.16.2. HRB DISCLOSURE SCHEDULE 4.16.2 sets forth a listing, as of
the most recently available date (and in no event later than February 29, 2004),
by account, of: (A) all loans (including loan participations) of HRBT or any
other HRB Subsidiary that have been accelerated during the past twelve months;
(B) all loan commitments or lines of credit of HRBT or any other HRB Subsidiary
which have been terminated by HRBT or any other HRB Subsidiary during the past
twelve months by reason of a default or adverse developments in the condition of
the borrower or other events or circumstances affecting the credit of the
borrower; (C) all loans, lines of credit and loan commitments as to which HRBT
or any other HRB Subsidiary has given written notice of its intent to terminate
33
during the past twelve months; (D) with respect to all commercial loans
(including commercial real estate loans), all notification letters and other
written communications from HRBT or any other HRB Subsidiary to any of their
respective borrowers, customers or other parties during the past twelve months
wherein HRBT or any other HRB Subsidiary has requested or demanded that actions
be taken to correct existing defaults or facts or circumstances which may become
defaults; (E) each borrower, customer or other party which has notified HRBT or
any other HRB Subsidiary during the past twelve months of, or has asserted
against HRBT or any other HRB Subsidiary, in each case in writing, any "lender
liability" or similar claim, and, to the Knowledge of HRBT, each borrower,
customer or other party which has given HRBT or any other HRB Subsidiary any
oral notification of, or orally asserted to or against HRBT or any other HRB
Subsidiary, any such claim; (F) all loans, (1) that are contractually past due
90 days or more in the payment of principal and/or interest, (2) that are on
non-accrual status, (3) that as of the date of this Agreement are classified as
"Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful",
"Loss", "Classified", "Criticized", "Watch list" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the obligor thereunder, (4) where a reasonable
doubt exists as to the timely future collectability of principal and/or
interest, whether or not interest is still accruing or the loans are less than
90 days past due, (5) where, during the past three years, the interest rate
terms have been reduced and/or the maturity dates have been extended subsequent
to the agreement under which the loan was originally created due to concerns
regarding the borrower's ability to pay in accordance with such initial terms,
or (6) where a specific reserve allocation exists in connection therewith, and
(G) all assets classified by HRBT or any HRBT Subsidiary as real estate acquired
through foreclosure or in lieu of foreclosure, including in-substance
foreclosures, and all other assets currently held that were acquired through
foreclosure or in lieu of foreclosure. DISCLOSURE SCHEDULE 4.16.2 may exclude
any individual loan with a principal outstanding balance of less than $100,000,
provided that DISCLOSURE SCHEDULE 4.16.2 includes, for each category described,
the aggregate amount of individual loans with a principal outstanding balance of
less than $100,000 that have been excluded.
4.16.3. All loans receivable (including discounts) and accrued
interest entered on the books of HRB and the HRB Subsidiaries arose out of bona
fide arm's-length transactions, were made for good and valuable consideration in
the ordinary course of HRB's or the appropriate HRB Subsidiary's respective
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are true and genuine and are what they purport to
be, except as set forth in HRB DISCLOSURE SCHEDULE 4.16.3. To the Knowledge of
HRB, the loans, discounts and the accrued interest reflected on the books of HRB
and the HRB Subsidiaries are subject to no defenses, set-offs or counterclaims
(including, without limitation, those afforded by usury or truth-in-lending
laws), except as may be provided by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by general principles of equity. Except
as set forth in HRB DISCLOSURE SCHEDULE 4.16.3, all such loans are owned by HRB
or the appropriate HRB Subsidiary free and clear of any liens.
4.16.4. The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
34
4.17. Securities Documents.
HRB has made available to FNFG copies of its (i) annual reports on Form
10-K for the years ended March 31, 2003, 2002 and 2001, (ii) quarterly report on
Form 10-Q for the quarters ended June 30, September 30 and December 31, 2003,
and (iii) proxy materials used or for use in connection with its meetings of
shareholders held in 2003, 2002 and 2001. Such reports, prospectus and proxy
materials complied, at the time filed with the SEC, in all material respects,
with the Securities Laws.
4.18. Related Party Transactions.
Except as described in HRB's Proxy Statement distributed in connection
with the annual meeting of shareholders held in August 2003 (which has
previously been provided to FNFG), or as set forth in HRB DISCLOSURE SCHEDULE
4.18, neither HRB nor any HRB Subsidiary is a party to any transaction
(including any loan or other credit accommodation) with any Affiliate of HRB or
any HRB Affiliate. All such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. No loan or credit
accommodation to any Affiliate of HRB or any HRB Subsidiary is presently in
default or, during the three year period prior to the date of this Agreement,
has been in default or has been restructured, modified or extended. Neither HRB
nor any HRB Subsidiary has been notified that principal and interest with
respect to any such loan or other credit accommodation will not be paid when due
or that the loan grade classification accorded such loan or credit accommodation
by HRB is inappropriate.
4.19. Deposits.
Except as set forth in HRB DISCLOSURE SCHEDULE 4.20, none of the deposits
of HRB or any HRB Subsidiary is a "brokered deposit" as defined in 12 CFR
Section 337.6(a)(2).
4.20. Antitakeover Provisions Inapplicable; Required Vote.
The Board of Directors of HRB has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of HRB) necessary to exempt FNFG, the Merger, the Merger Agreement and
the transactions contemplated hereby from Section 203 of the DGCL. The
affirmative vote of a majority of the issued and outstanding shares of HRB
Common Stock is required to approve this Agreement and the Merger under HRB's
certificate of incorporation and the DGCL.
4.21. Registration Obligations.
Neither HRB nor any HRB Subsidiary is under any obligation, contingent or
otherwise, which will survive the Effective Time by reason of any agreement to
register any transaction involving any of its securities under the Securities
Act.
35
4.22. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements, whether
entered into for HRB's own account, or for the account of one or more of HRB's
Subsidiaries or their customers (all of which are set forth in HRB DISCLOSURE
SCHEDULE 4.23), were in all material respects entered into in compliance with
all applicable laws, rules, regulations and regulatory policies, and to the
Knowledge of HRB, with counterparties believed to be financially responsible at
the time; and to HRB's Knowledge each of them constitutes the valid and legally
binding obligation of HRB or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither HRB
nor any HRB Subsidiary, nor to the Knowledge of HRB any other party thereto, is
in breach of any of its obligations under any such agreement or arrangement in
any material respect.
4.23. Fairness Opinion.
HRB has received a written opinion from Sandler O'Neill to the effect
that, subject to the terms, conditions and qualifications set forth therein, as
of the date hereof, the Merger Consideration to be received by the shareholders
of HRB pursuant to this Agreement is fair to such shareholders from a financial
point of view. Such opinion has not been amended or rescinded as of the date of
this Agreement.
4.24. Trust Accounts
HRBT and each of its subsidiaries has properly administered all accounts
for which it acts as a fiduciary, including but not limited to accounts for
which it serves as trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the governing
documents and applicable laws and regulations. Neither HRBT nor any other HRB
Subsidiary, and to the Knowledge of HRB, nor has any of their respective
directors, officers or employees, committed any breach of trust with respect to
any such fiduciary account and the records for each such fiduciary account.
4.25. Intellectual Property
HRB and each HRB Subsidiary owns or, to HRB's Knowledge, possesses valid
and binding licenses and other rights (subject to expirations in accordance with
their terms) to use all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in their business, each without payment (except
as set forth in HRB DISCLOSURE SCHEDULE 4.25), and neither HRB nor any HRB
Subsidiary has received any notice of conflict with respect thereto that asserts
the rights of others. HRB and each HRB Subsidiary have performed all the
obligations required to be performed, and are not in default in any respect,
under any contract, agreement, arrangement or commitment relating to any of the
foregoing. To the Knowledge of HRB, the conduct of the business of HRB and each
HRB Subsidiary as currently conducted or proposed to be conducted does not, in
any respect, infringe upon, dilute, misappropriate or otherwise violate any
intellectual property owned or controlled by any third party.
36
4.26. Labor Matters
There are no labor or collective bargaining agreements to which HRB or any
HRB Subsidiary is a party. To the Knowledge of HRB, there is no union organizing
effort pending or threatened against HRB or any HRB Subsidiary. There is no
labor strike, labor dispute (other than routine employee grievances that are not
related to union employees), work slowdown, stoppage or lockout pending or, to
the Knowledge of HRB, threatened against HRB or any HRB Subsidiary. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
Knowledge of HRB, threatened against HRB or any HRB Subsidiary (other than
routine employee grievances that are not related to union employees). HRB and
each HRB Subsidiary is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice.
4.27. HRB Information Supplied
The information relating to HRB and any HRB Subsidiary to be contained in
the Merger Registration Statement, or in any other document filed with any Bank
Regulator or other Governmental Entity in connection herewith, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Merger Registration Statement will comply
with the provisions of the Exchange Act and the rules and regulations thereunder
and the provisions of the Securities Act and the rules and regulations
thereunder, except that no representation or warranty is made by HRB with
respect to statements made or incorporated by reference therein based on
information supplied by FNFG specifically for inclusion or incorporation by
reference in the Merger Registration Statement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FNFG
FNFG represents and warrants to HRB that the statements contained in this
Article V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article V), subject to the standard set forth in Section 5.1, and except as set
forth in the FNFG DISCLOSURE SCHEDULE delivered by FNFG to HRB on the date
hereof, and except as to any representation or warranty which specifically
relates to an earlier date, which only need be so correct as of such earlier
date. FNFG has made a good faith effort to ensure that the disclosure on each
schedule of the FNFG DISCLOSURE SCHEDULE corresponds to the section referenced
herein. However, for purposes of the FNFG DISCLOSURE SCHEDULE, any item
disclosed on any schedule therein is deemed to be fully disclosed with respect
to all schedules under which such item may be relevant as and to the extent that
it is reasonably clear on the face of such schedule that such item applies to
such other schedule. References to the Knowledge of FNFG shall include the
Knowledge of First Niagara Bank and First Niagara Commercial Bank.
37
5.1. Standard.
No representation or warranty of FNFG contained in this Article V shall be
deemed untrue or incorrect, and FNFG shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Article V, has had or is reasonably expected to have a Material
Adverse Effect, disregarding for these purposes (x) any qualification or
exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material", "materially", "in all material
respects", "Material Adverse Effect" or similar terms or phrases in any such
representation or warranty. The foregoing standard shall not apply to
representations and warranties contained in Sections 5.2 (other than the last
sentence of Sections 5.2.1 and 5.2.2), 5.3, and 5.4, which shall be deemed
untrue, incorrect and breached if they are not true and correct in all material
respects based on the qualifications and standards therein contained.
5.2. Organization.
5.2.1. FNFG is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly registered as
a savings and loan holding company under the HOLA. FNFG has 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.
5.2.2. First Niagara Bank is a savings bank duly organized, validly
existing and in good standing (to the extent required) under federal law. The
deposits of First Niagara Bank are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. First Niagara Bank is a member in
good standing of the FHLB and own the requisite amount of stock therein.
5.2.3. First Niagara Commercial Bank is a New York chartered
commercial bank duly organized, validly existing and in good standing (to the
extent required) under the laws of the State of New York. The deposits of First
Niagara Commercial Bank are insured by the FDIC to the fullest extent permitted
by law, and all premiums and assessments required to be paid in connection
therewith have been paid by First Niagara Commercial Bank when due. The
activities of First Niagara Commercial Bank have been limited to those set forth
in Section 2(a)(5)(E)(ii) of the BHCA.
5.2.4. FNFG DISCLOSURE SCHEDULE 5.2.3 sets forth each FNFG
Subsidiary. Each FNFG Subsidiary is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization.
5.2.5. The respective minute books of FNFG and each FNFG Subsidiary
accurately records, in all material respects, all material corporate actions of
their respective shareholders and boards of directors (including committees).
38
5.2.6. Prior to the date of this Agreement, FNFG has made available
to HRB true and correct copies of the certificate of incorporation and bylaws of
FNFG and First Niagara Bank and the FNFG Subsidiaries.
5.3. Capitalization.
5.3.1. The authorized capital stock of FNFG consists of 250,000,000
shares of common stock, $0.01 par value, of which 84,125,973 shares are
outstanding, validly issued, fully paid and nonassessable and free of preemptive
rights, and 50,000,000 shares of preferred stock, $0.01 par value ("FNFG
Preferred Stock"), none of which are outstanding. There are no shares of FNFG
Common Stock held by FNFG as treasury stock. Neither FNFG nor any FNFG
Subsidiary has or is bound by any Rights of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of FNFG Common Stock, or any other security of FNFG
or any securities representing the right to vote, purchase or otherwise receive
any shares of FNFG Common Stock or any other security of FNFG, other than shares
issuable under the FNFG Stock Benefit Plans.
5.3.2. FNFG owns all of the capital stock of First Niagara Bank free
and clear of any lien or encumbrance. First Niagara Bank owns all of the capital
stock of First Niagara Commercial Bank free and clear of any lien or
encumbrance.
