ANNEX A
AGREEMENT AND PLAN
OF MERGER
[AS AMENDED]
BETWEEN
SOVEREIGN BANCORP, INC.
AND
FIRST HOME BANCORP INC.
DECEMBER 18, 1997
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AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 18, 1997, is made
by and between SOVEREIGN BANCORP, INC. ("Sovereign"), a Pennsylvania
corporation, having its principal place of business in Wyomissing, Pennsylvania,
and FIRST HOME BANCORP INC. ("First Home"), a New Jersey corporation, having its
principal place of business in Pennsville, New Jersey.
BACKGROUND
1. Sovereign and First Home desire for First Home to merge with and into
Sovereign, with Sovereign surviving such merger, in accordance with the
applicable laws of the Commonwealth of Pennsylvania and the State of New Jersey,
and in accordance with the plan of merger set forth herein.
2. At or prior to the execution and delivery of this Agreement, (a) certain
directors and officers of First Home and affiliates of First Home, each have
executed in favor of Sovereign, a Letter Agreement dated December 18, 1997, in
the form attached hereto as Exhibit 1, and (b) First Home is concurrently
granting to Sovereign an option to acquire, under certain circumstances, First
Home's common stock (the "Sovereign Option") pursuant to a Stock Option
Agreement between Sovereign and First Home dated December 18, 1997, attached
hereto as Exhibit 2.
3. Sovereign desires to merge First Home Savings Bank, F.S.B., a federal
savings bank and a wholly-owned subsidiary of First Home ("First Home Savings"),
into and with Sovereign Bank, FSB, a federal savings bank and a wholly-owned
subsidiary of Sovereign ("Sovereign Bank"), with Sovereign Bank surviving such
merger in accordance with the Bank Plan of Merger in the form attached hereto as
Exhibit 3.
4. Sovereign and First Home desire to provide the terms and conditions
governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the indicated meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
Affiliate means, with respect to any Person, 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 or supplement hereto,
which constitutes a "plan of merger" between Sovereign and First Home.
Applicable Exchange Ratio shall have the meaning given to such term in
Section 1.02(e)(ii).
Applications means the applications for regulatory approval which are
required by the transactions contemplated hereby.
Articles of Merger means the articles of merger to be executed by Sovereign
and First Home and to be filed in the PDS and the NJSOS, in accordance with the
applicable laws of the Commonwealth of Pennsylvania and the State of New Jersey,
respectively.
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Bank Merger means the merger of First Home Savings with and into Sovereign
Bank, with Sovereign Bank surviving such merger, contemplated by Section 1.03 of
this Agreement.
Bank Plan of Merger has the meaning given to that term in Section 1.03 of
this Agreement.
BCL means the Pennsylvania Business Corporation Law of 1988, as amended.
Closing Date means the date determined by Sovereign, in its sole
discretion, upon five (5) days prior written notice to First Home, but in no
event later than thirty (30) days after the last condition precedent pursuant to
this Agreement has been fulfilled or waived (including the expiration of any
applicable waiting period), or such other date as Sovereign and First Home shall
agree.
Determination Date means the date immediately preceding the Closing Date.
Effective Date means the date upon which the Articles of Merger shall be
filed in the PDS and the NJSOS, and shall be the same as the Closing Date.
Environmental Law means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Regulatory
Authority relating to (i) 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 (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated from time to time thereunder.
FDIA means the Federal Deposit Insurance Act, as amended.
FDIC means the Federal Deposit Insurance Corporation.
First Home Common Stock means the common stock of First Home described in
Section 2.02(a).
First Home Disclosure Schedule means a disclosure schedule delivered by
First Home to Sovereign pursuant to this Agreement.
First Home Financials means (i) the audited consolidated financial
statements of First Home as of December 31, 1996 and for the three years ended
December 31, 1996, including the notes thereto, (ii) the unaudited interim
consolidated financial statements of First Home as of each calendar quarter
thereafter included in Securities Documents filed by First Home, including the
notes thereto and (iii) the preliminary unaudited consolidated statement of
condition and income statement of First Home as of November 30, 1997, and for
the two-month period then ended.
First Home Stock Option Plans means the Employee Compensation Program and
the 1994 Stock Option Plan for Non-Employee Directors.
First Home Regulatory Reports means the Annual Reports of First Home or
First Home Savings, as the case may be, on Form H-(b)11, any Current Report of
First Home or First Home Savings, as the case may be, on Form H-(b)11 filed with
the OTS from December 31, 1995 through the Closing Date and the Thrift Financial
Reports of First Home or First Home Savings, as the case may be, and
accompanying schedules for each calendar quarter, beginning with the quarter
ended December 31, 1995, through the Closing Date.
First Home Subsidiary means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by First Home, except
any corporation the stock of which is held in the ordinary course of the lending
activities of First Home Savings.
GAAP means generally accepted accounting principles as in effect at the
relevant date.
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HOLA means the Home Owners' Loan Act of 1933, as amended.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
Material Adverse Effect shall mean, with respect to Sovereign or First
Home, respectively, any effect that is material and adverse to its assets,
financial condition or results of operations on a consolidated basis, provided,
however, that Material Adverse Effect shall not be deemed to include (a) any
change in the value of the respective investment and loan portfolios of
Sovereign or First Home resulting from a change in interest rates generally, (b)
any change occurring after the date hereof in any federal or state law, rule or
regulation or in GAAP, which change affects banking institutions generally,
including any changes affecting the Bank Insurance Fund or the Savings
Association Insurance Fund, (c) reasonable expenses (plus reasonable legal fees,
cost and expense relating to any litigation arising as a result of the Merger
and the cost associated with Section 4.11(d) hereof) incurred in connection with
this Agreement and the transactions contemplated hereby, (d) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior informed
written consent of the other party in contemplation of the transactions
contemplated hereby (including without limitation any actions taken by First
Home pursuant to Section 4.10(a)(ix) of this Agreement), and (e) any effect with
respect to a party hereto caused, in whole or in substantial part, by the other
party.
Merger means the merger of First Home with and into Sovereign, with
Sovereign surviving such merger, contemplated by this Agreement.
NASD means the National Association of Securities Dealers, Inc.
NJBCA means the New Jersey Business Corporation Act, as amended.
NJDB means the Department of Banking of the State of New Jersey.
NJSOS means the Office of the Secretary of State of the State of New
Jersey.
OTS means the Office of Thrift Supervision.
PDS means the Department of State of the Commonwealth of Pennsylvania.
Person means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined in Section 13(d)(3) of
the Exchange Act).
Prospectus/Proxy Statement means the prospectus/proxy statement, together
with any supplements thereto, to be transmitted to holders of First Home Common
Stock in connection with the transactions contemplated by this Agreement.
Registration Statement means the registration statement on Form S-4,
including any pre-effective or post-effective amendments or supplements thereto,
as filed with the SEC under the Securities Act with respect to the Sovereign
Common Stock and Sovereign Stock Purchase Rights to be issued in connection with
the transactions contemplated by this Agreement.
Regulatory Agreement has the meaning given to that term in Section 2.11 and
3.10 of this Agreement.
Regulatory Authority means any banking agency or department of any federal
or state government, including without limitation the OTS, the FDIC, the NJDB,
or the respective staffs thereof.
Rights means warrants, options, rights, convertible securities and other
capital stock equivalents which obligate an entity to issue its securities.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and the rules
and regulations promulgated from time to time thereunder.
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Securities Documents means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
Securities Laws means the Securities Act and the Exchange Act and the rules
and regulations promulgated from time to time thereunder.
Sovereign Common Stock has the meaning given to that term in Section
3.02(a) of this Agreement.
Sovereign Disclosure Schedule means a disclosure schedule delivered by
Sovereign to First Home pursuant to this Agreement.
Sovereign Financials means (i) the audited consolidated financial
statements of Sovereign as of December 31, 1996 and for the three years ended
December 31, 1996, including the notes thereto, (ii) the unaudited interim
consolidated financial statements of Sovereign as of each calendar quarter
thereafter included in Securities Documents filed by Sovereign, including the
notes thereto, and (iii) the preliminary unaudited consolidated financial
statements of Sovereign as of November 30, 1997 and for the two month period
then ended, including the preliminary notes thereto.
Sovereign Market Price means, as of any date, the average of the mean
between the closing high bid and low asked prices of a share of Sovereign Common
Stock, as reported on the National Association of Securities Dealers Automated
Quotation System (Nasdaq) National Market System.
Sovereign Market Value means, as of any date, the average of the Sovereign
Market Prices for the fifteen consecutive trading days ending on the trading day
preceding the date as of which the Sovereign Market Value is determined.
Sovereign Option means the option granted to Sovereign by First Home to
acquire such number of shares of First Home Common Stock as shall equal 19.9% of
the shares of First Home Common Stock outstanding before giving effect to the
exercise of such option referenced in the recitals to this Agreement.
Sovereign Regulatory Reports means the Annual Reports of Sovereign on Form
H-(b)11 filed with the OTS since December 31, 1995 through the Closing Date, any
Current Report of Sovereign on Form H-(b)11 filed with the OTS from December 31,
1995 through the Closing Date and the Thrift Financial Reports of Sovereign Bank
and accompanying schedules for each calendar quarter, beginning with the quarter
ended December 31, 1995, through the Closing Date.
Sovereign Rights Agreement means the Rights Agreement dated as of September
19, 1989, as amended September 27, 1995, between Sovereign and Chemical Bank, as
rights agent, relating to Sovereign's Series A Junior Participating Preferred
Stock.
Sovereign Stock Purchase Rights means Rights to purchase a unit of
Sovereign's Series A Junior Participating Preferred Stock in accordance with the
terms of the Sovereign Rights Agreement.
Sovereign Subsidiaries means (i) any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by Sovereign,
except any corporation the stock of which is held in the ordinary course of the
lending activities of a bank and (ii) Sovereign Capital Trust I and any similar
entity sponsored or created by Sovereign after the date hereof.
Subsidiary means any corporation, 50% or more of the capital stock of which
is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held in the ordinary course of the lending
activities of a bank.
Section 1.02 The Merger.
(a) Closing. The closing will take place at 10:00 a.m. on the Closing Date
at such time and place as are agreed to by the parties hereto; provided, in any
case, that all conditions to closing set forth in Article V (other than the
delivery of certificates, opinions and other instruments and documents to be
delivered at the closing) have been satisfied or waived at or prior to the
Closing Date. On the Closing Date, First Home and Sovereign shall cause the
Articles of Merger to be duly executed and to be filed in the PDS and the NJSOS.
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(b) The Merger. Subject to the terms and conditions of this Agreement, on
the Effective Date: First Home shall merge with and into Sovereign; the separate
existence of First Home shall cease; Sovereign shall be the surviving
corporation in the Merger; and all of the property (real, personal and mixed),
rights, powers and duties and obligations of First Home shall be taken and
deemed to be transferred to and vested in Sovereign, as the surviving
corporation in the Merger, without further act or deed; all debts, liabilities
and duties of each of First Home and Sovereign shall thereafter be the
responsibility of Sovereign as the surviving corporation; all in accordance with
the applicable laws of the Commonwealth of Pennsylvania and the State of New
Jersey.
(c) Sovereign's Articles of Incorporation and Bylaws. On and after the
Effective Date, the articles of incorporation and the bylaws of Sovereign, as in
effect immediately prior to the Effective Date, shall automatically be and
remain the articles of incorporation and bylaws of Sovereign, as the surviving
corporation in the Merger, until thereafter altered, amended or repealed.
(d) Board of Directors and Officers of Sovereign and Sovereign Bank.
(i) On the Effective Date, the Board of Directors of Sovereign, as the
surviving corporation in the Merger, shall consist of those persons holding
such office immediately prior to the Effective Date.
(ii) On the Effective Date, the officers of Sovereign duly elected and
holding office immediately prior to the Effective Date shall be the
officers of Sovereign, as the surviving corporation in the Merger, existing
on such Effective Date.
(iii) On the effective date of the Bank Merger, the Board of Directors
of Sovereign Bank, as the surviving institution in the Bank Merger, shall
consist of those persons holding such office immediately prior to such
effective date.
(iv) On the effective date of the Bank Merger, the officers of
Sovereign Bank duly elected and holding office immediately prior to such
effective date shall be the officers of Sovereign Bank, as the surviving
corporation in the Bank Merger.
(e) Conversion of Shares.
(i) Sovereign Common Stock.
(A) Each share of Sovereign Common Stock issued and outstanding
immediately prior to the Effective Date shall, on and after the
Effective Date, continue to be issued and outstanding as an identical
share of Sovereign Common Stock. Shares of Sovereign Common Stock owned
by First Home (other than shares held in trust, managed, custodial or
nominee accounts and the like or held by mutual funds for which a
subsidiary of First Home acts as investment advisor, that in any such
case are beneficially owned by third parties (any such shares, "trust
account shares") and shares acquired in respect of debts previously
contracted (any such shares, "DPC shares")) shall become treasury stock
of Sovereign.
(B) Each share of Sovereign Common Stock issued and held in the
treasury of Sovereign as of the Effective Date, if any, shall, on and
after the Effective Date, continue to be issued and held in the treasury
of Sovereign.
(ii) First Home Common Stock.
(A) Subject to the provisions of subparagraphs (B), (C) and (D) of
this Section 1.02(e)(ii), each share of First Home Common Stock issued
and outstanding immediately prior to the Effective Date (other than
shares of First Home Common Stock, if any, then owned by Sovereign or
First Home or any First Home Subsidiary) shall, on the Effective Date,
by reason of the Merger and without any action on the part of the holder
thereof, be converted into and become a right to receive:
(i) if the Sovereign Market Value determined as of the
Effective Date is greater than or equal to $18.00 and less than or
equal to $22.00, then that number of shares of fully paid and
nonassessable shares of Sovereign Common Stock, and the
corresponding
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percentage of Sovereign Stock Purchase Rights pursuant to the
Sovereign Rights Agreement, equal to $31.25 divided by the Sovereign
Market Value determined as of the Effective Date;
(ii) if the Sovereign Market Value determined as of the
Effective Date is less than $18.00, then 1.736 shares of fully paid
and nonassessable shares of Sovereign Common Stock, and the
corresponding percentage of Sovereign Stock Purchase Rights pursuant
to the Sovereign Rights Agreement; or
(iii) if the Sovereign Market Value determined as of the
Effective Date is greater than $22.00, then 1.420 shares of fully
paid and nonassessable shares of Sovereign Common Stock, and the
corresponding percentage of Sovereign Stock Purchase Rights pursuant
to the Sovereign Rights Agreement (as determined pursuant to any of
Sections 1.02(e)(ii)(A)(i), 1.02(e)(ii)(A)(ii) or
1.02(e)(ii)(A)(iii), the "Applicable Exchange Ratio").
(B) Each share of First Home Common Stock (other than trust account
shares or DPC shares) owned by Sovereign or a Sovereign Subsidiary on
the Effective Date, if any, shall be cancelled.
(C) Each share of First Home Common Stock issued and held in the
treasury of First Home or owned by First Home or any First Home
Subsidiary (other than trust account shares or DPC shares) as of the
Effective Date, if any, shall be cancelled, and no cash, stock or other
property shall be delivered in exchange therefor.
(D) No fraction of a whole share of Sovereign Common Stock and no
scrip or certificates therefor shall be issued in connection with the
Merger. Any former holder of First Home Common Stock who would otherwise
be entitled to receive a fraction of a share of Sovereign Common Stock
shall receive, in lieu thereof, cash in an amount equal to such fraction
of a share multiplied by the Sovereign Market Price determined as of the
Effective Date.
(f) Stock Options.
(i) On the Effective Date, each option to acquire First Home Common
Stock which is then outstanding ("First Home Option"), whether or not
exercisable, shall cease to represent a right to acquire shares of First
Home Common Stock and shall be converted automatically into an option to
purchase shares of Sovereign Common Stock and the corresponding number of
Sovereign Stock Purchase Rights, and Sovereign shall assume each First Home
Option, in accordance with the terms of the applicable First Home Stock
Option Plan and stock option agreement by which it is evidenced, except
that from and after the Effective Date, (i) Sovereign and its Board of
Directors or a duly authorized committee thereof shall be substituted for
First Home and First Home's Board of Directors or duly authorized committee
thereof administering such First Home Stock Option Plan, (ii) each First
Home Option assumed by Sovereign may be exercised solely for shares of
Sovereign Common Stock and Sovereign Stock Purchase Rights, (iii) the
number of shares of Sovereign Common Stock subject to such First Home
Option shall be equal to the number of shares of First Home Common Stock
subject to such First Home Option immediately prior to the Effective Date
multiplied by the Applicable Exchange Ratio, provided that any fractional
shares of Sovereign Common Stock resulting from such multiplication shall
be rounded down to the nearest share, and (iv) the per share exercise price
under each such First Home Option shall be adjusted by dividing the per
share exercise price under each such First Home Option by the Applicable
Exchange Ratio, provided that such exercise price shall be rounded up to
the nearest cent. Notwithstanding clauses (iii) and (iv) of the preceding
sentence, each First Home Option which is an "incentive stock option" shall
be adjusted as required by Section 424 of the IRC, and the regulations
promulgated thereunder, so as not to constitute a modification, extension
or renewal of the option within the meaning of Section 424(h) of the IRC.
Sovereign and First Home agree to take all necessary steps to effect the
foregoing provisions of this Section 1.02(f).
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(ii) As soon as practicable after the Effective Date, Sovereign shall
deliver to each participant in each First Home Stock Option Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to such First Home Stock Option Plan shall continue in effect on the
same terms and conditions, including without limitation the duration thereof,
subject to the adjustments required by Section 1.02(f)(i) hereof after giving
effect to the Merger. Within 60 days after the Effective Date, Sovereign shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), with respect to the shares of
Sovereign Common Stock and Sovereign Stock Purchase Rights subject to such
options and shall use its reasonable best efforts to maintain the current status
of the prospectus or prospectuses contained therein for so long as such options
remain outstanding.
(g) Surrender and Exchange of First Home Stock Certificates.