5.3.3. To the Knowledge of FNFG, no Person or "group" (as that term
is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner (as
defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding
shares of FNFG Common Stock.
5.4. Authority; No Violation.
5.4.1. FNFG has full corporate power and authority to execute and
deliver this Agreement and, subject to receipt of the Regulatory Approvals, and
the approval of the FNFG shareholders, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by FNFG and
the completion by FNFG of the transactions contemplated hereby, including the
Merger, have been duly and validly approved by the Board of Directors of FNFG,
and no other corporate proceedings on the part of FNFG, except for the approval
of the FNFG shareholders, are necessary to complete the transactions
contemplated hereby, including the Merger. This Agreement has been duly and
validly executed and delivered by FNFG, and subject to approval by the
shareholders of FNFG and receipt of the Regulatory Approvals and due and valid
execution and delivery of this Agreement by HRB, constitutes the valid and
binding obligations of FNFG, enforceable against FNFG in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity.
5.4.2. Subject to receipt of Regulatory Approvals and HRB's and
FNFG's compliance with any conditions contained therein, and to the receipt of
the approval of the shareholders of FNFG, (A) the execution and delivery of this
Agreement by FNFG, (B) the consummation of the transactions contemplated hereby,
and (C) compliance by FNFG with any of the terms or provisions hereof will not
(i) conflict with or result in a breach of any provision of the certificate of
incorporation or bylaws of FNFG or any FNFG Subsidiary; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to FNFG or any FNFG Subsidiary or any of their respective
39
properties or assets; or (iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of FNFG or any FNFG Subsidiary
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other investment or
obligation to which any of them is a party, or by which they or any of their
respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof
which, either individually or in the aggregate, will not have a Material Adverse
Effect on FNFG.
5.5. Consents.
Except for (a) filings with Bank Regulators, the receipt of the Regulatory
Approvals, and compliance with any conditions contained therein, (b) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, (c) the filing with the SEC of (i) the Merger Registration Statement
and (ii) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from the SEC of such orders
as may be required in connection therewith, (d) approval of the listing of FNFG
Common Stock to be issued in the Merger on the Nasdaq, (e) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
FNFG Common Stock pursuant to this Agreement, and (f) the approval of this
Agreement by the requisite vote of the shareholders of HRB and FNFG, no
consents, waivers or approvals of, or filings or registrations with, any
Governmental Entity are necessary, and, to FNFG's Knowledge, no consents,
waivers or approvals of, or filings or registrations with, any other third
parties are necessary, in connection with (x) the execution and delivery of this
Agreement by FNFG, and (y) the completion of the Merger and the Bank Mergers.
FNFG has no reason to believe that (i) any Regulatory Approvals or other
required consents or approvals will not be received, or that (ii) any public
body or authority, the consent or approval of which is not required or to which
a filing is not required, will object to the completion of the transactions
contemplated by this Agreement.
5.6. Financial Statements.
5.6.1. FNFG has previously made available to HRB the FNFG Financial
Statements. The FNFG Financial Statements have been prepared in accordance with
GAAP, and (including the related notes where applicable) fairly present in each
case in all material respects (subject in the case of the unaudited interim
statements to normal year-end adjustments) the consolidated financial position,
results of operations and cash flows of FNFG and the FNFG Subsidiaries on a
consolidated basis as of and for the respective periods ending on the dates
thereof, in accordance with GAAP during the periods involved, except as
indicated in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-Q.
40
5.6.2. At the date of each balance sheet included in the FNFG
Financial Statements, FNFG did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such FNFG Financial Statements or in the
footnotes thereto which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which are not material individually or in the aggregate or
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
5.7. Taxes.
FNFG and the FNFG Subsidiaries that are at least 80 percent owned by FNFG
are members of the same affiliated group within the meaning of Code Section
1504(a). FNFG has duly filed all federal, state and material local tax returns
required to be filed by or with respect to FNFG and each FNFG Subsidiary on or
prior to the Closing Date, taking into account any extensions (all such returns,
to the Knowledge of FNFG, being accurate and correct in all material respects)
and has duly paid or made provisions for the payment of all material federal,
state and local taxes which have been incurred by or are due or claimed to be
due from FNFG and any FNFG Subsidiary by any taxing authority or pursuant to any
written tax sharing agreement on or prior to the Closing Date other than taxes
or other charges which (i) are not delinquent, (ii) are being contested in good
faith, or (iii) have not yet been fully determined. As of the date of this
Agreement, FNFG has received no notice of, and to the Knowledge of FNFG, there
is no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of FNFG or any of its Subsidiaries, and no
claim has been made by any authority in a jurisdiction where FNFG or any of its
Subsidiaries do not file tax returns that FNFG or any such Subsidiary is subject
to taxation in that jurisdiction. Except as set forth in FNFG DISCLOSURE
SCHEDULE 5.7, FNFG and its Subsidiaries have not executed an extension or waiver
of any statute of limitations on the assessment or collection of any material
tax due that is currently in effect. FNFG and each of its Subsidiaries has
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party, and FNFG and each of its
Subsidiaries, to the Knowledge of FNFG, has timely complied with all applicable
information reporting requirements under Part III, Subchapter A of Chapter 61 of
the Code and similar applicable state and local information reporting
requirements.
5.8. No Material Adverse Effect.
FNFG has not suffered any Material Adverse Effect since December 31, 2003
and no event has occurred or circumstance arisen since that date which, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
FNFG.
5.9. Ownership of Property; Insurance Coverage.
5.9.1. FNFG and each FNFG Subsidiary has good and, as to real
property, marketable title to all material assets and properties owned by FNFG
or each FNFG Subsidiary in the conduct of their businesses, whether such assets
41
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the FNFG Financial
Statements or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of in the ordinary course of business, since
the date of such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to FHLB, inter-bank credit facilities, or any
transaction by a FNFG Subsidiary acting in a fiduciary capacity, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith,
(iii) non-monetary liens affecting real property which do not adversely affect
the value or use of such real property, and (iv) those described and reflected
in the FNFG Financial Statements. FNFG and the FNFG Subsidiaries, as lessee,
have the right under valid and subsisting leases of real and personal properties
used by FNFG and its Subsidiaries in the conduct of their businesses to occupy
or use all such properties as presently occupied and used by each of them.
5.9.2. FNFG and each FNFG Subsidiary currently maintain insurance
considered by FNFG to be reasonable for their respective operations.
5.10. Legal Proceedings.
Except as disclosed in FNFG DISCLOSURE SCHEDULE 5.10, neither FNFG nor any
FNFG Subsidiary is a party to any, and there are no pending or, to the Knowledge
of FNFG, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature (i) against FNFG or any FNFG Subsidiary, (ii) to
which FNFG or any FNFG Subsidiary's assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which would reasonably be expected to adversely affect
the ability of FNFG to perform under this Agreement, except for any proceeding,
claim, action, investigation or inquiry which, if adversely determined,
individually or in the aggregate, would not be reasonably expected to have a
Material Adverse Effect.
5.11. Compliance With Applicable Law.
5.11.1. To the Knowledge of FNFG, each of FNFG and each FNFG
Subsidiary is in compliance in all material respects with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable to it, its properties, assets and
deposits, its business, and its conduct of business and its relationship with
its employees, including, without limitation, the USA Patriot Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act of
1977, the Home Mortgage Disclosure Act, and all other applicable fair lending
laws and other laws relating to discriminatory business practices, and neither
FNFG nor any FNFG Subsidiary has received any written notice to the contrary.
5.11.2. Each of FNFG and each FNFG Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
42
authority, orders and approvals are in full force and effect and, to the
Knowledge of FNFG, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the Regulatory Approvals.
5.11.3. For the period beginning January 1, 2001, neither FNFG nor
any FNFG Subsidiary has received any written notification or, to the Knowledge
of FNFG, any other communication from any Bank Regulator (i) asserting that FNFG
or any FNFG Subsidiary is not in material compliance with any of the statutes,
regulations or ordinances which such Bank Regulator enforces; (ii) threatening
to revoke any license, franchise, permit or governmental authorization which is
material to FNFG or First Niagara Bank or First Niagara Commercial Bank; (iii)
requiring or threatening to require FNFG or any FNFG Subsidiary, or indicating
that FNFG or any FNFG Subsidiary may be required, to enter into a cease and
desist order, agreement or memorandum of understanding or any other agreement
with any federal or state governmental agency or authority which is charged with
the supervision or regulation of banks or engages in the insurance of bank
deposits restricting or limiting, or purporting to restrict or limit, in any
material respect the operations of FNFG or any FNFG Subsidiary, including
without limitation any restriction on the payment of dividends; or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of FNFG or any FNFG Subsidiary, including without
limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as an "FNFG Regulatory Agreement"). Neither FNFG nor any
FNFG Subsidiary has consented to or entered into any currently effective FNFG
Regulatory Agreement. The most recent regulatory rating given to First Niagara
Bank as to compliance with the CRA is satisfactory or better.
5.11.4. FNFG and each FNFG Subsidiary is in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice.
5.12. Employee Benefit Plans.
5.12.1. FNFG DISCLOSURE SCHEDULE 5.12 includes a list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare benefit plans, fringe benefit plans, employment, severance
and change in control agreements and all other benefit practices, policies and
arrangements maintained by FNFG or any FNFG Subsidiary and in which employees in
general may participate (the "FNFG Compensation and Benefit Plans"). Each FNFG
Compensation and Benefit Plan has been administered in form and in operation, in
all material respects with its terms and all applicable requirements of law and
no notice has been issued by any Governmental Authority questioning or
challenging such compliance. With respect to each of the FNFG Compensation and
Benefit Plans, if applicable, FNFG has provided or made available to HRB copies
of the most recent summary plan description (or other such summary of the terms
of the plan).
43
5.12.2. To the Knowledge of FNFG and except as disclosed in FNFG
DISCLOSURE SCHEDULE 5.12.2, each FNFG Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
COBRA, the Health Insurance Portability and Accountability Act and any
regulations or rules promulgated thereunder, and all material filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other applicable
law have been timely made or any interest, fines, penalties or other impositions
for late filings have been paid in full. Each FNFG Compensation and Benefit Plan
which is a Pension Plan and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and FNFG is not aware of any circumstances which are reasonably likely to result
in revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of FNFG, threatened action, suit or claim relating
to any of the FNFG Compensation and Benefit Plans (other than routine claims for
benefits). Neither FNFG nor any FNFG Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any FNFG Compensation and Benefit
Plan that would reasonably be expected to subject FNFG or any FNFG Subsidiary to
an unpaid tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
5.12.3. No liability to any Governmental Entity, other than PBGC
premiums arising in the ordinary course of business, has been or is expected by
FNFG or any of its Subsidiaries to be incurred with respect to any FNFG
Compensation and Benefit Plan which is a Defined Benefit Plan or with respect to
any ERISA Affiliate Plan currently or formerly maintained by FNFG or any ERISA
Affiliate. To the Knowledge of FNFG, except as set forth in FNFG DISCLOSURE
SCHEDULE 5.12.3, no FNFG Defined Benefit Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of
the last day of the end of the most recent plan year ending prior to the date
hereof. Except as set forth in FNFG DISCLOSURE SCHEDULE 5.12.3, the fair market
value of the assets of each FNFG Defined Benefit Plan exceeds the present value
of the benefits guaranteed under Section 4022 of ERISA under such FNFG Defined
Benefit Plan as of the end of the most recent plan year with respect to the
respective FNFG Defined Benefit Plan ending prior to the date hereof, calculated
on the basis of the actuarial assumptions used in the most recent actuarial
valuation for such FNFG Defined Benefit Plan as of the date hereof; and no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been required to be
filed for any FNFG Defined Benefit Plan within the 12-month period ending on the
date hereof. Neither FNFG nor any of its Subsidiaries has provided, or is
required to provide, security to any FNFG Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code or has taken any action, or omitted to take any action, that has resulted,
or would reasonably be expected to result in the imposition of a lien under
Section 412(n) of the Code or pursuant to ERISA. Neither FNFG, its Subsidiaries,
nor any ERISA Affiliate has contributed to any "multiemployer plan," as defined
in Section 3(37) of ERISA, on or after January 1, 1998. To the Knowledge of
FNFG, there is no pending investigation or enforcement action by any Bank
Regulator with respect to any FNFG Compensation and Benefit Plan or any ERISA
Affiliate Plan.
44
5.12.4. All material contributions required to be made under the
terms of any FNFG Compensation and Benefit Plan or ERISA Affiliate Plan or any
employee benefit arrangements to which FNFG or any FNFG Subsidiary is a party or
a sponsor have been timely made, and all anticipated contributions and funding
obligations are accrued on FNFG's consolidated financial statements to the
extent required by GAAP. FNFG and its Subsidiaries have expensed and accrued as
a liability the present value of future benefits under each applicable FNFG
Compensation and Benefit Plan for financial reporting purposes as required by
GAAP.
5.13. Environmental Matters.
5.13.1. To the Knowledge of FNFG, neither the conduct nor operation
of their business nor any condition of any property currently or previously
owned or operated by any of them (including, without limitation, in a fiduciary
or agency capacity), or on which any of them holds a lien, results or resulted
in a violation of any Environmental Laws that is reasonably likely to impose a
material liability (including a material remediation obligation) upon FNFG or
any of FNFG Subsidiary. To the Knowledge of FNFG, no condition has existed or
event has occurred with respect to any of them or any such property that, with
notice or the passage of time, or both, is reasonably likely to result in any
material liability to FNFG or any FNFG Subsidiary by reason of any Environmental
Laws. Neither FNFG nor any FNFG Subsidiary during the past five years has
received any written notice from any Person that FNFG or any FNFG Subsidiary or
the operation or condition of any property ever owned, operated, or held as
collateral or in a fiduciary capacity by any of them are currently in violation
of or otherwise are alleged to have financial exposure under any Environmental
Laws or relating to Materials of Environmental Concern (including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any Materials of Environmental Concern at, on, beneath, or
originating from any such property) for which a material liability is reasonably
likely to be imposed upon FNFG or any FNFG Subsidiary.
5.13.2. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
FNFG `s Knowledge, threatened, before any court, governmental agency or other
forum against FNFG or any FNFG Subsidiary (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental Law
or (y) relating to the presence of or release (defined herein) into the
environment of any Materials of Environmental Concern (as defined herein),
whether or not occurring at or on a site owned, leased or operated by any of the
FNFG .
5.14. Loan Portfolio.
5.14.1. The allowance for credit losses reflected in FNFG's audited
statement of condition at December 31, 2003 was, and the allowance for credit
losses shown on the balance sheets in FNFG's Securities Documents for periods
ending after December 31, 2003 will be, adequate, as of the dates thereof, under
GAAP.
5.14.2. FNFG DISCLOSURE SCHEDULE 5.14 sets forth a listing, as of
the most recently available date (and in no event later than February 29, 2004),
all loans of FNFG and any FNFG Subsidiary, (1) that are contractually past due
90 days or more in the payment of principal and/or interest, (2) that are on
non-accrual status, (3) that as of the date of this Agreement are classified as
45
"Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful",
"Loss", "Classified", "Criticized", "Watch list" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the obligor thereunder, (4) where a reasonable
doubt exists as to the timely future collectability of principal and/or
interest, whether or not interest is still accruing or the loans are less than
90 days past due, (5) where, during the past three years, the interest rate
terms have been reduced and/or the maturity dates have been extended subsequent
to the agreement under which the loan was originally created due to concerns
regarding the borrower's ability to pay in accordance with such initial terms,
or (6) where a specific reserve allocation exists in connection therewith; and
all assets classified by FNFG or any FNFG Subsidiary as real estate acquired
through foreclosure or in lieu of foreclosure, including in-substance
foreclosures, and all other assets currently held that were acquired through
foreclosure or in lieu of foreclosure. DISCLOSURE SCHEDULE 5.14 may exclude any
individual loan with a principal outstanding balance of less than $100,000.
5.14.3. All loans receivable (including discounts) and accrued
interest entered on the books of FNFG and the each FNFG Subsidiary arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of business, and the notes or other
evidences of indebtedness with respect to such loans (including discounts) are
true and genuine and are what they purport to be. To the Knowledge of FNFG, the
loans, discounts and the accrued interest reflected on the books of FNFG and the
FNFG Subsidiaries are subject to no defenses, set-offs or counterclaims
(including, without limitation, those afforded by usury or truth-in-lending
laws), except as may be provided by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by general principles of equity.
5.14.4. The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
5.15. Securities Documents.
FNFG has made available to HRB copies of its (i) annual reports on Form
10-K for the years ended December 31, 2003, 2002 and 2001, and (ii) proxy
materials used or for use in connection with its meetings of shareholders held
in 2003, 2002 and 2001. Such reports and such proxy materials complied, at the
time filed with the SEC, in all material respects, with the Securities Laws.
5.16. Deposits.
None of the deposits of any FNFG Subsidiary is a "brokered deposit" as
defined in 12 CFR Section 337.6(a)(2).
5.17. Antitakeover Provisions Inapplicable.
The transactions contemplated by this Agreement are not subject to the
requirements of any "moratorium," "control share," "fair price," "affiliate
transactions," "business combination" or other antitakeover laws and regulations
46
of any state, including the provisions of Section 203 of the DGCL applicable to
FNFG or any FNFG Subsidiary. The affirmative vote of a majority of the issued
and outstanding shares of FNFG Common Stock is required to approve this
Agreement and the Merger under FNFG's certificate of incorporation and the DGCL.
5.18. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements, whether
entered into for FNFG's own account, or for the account of one or more of FNFG's
Subsidiaries or their customers, were in all material respects entered into in
compliance with all applicable laws, rules, regulations and regulatory policies,
and to the Knowledge of FNFG, with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of FNFG or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither FNFG
nor any of its Subsidiaries, nor to the Knowledge of FNFG, any other party
thereto, is in breach of any of its obligations under any such agreement or
arrangement in any material respect.
5.19. Brokers, Finders and Financial Advisors.
Neither FNFG nor any FNFG Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person in connection with the transactions contemplated by this
Agreement, except for the retention of Ryan, Beck & Co. by FNFG and the fee
payable pursuant thereto.
5.20. FNFG Common Stock
The shares of FNFG Common Stock to be issued pursuant to this Agreement,
when issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and subject to no
preemptive rights.
5.21. Material Contracts
Neither FNFG nor any FNFG Subsidiary is a party to or subject to: (i) any
collective bargaining agreement with any labor union relating to employees of
FNFG or any FNFG Subsidiary; (ii) any agreement which by its terms limits the
payment of dividends by FNFG or any FNFG Subsidiary, or (iii) any agreement
(other than this Agreement), contract, arrangement, commitment or understanding
(whether written or oral) that restricts or limits in any material way the
conduct of business by FNFG or any FNFG Subsidiary.
5.22. FNFG Information Supplied
The information relating to FNFG and any FNFG Subsidiary to be contained
in the Merger Registration Statement, or in any other document filed with any
Bank Regulator or other Governmental Entity in connection herewith, will not
47
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Merger Registration Statement will comply
with the provisions of the Exchange Act and the rules and regulations thereunder
and the provisions of the Securities Act and the rules and regulations
thereunder, except that no representation or warranty is made by FNFG with
respect to statements made or incorporated by reference therein based on
information supplied by HRB specifically for inclusion or incorporation by
reference in the Merger Registration Statement.
5.23. Trust Accounts
First Niagara Bank and each of its subsidiaries has properly administered
all accounts for which it acts as a fiduciary, including but not limited to
accounts for which it serves as trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable laws and regulations.
Neither First Niagara Bank nor any other FNFG Subsidiary, and to the Knowledge
of FNFG, nor has any of their respective directors, officers or employees,
committed any breach of trust with respect to any such fiduciary account and the
records for each such fiduciary account.
5.24. Fairness Opinion
FNFG has received an opinion from Ryan Beck to the effect that, subject to
the terms, conditions and qualifications set forth therein, as of the date
hereof, the Merger Consideration to be paid by FNFG to the shareholders of HRB
pursuant to this Agreement is fair to FNFG shareholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
ARTICLE VI
COVENANTS OF HRB
6.1. Conduct of Business.
6.1.1. Affirmative Covenants. During the period from the date of
this Agreement to the Effective Time, except with the written consent of FNFG,
which consent will not be unreasonably withheld, conditioned or delayed, HRB
will, and it will cause each HRB Subsidiary to: operate its business, only in
the usual, regular and ordinary course of business; use reasonable efforts to
preserve intact its business organization and assets and maintain its rights and
franchises; and voluntarily take no action which would (i) adversely affect the
ability of the parties to obtain any Regulatory Approval or other approvals of
Governmental Entities required for the transactions contemplated hereby or
materially increase the period of time necessary to obtain such approvals, or
(ii) adversely affect its ability to perform its covenants and agreements under
this Agreement.
6.1.2. Negative Covenants. HRB agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted or
required by this Agreement, set forth in HRB DISCLOSURE SCHEDULE 6.1.2, or
consented to by FNFG in writing (which consent shall not be unreasonably
withheld or delayed), it will not, and it will cause each HRB Subsidiary not to:
48
(A) change or waive any provision of its Certificate of
Incorporation, Charter or Bylaws, except as required by law, or appoint a new
director to the board directors;
(B) change the number of authorized or issued shares of its
capital stock, issue any shares of HRB Common Stock that are held as "treasury
shares" as of the date of this Agreement, or issue or grant any Right or
agreement of any character relating to its authorized or issued capital stock or
any securities convertible into shares of such stock, make any grant or award
under the HRB Option Plan or the HRB Recognition Plan, or split, combine or
reclassify any shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any shares of capital stock, except that (i) HRB may issue
shares of HRB Common Stock upon the valid exercise, in accordance with the
information set forth in HRB DISCLOSURE SCHEDULE 4.3.1, of presently outstanding
HRB Options issued under the HRB Option Plan, (ii) HRB may continue to pay its
regular quarterly cash dividend of $0.08 per share (which may be increased to
$0.09 per share as to the dividend payable in August and November 2004) with
payment and record dates consistent with past practice (provided the declaration
of the last quarterly dividend by HRB prior to the Effective Time and the
payment thereof shall be coordinated with FNFG so that holders of HRB Common
Stock do not receive dividends on both HRB Common Stock and FNFG Common Stock
received in the Merger in respect of such quarter or fail to receive a dividend
on at least one of the HRB Common Stock or FNFG Common Stock received in the
Merger in respect of such quarter), and (iii) any HRB Subsidiary may pay
dividends to its parent company (as permitted under applicable law or
regulations) and the HR REIT may continue to pay dividends on the shares of
preferred stock and common stock issued and outstanding as of the date hereof
consistent with past practice.
(C) enter into, amend in any material respect or terminate any
contract or agreement (including without limitation any settlement agreement
with respect to litigation) except in the ordinary course of business;
(D) other than as set forth in HRB DISCLOSURE SCHEDULE
6.1.2(D), make application for the opening or closing of any, or open or close
any, branch or automated banking facility;
(E) grant or agree to pay any bonus, severance or termination
to, or enter into, renew or amend any employment agreement, severance agreement
and/or supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or employees,
except (i) as may be required pursuant to commitments existing on the date
hereof and set forth on HRB DISCLOSURE SCHEDULES 4.9.1 and 4.13.1, (ii) pay
increases previously authorized by HRB to take effect as of April 1, 2004, which
are set forth in HRB DISCLOSURE SCHEDULE 6.1.2, (iii) as to non-officer
employees, pay increases in the ordinary course of business consistent with past
practice, (iv) the payment of bonuses with respect the fiscal year ended March
31, 2004 consistent with past practice as to amounts and positions covered, the
expenses of which have been accrued in accordance with GAAP as of the date
hereof, (v) the payment immediately prior to the Effective Time of pro-rata
bonuses to employees other than officers who are a party to an employment
agreement with HRBT as of the date hereof (pro rata for the portion of the
fiscal year ending March 31, 2005 that precedes the Effective Time), consistent
with past practice as to amounts and positions covered, the expenses of which
will have been accrued in accordance with GAAP through the date thereof
49
consistent with past practice. Neither HRB nor any HRB Subsidiary shall hire or
promote any employee to a rank having a title of vice president or other more
senior rank or hire any new employee at an annual rate of compensation in excess
of $50,000, provided that HRB or an HRB Subsidiary may hire at-will, non-officer
employees to fill vacancies that may from time to time arise in the ordinary
course of business. In addition, HRB may agree to pay employees of HRB or HRBT,
who are identified by HRB and agreed to by FNFG, a retention bonus in an
individual amount to be agreed to by HRB and FNFG and in an aggregate amount as
to all retention bonuses not in excess of $200,000 or such other amount as the
parties may agree.