(i) Exchange of Certificates. Each holder of shares of First Home
Common Stock who surrenders to Sovereign (or its agent) the certificate or
certificates representing such shares will be entitled to receive, as soon
as practicable after the Effective Date, in exchange therefor a certificate
or certificates for the number of whole shares of Sovereign Common Stock
into which such holder's shares of First Home Common Stock have been
converted pursuant to the Merger, together with a check for cash in lieu of
any fractional share in accordance with Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates. Each certificate for shares
of Sovereign Common Stock issued in exchange for certificates for First
Home Common Stock pursuant to Section 1.02(g)(i) hereof will be dated the
Effective Date and be entitled to dividends and all other rights and
privileges pertaining to such shares of stock from and after the Effective
Date. Until surrendered, each certificate theretofore evidencing shares of
First Home Common Stock will, from and after the Effective Date, evidence
solely the right to receive certificates for shares of Sovereign Common
Stock pursuant to Section 1.02(g)(i) hereof and a check for cash in lieu of
any fractional share in accordance with Section 1.02(e)(ii)(D) hereof. If
certificates for shares of First Home Common Stock are exchanged for
Sovereign Common Stock at a date following one or more record dates for the
payment of dividends or of any other distribution on the shares of
Sovereign Common Stock, Sovereign will pay cash in an amount equal to
dividends theretofore payable on such Sovereign Common Stock and pay or
deliver any other distribution to which holders of shares of Sovereign
Common Stock have theretofore become entitled. Upon surrender of
certificates for shares of First Home Common Stock in exchange for
certificates for Sovereign Common Stock, Sovereign also shall pay any
dividends to which such holder of First Home Common Stock may be entitled
as a result of the declaration of a dividend on the First Home Common Stock
by First Home in accordance with the terms of this Agreement with a record
date prior to the Effective Date and a payment date after the Effective
Date. No interest will accrue or be payable in respect of dividends or cash
otherwise payable under this Section 1.02(g) upon surrender of certificates
for shares of First Home Common Stock.
Notwithstanding the foregoing, no party hereto will be liable to any
holder of First Home Common Stock for any amount paid in good faith to a
public official or agency pursuant to any applicable abandoned property,
escheat or similar law. Until such time as certificates for shares of First
Home Common Stock are surrendered by a First Home shareholder to Sovereign
for exchange, Sovereign shall have the right to withhold dividends or any
other distributions on the shares of Sovereign Common Stock issuable to
such shareholder.
(iii) Exchange Procedures. Each certificate for shares of First Home
Common Stock delivered for exchange under this Section 1.02(g) must be
endorsed in blank by the registered holder thereof or be accompanied by a
power of attorney to transfer such shares endorsed in blank by such holder.
If more than one certificate is surrendered at one time and in one
transmittal package for the same shareholder account, the number of whole
shares of Sovereign Common Stock for which certificates will be issued
pursuant to this Section 1.02(g) will be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered.
If shares of Sovereign Common Stock or payments of cash are to be issued or
made to a person
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other than the one in whose name the surrendered certificate is registered,
the certificate so surrendered must be properly endorsed in blank, with
signature(s) guaranteed, or otherwise in proper form for transfer, and the
person to whom certificates for shares of Sovereign Common Stock is to be
issued or to whom cash is to be paid shall pay any transfer or other taxes
required by reason of such issuance or payment to a person other than the
registered holder of the certificate for shares of First Home Common Stock
which are surrendered. As promptly as practicable after the Effective Date,
Sovereign shall send or cause to be sent to each shareholder of record of
First Home Common Stock transmittal materials for use in exchanging
certificates representing First Home Common Stock for certificates
representing Sovereign Common Stock into which the former have been
converted in the Merger. Certificates representing shares of Sovereign
Common Stock and checks for cash in lieu of fractional shares shall be
mailed to former shareholders of First Home as soon as reasonably possible
but in no event later than fifteen (15) business days following the receipt
of certificates representing former shares of First Home Common Stock duly
endorsed or accompanied by the materials referenced herein and delivered by
certified mail, return receipt requested (but in no event earlier than the
second business day following the Effective Date).
(iv) Closing of Stock Transfer Books; Cancellation of First Home
Certificates. Upon the Effective Date, the stock transfer books for First
Home Common Stock will be closed and no further transfers of shares of
First Home Common Stock will thereafter be made or recognized. All
certificates for shares of First Home Common Stock surrendered pursuant to
this Section 1.02(g) will be cancelled by Sovereign.
(h) Anti-Dilution Provisions. If, on the Effective Date, (i) the
Applicable Exchange Ratio is determined pursuant to either Section
1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii), (ii) Sovereign has, at any time after
the date hereof and before the Effective Date, (A) issued a dividend in shares
of Sovereign Common Stock, (B) combined the outstanding shares of Sovereign
Common Stock into a smaller number of shares, (C) subdivided the outstanding
shares of Sovereign Common Stock, or (D) reclassified the shares of Sovereign
Common Stock, and (iii) the Applicable Exchange Ratio would have been determined
under the same section if such dividend, combination, subdivision or
reclassification had not occurred (determined by appropriate mathematical
adjustment of the actual Applicable Exchange Ratio), then the number of shares
of Sovereign Common Stock to be delivered pursuant to Sections
1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii) to First Home shareholders who are
entitled to receive shares of Sovereign Common Stock in exchange for shares of
First Home Common Stock shall be adjusted so that each First Home shareholder
shall be entitled to receive such number of shares of Sovereign Common Stock as
such shareholder would have been entitled to receive if the Effective Date had
occurred prior to the happening of such event. (By way of illustration, if
Sovereign shall declare a stock dividend of 7% payable with respect to a record
date on or prior to the Effective Date and the conditions set forth above are
satisfied, the Applicable Exchange Ratio determined pursuant to Sections
1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii) shall be adjusted upward by 7%). If,
on the Effective Date, (i) the exchange ratio preliminarily would be determined
pursuant to Section 1.02(e)(ii)(A)(i), 1.02(e)(ii)(A)(ii), or
1.02(e)(ii)(A)(iii) (the "Tentative Exchange Ratio"), (ii) Sovereign has, at any
time after the date hereof and before the Effective Date, (A) issued a dividend
in shares of Sovereign Common Stock, (B) combined the outstanding shares of
Sovereign Common Stock into a smaller number of shares, (C) subdivided the
outstanding shares of Sovereign Common Stock, or (D) reclassified the shares of
Sovereign Common Stock, and (iii) the Tentative Exchange Ratio would have been
determined under a different section if such dividend, combination, subdivision,
or reclassification had not occurred (determined by appropriate mathematical
adjustment of the Sovereign Market Value), then the actual Applicable Exchange
Ratio shall be determined by giving effect to such mathematical adjustment and
by changing, if relevant, the otherwise determined exchange ratio amount set
forth in Section 1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii). (By way of
illustration, if Sovereign shall declare a two-for-one stock split payable with
respect to a record date on or prior to the Effective Date and the Sovereign
Market Value determined as of the Effective Date is $10.00, then the Applicable
Exchange Ratio shall be determined under Section 1.02(e)(ii)(A)(i) as though
such Sovereign Market Value were $20.00. In such event, each First Home
shareholder would receive 3.125 shares of
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Sovereign Common Stock in exchange for each share of First Home Common Stock, so
that the aggregate market value of the Sovereign Common Stock received would be
$31.25.)
Section 1.03 The Bank Merger. Sovereign and First Home shall use their
best efforts to cause First Home Savings to merge with and into Sovereign Bank,
with Sovereign Bank surviving such merger, as soon as practicable after the
Effective Date. Concurrently with, or as soon as practicable after, the
execution and delivery of this Agreement, Sovereign shall cause Sovereign Bank,
and First Home shall cause First Home Savings, to execute and deliver the Bank
Plan of Merger attached hereto as Exhibit 3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST HOME
First Home hereby represents and warrants to Sovereign that, except as
specifically set forth in the First Home Disclosure Schedule delivered to
Sovereign by First Home on the date hereof:
Section 2.01 Organization.
(a) First Home is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. First Home is a savings
and loan holding company duly registered under the HOLA. First Home has the
corporate power and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it. First Home is not qualified or licensed to do business as
a foreign corporation in any other jurisdiction and is not required to be so
qualified or licensed as the result of the ownership or leasing of property or
the conduct of its business except where the failure to be so qualified or
licensed would not have a Material Adverse Effect on First Home.
(b) First Home Savings is a federal savings bank duly organized and validly
existing under the laws of the United States. First Home Savings has the
corporate power and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it. Neither First Home Savings nor any other First Home
Subsidiary is qualified or licensed to do business as a foreign corporation in
any other jurisdiction and neither is required to be so qualified or licensed as
the result of the ownership or leasing of property or the conduct of its
business, except where the failure to be so qualified or licensed would not have
a Material Adverse Effect on First Home.
(c) There are no First Home Subsidiaries other than First Home Savings and
those identified in the First Home Disclosure Schedule.
(d) The deposits of First Home Savings are insured by the FDIC to the
extent provided in the FDIA.
(e) The respective minute books of First Home and First Home Savings and
each other First Home Subsidiary accurately record, in all material respects,
all material corporate actions of their respective shareholders and boards of
directors (including committees).
(f) Prior to the date of this Agreement, First Home has delivered to
Sovereign true and correct copies of the articles of incorporation and bylaws of
First Home and the charter and bylaws of First Home Savings as in effect on the
date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of First Home consists of (a) 10,000,000
shares of common stock, no par value ("First Home Common Stock"), of which
2,708,426 shares are outstanding, validly issued, fully paid and nonassessable
and free of preemptive rights, and (b) 1,000,000 shares of preferred stock, none
of which are issued or outstanding. Neither First Home nor First Home Savings
nor any other First Home Subsidiary has or is bound by any subscription, option,
warrant, call, commitment, agreement, plan or other Right 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 First Home Common Stock, First
Home preferred stock or any other security of First Home or any securities
representing the
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right to vote, purchase or otherwise receive any shares of First Home Common
Stock, First Home preferred stock or any other security of First Home, other
than (i) shares issuable under the Sovereign Option and (ii) 121,961 shares
issuable under First Home Stock Option Plans and as set forth in reasonable
detail in the First Home Disclosure Schedule.
(b) The authorized capital stock of First Home Savings consists of (i) 100
shares of common stock, no par value ("First Home Savings Common Stock"), of
which 100 shares are outstanding, validly issued, fully paid, nonassessable,
free of preemptive rights, all of which are owned by First Home free and clear
of any lien, security interests, pledges, charges and restrictions of any kind
or nature. Neither First Home nor any First Home Subsidiary has or is bound by
any subscription, option, warrant, call, commitment, agreement or other Right 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 the capital stock
of any First Home Subsidiary or any other security of any First Home Subsidiary
or any securities representing the right to vote, purchase or otherwise receive
any shares of the capital stock or any other security of any First Home
Subsidiary. Either First Home or First Home Savings owns all of the outstanding
shares of capital stock of each First Home Subsidiary free and clear of all
liens, security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature.
(c) Except as set forth in the First Home Disclosure Schedule, neither (i)
First Home, (ii) First Home Savings, nor (iii) any other First Home Subsidiary,
owns any equity interest, directly or indirectly, treasury stock, in any other
company or controls any other company, except for equity interests held in the
investment portfolios of First Home Subsidiaries, equity interests held by First
Home Subsidiaries in a fiduciary capacity, and equity interests held in
connection with the commercial loan activities of First Home Subsidiaries. There
are no subscriptions, options, warrants, calls, commitments, agreements or other
Rights outstanding and held by First Home or First Home Savings with respect to
any other company's capital stock or the equity of any other person.
(d) To the best of First Home's knowledge, except as disclosed in First
Home's proxy statement dated March 28, 1997, 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 First Home Common Stock.
Section 2.03 Authority; No Violation.
(a) First Home has full corporate power and authority to execute and
deliver this Agreement and to complete the transactions contemplated hereby.
First Home Savings has full corporate power and authority to execute and deliver
the Bank Plan of Merger and to consummate the Bank Merger. The execution and
delivery of this Agreement by First Home and the completion by First Home of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of First Home and, except for approval by the shareholders of
First Home as required under the NJBCA, First Home's certificate of
incorporation and bylaws and Nasdaq requirements applicable to it, no other
corporate proceedings on the part of First Home are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by First Home and, subject to approval of the
shareholders of First Home as required under the NJBCA, First Home's certificate
of incorporation and bylaws and Nasdaq requirements applicable to it and receipt
of the required approvals from Regulatory Authorities described in Section 3.04
hereof, constitutes the valid and binding obligation of First Home, enforceable
against First Home 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. The Bank
Plan of Merger, upon its execution and delivery by First Home Savings
concurrently with the execution and delivery of this Agreement, will constitute
the valid and binding obligation of First Home Savings, enforceable against
First Home Savings in accordance with its terms, subject to applicable
conservatorship or receivership provisions of the FDIA, or insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by First Home, (B) the
execution and delivery of the Bank Plan of Merger by First Home Savings, (C)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and First Home's and Sovereign's
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compliance with any conditions contained therein, the completion of the
transactions contemplated hereby, and (D) compliance by First Home or First Home
Savings with any of the terms or provisions hereof or of the Bank Plan of
Merger, will not (i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws of First Home or any First Home
Subsidiary or the charter and bylaws of First Home Savings; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to First Home or any First Home Subsidiary or any of their
respective properties or assets; or (iii) except as set forth in the First Home
Disclosure Schedule, 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 First Home or any First Home
Subsidiary under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement, commitment or
other instrument or obligation to which First Home or any First Home Subsidiary
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 First Home.
Section 2.04 Consents. Except for the consents, approvals, filings and
registrations from or with the Regulatory Authorities referred to in Section
3.04 hereof and compliance with any conditions contained therein, and the
approval of this Agreement by the shareholders of First Home under the NJBCA,
First Home's articles of incorporation and bylaws and Nasdaq requirements
applicable to it, and the approval of the Bank Plan of Merger by First Home as
sole shareholder of First Home Savings under the HOLA, and by the First Home
Savings Board of Directors, and except as disclosed in the First Home Disclosure
Schedule, no consents or approvals of, or filings or registrations with, any
public body or authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with (a) the execution
and delivery of this Agreement by First Home or the Bank Plan of Merger by First
Home Savings, and (b) the completion by First Home of the transactions
contemplated hereby or by First Home Savings of the Bank Merger. As of the date
hereof, First Home has no reason to believe that (i) any required consents or
approvals will not be received or will be received with conditions, limitations
or restrictions unacceptable to it or which would adversely impact First Home's
ability to complete the transactions contemplated by this Agreement or that (ii)
any public body or authority, the consent or approval of which is not required
or any filing with which is not required, will object to the completion of the
transactions contemplated by this Agreement. Shareholders of First Home are not
entitled to exercise dissenters' rights in connection with the transactions
contemplated by this Agreement under federal or New Jersey law.
Section 2.05 Financial Statements.
(a) First Home has previously delivered, or will deliver, to Sovereign the
First Home Regulatory Reports. The First Home Regulatory Reports have been, or
will be, prepared in all material respects in accordance with applicable
regulatory accounting principles and practices throughout the periods covered by
such statements, and fairly present, or will fairly present in all material
respects, the financial position, results of operations and changes in
shareholders' equity of First Home as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
(b) First Home has previously delivered to Sovereign the First Home
Financials. The First Home Financials have been, or will be, prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements, except as noted therein, and fairly present, or will
fairly present, the consolidated financial position, results of operations and
cash flows of First Home as of and for the periods ended on the dates thereof,
in accordance with GAAP applied on a consistent basis, except as noted therein.
(c) At the date of each balance sheet included in the First Home Financials
or the First Home Regulatory Reports, neither First Home nor First Home Savings
(as the case may be) had, or will have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or
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otherwise) of a type required to be reflected in such First Home Financials or
First Home 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 in the aggregate and 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.
Section 2.06 Taxes.
(a) First Home and the First Home Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). First Home has duly
filed, and will file, all federal, state and local tax returns required to be
filed by or with respect to First Home and all First Home Subsidiaries on or
prior to the Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will make,
provisions for the payment of all federal, state and local taxes which have been
incurred by or are due or claimed to be due from First Home and any First Home
Subsidiary by any taxing authority or pursuant to any tax sharing agreement or
arrangement (written or oral) on or prior to the Closing Date other than taxes
which (i) are not delinquent or (ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has been filed (or will be
filed prior to the Closing Date) by or with respect to First Home or any First
Home Subsidiary.
Section 2.07 No Material Adverse Effect. First Home has not suffered any
Material Adverse Effect since September 30, 1997.
Section 2.08 Contracts.
(a) Except as described in First Home's proxy statement for its April 25,
1997 annual meeting of shareholders and Annual Report on Form 10-K for the year
ended December 31, 1996, previously delivered to Sovereign, in the footnotes to
the audited consolidated financial statements of First Home as of December 31,
1996 and for the three years ended December 31, 1996, in the footnotes to the
audited financial statements of First Home Savings as of December 31, 1996 and
for the three years ended December 31, 1996, or in the First Home Disclosure
Schedule, neither First Home nor any First Home Subsidiary is a party to or
subject to: (i) any employment, consulting or severance contract or arrangement
with any past or present officer, director or employee of First Home or any
First Home Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options, deferred
compensation, retirement payments, profit sharing or similar arrangements for or
with any past or present officers, directors or employees of First Home or any
First Home Subsidiary; (iii) any collective bargaining agreement with any labor
union relating to employees of First Home or any First Home Subsidiary; (iv) any
agreement which by its terms limits the payment of dividends by any First Home
Subsidiary; (v) any instrument evidencing or related to 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 First Home or any First Home Subsidiary is an obligor to any person,
which instrument evidences or relates to indebtedness other than deposits,
repurchase agreements, Federal Home Loan Bank advances and repurchases, bankers
acceptances and "treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" 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 Sovereign or any Sovereign Subsidiary; or (vi) any
contract (other than this Agreement) limiting the freedom of any First Home
Subsidiary to engage in any type of banking or bank-related business permissible
under law.
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 2.08(a) or described in the First Home proxy
statement for its April 25, 1997 annual meeting of shareholders or in a footnote
to such First Home Financials, have been provided to Sovereign on or before the
date hereof, are listed on the First Home Disclosure Schedule and are in full
force and effect on the date hereof and neither First Home nor any First Home
Subsidiary (nor, to the knowledge of
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First Home, any other party to any such contract, plan, arrangement or
instrument) has breached any provision of, or is in default in any respect under
any term of, any such contract, plan, arrangement or instrument which breach has
resulted in or will result in a Material Adverse Effect with respect to First
Home. Except as set forth in the First Home Disclosure Schedule, no party to any
material contract, plan, arrangement or instrument will have the right to
terminate any or all of the provisions of any such contract, plan, arrangement
or instrument as a result of the transactions contemplated by this Agreement.