(F) enter into or, except as may be required by law,
materially modify any pension, retirement, stock option, stock purchase, stock
appreciation right, stock grant, savings, profit sharing, deferred compensation,
supplemental retirement, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
employees; or make any contributions to any defined contribution or defined
benefit plan not in the ordinary course of business consistent with past
practice;
(G) merge or consolidate HRB or any HRB Subsidiary with any
other corporation; sell or lease all or any substantial portion of the assets or
business of HRB or any HRB Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other person, firm,
association, corporation or business organization other than in connection with
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between HRB,
or any HRB Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any HRB Subsidiary of its certificate of authority to
maintain, or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to establish a new
branch office;
(H) sell or otherwise dispose of the capital stock of HRB or
sell or otherwise dispose of any asset of HRB or of any HRB Subsidiary other
than in the ordinary course of business consistent with past practice; except
for transactions with the FHLB, subject any asset of HRB or of any HRB
Subsidiary to a lien, pledge, security interest or other encumbrance (other than
in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business
and transactions in "federal funds" and the satisfaction of legal requirements
in the exercise of trust powers) other than in the ordinary course of business
consistent with past practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in the ordinary course of
business consistent with past practice;
(I) voluntarily take any action which would result in any of
the representations and warranties of HRB or HRBT set forth in this Agreement
becoming untrue as of any date after the date hereof or in any of the conditions
set forth in Article IX hereof not being satisfied, except in each case as may
be required by applicable law;
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(J) change any method, practice or principle of accounting,
except as may be required from time to time by GAAP (without regard to any
optional early adoption date) or any Bank Regulator responsible for regulating
HRB or HRBT;
(K) waive, release, grant or transfer any material rights of
value or modify or change in any material respect any existing material
agreement or indebtedness to which HRB or any HRB Subsidiary is a party, other
than in the ordinary course of business, consistent with past practice;
(L) purchase any equity securities, or purchase any securities
other than securities (i) rated "A" or higher by either Standard & Poor's
Ratings Services or Moody's Investors Service, (ii) having a face amount of not
more than $5,000,000, (iii) with a weighted average life of not more than five
years and (iv) otherwise in the ordinary course of business consistent with past
practice;
(M) except for commitments issued prior to the date of this
Agreement which have not yet expired and which have been disclosed on the HRB
DISCLOSURE SCHEDULE 6.12(M), and the renewal of existing lines of credit, make
any new loan or other credit facility commitment (including without limitation,
lines of credit and letters of credit) in an amount in excess of $1,500,000 for
a commercial real estate loan or $1,500,000 for a commercial business loan, or
in excess of $750,000 for a residential loan. In addition, the prior approval of
FNFG is required with respect to the foregoing: (i) any new loan or credit
facility commitment in an amount of $750,000 or greater to any borrower or group
of affiliated borrowers whose credit exposure with HRBT, HRB or any HRB
Subsidiary, in the aggregate, exceeds $5,000,000 prior thereto or as a result
thereof; and (ii) any new loan or credit facility commitment in excess of
$750,000 to any person residing, or any property located, outside of New York
State.
(N) except as set forth on the HRB DISCLOSURE SCHEDULE
6.12(N), enter into, renew, extend or modify any other transaction (other than a
deposit transaction) with any Affiliate;
(O) enter into any futures contract, option, interest rate
caps, interest rate floors, interest rate exchange agreement or other agreement
or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(P) except for the execution of this Agreement, and actions
taken or which will be taken in accordance with this Agreement and performance
thereunder, take any action that would give rise to a right of payment to any
individual under any employment agreement;
(Q) make any material change in policies in existence on the
date of this Agreement with regard to: the extension of credit, or the
establishment of reserves with respect to the possible loss thereon or the
charge off of losses incurred thereon; investments; asset/liability management;
or other material banking policies except as may be required by changes in
applicable law or regulations or by a Bank Regulator;
51
(R) except for the execution of this Agreement, and the
transactions contemplated therein, take any action that would give rise to an
acceleration of the right to payment to any individual under any HRB Employee
Plan;
(S) except as set forth in HRB DISCLOSURE SCHEDULE 6.12(S),
make any capital expenditures in excess of $50,000 individually or $100,000 in
the aggregate, other than pursuant to binding commitments existing on the date
hereof and other than expenditures necessary to maintain existing assets in good
repair;
(T) except as set forth in HRB DISCLOSURE SCHEDULE 6.12(T),
purchase or otherwise acquire, or sell or otherwise dispose of, any assets or
incur any liabilities other than in the ordinary course of business consistent
with past practices and policies;
(U) sell any participation interest in any loan (other than
sales of loans secured by one- to four-family real estate that are consistent
with past practice) (and provided that First Niagara Bank will be given the
first opportunity to purchase any loan participation being sold) or OREO
properties (other than sales of OREO which generate a net book loss of not more
than $20,000 per property);
(V) undertake or enter into any lease, contract or other
commitment for its account, other than in the normal course of providing credit
to customers as part of its banking business, involving a payment by HRB or HRBT
of more than $50,000 annually, or containing any financial commitment extending
beyond 24 months from the date hereof;
(W) pay, discharge, settle or compromise any claim, action,
litigation, arbitration or proceeding, other than any such payment, discharge,
settlement or compromise in the ordinary course of business consistent with past
practice that involves solely money damages in the amount not in excess of
$50,000 individually or $100,000 in the aggregate, and that does not create
negative precedent for other pending or potential claims, actions, litigation,
arbitration or proceedings;
(X) foreclose upon or take a deed or title to any commercial
real estate without first conducting a Phase I environmental assessment of the
property or foreclose upon any commercial real estate if such environmental
assessment indicates the presence of a Materials of Environmental Concern;
(Y) purchase or sell any mortgage loan servicing rights other
than in the ordinary course of business consistent with past practice;
(Z) issue any broadly distributed communication of a general
nature to employees (including general communications relating to benefits and
compensation) without prior consultation with FNFG and, to the extent relating
to post-Closing employment, benefit or compensation information without the
prior consent of FNFG (which shall not be unreasonably withheld) or issue any
broadly distributed communication of a general nature to customers without the
prior approval of FNFG (which shall not be unreasonably withheld), except as
required by law or for communications in the ordinary course of business
consistent with past practice that do not relate to the Merger or other
transactions contemplated hereby; or
52
(AA) agree to do any of the foregoing.
6.2. Current Information.
6.2.1. During the period from the date of this Agreement to the
Effective Time, HRB will cause one or more of its representatives to confer with
representatives of FNFG and report the general status of its ongoing operations
at such times as FNFG may reasonably request. HRB will promptly notify FNFG of
any material change in the normal course of its business or in the operation of
its properties and, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving HRB or any HRB Subsidiary. Without limiting the
foregoing, senior officers of FNFG and HRB shall meet on a reasonably regular
basis (expected to be at least monthly) to review the financial and operational
affairs of HRB and its Subsidiaries, in accordance with applicable law, and HRB
shall give due consideration to FNFG's input on such matters, with the
understanding that, notwithstanding any other provision contained in this
Agreement, neither FNFG nor any FNFG Subsidiary shall under any circumstance be
permitted to exercise control of HRB or any HRB Subsidiary prior to the
Effective Time.
6.2.2. HRBT and First Niagara Bank shall meet on a regular basis to
discuss and plan for the conversion of HRBT's data processing and related
electronic informational systems to those used by First Niagara Bank, which
planning shall include, but not be limited to, discussion of the possible
termination by HRBT of third-party service provider arrangements effective at
the Effective Time or at a date thereafter, non-renewal of personal property
leases and software licenses used by HRBT in connection with its systems
operations, retention of outside consultants and additional employees to assist
with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that HRBT shall not be
obligated to take any such action prior to the Effective Time and, unless HRBT
otherwise agrees, no conversion shall take place prior to the Effective Time. In
the event that HRBT takes, at the request of First Niagara Bank, any action
relative to third parties to facilitate the conversion that results in the
imposition of any termination fees or charges, First Niagara Bank shall
indemnify HRBT for any such fees and charges, and the costs of reversing the
conversion process, if for any reason the Merger is not consummated for any
reason other than a breach of this Agreement by HRB, or a termination of this
Agreement under Section 11.1.8 or 11.1.9.
6.2.3. HRBT shall provide First Niagara Bank, within fifteen (15)
business days of the end of each calendar month, a written list of nonperforming
assets (the term "nonperforming assets," for purposes of this subsection, means
(i) loans that are "troubled debt restructuring" as defined in Statement of
Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate owned,
(iv) all loans ninety (90) days or more past due) as of the end of such month
and (iv) and impaired loans. On a monthly basis, HRB shall provide First Niagara
Bank with a schedule of all loan approvals, which schedule shall indicate the
loan amount, loan type and other material features of the loan.
6.2.4. HRB shall promptly inform FNFG upon receiving notice of any
legal, administrative, arbitration or other proceedings, demands, notices,
53
audits or investigations (by any federal, state or local commission, agency or
board) relating to the alleged liability of HRB or any HRB Subsidiary under any
labor or employment law.
6.3. Access to Properties and Records.
Subject to Section 12.1 hereof, HRB shall permit FNFG reasonable access
upon reasonable notice to its properties and those of the HRB Subsidiaries, and
shall disclose and make available to FNFG during normal business hours all of
its books, papers and records relating to the assets, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' (other
than minutes that discuss any of the transactions contemplated by this Agreement
or any other subject matter HRB reasonably determines should be treated as
confidential) and shareholders' meetings, organizational documents, Bylaws,
material contracts and agreements, filings with any regulatory authority,
litigation files, plans affecting employees, and any other business activities
or prospects in which FNFG may have a reasonable interest; provided, however,
that HRB shall not be required to take any action that would provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights or business interests or confidences of any customer or
other person or would result in the waiver by it of the privilege protecting
communications between it and any of its counsel. HRB shall provide and shall
request its auditors to provide FNFG with such historical financial information
regarding it (and related audit reports and consents) as FNFG may reasonably
request for securities disclosure purposes. FNFG shall use commercially
reasonable efforts to minimize any interference with HRB's regular business
operations during any such access to HRB's property, books and records. HRB and
each HRB Subsidiary shall permit FNFG, at its expense, to cause a "phase I
environmental audit" and a "phase II environmental audit" to be performed at any
physical location owned or occupied by HRB or any HRB Subsidiary. In the event
any subsurface or phase II site assessments are conducted, FNFG shall indemnify
HRB and its Subsidiaries for all costs and expenses associated with returning
the property to its previous condition.
6.4. Financial and Other Statements.
6.4.1. Promptly upon receipt thereof, HRB will furnish to FNFG
copies of each annual, interim or special audit of the books of HRB and the HRB
Subsidiaries made by its independent auditors and copies of all internal control
reports submitted to HRB by such auditors in connection with each annual,
interim or special audit of the books of HRB and the HRB Subsidiaries made by
such auditors.
6.4.2. As soon as reasonably available, but in no event later than
the date such documents are filed with the SEC, HRB will deliver to FNFG the
Securities Documents filed by it with the SEC under the Securities Laws. HRB
will furnish to FNFG copies of all documents, statements and reports as it or
any HRB Subsidiary shall send to its shareholders, the FDIC, the FRB, the
Department or any other regulatory authority, except as legally prohibited
thereby. Within 25 days after the end of each month, HRB will deliver to FNFG a
consolidated balance sheet and a consolidated statement of income, without
related notes, for such month prepared in accordance with current financial
reporting practices.
54
6.4.3. HRB will advise FNFG promptly of the receipt of any
examination report of any Bank Regulator with respect to the condition or
activities of HRB or any of the HRB Subsidiaries.
6.4.4. With reasonable promptness, HRB will furnish to FNFG such
additional financial data that HRB possesses and as FNFG may reasonably request,
including without limitation, detailed monthly financial statements and loan
reports.
6.5. Maintenance of Insurance.
HRB shall maintain, and cause each HRB Subsidiary to maintain, insurance
in such amounts as are reasonable to cover such risks as are customary in
relation to the character and location of theirs properties and the nature of
their business
6.6. Disclosure Supplements.
From time to time prior to the Effective Time, HRB will promptly
supplement or amend the HRB DISCLOSURE SCHEDULE delivered in connection herewith
with respect to any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth or
described in such HRB DISCLOSURE SCHEDULE or which is necessary to correct any
information in such HRB DISCLOSURE SCHEDULE which has been rendered materially
inaccurate thereby. No supplement or amendment to such HRB DISCLOSURE SCHEDULE
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Article IX.
6.7. Consents and Approvals of Third Parties.
HRB shall use all commercially reasonable efforts to obtain as soon as
practicable all consents and approvals necessary or desirable for the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, HRB shall utilize the services of a
professional proxy soliciting firm to provide assistance in obtaining the
shareholder vote required to be obtained by it hereunder.
6.8. All Reasonable Efforts.
Subject to the terms and conditions herein provided, HRB agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
6.9. Failure to Fulfill Conditions.
In the event that HRB determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify FNFG.
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6.10. No Solicitation.
From and after the date hereof until the termination of this Agreement,
neither HRB, nor any HRB Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by HRB or any
of its Subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries, or authorize or permit any of its
officers, directors, or employees or any of its subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative retained
by any of its subsidiaries to take any such action, and HRB shall notify FNFG
orally (within one business day) and in writing (as promptly as practicable) of
all of the relevant details relating to all inquiries and proposals which it or
any of its Subsidiaries or any such officer, director, employee, investment
banker, financial advisor, attorney, accountant or other representative may
receive relating to any of such matters, provided, however, that nothing
contained in this Section 6.10 shall prohibit the Board of Directors of HRB from
furnishing information to, or entering into discussions or negotiations with any
person or entity that makes an unsolicited written proposal to acquire HRB
pursuant to a merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction, if, and only to the
extent that, (A) the Board of Directors of HRB has consulted with its
independent financial advisor as to whether such proposal may be or could be
superior to the Merger from a financial point-of-view to HRB's shareholders, (B)
the Board of Directors of HRB, after consultation with and after considering the
advice of independent legal counsel, determines in good faith that the failure
to furnish information to or enter into discussions with such person may cause
the Board of Directors of HRB to breach its fiduciary duties to shareholders
under applicable law; (C) such Acquisition Proposal was not solicited by HRB and
did not otherwise result from a breach of this Section 6.10 by HRB (such
proposal that satisfies (A), (B) and (C) being referred to herein as a "Superior
Proposal"); (D) HRB promptly notifies FNFG of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with HRB or any of its
representatives indicating, in connection with such notice, the name of such
person and the material terms and conditions of any inquiries, proposals or
offers, and receives from such person or entity an executed confidentiality
agreement in form and substance identical in all material respects to the
confidentiality agreement that HRB and FNFG entered into; and (E) the HRB
Shareholders Meeting has not occurred. For purposes of this Agreement,
"Acquisition Proposal" shall mean any proposal or offer as to any of the
following (other than the transactions contemplated hereunder) involving HRB or
any of its subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transactions; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 25% or more of the
consolidated assets of HRB, in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 25% or more of the outstanding
shares of capital stock of HRB or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
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6.11. Reserves and Merger-Related Costs.