Except as set forth in the First Home Disclosure Schedule, none of the employees
(including officers) of First Home or any First Home Subsidiary, possess the
right to terminate their employment as a result of the execution of this
Agreement. Except as set forth in the First Home Disclosure Schedule, no plan,
employment agreement, termination agreement, or similar agreement or arrangement
to which First Home or any First Home Subsidiary is a party or under which First
Home or any First Home 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 the First Home
Disclosure Schedule, no such agreement, plan 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 First Home or any First Home
Subsidiary absent the occurrence of a subsequent event; (y) provides for
benefits which may cause the disallowance of a federal income tax deduction
under IRC Section 280G; or (z) requires First Home or any First Home Subsidiary
to provide a benefit in the form of First Home Common Stock or determined by
reference to the value of First Home Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in the First Home Disclosure Schedule, First Home
and the First Home Subsidiaries have, or will have as to property acquired after
the date hereof, good and, as to real property, marketable title to all assets
and properties owned by First Home or any First Home Subsidiary in the conduct
of their 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 First Home Regulatory Reports and in the First Home
Financials or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value, in the ordinary course of
business, since the date of such balance sheets), subject to no encumbrances,
liens, mortgages, security interests or pledges, except (i) those items which
secure repurchase agreements and liabilities for borrowed money from a Federal
Home Loan Bank, (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith and (iii) items permitted under Article IV. First
Home and the First Home Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by First Home 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. Except as disclosed
in the First Home Disclosure Schedule, 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 the Notes to
the First Home Financials.
(b) With respect to all agreements pursuant to which First Home or any
First Home Subsidiary has purchased securities subject to an agreement to
resell, if any, First Home or such First Home Subsidiary, as the case may be,
has a valid, perfected first lien or security interest 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.
(c) First Home and the First Home Subsidiaries currently maintain insurance
considered by First Home to be reasonable for their respective operations and
similar in scope and coverage to that maintained by other businesses similarly
engaged. Neither First Home nor any First Home Subsidiary has received notice
from any insurance carrier that (i) such insurance will be cancelled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs 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 First Home or First Home Savings under such policies.
All such insurance is valid and enforceable and in full force and effect, and
within the last three years First Home and First Home Savings have received each
type of insurance coverage for
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which they have applied and during such periods have not been denied
indemnification for any material claims submitted under any of their insurance
policies.
Section 2.10 Legal Proceedings. Except as disclosed in the First Home
Disclosure Schedule, neither First Home nor any First Home Subsidiary is a party
to any, and there are no pending or, to the best of First Home'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 First Home or any First Home Subsidiary,
(ii) to which First Home or any First Home 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 First Home to perform under this Agreement, except for any proceedings,
claims, actions, investigations or inquiries referred to in clauses (i) or (ii)
which, if adversely determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on First Home.
Section 2.11 Compliance With Applicable Law.
(a) Except as disclosed in the First Home Disclosure Schedule, First Home
and First Home Subsidiaries hold all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their businesses under, and
have complied in all material respects with, applicable laws, statutes, orders,
rules or regulations of any federal, state or local governmental authority
relating to them, other than where such failure to hold or such noncompliance
will neither result in a limitation in any material respect on the conduct of
their businesses nor otherwise have a Material Adverse Effect on First Home.
(b) Except as disclosed in the First Home Disclosure Schedule, neither
First Home nor any First Home Subsidiary has received any notification or
communication from any Regulatory Authority (i) asserting that First Home or any
First Home Subsidiary is not in compliance with any of the statutes, regulations
or ordinances which such Regulatory Authority enforces; (ii) threatening to
revoke any license, franchise, permit or governmental authorization which is
material to First Home or any First Home Subsidiary; (iii) requiring or
threatening to require First Home or any First Home Subsidiary, or indicating
that First Home or any First Home Subsidiary may be required, to enter into a
cease and desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting, or purporting to restrict or limit, in any
manner the operations of First Home or any First Home 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 First Home or any First Home 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 "Regulatory Agreement"). Neither First
Home nor any First Home Subsidiary has consented to or entered into any
Regulatory Agreement, except as heretofore disclosed to Sovereign.
Section 2.12 ERISA. First Home has previously delivered to Sovereign true
and complete copies of all employee pension benefit plans within the meaning of
ERISA Section 3(2), including profit sharing plans, employee stock ownership
plan, stock purchase plans, deferred compensation and supplemental income plans,
supplemental executive retirement plans, employment agreements, annual executive
and administrative incentive plan or long term incentive plans, severance plans,
policies and agreements, group insurance plans, and all other employee welfare
benefit plans within the meaning of ERISA Section 3(1) (including vacation pay,
sick leave, short-term disability, long-term disability, and medical plans) and
all other employee benefit plans, policies, agreements and arrangements, all of
which are set forth in the First Home Disclosure Schedule, sponsored or
contributed to for the benefit of the employees or former employees (including
retired employees) and any beneficiaries thereof or directors or former
directors of First Home or any First Home Subsidiary, together with (i) the most
recent actuarial (if any) and financial reports relating to those plans which
constitute "qualified plans" under IRC Section 401(a), (ii) the most recent
annual reports relating to such plans filed by them, respectively, with any
government agency, and (iii) all rulings and determination letters which pertain
to any such plans. Neither First Home, any First Home Subsidiary, nor any
pension plan maintained by First Home or any First Home Subsidiary, has
incurred, directly or indirectly, within the past six (6) years any liability
under Title IV of ERISA (including to the Pension Benefit Guaranty Corporation)
or
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to the IRS with respect to any pension plan qualified under IRC Section 401(a)
which liability has resulted in or will result in a Material Adverse Effect with
respect to First Home, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043 occurred with respect to
any such pension plan which would result in a Material Adverse Effect. With
respect to each of such plans that is subject to Title IV of ERISA, the present
value of the accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the plan's most recent actuarial report
did not, as of its latest valuation date, exceed the then current value of the
assets of such plan allocable to such accrued benefits. Neither First Home nor
any First Home Subsidiary has incurred or is subject to any liability under
ERISA Section 4201 for a complete or partial withdrawal from a multiemployer
plan. All "employee benefit plans," as defined in ERISA Section 3(3), comply and
within the past six (6) years have complied in all material respects with (i)
relevant provisions of ERISA and (ii) in the case of plans intended to qualify
for favorable income tax treatment, provisions of the IRC relevant to such
treatment. No prohibited transaction (which shall mean any transaction
prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any
transaction prohibited under IRC Section 4975) has occurred within the past six
(6) years with respect to any employee benefit plan maintained by First Home or
any First Home Subsidiary which would result in the imposition, directly or
indirectly, of an excise tax under IRC Section 4975 or other penalty under ERISA
or the IRC, which, individually or in the aggregate, has resulted in or will
result in a Material Adverse Effect with respect to First Home. First Home and
the First Home Subsidiaries provide continuation coverage under group health
plans for separating employees and "qualified beneficiaries" in accordance with
the provisions of IRC Section 4980B(f). Such group health plans are in material
compliance with Section 1862(b)(1) of the Social Security Act.
Section 2.13 Brokers, Finders and Financial Advisors; Fairness
Opinion. Except for First Home's engagement of RP Financial, LC ("RP
Financial") in connection with transactions contemplated by this Agreement,
neither First Home nor any First Home 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 in connection with any transaction other than the Merger, or,
except for its commitments disclosed in First Home Disclosure Schedule, incurred
any liability or commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement or in connection
with any transaction other than the Merger, which has not been reflected in the
First Home Financials. The First Home Disclosure Schedule shall contain as an
exhibit the engagement letter between First Home and RP Financial. RP Financial
has provided First Home with its written opinion to the effect that the Exchange
Ratio is fair to First Home shareholders from a financial point of view.
Section 2.14 Environmental Matters. To the knowledge of First Home,
neither First Home nor any First Home Subsidiary, nor any properties operated by
First Home or any First Home Subsidiary during First Home's use or ownership has
been or is in violation of or liable under any Environmental Law which violation
or liability, individually or in the aggregate, resulted in, or will result, in
a Material Adverse Effect with respect to First Home. There are no actions,
suits or proceedings, or demands, claims, notices or investigations (including
without limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of First Home,
threatened, relating to the liability of any property owned or operated by First
Home or any First Home Subsidiary under any Environmental Law.
Section 2.15 Allowance for Losses. The allowance for loan losses
reflected, and to be reflected, in the First Home Regulatory Reports, and shown,
and to be shown, on the balance sheets contained in the First Home Financials
have been, and will be, established in accordance with the requirements of GAAP
and all applicable regulatory criteria.
Section 2.16 Information to be Supplied. The information to be supplied by
First Home and First Home Savings for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) and/or any information First Home
filed with the SEC under the Exchange Act which is incorporated by reference
into the Registration Statement (including the Prospectus/Proxy Statement) will
not, at the time the Registration Statement is declared effective pursuant to
the Securities Act and
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as of the date the Prospectus/Proxy Statement is mailed to shareholders of First
Home and up to and including the date of the meeting of shareholders of First
Home to which such Prospectus/Proxy Statement relates, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The information supplied,
or to be supplied, by First Home for inclusion in the Applications will, at the
time such documents are filed with any Regulatory Authority and up to and
including the date of the attainment of any required regulatory approvals or
consents, be accurate in all material respects.
Section 2.17 Securities Documents. First Home has delivered to Sovereign
copies of its (i) annual report on SEC Form 10-K for the year ended December 31,
1996, (ii) quarterly reports on SEC Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997 and (iii) proxy materials used or for
use in connection with its meetings of shareholders held in 1997 and 1996. Such
reports and such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Exchange Act and all applicable rules and
regulations of the SEC.
Section 2.18 Related Party Transactions. Except as disclosed (i) in the
First Home Disclosure Schedule, (ii) in the proxy statement for use in
connection with First Home's April 25, 1997 annual meeting of shareholders or
(iii) in the footnotes to the First Home Financials, First Home is not a party
to any transaction (including any loan or other credit accommodation, but
excluding deposits in the ordinary course of business) with any Affiliate of
First Home (except a First Home Subsidiary). Except as disclosed in the First
Home Disclosure Schedule or in First Home's proxy statement for its April 25,
1997 annual meeting of shareholders, 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 risks or unfavorable
features. Except as set forth on the First Home Disclosure Schedule, no loan or
credit accommodation to any Affiliate of First Home 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 First Home nor
First Home Savings 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
First Home Savings is inappropriate.
Section 2.19 Schedule of Termination Benefits. The First Home Disclosure
Schedule includes a schedule of the present value as of December 31, 1997 of
termination benefits and related payments that would be payable to the
individuals identified thereon, excluding any options to acquire First Home
Common Stock granted to such individuals, under any and all employment
agreements, special termination agreements, supplemental executive retirement
plans, deferred bonus plans, deferred compensation plans, salary continuation
plans, or any other pension benefit or welfare benefit plan maintained by First
Home solely for the benefit of executive officers of First Home or any First
Home Subsidiary (the "Benefits Schedule"), assuming their employment is
terminated as of December 31, 1997 and the Closing Date occurs prior to such
termination. No other individuals are entitled to benefits under any such plans.
The present value of the termination benefits and related payments specified,
including required gross-up payments under Section 280G of the IRC, on the
Benefit Schedule with respect to each named individual (based on a 6% per annum
discount factor) is true and correct in all material respects. As of November
30, 1997, no First Home director had deferred any compensation accrued by First
Home.
Section 2.20 Loans. Each loan reflected as an asset in the First Home
Financial Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on First Home.
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Section 2.21 Antitakeover Provisions Inapplicable. The provisions of
Sections 14A:10A-4 and 14A:10A-5 of the NJBCA do not and will not apply to this
Agreement or the transactions contemplated hereby.
Section 2.22 Quality of Representations. The representations made by First
Home in this Agreement are true, correct and complete in all material respects,
and do not omit statements necessary to make them not misleading under all facts
and circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Sovereign hereby represents and warrants to First Home that, except as set
forth in the Sovereign Disclosure Schedule delivered by Sovereign to First Home
on or prior to the date hereof:
Section 3.01 Organization.
(a) Sovereign is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Sovereign is a
savings and loan holding company duly registered under the HOLA. Sovereign has
the corporate power and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it. Each Sovereign Subsidiary is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and each possesses full corporate power and authority to carry on
its respective business and to own, lease and operate its properties as
presently conducted. Neither Sovereign nor any Sovereign Subsidiary is required
by the conduct of its business or the ownership or leasing of its assets to
qualify to do business as a foreign corporation in any jurisdiction other than
the Commonwealth of Pennsylvania and the states of Delaware and New Jersey,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) Sovereign Bank is a federal savings bank, duly organized and validly
existing under the laws of the United States of America. Sovereign Bank has the
corporate power and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it.
(c) The deposits of Sovereign Bank are insured by the FDIC to the extent
provided in the FDIA.
(d) The respective minute books of Sovereign and Sovereign Bank accurately
record in all material respects all material corporate action of their
respective shareholders and boards of directors (including committees) through
the date of this Agreement.
(e) Prior to the execution of this Agreement, Sovereign has delivered to
First Home true and correct copies of the articles of incorporation and the
bylaws of Sovereign and Sovereign Bank, respectively, as in effect on the date
hereof.
Section 3.02 Capital Structure.
(a) The authorized capital stock of Sovereign consists of (a) 200,000,000
shares of common stock, no par value ("Sovereign Common Stock"), of which, at
the date of this Agreement, 10,008 shares were issued and held by Sovereign as
treasury stock and 89,366,365 shares are outstanding, validly issued, fully paid
and nonassessable, and (b) 7,500,000 shares of preferred stock, no par value, of
which, at the date of this Agreement, 2,000,000 shares of 6 1/4% Cumulative,
Convertible Preferred Stock, Series B, are outstanding, validly issued, fully
paid and nonassessable. No shares of Sovereign Common Stock were issued in
violation of any preemptive rights. Sovereign has no Rights authorized, issued
or outstanding, other than (i) the Sovereign Stock Purchase Rights, (ii) options
to acquire 2,342,047 shares of Sovereign Common Stock authorized under
Sovereign's employee benefit plans, stock option plans, non-employee directors
compensation plan, employee stock ownership plan, employee stock purchase plan,
and dividend reinvestment and stock purchase plan, and (iii) capital securities
issued by Sovereign Capital Trust I, and (iv) the deemed rights to acquire
Sovereign Stock possessed by holders of the common stock of ML Bancorp, Inc.
under the Agreement and Plan of Merger between Sovereign and ML Bancorp, Inc.,
dated September 18, 1997, contingent upon
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completion of the transactions contemplated thereby. As of September 30, 1997,
Sovereign had approximately 10,500 shareholders of record.
(b) To the best of Sovereign's knowledge, except as disclosed in
Sovereign's proxy statement dated March 19, 1997, 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 Sovereign Common Stock.
(c) Sovereign owns all of the capital stock of Sovereign Bank, free and
clear of any lien, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature and either Sovereign or
Sovereign Bank owns all of its shares of capital stock of each other Sovereign
Subsidiary free and clear of all liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature. Except for the
Sovereign Subsidiaries, Sovereign does not possess, directly or indirectly, any
material equity interest in any corporation, except for equity interests held in
the investment portfolios of Sovereign Subsidiaries, equity interests held by
Sovereign Subsidiaries in a fiduciary capacity, and equity interests held in
connection with the commercial loan activities of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Sovereign has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. Sovereign
Bank has full corporate power and authority to execute and deliver the Bank Plan
of Merger and to consummate the Bank Merger. The execution and delivery of this
Agreement by Sovereign and the completion by Sovereign of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Sovereign, and no other corporate proceedings on the part of
Sovereign are necessary to complete the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Sovereign and,
subject to receipt of the required approvals of Regulatory Authorities described
in Section 3.04 hereof, constitutes the valid and binding obligation of
Sovereign, enforceable against Sovereign 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. The Bank Plan of Merger, upon its execution and delivery by Sovereign
Bank concurrently with the execution and delivery of this Agreement, will
constitute the valid and binding obligation of Sovereign Bank, enforceable
against Sovereign Bank in accordance with its terms, subject to applicable
conservatorship and receivership provisions of the FDIA, or insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by Sovereign, (B) the
execution and delivery of the Bank Plan of Merger by Sovereign Bank, (C) subject
to receipt of approvals from the Regulatory Authorities referred to in Section
3.04 hereof and First Home's and Sovereign's compliance with any conditions
contained therein, the consummation of the transactions contemplated hereby, and
(D) compliance by Sovereign or Sovereign Bank with any of the terms or
provisions hereof or of the Bank Plan of Merger will not (i) conflict with or
result in a breach of any provision of the articles of incorporation or bylaws
of Sovereign or any Sovereign Subsidiary or the charter and bylaws of Sovereign
Bank; (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Sovereign or any Sovereign
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 Sovereign or Sovereign Bank 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 Sovereign
or Sovereign Bank 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
Sovereign.
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Section 3.04 Consents. Except for consents, approvals, filings and
registrations from or with the OTS, the NJDB, the SEC, and state "blue sky"
authorities, and compliance with any conditions contained therein, and the
approval of the Bank Plan of Merger by Sovereign as sole shareholder of
Sovereign Bank under the HOLA, and by the Sovereign Bank Board of Directors no
consents or approvals of, or filings or registrations with, any public body or
authority are necessary, and no consents or approvals of any third parties are
necessary, or will be, in connection with (a) the execution and delivery of this
Agreement by Sovereign or the Bank Plan of Merger by Sovereign Bank, and (b) the
completion by Sovereign of the transactions contemplated hereby or by Sovereign
Bank of the Bank Merger. Sovereign has no reason to believe that (i) any
required consents or approvals will not be received or will be received with
conditions, limitations or restrictions unacceptable to it or which would
adversely impact Sovereign's or Sovereign Bank's ability to complete the
transactions contemplated by this Agreement or that (ii) any public body or
authority, the consent or approval of which is not required or any filing with
which is not required, will object to the completion of the transactions
contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) Sovereign has made, or will make, the Sovereign Regulatory Reports
available to First Home for inspection. The Sovereign Regulatory Reports have
been, or will be, prepared in all material respects in accordance with
applicable regulatory accounting principles and practices throughout the periods
covered by such statements, and fairly present, or will fairly present in all
material respects, the financial position, results of operations, and changes in
shareholders' equity of Sovereign as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
(b) Sovereign has previously delivered, or will deliver, to First Home the
Sovereign Financials. The Sovereign Financials have been, or will be, prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered by the Sovereign Financials, except as noted therein and fairly present,
or will fairly present, the consolidated financial position, results of
operations and cash flows of Sovereign as of and for the periods ending on the
dates thereof, in accordance with GAAP applied on a consistent basis throughout
the periods covered by the Sovereign Financials, except as noted therein.