HRB agrees to consult with FNFG with respect to its loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves). FNFG and HRB shall also consult with respect to the
character, amount and timing of restructuring charges to be taken by each of
them in connection with the transactions contemplated hereby and shall take such
charges as FNFG shall reasonably request and which are not inconsistent with
GAAP, provided that no such actions need be effected until FNFG shall have
irrevocably certified to HRB that all conditions set forth in Article IX to the
obligation of FNFG to consummate the transactions contemplated hereby (other
than the delivery of certificates or opinions) have been satisfied or, where
legally permissible, waived.
6.12. Board of Directors and Committee Meetings.
HRB and HRBT shall permit representatives of FNFG (no more than two) to
attend any meeting of the Board of Directors of HRB and/or HRBT or the Executive
and Loan Committees thereof as an observer (the "Observer"), provided that
neither HRB nor HRBT shall be required to permit the FNFG representative to
remain present during any confidential discussion of this Agreement and the
transactions contemplated hereby or any third party proposal to acquire control
of HRB or HRBT or during any other matter that the respective Board of Directors
has reasonably determined to be confidential with respect to FNFG's
participation.
ARTICLE VII
COVENANTS OF FNFG
7.1. Conduct of Business.
During the period from the date of this Agreement to the Effective Time,
except with the written consent of HRB, which consent will not be unreasonably
withheld, FNFG will, and it will cause each FNFG Subsidiary to: conduct its
business only in the usual, regular and ordinary course consistent with past
practices; use reasonable efforts to preserve intact its business organization
and assets and maintain its rights and franchises; and voluntarily take no
action that would: (i) adversely affect the ability of the parties to obtain the
Regulatory Approvals or materially increase the period of time necessary to
obtain such approvals; (ii) adversely affect its ability to perform its
covenants and agreements under this Agreement; (iii) result in the
representations and warranties contained in Article V of this Agreement not
being true and correct on the date of this Agreement or at any future date on or
prior to the Closing Date or in any of the conditions set forth in Article IX
hereof not being satisfied; (iv) change or waive any provision of its
Certificate of Incorporation, except as required by law; (v) change any method,
practice or principle of accounting, except as may be required from time to time
by GAAP (without regard to any optional early adoption date) or any Bank
Regulator responsible for establishing regulatory accounting principles; or (vi)
result in the declaration, setting aside or payment of any extraordinary
dividend or other distribution in respect of its capital stock.
7.2. Current Information.
During the period from the date of this Agreement to the Effective Time,
FNFG will cause one or more of its representatives to confer with
representatives of HRB and report the general status of its financial condition,
operations and business and matters relating to the completion of the
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transactions contemplated hereby, at such times as HRB may reasonably request.
FNFG will promptly notify HRB, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution of material
litigation involving FNFG and any FNFG Subsidiary. FNFG will consult with HRB in
advance with respect to any proposed material change in the business or
operations of FNFG and with respect to any material strategic activities of
FNFG. FNFG shall be reasonably responsive to requests by HRB for access to such
information and personnel regarding FNFG and its Subsidiaries as may be
reasonably necessary for HRB to confirm that the representations and warranties
of FNFG contained herein are true and correct and that the covenants of FNFG
contained herein have been performed in all material respects; provided,
however, that FNFG shall not be required to take any action that would provide
access to or to disclose information where such access or disclosure, in FNFG's
reasonable judgment, would interfere with the normal conduct of FNFG's business
or would violate or prejudice the rights or business interests or confidences of
any customer or other person or would result in the waiver by it of the
privilege protecting communications between it and any of its counsel. FNFG will
locate at least one significant operational function (e.g., loan servicing and
collections) in Hudson, New York following the Effective Time and will consult
with HRB and HRBT in this regard during the period from the date of this
Agreement to the Effective Time.
7.3. Financial and Other Statements.
As soon as reasonably available, but in no event later than the date such
documents are filed with the SEC, FNFG will deliver to HRB the Securities
Documents filed by it with the SEC under the Securities Laws. FNFG will furnish
to HRB copies of all documents, statements and reports as it or FNFG file with
the OTS or any other Bank Regulator authority with respect to the Merger. FNFG
will furnish to HRB copies of all documents, statements and reports as it or any
FNFG Subsidiary sends to the shareholders of FNFG. FNFG will advise HRB promptly
of the receipt of any examination report of any Bank Regulator with respect to
the condition or activities of FNFG or any of the FNFG Subsidiaries.
7.4. Disclosure Supplements.
From time to time prior to the Effective Time, FNFG will promptly
supplement or amend the FNFG DISCLOSURE SCHEDULE delivered in connection
herewith with respect to any material matter hereafter arising which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such FNFG DISCLOSURE SCHEDULE or which
is necessary to correct any information in such FNFG DISCLOSURE SCHEDULE which
has been rendered inaccurate thereby. No supplement or amendment to such FNFG
DISCLOSURE SCHEDULE shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
7.5. Consents and Approvals of Third Parties.
FNFG shall use all commercially reasonable efforts to obtain as soon as
practicable all consents and approvals, including the approval of the
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shareholders of FNFG, necessary or desirable for the consummation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, FNFG shall utilize the services of a professional proxy
soliciting firm to provide assistance in obtaining the shareholder vote required
to be obtained by it hereunder.
7.6. All Reasonable Efforts.
Subject to the terms and conditions herein provided, FNFG agrees to use
all commercially reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
7.7. Failure to Fulfill Conditions.
In the event that FNFG determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify HRB.
7.8. Employee Benefits.
7.8.1. FNFG agrees that it will honor all HRB Compensation and
Benefit Plans in accordance with their terms as in effect immediately before the
Effective Time, subject to any amendment or termination thereof that may be
required by the terms of this Agreement. FNFG will review all other HRB
Compensation and Benefit Plans to determine whether to maintain, terminate or
continue such plans. FNFG and HRB agree that HRB shall cause HRBT to take such
action as is necessary to freeze the HRBT Defined Benefit Plan as of December
31, 2004, including issuing the notice to participants required under 204(h) of
ERISA. In the event employee compensation and/or benefits as currently provided
by HRB or any HRB Subsidiary are changed or terminated by FNFG, in whole or in
part, FNFG shall provide Continuing Employees (as defined below) with
compensation and benefits that are, in the aggregate, substantially similar to
the compensation and benefits provided to similarly situated employees of FNFG
or applicable FNFG Subsidiary (as of the date any such compensation or benefit
is provided). Employees of HRB or any HRB Subsidiary who become participants in
an FNFG Compensation and Benefit Plan shall, for purposes of determining
eligibility for and for any applicable vesting periods of such employee benefits
only (and not for benefit accrual purposes unless specifically set forth herein)
be given credit for meeting eligibility and vesting requirements in such plans
for service as an employee of HRB or HRBT or any predecessor thereto prior to
the Effective Time, provided, however, that credit for prior service shall not
be given for any purpose under the FNFG ESOP, and provided further, that credit
for benefit accrual purposes will be given only for purposes of FNFG vacation
policies or programs and for purposes of the calculation of severance benefits
under any severance compensation plan of FNFG. This Agreement shall not be
construed to limit the ability of FNFG or First Niagara Bank to terminate the
employment of any employee or to review employee benefits programs from time to
time and to make such changes as they deem appropriate.
7.8.2. The HRB Employee Stock Ownership Plan (the "HRB ESOP") shall
be terminated as of, or immediately prior to, the Effective Time (all shares
held by the ESOP shall be converted into the right to receive the Merger
Consideration), all outstanding HRB ESOP indebtedness shall be repaid, and the
balance shall be allocated as earnings of the HRB ESOP and distributed to HRB
ESOP participants who are employed by HRB or any HRB Subsidiary at or
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immediately prior to the Merger Effective Time (subject to the receipt of a
favorable determination letter from the IRS), as provided for in the HRB ESOP
and unless otherwise required by applicable law. In accordance herewith, HRB
shall amend the HRB ESOP to cause all account balances to be distributed in the
form of lump sum distributions following the receipt of a favorable
determination letter from the IRS on the termination of the ESOP. Prior to the
Effective Time, HRB and HRBT, and following the Effective Time, FNFG shall use
their respective best efforts in good faith to obtain such favorable
determination letter (including, but not limited to, making such changes to the
ESOP and the proposed allocations as may be requested by the IRS as a condition
to its issuance of a favorable determination letter). HRB and HRBT, and
following the Effective Time, FNFG and First Niagara Bank, will adopt such
amendments to the HRB ESOP as may be reasonably required by this Section 7.8.2
or by the IRS as a condition to granting such favorable determination letter on
termination. Neither HRB or HRBT, or following the Effective Time, FNFG or First
Niagara Bank shall make any distribution from the HRB ESOP relating to the
termination of the ESOP, except as may be required by applicable law, until
receipt of such favorable determination letter. In the case of a conflict
between the terms of this Section and the terms of the HRB ESOP, the terms of
the HRB ESOP shall control, however, in the event of any such conflict, HRB and
HRBT before the Merger, and FNFG after the Merger, shall use their best efforts
to cause the ESOP to be amended to conform to the requirements of this Section.
7.8.3. The payments required to be made under the employment
agreements between (i) HRB and/or HRBT and (ii) each of the following
individuals, Carl A. Florio ("Florio"), Sidney Richter ("Richter") Timothy E.
Blow ("Blow"), James F. Mackerer ("Mackerer") and Michael Mackay ("Mackay"),
shall be made, unless otherwise set forth herein, immediately prior to the
Effective Time, and in accordance with the principles set forth in the
employment agreements and HRB DISCLOSURE SCHEDULE 7.8.3. Each of the executives
referenced in this Section 7.8.3 entitled to a payment under the employment
agreements (other than Carl A. Florio) shall sign an acknowledgement in
connection with the execution of this Agreement, which shall be included in HRB
DISCLOSURE SCHEDULE 7.8.3, agreeing to the application of the principles set
forth in this Section. In addition, contemporaneously with the execution of this
Agreement, Carl A. Florio shall enter into an acknowledgment attached to HRB
DISCLOSURE SCHEDULE 7.8.3 whereby he agrees to exercise a number of his vested
options previously granted to him on or before December 31, 2003, as set forth
on HRB DISCLOSURE SCHEDULE 3.4 in accordance with paragraph 1 of such
acknowledgement included in HRB DISCLOSURE SCHEDULE 7.8.3. Further such
acknowledgment and release shall specifically acknowledge that the income
recognized pursuant to the exercises contemplated by this Section shall not be
included in the calculation of the amounts payable under Section 9 or 11 of
either employment agreement or under the BRP. If requested by FNFG prior to
December 1, 2004, HRB shall take such action under its 1998 Recognition and
Retention Plan to accelerate the vesting of such outstanding stock awards and to
one or more of the individuals specified above in this Section 7.8.3, to a date
that is on or prior to December 31, 2004, provided, however, that the
acceleration of restricted stock shall not be considered compensation, annual
compensation or base cash compensation for purposes of increasing any payment
made under any such employment, severance or change in control agreement to
which such person is a party. In addition, if requested by FNFG prior to
December 1, 2004, all or a portion of the cash payment to be made pursuant to
Section 9 and 11 of one or more of the employment agreements referenced in this
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Section 7.8.3 shall be accelerated and paid by HRB or HRBT, as applicable, prior
to December 31, 2004, provided, however, that the acceleration of such amounts
shall not be considered compensation, annual compensation or base cash
compensation for purposes of increasing any payment made under any such
employment, severance or change in control agreement to which such person is a
party, and provided that FNFG shall have certified to HRB that all conditions
set forth in Article IX to the obligation of FNFG to consummate the transactions
contemplated by this Agreement (other than the delivery of certificates and
opinions) have been satisfied or, where permissible, waived. At the time of
payment of the amounts set forth in Sections 9 and if applicable, Section 11 of
the employment agreements referenced in this Section 7.8.3, each executive shall
enter into an acknowledgment and release, satisfactory in form to FNFG,
acknowledging that no further payments are due under such sections and releasing
HRB, HRBT, FNFG and First Niagara from any and all claims arising thereunder.