Sovereign will make the Sovereign Regulatory Reports available to First Home for
inspection.
(c) At the date of each balance sheet included in the Sovereign Financials
or Sovereign Regulatory Reports, Sovereign 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 Sovereign
Financials or in the footnotes thereto which are not fully reflected or reserved
against therein or disclosed in a footnote thereto, except for liabilities,
obligations or loss contingencies which are not material in the aggregate and
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations or 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.
Section 3.06 Taxes. Sovereign and the Sovereign Subsidiaries are members
of the same affiliated group within the meaning of IRC Section 1504(a).
Sovereign has duly filed, and will file, all federal, state and local tax
returns required to be filed by or with respect to Sovereign and all Sovereign
Subsidiaries on or prior to the Closing Date (all such returns being accurate
and correct in all material respects) and has duly paid or will pay, or made or
will make, provisions for the payment of all federal, state and local taxes
which have been incurred by or are due or claimed to be due from Sovereign and
any Sovereign Subsidiary by any taxing authority or pursuant to any tax sharing
agreement or arrangement (written or oral) on or prior to the Closing Date other
than taxes which (i) are not delinquent or (ii) are being contested in good
faith.
Section 3.07 No Material Adverse Effect. Sovereign has not suffered any
Material Adverse Effect since September 30, 1997.
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Section 3.08 Ownership of Property; Insurance Coverage.
(a) Sovereign and the Sovereign Subsidiaries have good and, as to real
property, marketable title to all assets and properties owned by Sovereign or
any of its Subsidiaries in the conduct of their 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 Sovereign
Financials and in the Sovereign Regulatory Reports or acquired subsequent
thereto (except to the extent that such assets and properties have been disposed
of for fair value, in the ordinary course of business, since the date of such
balance sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure liabilities for
borrowed money and that are described in the Sovereign Disclosure Schedule or
permitted under Article IV hereof, and (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith. Sovereign and the
Sovereign Subsidiaries, as lessee, have the right under valid and subsisting
leases of real and personal properties used by Sovereign and its Subsidiaries in
the conduct of their businesses to occupy and use all such properties as
presently occupied and used by each of them.
(b) Sovereign and the Sovereign Subsidiaries currently maintain insurance
in amounts considered by Sovereign to be reasonable for their respective
operations, and such insurance is similar in scope and coverage to that
maintained by other businesses similarly engaged. Neither Sovereign nor any
Sovereign Subsidiary has received notice from any insurance carrier that (i)
such insurance will be cancelled or that coverage thereunder will be reduced or
eliminated or (ii) premium costs with respect to such insurance will be
substantially increased.
Section 3.09 Legal Proceedings. Neither Sovereign nor any Sovereign
Subsidiary is a party to any, and there are no pending or, to the best of
Sovereign's knowledge, threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations or inquiries of any
nature (i) against Sovereign or any Sovereign Subsidiary, (ii) to which
Sovereign's or any Sovereign 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 Sovereign to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii) which,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on Sovereign.
Section 3.10 Compliance With Applicable Law.
(a) Sovereign and the Sovereign Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their businesses
under, and have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on Sovereign.
(b) Neither Sovereign nor any Sovereign Subsidiary has received any
notification or communication from any Regulatory Authority (i) asserting that
Sovereign or any Sovereign Subsidiary is not in compliance with any of the
statutes, regulations or ordinances which such Regulatory Authority enforces;
(ii) threatening to revoke any license, franchise, permit or governmental
authorization which is material to Sovereign or any Sovereign Subsidiary; (iii)
requiring or threatening to require Sovereign or any Sovereign Subsidiary, or
indicating that Sovereign or any Sovereign Subsidiary may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting, or purporting to restrict or limit, in
any manner the operations of Sovereign or any Sovereign 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 Sovereign or any Sovereign 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 "Regulatory Agreement"). Neither Sovereign nor any
Sovereign Subsidiary has consented to or entered into any Regulatory Agreement,
except as heretofore disclosed to First Home.
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Section 3.11 Information to be Supplied. The information to be supplied by
Sovereign for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) and/or any information Sovereign filed with the SEC
under the Exchange Act which is incorporated by reference into the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act and
as of the date the Prospectus/Proxy Statement is mailed to shareholders of First
Home and up to and including the date of the meeting of shareholders of First
Home to which such Prospectus/Proxy Statement relates, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The information supplied,
or to be supplied, by Sovereign for inclusion in the Applications will, at the
time such documents are filed with any Regulatory Authority and up to and
including the date(s) of the obtainment of any required regulatory approvals or
consents, be accurate in all material aspects.
Section 3.12 ERISA. Sovereign has previously made available to First Home
true and complete copies of the employee pension benefit plans within the
meaning of ERISA Section 3(2), profit sharing plans, employee stock ownership
plans, stock purchase plans, deferred compensation and supplemental income
plans, supplemental executive retirement plans, annual incentive plans, group
insurance plans, and all other employee welfare benefit plans within the meaning
of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), and all other employee
benefit plans, policies, agreements and arrangements, all of which are set forth
on the Sovereign Disclosure Schedule, sponsored or contributed to for the
benefit of the employees or former employees (including retired employees) and
any beneficiaries thereof or directors or former directors of Sovereign or any
Sovereign Subsidiary, together with (i) the most recent actuarial (if any) and
financial reports relating to those plans which constitute "qualified plans"
under IRC Section 401(a), (ii) the most recent annual reports relating to such
plans filed by them, respectively, with any government agency, and (iii) all
rulings and determination letters which pertain to any such plans. Neither
Sovereign, any Sovereign Subsidiary, nor any pension plan maintained by
Sovereign or any Sovereign Subsidiary, has incurred, directly or indirectly,
within the past six (6) years any liability under Title IV of ERISA (including
to the Pension Benefit Guaranty Corporation) or to the IRS with respect to any
pension plan qualified under IRC Section 401(a) which liability has resulted in
or will result in a Material Adverse Effect with respect to Sovereign, except
liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any reportable event
under ERISA Section 4043 occurred with respect to any such pension plan which
would result in a Material Adverse Effect. With respect to each of such plans
that is subject to Title IV of ERISA, the present value of the accrued benefits
under such plan, based upon the actuarial assumptions used for funding purposes
in the plan's most recent actuarial report did not, as of its latest valuation
date, exceed the then current value of the assets of such plan allocable to such
accrued benefits. Neither Sovereign nor any Sovereign Subsidiary has incurred or
is subject to any liability under ERISA Section 4201 for a complete or partial
withdrawal from a multiemployer plan. All "employee benefit plans," as defined
in ERISA Section 3(3), comply and within the past six (6) years have complied in
all material respects with (i) relevant provisions of ERISA, and (ii) in the
case of plans intended to qualify for favorable income tax treatment, provisions
of the IRC relevant to such treatment. No prohibited transaction (which shall
mean any transaction prohibited by ERISA Section 406 and not exempt under ERISA
Section 408 or any transaction prohibited under IRC Section 4975) has occurred
within the past six (6) years with respect to any employee benefit plan
maintained by Sovereign or any Sovereign Subsidiary that would result in the
imposition, directly or indirectly, of an excise tax under IRC Section 4975 or
other penalty under ERISA or the IRC, which individually or in the aggregate,
has resulted in or will result in a Material Adverse Effect with respect to
Sovereign. Sovereign and the Sovereign Subsidiaries provide continuation
coverage under group health plans for separating employees and "qualified
beneficiaries" in accordance with the provisions of IRC Section 4980B(f). Such
group health plans are in compliance with Section 1862(b)(1) of the Social
Security Act.
Section 3.13 Securities Documents. Sovereign has delivered, or will
deliver, to First Home copies of its (i) annual reports on SEC Form 10-K for the
years ended December 31, 1996, 1995, and 1994, (ii) quarterly reports on SEC
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997
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and September 30, 1997, (iii) current reports on SEC Form 8-K dated February 5,
1997, February 6, 1997, February 13, 1997, March 18, 1997 June 17, 1997,
September 12, 1997, as amended, September 18, 1997 and December 9, 1997, which
are all the Current Reports on Form 8-K which were or filed or required to be
filed, (iv) proxy statement dated March 19, 1997 used in connection with its
annual meeting of shareholders held in April 1997, (v) proxy material dated July
22, 1997 relating to Sovereign's acquisition of Bankers Corp., and (vi)
preliminary proxy material filed by Sovereign with the SEC in November, 1997 and
related Form S-4 Registration Statement relating to Sovereign's acquisition of
ML Bancorp, Inc. Such reports and such proxy materials complied, at the time
filed with the SEC, in all material respects, with the Exchange Act and the
applicable rules and regulations of the SEC.
Section 3.14 Environmental Matters. To the knowledge of Sovereign, neither
Sovereign nor any Sovereign Subsidiary, nor any properties operated by Sovereign
or any Sovereign Subsidiary during Sovereign's use or ownership has been or is
in violation of or liable under any Environmental Law which violation or
liability, individually or in the aggregate, resulted in or will result in a
Material Adverse Effect with respect to Sovereign. There are no actions, suits
or proceedings, or demands, claims, notices or investigations (including without
limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of Sovereign,
threatened, relating to the liability of any property owned or operated by
Sovereign or any Sovereign Subsidiary under any Environmental Law.
Section 3.15 Allowance for Loan Losses. The allowance for loan losses
reflected, and to be reflected, in the Sovereign Regulatory Reports, and shown,
and to be shown, on the balance sheets contained in the Sovereign Financials
have been, and will be, established in accordance with the requirements of GAAP
and all applicable regulatory criteria.
Section 3.16 Brokers and Finders. In connection with the transactions
contemplated by the Agreement, neither Sovereign nor any Sovereign Subsidiary,
nor any of their respective officers, directors, employees or agents, has
employed any broker, finder or financial advisor, or incurred any liability for
any fees or commissions to any such person, in connection with the transactions
contemplated by this Agreement.
Section 3.17 Loans. Each loan reflected as an asset in the Sovereign
Financial Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Sovereign.
Section 3.18 Accounting for the Merger; Reorganization. As of the date
hereof, Sovereign does not have any reason to believe that the Merger will fail
to qualify (i) for pooling-of-interests treatment under GAAP, or (ii) as a
reorganization under Section 368(a) of the IRC.
Section 3.19 NJBCA Antitakeover Provisions. Neither Sovereign nor any
Sovereign Subsidiary is an "interested shareholder" of First Home under Sections
14A:10A-4 and 14:10A-5 of the NJBCA.
Section 3.20 Quality of Representations. The representations made by
Sovereign in this Agreement are true, correct and complete in all material
respects and do not omit statements necessary to make the representations not
misleading under the circumstances.
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ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of First Home's Business.
(a) From the date of this Agreement to the Closing Date, First Home and
each First Home Subsidiary will conduct its business and engage in transactions,
including extensions of credit, only in the ordinary course and consistent with
past practice and policies, except as otherwise required by this Agreement or
with the written consent of Sovereign. First Home will use its reasonable good
faith efforts, and will cause First Home Savings to use its reasonable good
faith efforts, to (i) preserve its business organizations intact, (ii) maintain
good relationships with employees, and (iii) preserve for itself the good will
of customers of First Home and First Home Subsidiaries and others with whom
business relationships exist. From the date hereof to the Closing Date, except
as otherwise consented to or approved by Sovereign in writing or as permitted or
required by this Agreement, First Home will not, and First Home will not permit
any First Home Subsidiary to:
(i) amend or change any provision of its certificate of incorporation,
charter, or bylaws;
(ii) change the number of authorized or issued shares of its capital
stock or issue or grant any option, warrant, call, commitment,
subscription, right or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into
shares of such stock, 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 (A) First Home may issue shares of First Home
Common Stock upon the valid exercise, subject to the terms of the letter
agreement attached hereto as Exhibit 1, of presently outstanding options to
acquire First Home Common Stock under the First Home Stock Option Plans,
(B) First Home may pay a regular quarterly cash dividend, not to exceed
$.10 per share of First Home Common Stock outstanding, and (C) First Home
may issue shares of First Home Common Stock pursuant to the Sovereign
Option. As promptly as practicable following the date of this Agreement,
the Board of Directors of First Home shall cause its regular quarterly
dividend record dates and payment dates to be the same as Sovereign's
regular quarterly dividend record dates and payment dates for Sovereign
Common Stock, and except as provided above, First Home shall not change its
regular dividend payment dates and record dates without prior written
consent of Sovereign. Nothing contained in this Section 4.01(ii) or in any
other Section of this Agreement shall be construed to permit First Home
shareholders to receive two dividends either from First Home or from First
Home and Sovereign in any quarter or to deny or prohibit them from
receiving one dividend from First Home or Sovereign in any quarter. Subject
to applicable regulatory restrictions, if any, First Home Savings may pay a
cash dividend, in the aggregate, sufficient to fund any dividend by First
Home permitted hereunder;
(iii) grant any severance or termination pay (other than pursuant to
written policies or written agreements of First Home or First Home
Subsidiaries in effect on the date hereof and provided to Sovereign prior
to the date hereof or as otherwise agreed to in writing by Sovereign and
First Home) to, or enter into any new or amend any existing employment
agreement with, or increase the compensation of, any employee, officer or
director of First Home or any First Home Subsidiary, except for routine
periodic increases in salary (estimated to be not in excess of $125,000
through June 30, 1998) and bonus required by existing bonus plans
(estimated to be not in excess of $200,000 through June 30, 1998);
(iv) merge or consolidate First Home or any First Home Subsidiary with
any other corporation; sell or lease all or any substantial portion of the
assets or business of First Home or any First Home 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 the collection of any loan or credit
arrangement between any First Home 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 First Home
Subsidiary of its
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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;
(v) sell or otherwise dispose of the capital stock of First Home
Savings or sell or otherwise dispose of any asset of First Home or of any
First Home Subsidiary other than in the ordinary course of business
consistent with past practice; subject any asset of First Home or of any
First Home 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;
(vi) take any action which would result in any of the representations
and warranties of First Home 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 V hereof not being satisfied, except in each case as may be
required by applicable law;
(vii) 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 Regulatory Authority responsible for
regulating First Home or First Home Savings;
(viii) waive, release, grant or transfer any rights of value or modify
or change in any material respect any existing material agreement to which
First Home or any First Home Subsidiary is a party, other than in the
ordinary course of business, consistent with past practice;
(ix) implement any pension, retirement, profit sharing, bonus, welfare
benefit or similar plan or arrangement which was not in effect on the date
of this Agreement, or materially amend any existing plan or arrangement
except to the extent such amendments do not result in an increase in cost;
provided, however, that First Home may contribute to the First Home
employee stock ownership plan, to the extent accrued on the First Home
Financial Statements at and for periods prior to the date of this
Agreement, (i) up to $240,000 (consisting of both voluntary and matching
contributions) in January 1998 with respect to the year ending December 31,
1997 and (ii) a pro rated amount up to $120,000 (consisting of both
voluntary and matching contributions) prior to the Closing Date with
respect to the year ending December 31, 1998 (such amount to be pro rated
based on the number of days elapsed from January 1, 1998 to the Closing
Date);
(x) purchase any security for its investment portfolio not rated "A"
or higher by either Standard & Poor's Corporation or Xxxxx'x Investor
Services, Inc. or otherwise alter, in any material respect, the mix,
maturity, credit or interest rate risk profile of its portfolio of
Investment Securities or its portfolio of Mortgage-Backed Securities.
(xi) make any new loan or other credit facility commitment (including
without limitation, lines of credit and letters of credit) to any borrower
or group of affiliated borrowers in excess of $1,000,000 in the aggregate,
or increase, compromise, extend, renew or modify any existing loan or
commitment outstanding in excess of $1,000,000, except for any commitment
disclosed on the First Home Disclosure Schedule; provided that Sovereign
will not unreasonably withhold its consent with respect to any request by
First Home for permission to increase, compromise, extend, renew or modify
any loan subject to this provision;
(xii) except as set forth on the First Home Disclosure Schedule or
except in the ordinary course of business consistent with past practice,
enter into, renew, extend or modify any other transaction with any
Affiliate other than deposit and loan transactions in the ordinary course
of business and which are in compliance with applicable laws and
regulations;
(xiii) enter into any interest rate swap or similar commitment,
agreement or arrangement;
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(xiv) except for the execution of this Agreement, or resulting
therefrom, take any action that would give rise to a right of payment to
any individual under any employment agreement;
(xv) intentionally and knowingly take any action that would preclude
satisfaction of the condition to closing contained in Section 5.02(k)
relating to financial accounting treatment of the Merger; or
(xvi) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be considered in the
ordinary course of business for First Home or any First Home Subsidiary to do
any of the following: (i) make any capital expenditure of $100,000 or more not
disclosed on First Home Disclosure Schedule 4.01, without the prior written
consent of Sovereign; (ii) make any sale, assignment, transfer, pledge,
hypothecation or other disposition of any assets having a book or market value,
whichever is greater, in the aggregate in excess of $1,000,000, other than
pledges of assets to secure government deposits, to exercise trust powers, sales
of assets received in satisfaction of debts previously contracted in the normal
course of business, issuance of loans, or transactions in the investment
securities portfolio by First Home or a First Home Subsidiary or repurchase
agreements made, in each case, in the ordinary course of business; or (iii)
undertake or enter 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 First Home or any First Home Subsidiary
of more than $100,000 annually, or containing a material financial commitment
and extending beyond 12 months from the date hereof.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the Closing Date, First Home or
Sovereign, as the case may be, shall afford to, and shall cause each First Home
Subsidiary or Sovereign Subsidiary to afford to, the other party and its
authorized agents and representatives, complete access to their respective
properties, assets, books and records and personnel, at reasonable hours and
after reasonable notice; and the officers of First Home and Sovereign will
furnish any person making such investigation on behalf of the other party with
such financial and operating data and other information with respect to the
businesses, properties, assets, books and records and personnel as the person
making such investigation shall from time to time reasonably request.