7.8.4. Contemporaneously with the execution of this Agreement, HRB
and HRBT shall obtain from each executive covered by a change in control
severance agreement that provides for the payment of up to 200% of such persons
"base amount" as determined under Code Section 280G a consent to the assignment
of such agreement to FNFG or First Niagara Bank, and setting forth their
understanding and agreement to the method of calculation of the benefits
thereunder, including the inability of FNFG and/or First Niagara Bank to provide
disability insurance coverage. Within fifteen (15) days following the execution
of this Agreement, HRB and HRBT shall use their best efforts to obtain such
consents and acknowledgments from each other executive covered by a change in
control severance agreement. At the time of payment of a cash severance payment
in accordance with the terms of a change in control severance agreement, the
affected executive shall enter into an acknowledgment and release, satisfactory
in form to FNFG, acknowledging that no further payments are due under such
agreements (other than the welfare benefit payments that an executive may be
entitled to under such agreement) and releasing HRB, HRBT, FNFG and First
Niagara from any and all claims arising thereunder (other than claims for such
welfare benefits).
7.8.5. FNFG shall honor in accordance with its terms HRBT Employee
Change in Control Severance Plan, provided however, that prior to the Closing
Date, HRBT shall amend the Employee Severance Compensation Plan to cover any
employee at the assistant vice-president level or above who is not otherwise
covered by an employment or change in control severance agreement and to require
any employee receiving a severance benefit thereunder to execute an
acknowledgment and release of employment-related claims (excluding claims for
employee benefits due and payable after the date of execution of the release),
in a form satisfactory to FNFG and First Niagara Bank. Any employees of HRB or
any HRB Subsidiary who are not parties to an employment, change in control or
severance agreement or contract providing severance payments and who are not
covered under the HRBT Employee Severance Compensation Plan shall at the
Effective Time be covered by and eligible to receive severance benefits under
the severance plan or policy of FNFG applicable to its employees generally, in
accordance with the terms of such plan or policy.
7.8.6. In the event of any termination or consolidation of any HRB
health plan with any FNFG health plan, FNFG shall make available to employees of
HRB or any HRB Subsidiary who continue employment with FNFG or a FNFG Subsidiary
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("Continuing Employees") and their dependents employer-provided health coverage
on the same basis as it provides such coverage to FNFG employees. Unless a
Continuing Employee affirmatively terminates coverage under a HRB health plan
prior to the time that such Continuing Employee becomes eligible to participate
in the FNFG health plan, no coverage of any of the Continuing Employees or their
dependents shall terminate under any of the HRB health plans prior to the time
such Continuing Employees and their dependents become eligible to participate in
the health plans, programs and benefits common to all employees of FNFG and
their dependents. In the event of a termination or consolidation of any HRB
health plan, terminated HRB employees and qualified beneficiaries will have the
right to continued coverage under group health plans of FNFG in accordance with
Code Section 4980B(f), consistent with the provisions below. In the event of any
termination of any HRB health plan, or consolidation of any HRB health plan with
any FNFG health plan, any coverage limitation under the FNFG health plan due to
any pre-existing condition shall be waived by the FNFG health plan to the degree
that such condition was covered by the HRB health plan and such condition would
otherwise have been covered by the FNFG health plan in the absence of such
coverage limitation. All HRB Employees who cease participating in an HRB health
plan and become participants in a comparable FNFG health plan shall receive
credit for any co-payment and deductibles paid under HRB's health plan for
purposes of satisfying any applicable deductible or out-of-pocket requirements
under the FNFG health plan, upon substantiation, in a form satisfactory to FNFG
that such co-payment and/or deductible has been satisfied.
7.8.7. The payments required to be made pursuant to the HRBT Benefit
Restoration Plan ("BRP") shall made be in accordance with the following
principles: (a) the payments shall be made in accordance with the methodology
set forth in the executive acknowledgments executed contemporaneously with this
Agreement and included in HRB DISCLOSURE SCHEDULE 7.8.3; (b) no contributions
(other than earnings credited) shall be credited under Section 3.2 of the BRP
after the execution date of the First Amendment to the BRP, and (c) no payment
shall be made under Section 3.4 of the BRP. At the election of FNFG, the
determination of the amounts accrued or to be accrued under the BRP from the
execution date of this Agreement through the Effective Time shall be subject to
the review and approval of KPMG or other similar independent accounting firm.
Immediately before the Effective Time, HRB and/or HRBT shall take such action as
is necessary to terminate the BRP, effective as of the Effective Time, and to
cause First Niagara to become the administrator of the HRBT Supplemental
Retirement and Benefit Restoration Plan at the Effective Time. Each of the
executives entitled to a payment under the HRBT BRP shall sign an
acknowledgement in connection with the execution of this Agreement, which shall
be included in HRB DISCLOSURE SCHEDULE 7.8.7, agreeing to the application of the
principles set forth in this Section and the method of payment of the account
balances under the BRP.
7.8.8. HRB shall cause HRBT to terminate all HRBT Non-qualified
Deferred Compensation Agreements, including the Non-qualified Deferred Stock
Compensation Agreements, with its officers and directors, effective immediately
prior to the Effective Time. The amounts owed thereunder including reasonable
interest (which in the case of such agreements, other than the Non-qualified
Deferred Stock Compensation Agreements, is set forth in the agreement), shall be
paid in three (3) annual installments commencing at the Effective Time and
continuing on each anniversary of the Effective Time. HRBT shall use its best
efforts to obtain an acknowledgment and release at the Effective Time from each
officer and director who receives a payment under a Deferred Compensation
Agreement that the payment is in full satisfaction of the amounts due and owing
thereunder.
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7.8.9. HRB shall cause HRBT to use its best efforts to obtain the
agreement of the participant in the Supplemental Executive Retirement Plan to
terminate such plan and to distribute the benefits thereunder in a lump sum
payment in cash. HRBT shall use its best efforts to obtain an acknowledgment and
release of the executive at the time of such payment, that such payment is in
full satisfaction of the amounts due and owing thereunder.
7.8.10. The Consulting Agreement between Harry L. Robinson and HRB
shall be terminated as of the Effective Time and the present value of the
remaining payments due and owing thereunder shall be paid as of the Effective
Time. The Non-Competition Agreement between HRB and Harry L. Robinson shall
continue in full force and effect for the remainder of the period set forth
therein, or until May 1, 2006, and HRB and Harry L. Robinson shall enter into a
consent to the assignment of the Non-Competition Agreement contemporaneously
with the execution of this Agreement.
7.8.11. HRB shall take such action as is necessary to terminate the
1998 Recognition and Retention Plan immediately prior to the Effective Time and
to accelerate the vesting of all unvested shares of restricted stock to the
participants therein as of the Effective Time. HRB shall use its best efforts to
obtain acknowledgments that the restricted stock and other payments made
thereunder are in full satisfaction of all amounts due and owing to such persons
under the Recognition and Retention Plan.
7.9. Directors and Officers Indemnification and Insurance.
7.9.1. FNFG shall maintain, or shall cause First Niagara Bank to
maintain, in effect for six years following the Effective Time, the current
directors' and officers' liability insurance policies covering the officers and
directors of HRB (provided, that FNFG may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring at or prior to the Effective
Time; provided, however, that in no event shall FNFG be required to expend
pursuant to this Section 7.9.1 more than 175% of the annual cost currently
expended by HRB with respect to such insurance (the "Maximum Amount"); provided,
further, that if the amount of the annual premium necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, FNFG shall maintain
the most advantageous policies of directors' and officers' insurance obtainable
for a premium equal to the Maximum Amount. In connection with the foregoing, HRB
agrees in order for FNFG to fulfill its agreement to provide directors and
officers liability insurance policies for six years to provide such insurer or
substitute insurer with such reasonable and customary representations as such
insurer may request with respect to the reporting of any prior claims.
7.9.2. In addition to 7.9.1, for a period of six years after the
Effective Time, FNFG shall indemnify, defend and hold harmless each person who
is now, or who has been at any time before the date hereof or who becomes before
the Effective Time, an officer, director or employee of HRB or a HRB Subsidiary
(the "Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorney's fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of FNFG,
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which consent shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal, or
administrative (each a "Claim"), in which an Indemnified Party is, or is
threatened to be made, a party or witness in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of HRB or a HRB Subsidiary if such Claim pertains to any matter of
fact arising, existing or occurring at or before the Effective Time (including,
without limitation, the Merger and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, or after, the
Effective Time (the "Indemnified Liabilities"), to the fullest extent permitted
under applicable state or Federal law, FNFG's Certificate of Incorporation and
Bylaws, and under HRB's Certificate of Incorporation or Charter and Bylaws. FNFG
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by applicable
state or Federal law upon receipt of an undertaking to repay such advance
payments if he shall be adjudicated or determined to be not entitled to
indemnification in the manner set forth below. Any Indemnified Party wishing to
claim indemnification under this Section 7.9.2 upon learning of any Claim, shall
notify FNFG (but the failure so to notify FNFG shall not relieve it from any
liability which it may have under this Section 7.9.2, except to the extent such
failure materially prejudices FNFG) and shall deliver to FNFG the undertaking
referred to in the previous sentence. In addition FNFG acknowledges the
obligations of HRB pursuant to HRB's previous acquisitions of or mergers with
other financial institutions.
7.9.3. In the event that either FNFG or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving bank or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of FNFG shall assume the obligations set forth in this
Section 7.9.
7.9.4. The obligations of FNFG provided under this Section 7.9 are
intended to be enforceable against FNFG directly by the Indemnified Parties and
shall be binding on all respective successors and permitted assigns of FNFG.
7.10. Stock Listing.
FNFG agrees to list on the Nasdaq (or such other national securities
exchange on which the shares of the FNFG Common Stock shall be listed as of the
date of consummation of the Merger), subject to official notice of issuance, the
shares of FNFG Common Stock to be issued in the Merger.
7.11. Stock and Cash Reserve.
FNFG agrees at all times from the date of this Agreement until the Merger
Consideration has been paid in full to reserve a sufficient number of shares of
its common stock and to maintain sufficient liquid accounts or borrowing
capacity to fulfill its obligations under this Agreement.
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7.12. Section 16(b) Exemption
FNFG and HRB agree that, in order to most effectively compensate and
retain HRB Insiders (as defined below) in connection with the Merger, both prior
to and after the Effective Time, it is desirable that HRB Insiders not be
subject to a risk of liability under Section 16(b) of the Exchange Act to the
fullest extent permitted by applicable law in connection with the conversion of
shares of HRB Common Stock into shares of FNFG in the Merger, and for that
compensatory and retentive purpose agree to the provisions of this Section 7.12.
Assuming that HRB delivers to FNFG the HRB Section 16 Information (as defined
below) in a timely fashion prior to the Effective Time, the Board of Directors
of FNFG, or a committee of non-employee directors thereof (as such term is
defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably
promptly thereafter and in any event prior to the Effective Time adopt a
resolution providing in substance that the receipt by the HRB Insiders (as
defined below) of FNFG Common Stock in exchange for shares of HRB Common Stock,
pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the HRB Section 16 Information, are intended to be
exempt from liability pursuant to Section 16(b) under the Exchange Act to the
fullest extent permitted by applicable law. "HRB Section 16 Information" shall
mean information accurate in all material respects regarding the HRB Insiders,
the number of shares of HRB Common Stock held by each such HRB Insider and
expected to be exchanged for FNFG Common Stock in the Merger. "HRB Insiders"
shall mean those officers and directors of HRB who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are expected to be
subject to Section 16(a) of the Exchange Act with respect to FNFG Common Stock
subsequent to the Effective Time.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. HRB and FNFG Shareholder Meetings.
8.1.1. HRB will (i) as promptly as practicable after the Merger
Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "HRB Shareholders Meeting"), for the purpose of considering
this Agreement and the Merger, and for such other purposes as may be, in HRB's
reasonable judgment, necessary or desirable, (ii) subject to the next sentence,
have its Board of Directors recommend approval of this Agreement to the HRB
shareholders. The Board of Directors of HRB may fail to make such a
recommendation, or withdraw, modify or change any such recommendation only in
connection with a Superior Proposal, as set forth in Section 6.10 of this
Agreement, and only if such Board of Directors, after having consulted with and
considered the advice of outside counsel to such Board, has determined that the
making of such recommendation, or the failure so to withdraw, modify or change
its recommendation, could reasonably be expected to constitute a breach of the
fiduciary duties of such directors under applicable law; and (iii) cooperate and
consult with FNFG with respect to each of the foregoing matters.
8.1.2. FNFG will (i) as promptly as practicable after the Merger
Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "FNFG Shareholders Meeting"), for the purpose of considering
this Agreement and the Merger, and for such other purposes as may be, in FNFG's
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reasonable judgment, necessary or desirable, (ii) subject to the next sentence,
have its Board of Directors recommend approval of this Agreement to the FNFG
shareholders. The Board of Directors of FNFG may fail to make such a
recommendation, or withdraw, modify or change any such recommendation only if
such Board of Directors, after having consulted with and considered the advice
of outside counsel to such Board, has determined that the making of such
recommendation, or the failure so to withdraw, modify or change its
recommendation, could reasonably be expected to constitute a breach of the
fiduciary duties of such directors under applicable law; and (iii) cooperate and
consult with HRB with respect to each of the foregoing matters.