(b) First Home and Sovereign each agree to conduct such investigation and
discussions hereunder in a manner so as not to interfere unreasonably with
normal operations and customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from the
date of this Agreement through the Closing Date, First Home shall permit
employees of Sovereign reasonable access to and participation in matters
relating to problem loans, loan restructurings and loan work-outs of First Home
and the First Home Subsidiaries, provided that nothing contained in this
subparagraph shall be construed to grant Sovereign or any Sovereign employee any
final decision-making authority with respect to such matters. Sovereign shall
have the right, however, at Sovereign's expense, to cause First Home or any
First Home Subsidiary to obtain an appraisal by an independent third party
experienced in such matters, and mutually satisfactory to Sovereign and First
Home, of the assets or property securing any loan made by First Home or any
First Home Subsidiary, with a principal balance of $500,000 or more.
(d) If the transactions contemplated by this Agreement shall not be
consummated, First Home and Sovereign will each destroy or return all documents
and records obtained from the other party or its representatives, during the
course of its investigation and will cause all information with respect to the
other party obtained pursuant to this Agreement or preliminarily thereto to be
kept confidential, except to the extent such information becomes public through
no fault of the party to whom the information was provided or any of its
representatives or agents and except to the extent disclosure of any such
information is legally required. First Home and Sovereign shall each give prompt
notice to the other party of any contemplated disclosure where such disclosure
is so legally required.
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Section 4.03 Regulatory Matters and Consents.
(a) First Home and Sovereign shall promptly prepare a Prospectus/Proxy
Statement to be mailed to shareholders of First Home in connection with First
Home's meeting of shareholders and the transactions contemplated hereby, and to
be filed by Sovereign with the SEC in the Registration Statement, which
Prospectus/Proxy statement shall conform to all applicable legal requirements.
Sovereign shall, as promptly as practicable following the preparation thereof,
file the Registration Statement with the SEC and First Home and Sovereign shall
use all reasonable efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. Sovereign
will advise First Home, promptly after Sovereign receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the suspension of
the qualification of the shares of capital stock issuable pursuant to the
Registration Statement, or the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information. Sovereign shall use
its best efforts to obtain, prior to the effective date of the Registration
Statement, all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement.
Sovereign will provide First Home with as many copies of such Registration
Statement and all amendments thereto promptly upon the filing thereof as First
Home may reasonably request.
(b) Sovereign and First Home will prepare all Applications to Regulatory
Authorities and make all filings for, and use their reasonable best efforts to
obtain as promptly as practicable after the date hereof, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement.
(c) First Home will furnish Sovereign with all information concerning First
Home and First Home Subsidiaries as may be reasonably necessary or advisable in
connection with the Registration Statement and any Application or filing made by
or on behalf of Sovereign to any Regulatory Authority in connection with the
transactions contemplated by this Agreement and the Bank Plan of Merger.
(d) Sovereign and First Home shall have the right to review in advance, and
to the extent practicable each will consult with the other on, all information
which appears in any filing made with or written materials submitted to the SEC,
any Regulatory Authority or any third party in connection with the transactions
contemplated by this Agreement and the Bank Plan of Merger. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of the SEC, Regulatory Authorities and third parties necessary or
advisable to consummate the transactions contemplated by this Agreement and the
Bank Plan of Merger and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated hereby and
thereby.
(e) Sovereign will promptly furnish First Home with copies of all written
communications to, or received by Sovereign or any Sovereign Subsidiary from,
any Regulatory Authority in respect of the transactions contemplated hereby.
Section 4.04 Taking of Necessary Action.
(a) Sovereign and First Home shall each use its best efforts in good faith,
and each of them shall cause its Subsidiaries to use their reasonable best
efforts in good faith, to take or cause to be taken all action necessary or
desirable on its part using its best efforts so as to permit completion of the
Merger and the Bank Merger, as soon as practicable after the date hereof,
including, without limitation, (A) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required or desirable for
consummation of the transactions contemplated hereby (including assignment of
leases without any change in terms), provided that neither First Home nor any
First Home Subsidiary shall agree to make any payments or modifications to
agreements in connection therewith without the prior written consent of
Sovereign,
A-27
and (B) requesting the delivery of appropriate opinions, consents and letters
from its counsel and independent auditors. No party hereto shall take, or cause,
or to the best of its ability permit to be taken, any action that would
substantially impair the prospects of completing the Merger and the Bank Merger
pursuant to this Agreement and the Bank Plan of Merger; provided that nothing
herein contained shall preclude Sovereign or First Home or from exercising its
rights under this Agreement or the Stock Option Agreement.
Section 4.05 Certain Agreements.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Date, a director or officer or
employee of First Home or any of its Subsidiaries (the "Indemnified Parties")
is, or is threatened to be, made a party to a suit based in whole or in part on,
or arising in whole or in part out of, or pertaining to (i) the fact that he is
or was a director, officer or employee of First Home, any of the First Home's
Subsidiaries or any of their respective predecessors or (ii) this Agreement or
any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Date, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto to
the extent permitted by the NJBCA and the Certificate of incorporation and
bylaws of First Home. On or after the Effective Date, Sovereign shall indemnify,
defend and hold harmless all prior and then-existing directors and officers of
First Home and any First Home Subsidiary, against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement (with the approval of Sovereign which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based 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 First Home or any First Home Subsidiary, whether pertaining to any
matter existing or occurring at or prior to the Effective Date and whether
asserted or claimed prior to, or at or after, the Effective Date ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, to the same extent as such officer, director
or employee may be indemnified by First Home or any First Home Subsidiary as of
the date hereof including the right to advancement of expenses, provided,
however, that any such officer, director or employee of First Home or any First
Home Subsidiary may not be indemnified by Sovereign and/or Sovereign Bank if
such indemnification is prohibited by applicable law.
(b) Sovereign shall maintain First Home's existing directors' and officers'
liability insurance policy (or a policy providing comparable coverage amounts on
terms generally no less favorable, including Sovereign's existing policy if it
meets the foregoing standard) covering persons who are currently covered by such
insurance for a period of five years after the Effective Date; provided,
however, that in no event shall Sovereign be obligated to expend, in order to
maintain or provide insurance coverage pursuant to this Section 4.05(b), any
amount per annum in excess of 150% of the amount of the annual premiums paid as
of the date hereof by First Home for such insurance (the "Maximum Amount"). If
the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Sovereign shall use all
reasonable efforts to maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount. In the event that Sovereign acts as its own insurer for all of its
directors and officers with respect to matters typically covered by a directors'
and officers' liability insurance policy, Sovereign's obligations under this
Section 4.05(b) may be satisfied by such self insurance, so long as its senior
debt ratings by Standard & Poor's Corporation and Xxxxx'x Investors Services,
Inc. are not lower than such ratings as of the date hereof.
(c) Sovereign agrees to honor and Sovereign agrees to cause Sovereign Bank
to honor all terms and conditions of all existing employment contracts and
special termination agreements disclosed in the First Home Disclosure Schedule
and for purposes of this Agreement the terms of such employment contracts shall
be for a period of three (3) years from the Closing Date. Under such employment
contracts, each employee may elect to be paid out under the terms of such
contract or receive a lump-
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sum payment of the present value (based on a 6% per annum discount factor) of
the payments required to be made thereunder.
(d) In the event that Sovereign or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 4.05.
Section 4.06 No Other Bids and Related Matters.
(a) So long as this Agreement remains in effect, First Home shall not and
First Home shall not authorize or permit any of its directors, officers,
employees or agents, to directly or indirectly (i) respond to, solicit, initiate
or encourage any inquiries relating to, or the making of any proposal which
relates to, an Acquisition Transaction (as defined below), (ii) recommend or
endorse an Acquisition Transaction, (iii) participate in any discussions or
negotiations regarding an Acquisition Transaction, (iv) provide any third party
(other than Sovereign or an affiliate of Sovereign) with any nonpublic
information in connection with any inquiry or proposal relating to an
Acquisition Transaction or (v) enter into an agreement with any other party with
respect to an Acquisition Transaction. First Home will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Sovereign with respect to any
of the foregoing, and will take all actions necessary or advisable to inform the
appropriate individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 4.06. First Home will notify
Sovereign orally (within one day) and in writing (as promptly as practicable) if
any inquiries or proposals relating to an Acquisition Transaction are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, First Home. As used in
this Agreement, "Acquisition Transaction" shall mean one of the following
transactions with a party other than Sovereign of an affiliate of Sovereign (i)
a merger or consolidation, or any similar transaction, involving First Home or a
First Home Subsidiary, (ii) a purchase, lease or other acquisition of all or a
substantial portion of the assets or liabilities of First Home or a First Home
Subsidiary or (iii) a purchase or other acquisition (including by way of share
exchange, tender offer, exchange offer or otherwise) of a substantial interest
in any class or series of equity securities of First Home (other than as
permitted by Section 4.01(a)(ii) hereof) or a First Home Subsidiary.
(b) Notwithstanding the foregoing, First Home, after written notice to
Sovereign, may for a period of thirty (30) days after the date of this Agreement
respond to unsolicited inquiries from third parties with respect to an
Acquisition Transaction if the fiduciary duty of the individuals set forth in
the first sentence of Section 4.06(a) legally requires them to do so and they
are so advised in a written opinion of counsel.
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule. Each
party shall promptly advise the other party of any change or event having a
Material Adverse Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Each party shall update its respective
Disclosure Schedule as promptly as practicable after the occurrence of an event
or fact which, if such event or fact had occurred prior to the date of this
Agreement, would have been disclosed in such Disclosure Schedule. The delivery
of such updated Schedule shall not relieve a party from any breach or violation
of this Agreement and shall not have any effect for the purposes of determining
the satisfaction of the condition set forth in Sections 5.01(c) and 5.02(c)
hereof, as applicable.
Section 4.08 Conduct of Sovereign's Business. From the date of this
Agreement to the Closing Date, Sovereign will use its best efforts to (x)
preserve its business organizations intact, (y) maintain good relationships with
employees, and (z) preserve for itself the goodwill of customers of Sovereign
and Sovereign Subsidiaries and others with whom business relationships exist.
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Section 4.09 Current Information.
(a) During the period from the date of this Agreement to the Effective
Date, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year ending
December 31), First Home and Sovereign will deliver to the other party its
quarterly report on Form 10-Q under the Exchange Act, and, as soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year
ended December 31, First Home and Sovereign will deliver to the other party its
Annual Report on Form 10-K. Within 25 days after the end of each month, First
Home and Sovereign will deliver to the other party a consolidated balance sheet
and a consolidated statement of operations, without related notes, for such
month.
(b) First Home shall provide to Sovereign a copy of the minutes of any
meeting of the Board of Directors of First Home or any First Home Subsidiary, or
any committee thereof, or any senior management committee, promptly after such
minutes are approved at a subsequent meeting of the board or committee, but in
any event within 40 days of the meeting of such board or committee to which such
minutes relate, except that with respect to any meeting held within 30 days of
the Closing Date, such minutes shall be provided prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and First Home.
(a) From and after the date of this Agreement, First Home shall:
(i) Voting by Directors. Recommend to all members of First Home's
Board of Directors to vote all shares of First Home's Common Stock
beneficially owned by each such director in favor of this Agreement;
(ii) Phase I Environmental Audit. Permit Sovereign, if Sovereign
elects to do so, at its own expense, to cause a "phase I environmental
audit" to be performed at any physical location owned or occupied by First
Home or any First Home Subsidiary on the date hereof;
(iii) Approval of Bank Plan of Merger. Approve the Bank Plan of
Merger as sole shareholder of First Home Savings and obtain the approval
of, and cause the execution and delivery of, the Bank Plan of Merger by
First Home Savings;
(iv) Proxy Solicitor. If Sovereign requests and agrees to bear the
expense thereof, retain a proxy solicitor in connection with the
solicitation of First Home shareholder approval of this Agreement;
(v) Timely Review. If requested by Sovereign at Sovereign's sole
expense, cause its independent certified public accountants to perform a
review of its unaudited consolidated financial statements as of the end of
any calendar quarter, in accordance with Statement of Auditing Standards
No. 36, and to issue its report on such financial statements as soon as is
practicable thereafter;
(vi) Outside Service Bureau Contracts. If requested to do so by
Sovereign, use its reasonable best efforts to obtain an extension of any
contract with an outside service bureau or other vendor of services to
First Home or any First Home Subsidiary, on terms and conditions mutually
acceptable to First Home and Sovereign;
(vii) Committee Meetings. Permit a representative of Sovereign, who
is reasonably acceptable to First Home, to attend all committee meetings of
First Home and First Home Savings management including, without limitation,
any loan or asset/liability committee;
(viii) List of Nonperforming Assets. Provide Sovereign, within ten
(10) days after the quarterly meeting of its Asset Review Committee, a
written list of nonperforming assets as of the end of such month;
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(ix) Reserves and Merger-Related Costs. On or before the Effective
Date, establish such additional accruals and reserves as may be necessary
to conform the accounting reserve practices and methods (including credit
loss practices and methods) of First Home to those of Sovereign (as such
practices and methods are to be applied to First Home from and after the
Closing Date) and Sovereign's plans with respect to the conduct of the
business of First Home following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by First Home, provided,
however, that First Home shall not be required to take such action (A) more
than five (5) days prior to the Effective Date; and (B) unless Sovereign
agrees in writing that all conditions to closing set forth in Section 5.02
have been satisfied or waived (except for the expiration of any applicable
waiting periods); prior to the delivery by Sovereign of the writing
referred to in the preceding clause, First Home shall provide Sovereign a
written statement, certified without personal liability by the chief
executive officer of First Home and dated the date of such writing, that
the representation made in Section 2.15 hereof is true as of such date or,
alternatively, setting forth in detail the circumstances that prevent such
representation from being true as of such date; and no accrual or reserve
made by First Home or any First Home Subsidiary pursuant to this
subsection, or any litigation or regulatory proceeding arising out of any
such accrual or reserve, shall constitute or be deemed to be a breach or
violation of any representation, warranty, covenant, condition or other
provision of this Agreement or to constitute a termination event within the
meaning of Section 6.01(d) hereof; and
(x) Shareholders Meetings. First Home shall take all action necessary
to properly call and convene a special meeting of its shareholders as soon
as practicable after the date hereof to consider and vote upon this
Agreement and the transactions contemplated hereby. The Board of Directors
of First Home shall recommend that the shareholders of First Home, approve
this Agreement and the transactions contemplated hereby; provided, however,
that no director of First Home shall be required to take any action in
accordance with this subsection in such person's capacity as a director if
the fiduciary duty of such person in such capacity legally requires
otherwise and such person is so advised in a written opinion of counsel.
(b) From and after the date of this Agreement, Sovereign and First Home
shall each:
(i) Identification of First Home's Affiliates. Cooperate with the
other and use its best efforts to identify those persons who may be deemed
to be Affiliates of First Home;
(ii) Public Announcements. Cooperate and cause its respective
officers, directors, employees and agents to cooperate in good faith,
consistent with their respective legal obligations, in the preparation and
distribution of, and agree upon the form and substance of, any press
release related to this Agreement and the transactions contemplated hereby,
and any other public disclosures related thereto, including without
limitation communications to First Home shareholders, First Home's internal
announcements and customer disclosures, but nothing contained herein shall
prohibit either party from making any disclosure which its counsel deems
necessary under applicable law;
(iii) Maintenance of Insurance. Maintain, and cause their respective
Subsidiaries to maintain, insurance in such amounts as are reasonable to
cover such risks as are customary in relation to the character and location
of its properties and the nature of its business;
(iv) Maintenance of Books and Records. Maintain, and cause their
respective Subsidiaries to maintain, books of account and records in
accordance with GAAP applied on a basis consistent with those principles
used in preparing the financial statements heretofore delivered;
(v) Delivery of Securities Documents. Deliver to the other, copies of
all Securities Documents simultaneously with the filing thereof; and
(vi) Taxes. File all federal, state, and local tax returns required
to be filed by them or their respective Subsidiaries on or before the date
such returns are due (including any extensions) and pay all taxes shown to
be due on such returns on or before the date such payment is due.
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Section 4.11 Employee Benefits and Termination Benefits.
(a) Employee Benefits. On and after the Effective Date, the employee
pension (including employee stock ownership plans) and welfare benefit plans of
Sovereign and First Home may, at Sovereign's election and subject to the
requirements of the IRC, continue to be maintained separately, consolidated or
terminated, provided, however, that First Home employees shall receive benefits
at least as favorable, in the aggregate, as the benefits to which they were
entitled on the date of this Agreement. First Home and Sovereign agree that,
subject to the conditions described herein, as soon as practicable after the
Effective Date and receipt of a favorable determination letter from the IRS upon
plan termination, participants in the First Home ESOP shall be entitled at their
election to have the amounts in their First Home ESOP accounts either
distributed to them in a lump sum or rolled over to another tax-qualified plan
(including Sovereign plans to the extent permitted by Sovereign) or individual
retirement account. In the event of a consolidation of any or all of such
pension benefit plans or in the event of termination of the First Home pension
benefit plans, First Home and First Home Savings employees shall receive full
credit for service with First Home or First Home Savings under Sovereign's
pension and 401(k) plans, but not Sovereign's Employee Stock Ownership Plan, for
purposes of eligibility and vesting determination. In the event of any
termination of or consolidation of any First Home or First Home Savings health
plan with any Sovereign health plan, all employees of First Home or First Home
Savings who were eligible for coverage under the terminated plan shall have
coverage under any successor health plan with protection for any pre-existing
condition. In the event of a termination or consolidation of any First Home or
First Home Savings health plan, terminated First Home or First Home Savings
employees will have the right to continue coverage under group health plans of
Sovereign and/or the Sovereign Subsidiaries in accordance with the IRC Section
4980B(f).
(b) Termination Benefits. First Home shall cause to be delivered to
Sovereign concurrently with the execution of this Agreement with respect to each
executive officer named on the Benefits Schedule included in the First Home
Disclosure Schedule, the written acknowledgment of each such individual in the
form attached hereto as Exhibit 4 pursuant to which each such individual agrees
and acknowledges that the dollar amount set forth opposite such individual's
name on such Benefits Schedule is the entire amount that would be due to such
individual under any employment agreement, special termination agreement,
supplemental executive retirement plan, deferred bonus plan, deferred
compensation plan, salary continuation plan, or any other pension benefit or
welfare benefit plan maintained by First Home solely for the benefit of officers
of First Home or First Home Subsidiaries assuming a termination of such
individual's employment on December 31, 1997, subsequent to the Closing Date.
First Home and Sovereign acknowledge and agree that the amounts shown on the
Benefits Schedule and the letter of acknowledgement for each officer named
herein reflect a good faith estimate of the amounts that will be payable to such
individuals under the circumstances described and may be subject to adjustment
upon an actual termination of employment in order to reflect increases in such
individuals' compensation and benefit plans consistent with past practices for
routine periodic increases.
"(c) Severance Policy. Sovereign agrees to cause Sovereign
Bank to provide employees of First Home Savings whose
employment is terminated in connection with the Merger within
three (3) months after the conversion of First Home's system
to that of Sovereign's, either because such employee's
position is eliminated or such employee is not offered
comparable employment (i.e., not offered employment for a
position of generally similar job description or
responsibilities in a location within thirty (30) miles from
an employee's work location), and who do not at their election
cease performing services for Sovereign or First Home, as
applicable, prior to their final termination date as set or
adjusted by Sovereign, excluding any employee who has an
existing employment or consulting agreement or whose
employment is terminated for Cause (as defined below), as
follows, provided such employees execute such documentation as
Sovereign may reasonably require, including Sovereign's
customary form of release: (i) the thirteen employees
identified on First Home's
A-32
Disclosure Schedule shall be entitled to two weeks of base
salary as severance pay for each year of service with First
Home or First Home Savings, or Sovereign or any Sovereign
Subsidiary, with a two-week minimum; and (ii) employees other
than the thirteen employees identified on First Home's
Disclosure Schedule shall be entitled to one week of base
salary as severance pay for each year of service with First
Home or First Home Savings, or Sovereign or any Sovereign
Subsidiary, with a one-week minimum. For purposes of this
Section 4.11(c), "Cause" shall mean termination because of the
employee's personal dishonesty, failure to meet established
performance goals (which shall be reasonably established),
willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties
or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses). The benefits
provided to terminated First Home or First Home Savings
employees under this subsection are the only severance
benefits payable by First Home or First Home Savings under any
plan or policy (excluding severance benefits provided under
existing employment or consulting agreements or as otherwise
required by law), except for employees who do not execute the
documentation required by Sovereign, which employees shall be
entitled to the termination benefits provided under First Home
Savings' severance policies. The benefits payable to First
Home employees under this subsection or otherwise shall in any
event be in lieu of any termination benefits to which such
employees would otherwise be entitled under Sovereign's or
Sovereign Bank's severance policies or programs then in
effect."
4. Section 4.11(d) of the Agreement is deleted in its entirety and
replaced with the following:
"(d) Retention Bonuses. Notwithstanding subparagraph (c)
above, each employee of First Home or of First Home Savings
identified in the First Home Disclosure Schedule shall be
entitled to receive a "retention" bonus from First Home or
First Home Savings Bank as determined by the executive
officers of First Home (after consultation with Sovereign) and
as set forth on First Home's Disclosure Schedule in the event
that such employee remains an employee of First Home, First
Home Savings or Sovereign, as applicable, until the date the
systems conversion occurs or is involuntarily terminated prior
to the date of the systems conversion, but after the Effective
Date, and satisfactorily fulfills the duties and
responsibilities of the position of such employee of First
Home, First Home Savings or Sovereign, as the case may be,
through the date of systems conversion; provided that
retention bonuses, in the aggregate, shall not exceed
$250,000."
(e) Employee Loan Program. Prior to consummation of the Merger, First Home
may continue to originate loans pursuant to its employee loan program in effect
as of the date hereof, and upon consummation of the Merger, Sovereign agrees to
cause Sovereign Bank to honor the loans originated by First Home pursuant to
such employee loan program.
(f) Intention Regarding Future Employment. Within ninety (90) days of the
date hereof, Sovereign and Sovereign Bank intends to use their reasonable best
efforts to inform the employees of First Home and First Home Savings of the
likelihood of such employees having continued employment with Sovereign Bank
following the Effective Date and, where appropriate, intends to use their
reasonable best efforts to interview the First Home and First Home Savings
employees to determine if there are mutually beneficial employment opportunities
available at Sovereign Bank. It is the intent of Sovereign Bank in connection
with reviewing applicants for employment positions to give any First Home
employee who is terminated in connection with the Merger within three months of
the Effective Date the same consideration as is afforded Sovereign Bank
employees for such positions in accordance with existing formal or informal
policies for a period of three months from such date of termination.
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Section 4.12 Stock Exchange Listing. Sovereign shall use all reasonable
best efforts to cause the shares of Sovereign Common Stock to be issued in
connection with the Merger to be approved for quotation on the Nasdaq Stock
Market's National Market System, subject to official notice of issuance, as of
or prior to the Effective Date.
Section 4.13 Affiliate Letter. Concurrently with the execution and
delivery of this Agreement, First Home shall cause to be delivered to Sovereign
the Letter Agreement attached hereto as Exhibit 1, executed by each director,
officer and any shareholder required to file reports on SEC Schedule 13D under
the Exchange Act set forth thereon.
Section 4.14 Publication of Combined Financial Results. Sovereign shall
use its reasonable best efforts to publish as soon as possible, but no later
than the required date of filing its Quarterly Report on Form 10-Q for the first
fiscal quarter following the Effective Date in which there are at least 30 days
of post-Merger combined operations, combined revenues and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
Section 4.15 Sovereign Rights Agreement. Sovereign agrees that any
Sovereign Rights issued pursuant to the Sovereign Rights Agreement shall be
issued with respect to each share of Sovereign Common Stock issued pursuant to
the terms hereof regardless whether there has occurred a "Distribution Date"
under the terms of such Sovereign Rights Agreement prior to the Effective Date,
as well as to take all action necessary or advisable to enable the holder of
each such share of Sovereign Common Stock to obtain the benefit of such
Sovereign Stock Purchase Rights notwithstanding their prior distribution,
including without limitation, amendment of the Sovereign Rights Agreement.
Section 4.16 Advisory Board. On the Effective Date, Sovereign Bank shall
establish for a period of at least two years the First Home Advisory Board (the
"Advisory Board"), which shall consist of all the members of the First Home
Board of Directors immediately prior to the Effective Date. The members of the
Advisory Board shall be paid an annual retainer of $9,000, exclusive of any
First Home Board Members who do not wish to join the Advisory Board.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to First Home's Obligations under this
Agreement. The obligations of First Home hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by First Home pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Sovereign and Sovereign Bank to authorize the execution, delivery and
performance of this Agreement and the Bank Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement and the Bank
Plan of Merger, shall have been duly and validly taken by Sovereign and
Sovereign Bank; and First Home shall have received certified copies of the
resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of Sovereign required by this
Agreement to be performed by Sovereign at or prior to the Closing Date shall
have been duly performed and complied with in all respects, except where the
failure to perform or comply with any obligation or covenant would not, either
individually or in the aggregate, result in a Material Adverse Effect with
respect to Sovereign;
(c) Representations and Warranties. The representations and warranties of
Sovereign set forth in this Agreement shall be true and correct, as of the date
of this Agreement, and as of the Closing Date as though made on and as of the
Closing Date, except as to any representation or warranty (i) which specifically
relates to an earlier date or (ii) where the breach of the representation or
warranty would not, either individually or in the aggregate, constitute a
Material Adverse Effect with respect to Sovereign;
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(d) Approvals of Regulatory Authorities. Sovereign shall have received all
required approvals of Regulatory Authorities of the Merger, and delivered copies
thereof to First Home; and all notice and waiting periods required thereunder
shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997, there shall not
have occurred any Material Adverse Effect with respect to Sovereign;
(g) Officer's Certificate. Sovereign shall have delivered to First Home a
certificate and such other documents, dated the Closing Date and signed, without
personal liability, by its chairman or president, to the effect that the
conditions set forth in subsections (a) through (e) of this Section 5.01 have
been satisfied, to the best knowledge of the officer executing the same;
(h) Opinion of Sovereign's Counsel. First Home shall have received an
opinion of Xxxxxxx & Xxx, counsel to Sovereign, dated the Closing Date, in form
and substance reasonably satisfactory to First Home and its counsel to the
effect set forth on Exhibit 5 attached hereto;
(i) Registration Statement. The Registration Statement shall be effective
under the Securities Act and no proceedings shall be pending or threatened by
the SEC to suspend the effectiveness of the Registration Statement; and all
required approvals by state securities or "blue sky" authorities with respect to
the transactions contemplated by this Agreement, shall have been obtained and
neither the Registration Statement nor any such approval by state securities or
"blue sky" authorities shall be subject to a stop order or threatened stop order
by the SEC or any such authority;
(j) Tax Opinion. First Home shall have received an opinion of Xxxxxxx &
Xxx, substantially to the effect set forth on Exhibit 6 attached hereto;
(k) Approval of First Home's Shareholders. This Agreement shall have been
approved by the shareholders of First Home by such vote as is required under
First Home's articles of incorporation and bylaws, NJBCC or under Nasdaq
requirements applicable to it; and
(l) Investment Banking Opinion. First Home shall have received a written
opinion, dated within five (5) days of mailing the Prospectus/Proxy Statement,
from RP Financial, updating its prior written opinion, to the effect that the
Applicable Exchange Ratio is fair, from a financial point of view, to such
shareholders.
Section 5.02 Conditions to Sovereign's Obligations under this
Agreement. The obligations of Sovereign hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Sovereign pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, First Home and First Home Savings to authorize the execution, delivery
and performance of this Agreement and the Bank Plan of Merger, respectively, and
the consummation of the transactions contemplated by this Agreement and the Bank
Plan of Merger, shall have been duly and validly taken by First Home and First
Home Savings; and Sovereign shall have received certified copies of the
resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of First Home, required by
this Agreement to be performed by it at or prior to the Closing Date shall have
been duly performed and complied with in all respects, except where the failure
to perform or comply with any obligation or covenant would not, either
individually or in the aggregate, result in a Material Adverse Effect with
respect to First Home;
(c) Representations and Warranties. The representations and warranties of
First Home set forth in this Agreement shall be true and correct as of the date
of this Agreement, and as of the Closing Date as though made on and as of the
Closing Date, except as to any representation or warranty (i) which specifically
relates to an earlier date or (ii) where the breach of the representation or
warranty would
A-35
not, either individually or in the aggregate, result in a Material Adverse
Effect with respect to First Home;
(d) Approvals of Regulatory Authorities. Sovereign shall have received all
required approvals of Regulatory Authorities for the Merger, without the
imposition of any term or condition that would have a Material Adverse Effect on
Sovereign upon completion of the Merger; and all notice and waiting periods
required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997, there shall not
have occurred any Material Adverse Effect with respect to First Home.
(g) Officer's Certificate. First Home shall have delivered to Sovereign a
certificate and such other documents, dated the Closing Date and signed, without
personal liability, by its chairman of the board or president, to the effect
that the conditions set forth in subsections (a) through (e) of this Section
5.02 have been satisfied, to the best knowledge of the officer executing the
same;
(h) Opinions of First Home's Counsel. Sovereign shall have received an
opinion of Blank Rome Xxxxxxxx & XxXxxxxx LLP, counsel to First Home, dated the
Closing Date, in form and substance reasonably satisfactory to Sovereign and its
counsel to the effect set forth on Exhibit 7 attached hereto;
(i) Registration Statement. The Registration Statement shall be effective
under the Securities Act and no proceedings shall be pending or threatened by
the SEC to suspend the effectiveness of the Registration Statement; and all
required approvals by state securities or "blue sky" authorities with respect to
the transactions contemplated by this Agreement, shall have been obtained and
neither the Registration Statement nor any such approval by state securities or
"blue sky" authorities shall be subject to a stop order or threatened stop order
by the SEC or any such authority;
(j) Tax Opinion. Sovereign shall have received an opinion of Xxxxxxx &
Xxx, its counsel, substantially to the effect set forth on Exhibit 6 attached
hereto;
(k) Pooling Letter. Sovereign shall have received a letter from Ernst &
Young L.L.P. to the effect that the Merger will be treated as a "pooling of
interests" for financial accounting purposes;
(l) Phase I Environmental Audit Results. The results of any "phase I
environmental audit" conducted pursuant to Section 4.10(a)(ii) with respect to
owned or occupied bank premises shall be reasonably satisfactory to Sovereign;
provided, however, that (i) any such environmental audit must be initiated
within 45 days of the date of this Agreement, (ii) Sovereign must elect to
terminate this Agreement or waive its right to terminate the Agreement under
this Section 5.02(l) within 15 days of receiving the results of such
environmental audit and (iii) Sovereign may not terminate this Agreement under
this Section 5.02(l) unless the results of such audits result in a Material
Adverse Effect on Sovereign; and
(m) Liquidation Account. Neither the Merger or consummation of the Bank
Plan of Merger shall require Sovereign, First Home or any Subsidiary of either
to distribute to depositors the liquidation account established by First Home
Savings in connection with its conversion from mutual to stock form.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be terminated on or at any
time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By Sovereign or First Home:
A-36
(i) if the Closing Date shall not have occurred on or before July 31,
1998, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe, in any
material respect, its agreements set forth in this Agreement required to be
performed or observed by such party on or before the Closing Date; or
(ii) if either party has received a final unappealable administrative
order from a Regulatory Authority whose approval or consent has been
requested that such approval or consent will not be granted, or in the case
of a termination by Sovereign, will not be granted absent the imposition of
terms and conditions which would permit satisfaction of the condition set
forth at Section 5.02(d) hereof, unless the failure of such occurrence
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe in any material respect its agreements set
forth herein required to be performed or observed by such party on or
before the Closing Date; or
(c) By First Home, if on the Closing Date the Sovereign Market Value shall
be less than $13.50 (as adjusted for stock splits and dividends) subject,
however, to the following: If First Home shall elect to terminate this Agreement
pursuant to this Section 6.01(c), it shall give written notice thereof to
Sovereign (provided that such notice of election to terminate may be withdrawn
at any time within the five-day period commencing with receipt of such notice).
During the five-day period commencing with its receipt of such notice, Sovereign
shall have the option to elect to increase the Applicable Exchange Ratio to an
amount which when multiplied by the Sovereign Market Value determined as of the
Closing Date, equal to $23.44 and the Closing Date shall be postponed by the
minimum amount of time necessary, if any, to accommodate Sovereign's election of
such option (i.e. up to a five-day period). If Sovereign so elects within such
five-day period, it shall give prompt written notice to First Home of such
election and the Applicable Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 6.01(c) and this Agreement shall remain in
effect in accordance with its terms (except as the Applicable Exchange Ratio
shall have been so modified), and any references in this Agreement to "Exchange
Ratio" or "Applicable Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 6.01(c).
(d) At any time on or prior to the Effective Date, by First Home in writing
if Sovereign has, or by Sovereign in writing if First Home has, in any material
respect, breached (i) any material covenant or undertaking contained herein or
(ii) any representation or warranty contained herein, which in the case of a
breach referred to in subclause (i) or (ii) above by Sovereign would have a
Material Adverse Effect on Sovereign and in case of a breach referred to in
subclause (i) or (ii) above by First Home would have a Material Adverse Effect
on First Home, in any case if such breach has not been substantially cured by
the earlier of 30 days after the date on which written notice of such breach is
given to the party committing such breach or the Effective Date or if on such
date such breach no longer causes a Material Adverse Effect.
Section 6.02 Effect of Termination. If this Agreement is terminated
pursuant to Section 6.01 hereof, this Agreement shall forthwith become void
(other than Section 4.02(d), Section 4.10(b)(iii) and Section 7.01 hereof, which
shall remain in full force and effect), and there shall be no further liability
on the part of Sovereign or First Home to the other, except for any liability
arising out of any uncured willful breach of any covenant or other agreement
contained in this Agreement or any fraudulent breach of a representation or
warranty.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of printing and mailing the
Proxy Statement/Prospectus which shall be shared equally, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and Warranties. All
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants that by
their terms are to be performed after the Effective Date, including without
A-37
limitation the covenants set forth in Sections 1.02(f), 1.02(g), 4.05, and
4.11(a) and (c) which will survive the Merger, shall terminate on the Closing
Date.
Section 7.03 Amendment, Extension and Waiver. Subject to applicable law,
at any time prior to the consummation of the transactions contemplated by this
Agreement, the parties may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of either 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 in Articles IV and V hereof or otherwise
provided that any amendment, extension or waiver granted or executed after
shareholders of First Home have approved this Agreement shall not modify either
the amount or the form of the consideration to be provided hereby to holders of
First Home Common Stock upon consummation of the Merger or otherwise materially
adversely affect the shareholders of First Home without the approval of the
shareholders who would be so affected. This Agreement may not be amended except
by an instrument in writing authorized by the respective Boards of Directors and
signed, by duly authorized officers, on behalf 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 by a duly authorized
officer 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.
Section 7.04 Entire Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior arrangements and understandings
between the parties, both written or oral with respect to its subject matter.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors, any rights, remedies,
obligations or liabilities other than pursuant to Sections 1.02(f), 1.02(g),
4.05, and 4.11(a) and (c).
Section 7.05 No Assignment. Neither party hereto may assign any of its
rights or obligations hereunder to any other person, without the prior written
consent of the other party hereto.
Section 7.06 Notices. All notices or other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
prepaid registered or certified mail (return receipt requested), or sent by
telecopy, addressed as follows:
(a) If to Sovereign, to:
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxx, President and
Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq. and
Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
A-38
(b) If to First Home, to:
First Home Bancorp Inc.
000 Xxxxx Xxxxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Chairman, President and Chief
Executive Officer
Telecopy No.: (000) 000-0000
with copies to:
Blank Rome Comisky & XxXxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
Section 7.07 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 7.08 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 7.09 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 7.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic internal law (including the law of
conflicts of law) of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
SOVEREIGN BANCORP, INC.
By /s/ XXX X. XXXXX
--------------------------------------
Xxx X. Xxxxx
President and Chief Executive Officer
FIRST HOME BANCORP INC.
By /s/ XXXXXXX X. XXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxx,
Chairman, President and Chief
Executive Officer
A-39
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
WHEREAS, Sovereign Bancorp, Inc. ("Sovereign") and First Home Bancorp Inc.