8.2. Joint Proxy Statement-Prospectus.
8.2.1. For the purposes (x) of registering FNFG Common Stock to be
offered to holders of HRB Common Stock in connection with the Merger with the
SEC under the Securities Act and (y) of holding the HRB Shareholders Meeting and
the FNFG Shareholders Meeting, FNFG shall draft and prepare, and HRB shall
cooperate in the preparation of, the Merger Registration Statement, including a
combined proxy statement and prospectus satisfying all applicable requirements
of applicable state securities and banking laws, and of the Securities Act and
the Exchange Act, and the rules and regulations thereunder (such proxy
statement/prospectus in the form mailed to the HRB and FNFG shareholders,
together with any and all amendments or supplements thereto, being herein
referred to as the "Joint Proxy Statement-Prospectus"). FNFG shall file the
Merger Registration Statement, including the Joint Proxy Statement-Prospectus,
with the SEC. Each of FNFG and HRB shall use their best efforts to have the
Merger Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing, and each of HRB and FNFG shall
thereafter promptly mail the Joint Proxy Statement-Prospectus to its
shareholders. FNFG shall also use its best efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and HRB shall furnish all
information concerning HRB and the holders of HRB Common Stock as may be
reasonably requested in connection with any such action.
8.2.2. HRB shall provide FNFG with any information concerning itself
that FNFG may reasonably request in connection with the drafting and preparation
of the Joint Proxy Statement-Prospectus, and FNFG shall notify HRB promptly of
the receipt of any comments of the SEC with respect to the Joint Proxy
Statement-Prospectus and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to HRB
promptly copies of all correspondence between FNFG or any of their
representatives and the SEC. FNFG shall give HRB and its counsel the opportunity
to review and comment on the Joint Proxy Statement-Prospectus prior to its being
filed with the SEC and shall give HRB and its counsel the opportunity to review
and comment on all amendments and supplements to the Joint Proxy
Statement-Prospectus and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
Each of FNFG and HRB agrees to use all reasonable efforts, after consultation
with the other party hereto, to respond promptly to all such comments of and
requests by the SEC and to cause the Joint Proxy Statement-Prospectus and all
required amendments and supplements thereto to be mailed to the holders of HRB
Common Stock entitled to vote at the HRB Shareholders Meeting hereof at the
earliest practicable time.
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8.2.3. HRB and FNFG shall promptly notify the other party if at any
time it becomes aware that the Joint Proxy Statement-Prospectus or the Merger
Registration Statement contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, HRB shall cooperate with FNFG in the
preparation of a supplement or amendment to such Joint Proxy
Statement-Prospectus that corrects such misstatement or omission, and FNFG shall
file an amended Merger Registration Statement with the SEC, and each of HRB and
FNFG shall mail an amended Joint Proxy Statement-Prospectus to the HRB and the
FNFG shareholders. If requested by FNFG, HRB shall obtain a "comfort" letter
from its independent certified public accountant, dated as of the date of the
Joint Proxy Statement-Prospectus and updated as of the date of consummation of
the Merger, with respect to certain financial information regarding HRB, in form
and substance that is customary in transactions such as the Merger.
8.3. Regulatory Approvals.
Each of HRB and FNFG will cooperate with the other and use all reasonable
efforts to promptly prepare all necessary documentation, to effect all necessary
filings and to obtain all necessary permits, consents, waivers, approvals and
authorizations of the SEC, the Bank Regulators and any other third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement. HRB and FNFG will furnish each other and each other's counsel
with all information concerning themselves, their subsidiaries, directors,
officers and shareholders and such other matters as may be necessary or
advisable in connection with the Joint Proxy Statement-Prospectus and any
application, petition or any other statement or application made by or on behalf
of HRB, FNFG to any Bank Regulatory or governmental body in connection with the
Merger, and the other transactions contemplated by this Agreement. HRB shall
have the right to review and approve in advance all characterizations of the
information relating to HRB and any of its Subsidiaries, which appear in any
filing made in connection with the transactions contemplated by this Agreement
with any governmental body. FNFG shall give HRB and its counsel the opportunity
to review and comment on each filing prior to its being filed with a Bank
Regulator and shall give HRB and its counsel the opportunity to review and
comment on all amendments and supplements to such filings and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, a Bank Regulator.
8.4. Affiliates.
8.4.1. HRB shall use all reasonable efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act) of HRB to deliver to FNFG, as soon as practicable
after the date of this Agreement, and at least thirty (30) days prior to the
date of the HRB Shareholders Meeting, a written agreement, in the form of
Exhibit E hereto, providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of FNFG Common Stock to be received by such
"affiliate," as a result of the Merger otherwise than in compliance with the
applicable provisions of the Securities Act and the rules and regulations
thereunder.
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ARTICLE IX
CLOSING CONDITIONS
9.1. Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, none of which may be waived:
9.1.1. Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite vote of the
shareholders of HRB and FNFG.
9.1.2. Injunctions. None of the parties hereto shall be subject to
any order, decree or injunction of a court or agency of competent jurisdiction
that enjoins or prohibits the consummation of the transactions contemplated by
this Agreement and no statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity or Bank Regulator, that enjoins or prohibits the consummation of the
transactions contemplated by this Agreement.
9.1.3. Regulatory Approvals. All Regulatory Approvals and other
necessary approvals, authorizations and consents of any Governmental Entities
required to consummate the transactions contemplated by this Agreement shall
have been obtained and shall remain in full force and effect and all waiting
periods relating to such approvals, authorizations or consents shall have
expired; and no such approval, authorization or consent shall include any
condition or requirement, excluding standard conditions that are normally
imposed by the regulatory authorities in bank merger transactions, that would,
in the good faith reasonable judgment of the Board of Directors of FNFG,
materially and adversely affect the business, operations, financial condition,
property or assets of the combined enterprise of HRB, HRBT and FNFG or
materially impair the value of HRB or HRBT to FNFG.
9.1.4. Effectiveness of Merger Registration Statement. The Merger
Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Merger Registration Statement
shall have been issued, and no proceedings for that purpose shall have been
initiated or threatened by the SEC and, if the offer and sale of FNFG Common
Stock in the Merger is subject to the blue sky laws of any state, shall not be
subject to a stop order of any state securities commissioner.
9.1.5. Nasdaq Listing. The shares of FNFG Common Stock to be issued
in the Merger shall have been authorized for listing on the Nasdaq, subject to
official notice of issuance.
9.1.6. Tax Opinion. On the basis of facts, representations and
assumptions which shall be consistent with the state of facts existing at the
Closing Date, FNFG shall have received an opinion of Luse Gorman Pomerenk &
Schick, P.C., reasonably acceptable in form and substance to FNFG, and HRB shall
have received an opinion of Silver, Freedman & Taff, reasonably acceptable in
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form and substance to HRB, each dated as of the Closing Date, substantially to
the effect that for federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
the tax opinions described in this Section 9.1.6, the law firms may require and
rely upon customary representations contained in certificates of officers of
FNFG and HRB and their respective Subsidiaries.
9.2. Conditions to the Obligations of FNFG under this Agreement.
The obligations of FNFG under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.5 at
or prior to the Closing Date:
9.2.1. Representations and Warranties. Each of the representations
and warranties of HRB set forth in this Agreement shall be true and correct as
of the date of this Agreement and upon the Effective Time with the same effect
as though all such representations and warranties had been made on the Effective
Time (except to the extent such representations and warranties speak as of an
earlier date), in any case subject to the standard set forth in Section 4.1; and
HRB shall have delivered to FNFG a certificate to such effect signed by the
Chief Executive Officer and the Chief Financial Officer of HRB as of the
Effective Time.
9.2.2. Agreements and Covenants. HRB shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and FNFG shall have received a certificate signed on behalf
of HRB by the Chief Executive Officer and Chief Financial Officer of HRB to such
effect dated as of the Effective Time.
9.2.3. Permits, Authorizations, Etc. HRB shall have obtained any and
all material permits, authorizations, consents, waivers, clearances or approvals
required for the lawful consummation of the Merger and the Bank Merger.
9.2.4. Dissenting Shares. As of immediately prior to the Effective
Time, not more than 10% of the issued and outstanding shares of HRB Common Stock
shall have dissented to the Merger under the DGCL, and preserved, as of
immediately prior to the Effective Time, the right to pursue their right of
appraisal for the fair value of their shares of HRB Common Stock under the DGCL.
9.2.5. No Material Adverse Effect. Since March 31, 2003, no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on HRB.
HRB will furnish FNFG with such certificates of its officers or others and
such other documents to evidence fulfillment of the conditions set forth in this
Section 9.2 as FNFG may reasonably request.
9.3. Conditions to the Obligations of HRB and HRBT under this Agreement.
The obligations of HRB under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.5 at
or prior to the Closing Date:
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9.3.1. Representations and Warranties. Each of the representations
and warranties of FNFG set forth in this Agreement shall be true and correct as
of the date of this Agreement and upon the Effective Time with the same effect
as though all such representations and warranties had been made on the Effective
Time (except to the extent such representations and warranties speak as of an
earlier date), in any case subject to the standard set forth in Section 5.1; and
FNFG shall have delivered to HRB a certificate to such effect signed by the
Chief Executive Officer and the Chief Financial Officer of FNFG as of the
Effective Time.
9.3.2. Agreements and Covenants. FNFG shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and HRB shall have received a certificate signed on behalf
of FNFG by the Chief Executive Officer and Chief Financial Officer to such
effect dated as of the Effective Time.
9.3.3. Permits, Authorizations, Etc. FNFG shall have obtained any
and all material permits, authorizations, consents, waivers, clearances or
approvals required for the lawful consummation of the Merger and the Bank
Merger.
9.3.4. Payment of Merger Consideration. FNFG shall have delivered
the Exchange Fund to the Exchange Agent on or before the Closing Date and the
Exchange Agent shall provide HRB with a certificate evidencing such delivery.
9.3.5. No Material Adverse Effect. Since December 31, 2003, no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on FNFG.
FNFG will furnish HRB with such certificates of their officers or others
and such other documents to evidence fulfillment of the conditions set forth in
this Section 9.3 as HRB may reasonably request.
ARTICLE X
THE CLOSING
10.1. Time and Place.
Subject to the provisions of Articles IX and XI hereof, the Closing of the
transactions contemplated hereby shall take place at the offices of Luse Gorman
Pomerenk & Schick, 5335 Wisconsin Avenue, Suite 400, Washington, D.C. at 10:00
a.m., or at such other place or time upon which FNFG and HRB mutually agree. A
pre-closing of the transactions contemplated hereby (the "Pre-Closing") shall
take place at the offices of Luse Gorman Pomerenk & Schick, 5335 Wisconsin
Avenue, Suite 400, Washington, D.C. at 10:00 a.m. on the day prior to the
Closing Date.
10.2. Deliveries at the Pre-Closing and the Closing.
At the Pre-Closing there shall be delivered to FNFG and HRB the opinions,
certificates, and other documents and instruments required to be delivered at
the Pre-Closing under Article IX hereof. At or prior to the Closing, FNFG shall
have delivered the Merger Consideration as set forth under Section 9.3.4 hereof.
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ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval of the Merger by the shareholders of HRB:
11.1.1. At any time by the mutual written agreement of FNFG and HRB;
11.1.2. By the Board of Directors of either party (provided, that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach by its nature cannot be
cured prior to the Termination Date or shall not have been cured within 30 days
after written notice of such breach by the terminating party to the other party
provided, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 11.1.2 unless the breach of representation or
warranty, together with all other such breaches, would entitle the terminating
party not to consummate the transactions contemplated hereby under Section 9.2.1
(in the case of a breach of a representation or warranty by HRB) or Section
9.3.1 (in the case of a breach of a representation or warranty by FNFG);
11.1.3. By the Board of Directors of either party (provided, that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material failure to perform or comply with any of the covenants or agreements
set forth in this Agreement on the part of the other party, which failure by its
nature cannot be cured prior to the Termination Date or shall not have been
cured within 30 days after written notice of such failure by the terminating
party to the other party provided, however, that neither party shall have the
right to terminate this Agreement pursuant to this Section 11.1.3 unless the
breach of covenant or agreement, together with all other such breaches, would
entitle the terminating party not to consummate the transactions contemplated
hereby under Section 9.2.2 (in the case of a breach of covenant by HRB) or
Section 9.3.2 (in the case of a breach of covenant by FNFG);
11.1.4. At the election of the Board of Directors of either party if
the Closing shall not have occurred by the Termination Date, or such later date
as shall have been agreed to in writing by FNFG and HRB; provided, that no party
may terminate this Agreement pursuant to this Section 11.1.4 if the failure of
the Closing to have occurred on or before said date was due to such party's
material breach of any representation, warranty, covenant or other agreement
contained in this Agreement;
11.1.5. By the Board of Directors of either party if the
shareholders of HRB or the shareholders of FNFG shall have voted at the
respective shareholders meeting on the transactions contemplated by this
Agreement and such vote shall not have been sufficient to approve such
transactions;
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11.1.6. By the Board of Directors of either party if (i) final
action has been taken by a Bank Regulator whose approval is required in
connection with this Agreement and the transactions contemplated hereby, which
final action (x) has become unappealable and (y) does not approve this Agreement
or the transactions contemplated hereby, or (ii) any court of competent
jurisdiction or other governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable;
11.1.7. By the Board of Directors of either party (provided, that
the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section 11.1.4
of this Agreement.