("First Home") entered into an Agreement and Plan of Merger, dated December 18,
1997 (the "Agreement"), which sets forth the terms and conditions pursuant to
which First Home will merge with and into Sovereign, with Sovereign being the
surviving corporation; and
WHEREAS, Sovereign and First Home desire to amend the Agreement to provide
for the establishment by Sovereign Bank, a wholly owned subsidiary of Sovereign,
of an advisory board with at least two successive one year terms.
NOW, THEREFORE, pursuant to the terms of Section 7.05 of the Agreement and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Sovereign and First Home, intending to be legally bound, do
hereby adopt this Amendment and agree that Section 4.16 of the Agreement is
deleted in its entirety and replaced with the following:
Section 4.16 Advisory Board. On the Effective Date, Sovereign Bank
shall establish the First Home Advisory Board (the "Advisory Board"), which
shall consist of all members of the First Home Board of Directors
immediately prior to the Effective Date. Each member of the Advisory Board
shall be paid an annual retainer of $9,000. The Advisory Board shall be
initially established for a one year term, provided, however, that
Sovereign Bank will use its best efforts to cause such persons to be
re-appointed for at least an additional one year term.
IN WITNESS WHEREOF, Sovereign and First Home have caused this Amendment to
the Agreement to be duly executed on its behalf by its officers thereunto duly
authorized as of this 1st day of May, 1998.
SOVEREIGN BANCORP, INC.
By: /s/ XXX X. XXXXX
----------------------------------
Name: Xxx X. Xxxxx
Title: President and Chief
Executive Officer
FIRST HOME BANCORP INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman, President and
Chief Executive Officer
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SECOND AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
WHEREAS, Sovereign Bancorp, Inc. ("Sovereign") and First Home Bancorp Inc.
("First Home") entered into an Agreement and Plan of Merger, dated December 18,
1997 (the "Agreement"), which sets forth the terms and conditions pursuant to
which First Home will merge with and into Sovereign, with Sovereign being the
surviving corporation; and
WHEREAS, the Agreement was amended by a First Amendment to the Agreement
and Plan of Merger, dated as of May 1, 1998, and Sovereign and First Home desire
to further amend the Agreement.
NOW, THEREFORE, pursuant to the terms of Section 7.05 of the Agreement and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Sovereign and First Home, intending to be legally bound, do
hereby adopt this Amendment and agree as follows:
1. Section 4.01(a)(iii) of the Agreement is deleted in its entirety
and replaced with the following:
"(iii) grant any severance or termination pay (other than
pursuant to written policies or written agreements of First
Home or First Home Subsidiaries in effect on the date hereof
and provided to Sovereign prior to the date hereof or as
otherwise agreed to in writing by Sovereign and First Home)
to, or enter into any new or amend any existing employment
agreement with, or increase the compensation of, any employee,
officer or director of First Home or any First Home
Subsidiary, except for routine periodic increases in salary
(estimated to be not in excess of $125,000 through June 30,
1998 and not to exceed $21,000 for each additional calendar
month or partial calendar month thereafter) and bonus required
by existing bonus plans (estimated to be not in excess of
$200,000 through June 30, 1998 and not to exceed $30,000 for
each additional calendar month or partial calendar month
thereafter);"
2. Section 4.01(a)(ix) of the Agreement is deleted in its entirety and
replaced with the following:
"(ix) implement any pension, retirement, profit sharing,
bonus, welfare benefit or similar plan or arrangement which
was not in effect on the date of this Agreement, or materially
amend any existing plan or arrangement except to the extent
such amendments do not result in an increase in cost;
provided, however, that First Home may contribute to the First
Home employee stock ownership plan, to the extent accrued on
the First Home Financial Statements at and for periods prior
to the date of this Agreement, (i) up to $240,000 (consisting
of both voluntary and matching contributions) in January 1998
with respect to the year ending December 31, 1997 and (ii) a
pro-rated amount up to $240,000 (consisting of both voluntary
and matching contributions) prior to the Closing Date with
respect to the year ending December 31, 1998 (such amount to
be pro-rated based on the number of days elapsed from January
1, 1998 to the Closing Date);"
3. Section 4.11(c) of the Agreement is deleted in its entirety and
replaced with the following:
"(c) Severance Policy. Sovereign agrees to cause Sovereign
Bank to provide employees of First Home Savings whose
employment is terminated in connection with the Merger within
three (3) months after the conversion of First Home's system
to that of Sovereign's, either because such employee's
position is eliminated or such employee is not offered
comparable employment (i.e., not offered employment for a
position of generally similar job description or
responsibilities in a location within thirty (30) miles from
an employee's work location), and who do not at their election
cease performing services for
A-41
Sovereign or First Home, as applicable, prior to their final
termination date as set or adjusted by Sovereign, excluding
any employee who has an existing employment or consulting
agreement or whose employment is terminated for Cause (as
defined below), as follows, provided such employees execute
such documentation as Sovereign may reasonably require,
including Sovereign's customary form of release: (i) the
thirteen employees identified on First Home's Disclosure
Schedule shall be entitled to two weeks of base salary as
severance pay for each year of service with First Home or
First Home Savings, or Sovereign or any Sovereign Subsidiary,
with a two-week minimum; and (ii) employees other than the
thirteen employees identified on First Home's Disclosure
Schedule shall be entitled to one week of base salary as
severance pay for each year of service with First Home or
First Home Savings, or Sovereign or any Sovereign Subsidiary,
with a one-week minimum. For purposes of this Section 4.11(c),
"Cause" shall mean termination because of the employee's
personal dishonesty, failure to meet established performance
goals (which shall be reasonably established), willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or
willful violation of any law, rule or regulation (other than
traffic violations or similar offenses). The benefits provided
to terminated First Home or First Home Savings employees under
this subsection are the only severance benefits payable by
First Home or First Home Savings under any plan or policy
(excluding severance benefits provided under existing
employment or consulting agreements or as otherwise required
by law), except for employees who do not execute the
documentation required by Sovereign, which employees shall be
entitled to the termination benefits provided under First Home
Savings' severance policies. The benefits payable to First
Home employees under this subsection or otherwise shall in any
event be in lieu of any termination benefits to which such
employees would otherwise be entitled under Sovereign's or
Sovereign Bank's severance policies or programs then in
effect."
4. Section 4.11(d) of the Agreement is deleted in its entirety and
replaced with the following:
"(d) Retention Bonuses. Notwithstanding subparagraph (c)
above, each employee of First Home or of First Home Savings
identified in the First Home Disclosure Schedule shall be
entitled to receive a "retention" bonus from First Home or
First Home Savings Bank as determined by the executive
officers of First Home (after consultation with Sovereign) and
as set forth on First Home's Disclosure Schedule in the event
that such employee remains an employee of First Home, First
Home Savings or Sovereign, as applicable, until the date the
systems conversion occurs or is involuntarily terminated prior
to the date of the systems conversion, but after the Effective
Date, and satisfactorily fulfills the duties and
responsibilities of the position of such employee of First
Home, First Home Savings or Sovereign, as the case may be,
through the date of systems conversion; provided that
retention bonuses, in the aggregate, shall not exceed
$250,000."
5. Section 6.01(b)(i) of the Agreement is deleted in its entirety and
replaced with the following:
"(i) if the Closing Date shall not have occurred on or
before September 30, 1998, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe, in any
material respect, its agreements set forth in this Agreement
required to be performed or observed by such party on or
before the Closing Date;"
6. Except as amended hereby, the Agreement is ratified and confirmed
in all respects.
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IN WITNESS WHEREOF, Sovereign and First Home have caused this Second
Amendment to the Agreement to be duly executed on its behalf by its officers
thereunto duly authorized as of this 22nd day of June 1998.
SOVEREIGN BANCORP, INC.
By: /s/ XXX X. XXXXX
---------------------------------------------
Name: Xxx X. Xxxxx
Title: President and Chief Executive Officer
FIRST HOME BANCORP INC.
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman, President and Chief
Executive Officer
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FORM OF AFFILIATE LETTER
EXHIBIT 1
December 18, 1997
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and First Home Bancorp Inc. ("First
Home") desire to enter into an agreement dated December 18, 1997 ("Agreement"),
pursuant to which, subject to the terms and conditions set forth therein, (a)
First Home will merge with and into Sovereign with Sovereign surviving the
merger, and (b) shareholders of First Home will receive common stock of
Sovereign in exchange for common stock of First Home outstanding on the closing
date (the foregoing, collectively, referred to herein as the "Merger").
Sovereign has required, as a condition to its execution and delivery to
First Home of the Agreement, that the undersigned, being directors, executive
officers and major shareholders of First Home, execute and deliver to Sovereign
this Letter Agreement.
Each of the undersigned, in order to induce Sovereign to execute and
deliver to First Home the Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of First Home called to vote for approval of the Agreement and the
Merger so that all shares of common stock of First Home then owned by the
undersigned will be counted for the purpose of determining the presence of a
quorum at such meetings and to vote or cause to be voted all such shares in
favor of approval and adoption of the Agreement and the transactions
contemplated thereby (including any amendments or modifications of the terms
thereof approved by the Board of Directors of First Home);
(b) Agrees not to vote or execute any written consent to rescind or amend
in any manner any prior vote or written consent, as a shareholder of First Home,
to approve or adopt the Agreement;
(c) Agrees to use reasonable best efforts to cause the Merger to be
consummated; provided, however, that the undersigned shall not be required to
take any actions under this subparagraph in such person's capacity as a director
if the fiduciary duty of such person in such capacity legally requires otherwise
and such person is so advised in a written opinion of counsel;
(d) Agrees not to offer, sell, transfer or otherwise dispose of any shares
of common stock of Sovereign received in the Merger, except (i) at such time as
a registration statement under the Securities Act of 1933, as amended
("Securities Act") covering sales of such Sovereign common stock is effective
and a prospectus is made available under the Securities Act, (ii) within the
limits, and in accordance with the applicable provisions of, Rule 145(d) under
the Securities Act, or (iii) in a transaction which, in the opinion of counsel
satisfactory to Sovereign or as described in a "no-action" or interpretive
letter from the staff of the Securities and Exchange Commission ("SEC"), is not
required to be registered under the Securities Act; and acknowledges and agrees
that Sovereign is under no obligation to register the sale, transfer or other
disposition of Sovereign common stock by the undersigned or on behalf of the
undersigned, or to take any other action necessary to make an exemption from
registration available;
(e) Notwithstanding the foregoing, agrees not to sell, or in any other way
reduce the risk of the undersigned relative to, any shares of common stock of
First Home or of common stock of Sovereign, during the period commencing thirty
days prior to the effective date of the Merger and ending on the date on which
financial results covering at least thirty days of post-Merger combined
operations of Sovereign and First Home have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies
provided, however, that excluded from the foregoing
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undertaking shall be such sales, pledges, transfers or other dispositions of
shares of First Home Common Stock or shares of Sovereign Common Stock which, in
the reasonable opinion of counsel for Sovereign, are individually and in the
aggregate de minimis within the meaning of Topic 2-E of the Staff Accounting
Bulletin Series of the Securities and Exchange Commission;
(f) Agrees that neither First Home nor Sovereign shall not be bound by any
attempted sale of any shares of First Home Common Stock or Sovereign common
stock, respectively, and Sovereign's transfer agents shall be given an
appropriate stop transfer order and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance with the terms
of this Letter Agreement; and further agrees that the certificate representing
shares of Sovereign common stock owned by the undersigned may be endorsed with a
restrictive legend consistent with the terms of this Letter Agreement;
(g) Acknowledges and agrees that the provisions of subparagraphs (d), (e)
and (f) hereof also apply to shares of Sovereign common stock received in the
Merger (or any shares of First Home common stock or of Sovereign common stock,
whether or not received in the Merger, for the period referred to in
subparagraph (e) above) owned by (i) his or her spouse, (ii) any of his or her
relatives or relatives of his or her spouse occupying his or her home, (iii) any
trust or estate in which he or she, his or her spouse, or any such relative owns
at least a 10% beneficial interest or of which any of them serves as trustee,
executor or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, any affiliate of the undersigned, his or
her spouse, or any such relative owns at least 10% of any class of equity
securities or of the equity interest;
(h) Represents that the undersigned has no plan or intention to sell,
exchange, or otherwise dispose of any shares of common stock of Sovereign to be
received in the Merger prior to expiration of the time period referred to in
subparagraph (e) hereof; and
(i) Represents that the undersigned has the capacity to enter into this
Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
------------------------------
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement.
------------------------------
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same Letter Agreement.
------------------------------
This Letter Agreement shall terminate concurrently with any termination of
the Agreement in accordance with its terms.
The undersigned intend to be legally bound hereby.
Sincerely,
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EXHIBIT 2
STOCK OPTION AGREEMENT
[See Annex B]
A-46
EXHIBIT 3
BANK PLAN OF MERGER
THIS BANK PLAN OF MERGER ("Plan of Merger") dated December 18, 1997, is by
and between SOVEREIGN BANK, ("Sovereign Bank"), and FIRST HOME SAVINGS BANK,
F.S.B. ("First Home Savings").
BACKGROUND
1. Sovereign Bank is a federal savings bank and a wholly-owned subsidiary
of Sovereign Bancorp, Inc., a Pennsylvania corporation ("Sovereign"). The
authorized capital stock of Sovereign Bank consists of 1,000 shares of common
stock, par value $1.00 per share ("Sovereign Bank Common Stock"), of which at
the date hereof 1,000 shares are issued and outstanding.
2. First Home Savings is a federal savings bank and a wholly-owned
subsidiary of First Home Bancorp Inc., a New Jersey corporation ("First Home").
The authorized capital stock of First Home Savings consists of 100 shares of
common stock, no par value ("First Home Savings Common Stock"), of which at the
date hereof 100 shares are issued and outstanding.
3. The respective Boards of Directors of Sovereign Bank and First Home
Savings deem the merger of First Home Savings with and into Sovereign Bank,
pursuant to the terms and conditions set forth or referred to herein, to be
desirable and in the best interests of the respective corporations and their
respective shareholders.
4. The respective Boards of Directors of Sovereign Bank and First Home
Savings have adopted resolutions approving this Plan of Merger. The respective
Boards of Directors of Sovereign and First Home have adopted resolutions
approving an Agreement dated December 18, 1997 (the "Agreement") between
Sovereign and First Home, pursuant to which this Plan of Merger is being
executed by Sovereign Bank and First Home Savings.
AGREEMENT
In consideration of the premises and of the mutual covenants and agreements
herein contained, and in accordance with the applicable laws and regulations of
the United States of America, Sovereign Bank and First Home Savings, intending
to be legally bound hereby, agree:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan of Merger and in
accordance with the applicable laws and regulations of the United States of
America, on the Effective Date (as that term is defined in Article V hereof):
First Home Savings shall merge with and into Sovereign Bank; the separate
existence of First Home Savings shall cease; and Sovereign Bank shall be the
resulting bank (such transaction referred to herein as the "Merger" and
Sovereign Bank, as the resulting bank in the Merger, referred to herein as the
"Surviving Bank"). The name of the Surviving Bank shall be "Sovereign Bank."
Sovereign Bank will have its home office at 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000 and its branch offices at the locations listed on
Exhibit "A."
ARTICLE II
CHARTER AND BYLAWS
On and after the Effective Date, the Charter and Bylaws of Sovereign Bank,
as in effect immediately prior to the Effective Date, shall be the Charter and
Bylaws of the Surviving Bank, and may thereafter be amended in accordance with
applicable law.
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ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
3.1 Board of Directors. On and after the Effective Date, the directors of
the Surviving Bank shall consist of the directors of Sovereign Bank duly elected
and holding office immediately prior to the Effective Date. Directors shall be
elected annually and shall hold office until their successors are elected and
qualified. The names and residence addresses of the directors are:
NAME RESIDENCE ADDRESS
---- -----------------
Xxxxxx X. Xxxxxxx............................ [intentionally omitted]
Xxxxx Hard................................... [intentionally omitted]
Xxxxxxx X. Xxxx.............................. [intentionally omitted]
Xxxxxx X. Xxxxx.............................. [intentionally omitted]
F. Xxxxxx Xxxxxx............................. [intentionally omitted]
Xxxxxx X. Xxxxx.............................. [intentionally omitted]
Xxxxxxx X. Xxxx.............................. [intentionally omitted]
Xxxxx X. Xxxxxxxxxxx......................... [intentionally omitted]
Xxxxxxx X. Xxxxxxx........................... [intentionally omitted]
Xxxxxx X. Xxxxxxxxx.......................... [intentionally omitted]
Xxxxxxxxx X. Xxxxxxxxx....................... [intentionally omitted]
Xxxxxx X. Xxxxxx............................. [intentionally omitted]
Xxx X. Xxxxx................................. [intentionally omitted]
Xxxxxxx X. Xxxxxx............................ [intentionally omitted]
G. Xxxxxx Xxxxxx............................. [intentionally omitted]
Xx. Xxxx X. Xxxxxx........................... [intentionally omitted]
3.2 Officers. On and after the Effective Date, the officers of the
Surviving Bank shall consist of the officers of Sovereign Bank duly elected and
holding office immediately prior to the Effective Date. The names and titles of
the officers are:
NAME TITLE
---- -----
Xxx X. Xxxxx President and Chief Executive Officer
Xxxx X. Xxxxxxx Treasurer and Chief Financial Officer
Xxxxxxxx X. Xxxxxxxx, Xx. Secretary and Chief Administrative
Officer
Xxxx X. Xxxxxx Assistant Secretary
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ARTICLE IV
CONVERSION OF SHARES
4.1 Stock of Sovereign Bank. Each share of Sovereign Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall, on and
after the Effective Date, continue to be issued and outstanding as a share of
common stock of the Surviving Bank.
4.2 Stock of First Home Savings. Each share of First Home Savings Common
Stock issued and outstanding immediately prior to the Effective Date, and each
share of First Home Savings Common Stock issued and held in the treasury of
First Home as of the Effective Date, if any, shall, on the Effective Date, be
cancelled, and no cash, stock or other property shall be delivered in exchange
therefor.