11.1.8. By the Board of Directors of FNFG if HRB has received a
Superior Proposal, and in accordance with Section 6.10 of this Agreement, the
Board of Directors of HRB has entered into an acquisition agreement with respect
to the Superior Proposal, terminated this Agreement, or withdraws its
recommendation of this Agreement, fails to make such recommendation or modifies
or qualifies its recommendation in a manner adverse to FNFG.
11.1.9. By the Board of Directors of HRB if HRB has received a
Superior Proposal, and in accordance with Section 6.10 of this Agreement, the
Board of Directors of HRB has made a determination to accept such Superior
Proposal; provided that HRB shall not terminate this Agreement pursuant to this
Section 11.1.9 and enter in a definitive agreement with respect to the Superior
Proposal until the expiration of five (5) business days following FNFG receipt
of written notice advising FNFG that HRB has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal (and
including a copy thereof with all accompanying documentation, if in writing)
identifying the person making the Superior Proposal and stating whether HRB
intends to enter into a definitive agreement with respect to the Superior
Proposal. After providing such notice, HRB shall provide a reasonable
opportunity to FNFG during the three-day period to make such adjustments in the
terms and conditions of this Agreement as would enable HRB to proceed with the
Merger on such adjusted terms.
11.1.10. By HRB, if its Board of Directors so determines by a
majority vote of the members of its entire Board, at any time during the
five-day period commencing on the Determination Date, such termination to be
effective on the 30th day following such Determination Date ("Effective
Termination Date"), if both of the following conditions are satisfied:
(i) The FNFG Market Value on the Determination Date is less than
$11.59; and
(ii) the number obtained by dividing the FNFG Market Value on the
Determination Date by the Initial FNFG Market Value ("FNFG Ratio") shall
be less than the quotient obtained by dividing the Final Index Price by
the Initial Index Price minus 0.20;
72
subject, however, to the following three sentences. If HRB elects to exercise
its termination right pursuant to this Section 11.1.10, it shall give prompt
written notice thereof to FNFG. During the five business day period commencing
with its receipt of such notice, FNFG shall have the option of paying additional
Merger Consideration in the form of FNFG Common Stock, cash, or a combination of
FNFG Common Stock and cash so that the Aggregate FNFG Share Amount shall be
valued at the lesser of (i) the product of 0.85 and the Initial FNFG Market
Value or (ii) the product obtained by multiplying the Index Ratio by the Initial
FNFG Market Value. If within such five business day period, FNFG delivers
written notice to HRB that it intends to proceed with the Merger by paying such
additional consideration, as contemplated by the preceding sentence, then no
termination shall have occurred pursuant to this Section 11.10 and this
Agreement shall remain in full force and effect in accordance with its terms
(except that the Merger Consideration shall have been so modified).
For purposes of this Section 11.1.10, the following terms shall have the
meanings indicated below:
"Acquisition Transaction" shall mean (i) a merger or consolidation, or any
similar transaction, involving the relevant companies, (ii) a purchase, lease or
other acquisition of all or substantially all of the assets of the relevant
companies, (iii) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of the relevant companies; or (iv) agree or commit to
take any action referenced above.
"Determination Date" shall mean the first date on which all Regulatory
Approvals (and waivers, if applicable) necessary for consummation of the Merger
and the Bank Mergers have been received (disregarding any waiting period).
"Final Index Price" means the sum of the Final Prices for each company
comprising the Index Group multiplied by the weighting set forth opposite such
company's name in the definition of Index Group below.
"Final Price," with respect to any company belonging to the Index Group,
means the average of the daily closing sales prices of a share of common stock
of such company (and if there is no closing sales price on any such day, then
the mean between the closing bid and the closing asked prices on that day), as
reported on the consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded, for the five
consecutive trading days immediately preceding the Determination Date.
"FNFG Market Value" shall be the average of the daily closing sales prices
of a share of FNFG Common Stock as reported on the Nasdaq National Market for
the five consecutive trading days immediately preceding the Determination Date.
"Index Group" means the financial institution holding companies listed
below, the common stock of all of which shall be publicly traded and as to which
there shall not have been an Acquisition Transaction involving such company
publicly announced at any time during the period beginning on the date of this
Agreement and ending on the Determination Date. In the event that the common
stock of any such company ceases to be publicly traded or an Acquisition
Proposal for such company to be acquired, or for such company to acquire another
73
company in transaction with a value exceeding 25% of the acquiror's market
capitalization as reflected in the table below, is announced at any time during
the period beginning on the date of this Agreement and ending on the
Determination Date, such company will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted proportionately
for purposes of determining the Final Index Price and the Initial Index Price.
The financial institution holding companies and the weights attributed to them
are as follows:
Company Name Weight (%) Index Price
---------------------------------- ---------- -----------
Anchor BanCorp Wisconsin Inc. 3.94% 1.00
Bank Mutual Corporation 5.99% 0.67
Commercial Federal Corporation 7.67% 2.12
Dime Community Bancshares, Inc. 5.20% 1.06
First Federal Capital Corp 3.24% 0.69
Independence Community Bank Corp. 15.15% 6.17
MAF Bancorp, Inc. 9.77% 4.25
Provident Financial Services, Inc. 7.66% 1.43
Sterling Financial Corporation 5.07% 1.86
TrustCo Bank Corp NY 6.77% 0.91
Washington Federal, Inc. 13.60% 3.47
Webster Financial Corporation 15.94% 8.08
100.00% 31.71
======
"Initial FNFG Market Value" means the closing sales price of a share of
FNFG Common Stock, as reported on the Nasdaq National Market, on the five
trading days immediately preceding the public announcement of this Agreement,
adjusted as indicated in the last sentence of this Section 11.1.10.
"Initial Index Price" means the sum of the per share closing sales price
of the common stock of each company comprising the Index Group multiplied by the
applicable weighting, as such prices are reported on the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded on the trading day immediately preceding the public
announcement of this Agreement.
"Index Ratio" shall be the Final Index Price divided by the Initial Index
Price.
If FNFG or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the date of this Agreement and
the Determination Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 11.1.10.
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11.2. Effect of Termination.
11.2.1. In the event of termination of this Agreement pursuant to
any provision of Section 11.1, this Agreement shall forthwith become void and
have no further force, except that (i) the provisions of Sections 11.2, 12.1,
12.2, 12.6, 12.9, 12.10, and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect.
11.2.2. If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
(B) In the event of a termination of this Agreement because of
a willful breach of any representation, warranty, covenant or agreement
contained in this Agreement, the breaching party shall remain liable for any and
all damages, costs and expenses, including all reasonable attorneys' fees,
sustained or incurred by the non-breaching party as a result thereof or in
connection therewith or with respect to the enforcement of its rights hereunder.
(C) As a condition of FNFG's willingness, and in order to
induce FNFG, to enter into this Agreement, and to reimburse FNFG for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this Agreement, HRB hereby agrees to pay FNFG,
and FNFG shall be entitled to payment of a fee of $24,000,000 (the "FNFG Fee"),
within three business days after written demand for payment is made by FNFG,
following the occurrence of any of the events set forth below:
(i) HRB terminates this Agreement pursuant to Section 11.1.9 or FNFG
terminates this Agreement pursuant to Section 11.1.8; or
(ii) The entering into a definitive agreement by HRB relating to an
Acquisition Proposal or the consummation of an Acquisition Proposal
involving HRB within twelve months after the occurrence of any of the
following: (i) the termination of the Agreement by FNFG pursuant to
Section 11.1.2 or 11.1.3 because of a willful breach by HRB; or (ii) the
failure of the shareholders of HRB to approve this Agreement after the
occurrence of an Acquisition Proposal.
(D) If demand for payment of the FNFG Fee is made pursuant to
Section 11.2.2(C) and payment is timely made, then FNFG will not have any other
rights or claims against HRB, its Subsidiaries, and their respective officers
and directors, under this Agreement, it being agreed that the acceptance of the
FNFG Fee under Section 11.2.2(C) will constitute the sole and exclusive remedy
of FNFG against HRB and its Subsidiaries and their respective officers and
directors.
(E) As a condition of HRB's willingness, and in order to
induce HRB, to enter into this Agreement, and to reimburse HRB for incurring the
costs and expenses related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, FNFG hereby agrees to pay HRB, and
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HRB shall be entitled to payment of a fee of $24,000,000 (the "HRB Fee"), within
three business days after written demand for payment is made by HRB, if (i)
pursuant to Section 8.1.2 of this Agreement, the FNFG Board of Directors fails
to recommend to the FNFG shareholders the approval of this Agreement at the FNFG
Shareholders Meeting, or withdraws, modifies or changes any such recommendation
of approval in a manner adverse to HRB, and (ii) this Agreement is terminated by
the Board of Directors of either party pursuant to Section 11.1.5 because the
FNFG shareholders fail to approve this Agreement by the requisite vote of the
shareholders at the FNFG Shareholders Meeting.
(F) If demand for payment of the HRB Fee is made pursuant to
Section 11.2.2(E) and payment is timely made, then HRB will not have any other
rights or claims against FNFG, its Subsidiaries, and their respective officers
and directors, under this Agreement, it being agreed that the acceptance of the
HRB Fee under Section 11.2.2(E) will constitute the sole and exclusive remedy of
HRB against FNFG and its Subsidiaries and their respective officers and
directors.
11.3. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time
(whether before or after approval thereof by the shareholders of HRB), the
parties hereto by action of their respective Boards of Directors, may (a) amend
this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of this
Agreement and the transactions contemplated hereby by the shareholders of HRB,
there may not be, without further approval of such shareholders, any amendment
of this Agreement which reduces the amount, value or changes the form of
consideration to be delivered to HRB's shareholders pursuant to this Agreement.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE XII
MISCELLANEOUS
12.1. Confidentiality.
Except as specifically set forth herein, FNFG and HRB mutually agree to be
bound by the terms of the confidentiality agreements dated February 27, 2004
(the "Confidentiality Agreement") previously executed by the parties hereto,
which Confidentiality Agreement is hereby incorporated herein by reference. The
parties hereto agree that such Confidentiality Agreements shall continue in
accordance with their respective terms, notwithstanding the termination of this
Agreement.
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12.2. Public Announcements.
HRB and FNFG shall cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement, and except as may be otherwise required by law, neither HRB nor
FNFG shall issue any news release, or other public announcement or communication
with respect to this Agreement unless such news release, public announcement or
communication has been mutually agreed upon by the parties hereto.
12.3. Survival.
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on and be
terminated and extinguished at the Effective Time, except for those covenants
and agreements contained herein which by their terms apply in whole or in part
after the Effective Time.
12.4. Notices.
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered by receipted hand delivery or mailed by
prepaid registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to HRB, to: Carl A. Florio
President and Chief Executive Officer
Hudson River Bancorp, Inc.
One Hudson City Centre
Hudson, New York 12534
Fax: (518) 822-1419
With required copies to: Barry Taff, Esq.
Silver, Freedman & Taff
1100 New York Avenue, N.W.
Washington, DC 20005
Fax: (202) 337-5502
If to FNFG, to: Paul J. Kolkmeyer
President and Chief Executive Officer
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
Fax: (716) 625-8673
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With required copies to: John J. Gorman, Esq.
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Fax: (202) 362-2902
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party, and that (except as provided in Article III and
Sections 7.8.3 and 7.9 of this Agreement) nothing in this Agreement is intended
to confer upon any other person any rights or remedies under or by reason of
this Agreement.
12.6. Complete Agreement.
This Agreement, including the Exhibits and Disclosure Schedules hereto and
the documents and other writings referred to herein or therein or delivered
pursuant hereto, and the Confidentiality Agreement, referred to in Section 12.1,
contains the entire agreement and understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings (other than the Confidentiality Agreements referred to in Section
12.1 hereof) between the parties, both written and oral, with respect to its
subject matter.
12.7. Counterparts.
This Agreement may be executed in one or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original. A facsimile copy of a signature page shall be deemed to be an
original signature page.
12.8. Severability.
In the event that any one or more provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
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12.9. Governing Law.
This Agreement shall be governed by the laws of Delaware, without giving
effect to its principles of conflicts of laws.
12.10. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which are part of the related
Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5"
and references to "Section 5.5" would also refer to material contained in the
subsection described as "Section 5.5.1"). The table of contents, index and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrases
"the date of this Agreement", "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date set
forth in the Recitals to this Agreement.
12.11. Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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IN WITNESS WHEREOF, FNFG and HRB have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first set forth
above.
First Niagara Financial Group, Inc.
Dated: April 1, 2004 By: /s/ Paul J. Kolkmeyer
----------------------------------
Name: Paul J. Kolkmeyer
Title: President
and Chief Executive Officer
Hudson River Bancorp, Inc.
Dated: April 1, 2004 By: /s/ Carl A. Florio
----------------------------------
Name: Carl A. Florio
Title: President
and Chief Executive Officer
80