ARTICLE V
EFFECTIVE DATE OF THE MERGER
The Merger shall be effective on the date on which articles of combination
executed by Sovereign Bank and First Home Savings are filed with and endorsed by
the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R. Section
552.13(k), unless a later date as specified in such articles of combination (the
"Effective Date"). The Merger shall not be effective unless and until (i) the
Merger receives any necessary approval from the OTS pursuant to 12 CFR Section
563.22(a) or (c), (ii) in the case the Merger requires a notification pursuant
to 12 CFR Section 563.22(b), notification has been provided to the OTS, or (iii)
in the case of Merger requires notice pursuant to 12 CFR Section 563.22(c), the
notice has been filed, and the appropriate period of time has passed or the OTS
has advised the parties that it will not disapprove the Merger.
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date, the separate existence of
First Home Savings shall cease. As provided in 12 CFR Section552.13(l), as of
the Effective Date, all of the assets, properties, obligations and liabilities
of every kind and character, real, personal and mixed, tangible and intangible,
chosen in action, rights, and credits then owned by either the Sovereign Bank or
First Home Savings, or which would inure or be subject to either of them, shall
immediately by operation of law and without any conveyance or transfer and
without any further act or deed, be vested in and become the assets, property,
obligations and liabilities of the Surviving Bank which shall have, hold and
enjoy the same in its own right as fully and to the same extent as the same were
possessed, held and enjoyed by the Sovereign Bank and First Home Savings
immediately prior to the Effective Date. The Surviving Bank shall be deemed to
be and shall be a continuation of the entity and identity both of the Sovereign
Bank of First Home Savings and the rights and obligations of the Sovereign Bank
and of First Home Savings shall remain unimpaired; and the Surviving Bank, upon
the consummation of the Merger, shall succeed to all of such rights and
obligations and the duties and liabilities connected therewith.
6.2 Savings Accounts. As of the Effective Date, all savings accounts of
First Home Savings shall be and become savings accounts in the Surviving Bank
without change in their respective terms, maturity, minimum required balances or
withdrawal value. Each savings account of First Home Savings shall, as of the
Effective Time Date, be considered, for purpose of interest declared by the
Surviving Bank thereafter, as if it had been a savings account of the Surviving
Bank at the time said savings account was opened in First Home Savings and at
all times thereafter until such account ceases to be a savings account of the
Surviving Bank. Appropriate evidence of savings account ownership interest in
the Surviving Bank shall be provided, as necessary, after consummation of the
merger by the Surviving Bank to each savings account holder of First Home
Savings.
All savings accounts of Sovereign Bank prior to consummation of the merger
shall, as of the Effective Date, continue to be savings accounts in the
Surviving Bank without any change whatsoever
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in any of the provisions of such savings accounts, including, without
limitation, their respective terms maturity, minimum required balances or
withdrawal value.
6.3 Liquidation Account. After the Effective Date, Sovereign Bank will
continue to maintain the Sovereign Bank liquidation account for the benefit of
eligible account holders on the same basis as immediately prior to the Effective
Date, and First Home Savings' liquidation account for the benefit of eligible
account holders shall automatically be deemed assumed in full by Sovereign Bank,
as of the Effective Date, on the same basis as it existed immediately prior to
the Effective Date.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Sovereign Bank and First Home Savings to effect the
Merger shall be subject to satisfaction, unless duly waived by the party
permitted to do so, of the conditions precedent set forth in the Agreement.
ARTICLE VIII
TERMINATION
This Plan of Merger shall terminate upon any termination of the Agreement
in accordance with its terms; provided, however, that any such termination of
this Plan of Merger shall not relieve any party hereto from liability on account
of a breach by such party of any of the terms hereof or thereof.
ARTICLE IX
AMENDMENT
Subject to applicable law, this Plan of Merger may be amended, by action of
the respective Boards of Directors of the parties hereto, at any time prior to
consummation of the Merger, but only by an instrument in writing signed by duly
authorized officers on behalf of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Extensions; Waivers. Each party, by a written instrument signed by a
duly authorized officer, may extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive compliance
with any of the covenants, or performance of any of the obligations, of the
other party contained in this Plan of Merger.
10.2 Notices. Any notice or other communication required or permitted
under this Plan of Merger shall be given, and shall be effective, in accordance
with the provisions of Section 7.06 of the Agreement.
10.3 Captions. The headings of the several Articles and Sections herein
are inserted for convenience of reference only and are not intended to be part
of, or to affect the meaning or interpretation of, this Plan of Merger.
10.4 Counterparts. For the convenience of the parties hereto, this Plan of
Merger may be executed in several counterparts, each of which shall be deemed
the original, but all of which together shall constitute one and the same
instrument.
10.5 Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of the United States of America and, in the absence
of controlling Federal law, in accordance with the laws of the Commonwealth of
Pennsylvania.
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IN WITNESS WHEREOF, Sovereign Bank and First Home Savings have caused this
Bank Plan of Merger to be executed by their duly authorized officers and their
corporate seals to be hereunto affixed on the date first written above.
SOVEREIGN BANK
By /s/ XXX X. XXXXX
-----------------------------------
Xxx X. Xxxxx
President
FIRST HOME SAVINGS BANK, F.S.B.
By /s/ XXXXXXX X. XXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxx,
Chairman of the Board,
President and Chief Executive
Officer
A-51
EXHIBIT "A"
TO PLAN OF MERGER
SOVEREIGN BANK
BRANCH LOCATIONS
[INTENTIONALLY OMITTED.]
A-52
EXHIBIT 4
FORM OF AGREEMENT RE: BENEFITS
December 18, 1997
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Gentlemen:
I, the undersigned, hereby acknowledge and agree that an amount equal to
the lesser of (i) $__ or (ii) the highest amount which does not result in a loss
of federal income tax deduction under IRC Section 280G to First Home or
Sovereign with respect to any portion of such amount is the maximum amount that
I would be entitled to receive from First Home, any First Home subsidiary or any
of their respective successors or assigns pursuant to any employment agreement,
special termination agreement, supplemental executive retirement plan, deferred
compensation plan, salary continuation plan, or any other benefit or welfare
plan assuming that my employment with First Home or any First Home subsidiary
(or any of their respective successors or assigns) were terminated for any
reason, whether voluntarily or involuntarily, on December 31, 1997, and the
Closing Date were to occur on such termination date. All capitalized terms used
herein but not defined herein shall have the meanings given to them in the
Agreement. The amount shown above represents the total of all amounts available
for payment in an immediate lump sum upon termination and the present value, as
of December 31, 1997 (based on a 6% per annum discount factor) of all payments
to be made on a date or dates subsequent to the date of termination. I
acknowledge and agree that the amount actually payable to me, as a result of
reductions necessary to avoid excise tax payments and loss of federal income tax
deduction under IRC Section 280G, may be less than the total amounts otherwise
payable under the terms of any such agreement or plan.
This letter is subject to the acknowledgement and agreement of Sovereign
Bancorp, Inc., as evidenced below, that the amount shown above reflects a good
faith estimate of the amounts that will be payable to me as hereinbefore
specified, and may be subject to adjustment upon an actual termination of my
employment to reflect increases in my compensation and benefits due to the
passage of time or in accordance with the terms of First Home's employee benefit
plans and past practices for routine increases.
Sincerely,
Acknowledged and Agreed to:
SOVEREIGN BANK, INC.
By ___________________________________
Title ________________________________
X-00
XXXXXXX 0
XXXX XX XXXXXXX OF COUNSEL TO SOVEREIGN
First Home shall have received from counsel to Sovereign, an opinion, dated
as of the Closing Date, substantially to the effect that, subject to normal
exceptions and qualifications:
(a) Sovereign and Sovereign Bank have the requisite corporate power to
perform their obligations under the Agreement and the Plan of Merger,
respectively. The execution and delivery of the Agreement and the Plan of Merger
and the consummation of the transactions contemplated thereunder have been
authorized by all necessary corporate action on the part of Sovereign and
Sovereign Bank, and the Agreement and the Plan are enforceable in accordance
with their respective terms and constitute valid and legally binding obligations
of Sovereign and Sovereign Bank, respectively, except to the extent
enforceability, validity and the legally binding nature may be limited by
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship, and other laws affecting creditors' rights generally and
institutions the deposits of which are insured by the FDIC, and as may be
limited by the exercise of judicial discretion in applying principles of equity.
Subject to satisfaction of the conditions set forth in the Agreement, neither
the transactions contemplated in the Agreement or the Plan, nor compliance by
Sovereign and Sovereign Bank with any of the respective provisions thereof, will
(i) conflict with or result in a breach or default under (A) the articles of
incorporation or bylaws of Sovereign or the charter or bylaws of Sovereign Bank,
or, (B) to the knowledge of such counsel, any material note, bond, mortgage,
indenture, license, agreement or other material instrument or obligation to
which Sovereign or Sovereign Bank is a party; or (ii) based on certificates of
officers and without independent verification, to the knowledge of such counsel,
result in the creation or imposition of any material lien or encumbrance upon
the property of Sovereign or Sovereign Bank, except such material lien,
instrument or obligation that has been disclosed pursuant to the Agreement or
the Plan; or (iii) violate in any material respect any order, writ, injunction
or decree known to such counsel, or any federal or Pennsylvania statute, rule or
regulation applicable to Sovereign or Sovereign Bank.
(b) Sovereign Bank is a validly existing federally-chartered savings bank
organized and in good standing under the laws of the United States of America.
The deposits of Sovereign Bank are insured to the maximum extent provided by law
by the Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal, administrative,
arbitration or governmental proceeding or investigation pending or threatened to
which Sovereign or Sovereign Bank is a party which would, if determined
adversely to Sovereign or Sovereign Bank, have a material adverse effect on the
business, properties, financial condition or results of operation of Sovereign
and Sovereign Bank taken as a whole, or which presents a claim to restrain or
prohibit the transactions contemplated by the Agreement and the Plan,
respectively.
(d) No consent, approval, authorization or order of any federal or state
court or federal or state governmental agency or body, or to such counsel's
knowledge, of any third party, is required for the consummation by Sovereign or
Sovereign Bank of the transactions contemplated by the Agreement and the Plan,
except for such consents, approvals, authorizations or orders as have been
obtained or where the failure to obtain such approval, consent, authorization or
order would not have a material adverse effect on the consummation of the
transactions contemplated by the Agreement and Plan of Merger.
(e) Upon the filing and effectiveness of the Articles of Merger with the
PDS, the Articles of Merger with the NJSOS, and Articles of Combination with the
OTS in accordance with the Agreement and the Plan, the mergers of Sovereign and
First Home and of Sovereign Bank and First Home Savings contemplated by the
Agreement and the Plan, respectively, will have been effected in compliance with
all applicable federal and Pennsylvania laws and regulations in all material
respects.
(f) The shares of Sovereign Common Stock to be issued in connection with
the merger of First Home and Sovereign contemplated by the Agreement have been
duly authorized and will, when issued
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in accordance with the terms of the Agreement, be validly issued, fully paid and
nonassessable, free and clear of any mortgage, pledge, lien, encumbrance or
claim (legal or equitable).
In addition to the foregoing opinions, such counsel shall state that on the
sole basis of such counsel's participation in conferences with officers and
employees of Sovereign in connection with the Proxy Statement/Prospectus, and
without other independent investigation or inquiry, such counsel has no reason
to believe that the Proxy Statement/Prospectus, including any amendments or
supplements thereto (except for the financial information, financial statements,
notes to the financial statements and financial tables, financial schedules and
other financial or statistical data contained therein and the stock valuation
information included or incorporated by reference therein and except for any
information supplied by First Home or First Home Savings for inclusion therein,
as to which counsel need express no belief), as of the date of mailing thereof,
contained any untrue statement of a material fact with respect to Sovereign or
omitted to state any material fact with respect to Sovereign necessary to make
any statement therein with respect to Sovereign, in light of the circumstances
under which it was made, not misleading. Counsel may state in delivering such
statement, that such counsel has not independently verified and does not assume
the responsibility for the accuracy, completeness or fairness of any information
or statements contained in the Proxy Statement/Prospectus, except with respect
to identified statements of law or regulations or legal conclusions relating to
Sovereign or the transactions contemplated in the Agreement and the Plan and
that it is relying as to materiality as to factual matters or certificates of
officers and representations of the parties to the Agreement and other factual
representations of Sovereign and Sovereign Bank.
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EXHIBIT 6
FORM OF TAX OPINION OF XXXXXXX & XXX
Sovereign and First Home shall have received an opinion of Xxxxxxx & Xxx
substantially to the effect that, under the provisions of the IRC:
1. The Merger will constitute a reorganization within the meaning of IRC
Section 368(a)(1)(A).
2. First Home and Sovereign will each be "a party to a reorganization"
within the meaning of IRC Section 368(b).
3. Neither First Home nor Sovereign will recognize any gain or loss upon
the transfer of First Home's assets to Sovereign in exchange solely for
Sovereign Common Stock (including any fractional share interests) and the
assumption by Sovereign of the liabilities of First Home.
4. The basis of the First Home assets in the hands of Sovereign will be the
same as the basis of such assets in the hands of First Home immediately prior to
the Merger.
5. The holding period of the assets of First Home to be received by
Sovereign will include the period during which the assets were held by First
Home.
6. No gain or loss will be recognized by the shareholders of First Home on
the receipt of Sovereign Common Stock (including any fractional share interests)
solely in exchange for their shares of First Home Common Stock.
7. The basis of the Sovereign Common Stock (including any fractional share
interests) to be received by the First Home shareholders in the Merger will be
the same as the basis of the First Home Common Stock surrendered in exchange
therefor.
8. The holding period of the Sovereign Common Stock (including any
fractional share interests) to be received by the First Home shareholders in the
Merger will include the period during which the First Home shareholders held
their First Home Common Stock, provided the shares of First Home Common Stock
are held as a capital asset on the Effective Date of the Merger.
9. The payment of cash in lieu of fractional share interests of Sovereign
Common Stock will be treated as if the fractional share interests were
distributed as part of the Merger and then redeemed by Sovereign. Such cash
payments will be treated as having been received as distributions in full
payment in exchange for the fractional share interests redeemed, as provided in
IRC Section 302(a).
10. The Rights transferred with the shares of Sovereign Common Stock will
not constitute "other property" within the meaning of IRC Section 356(a)(1)(B).
11. As provided in IRC Section 381(c)(2) and related Treasury regulations,
Sovereign will succeed to and take into account the earnings and profits, or
deficit in earnings and profits, of First Home as of the Effective Date of the
Merger. Any deficit in the earnings and profits of Sovereign or First Home will
be used only to offset the earnings and profits accumulated after the Merger.
12. Pursuant to IRC Section 381(a) and related Treasury regulations,
Sovereign will succeed to and take into account the items of First Home
described in IRC Section 381(c). Such items will be taken into account by
Sovereign subject to the conditions and limitations of IRC Sections 381, 382,
383, and 384 and the Treasury regulations thereunder.
13. The Bank Merger will constitute a reorganization within the meaning of
IRC Section 368(a)(1)(A).
14. First Home Savings and Sovereign Bank will each be "a party to a
reorganization" within the meaning of IRC Section 368(b).
15. Neither First Home Savings nor Sovereign Bank will recognize any gain
or loss upon the transfer of First Home Savings' assets to Sovereign Bank in
constructive exchange solely for
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Sovereign Bank Common Stock and the assumption by Sovereign Bank of the
liabilities of First Home Savings.
16. The basis of the First Home Savings assets in the hands of Sovereign
Bank will be the same as the basis of such assets in the hands of First Home
Savings immediately prior to the Bank Merger.
17. The holding period of the First Home Savings assets in the hands of
Sovereign Bank will include the period during which such assets were held by
First Home Savings.
18. No gain or loss will be recognized by Sovereign, as the shareholder of
First Home Savings, upon the constructive receipt of shares of Sovereign Bank
Common Stock in exchange for the First Home Savings Common Stock surrendered in
exchange therefor in the Bank Merger.
19. The basis of the Sovereign Bank Common Stock to be held by Sovereign
after the Bank Merger will equal the basis of such stock immediately before the
Bank Merger, increased by the basis of the First Home Savings Common Stock
surrendered in the constructive exchange.
20. As provided in IRC Section 381(c)(2) and related Treasury regulations,
Sovereign Bank will succeed to and take into account the earnings and profits,
or deficit in earnings and profits, of First Home Savings as of the effective
date of the Bank Merger. Any deficit in the earnings and profits of Sovereign
Bank or First Home Savings will be used only to offset the earnings and profits
accumulated after the Bank Merger.
21. Pursuant to IRC Section 381(a) and related Treasury regulations,
Sovereign Bank will succeed to and take into account the items of First Home
Savings described in IRC Section 381(c). Such items will be taken into account
by Sovereign Bank subject to the conditions and limitations of IRC Sections 381,
382, 383, and 384 and the Treasury regulations thereunder.
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EXHIBIT 7
FORM OF OPINION OF COUNSEL TO FIRST HOME
Sovereign shall have received from counsel to First Home, an opinion, dated
as of the Closing Date, substantially to the effect that, subject to normal
exceptions and qualifications:
(a) First Home and First Home Savings have the requisite corporate power to
perform their obligations under the Agreement and the Plan of Merger,
respectively. The execution and delivery of the Agreement and the Plan of Merger
and the consummation of the transactions contemplated thereunder have been
authorized by all necessary corporate action on the part of First Home and First
Home Savings, and the Agreement and the Plan constitute valid and legally
binding obligations of First Home and First Home Savings, respectively,
enforceable in accordance with their respective terms, except to the extent
enforceability, validity and the legally binding nature may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship, and other laws now or hereafter in effect, whether statutory or
decisional relating to creditors' rights generally or the rights of creditors of
federal savings banks and their holding companies, (ii) the exercise of judicial
discretion in applying principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); and (iii)
laws related to the safety and soundness of insured depository institutions;
provided that no opinion be rendered as to the effect or availability of
equitable remedies or injunctive relief. Subject to satisfaction of the
conditions set forth in the Agreement, neither the transactions contemplated in
the Agreement and the Plan, nor compliance by First Home and First Home Savings
with any of the respective provisions thereof, will (i) conflict with or result
in a breach or default under (A) the certificate of incorporation or bylaws of
First Home or the charter or bylaws of First Home Savings, or (B) based on
certificates of officers and without independent verification, to the knowledge
of such counsel, any material note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which First Home or First Home
Savings is a party; or (ii) to the knowledge of such counsel, result in the
creation or imposition of any material lien, instrument or encumbrance upon the
property of First Home or First Home Savings, except such material lien,
instrument or obligation that has been disclosed to Sovereign pursuant to the
Agreement and the Plan, or (iii) violate in any material respect any order,
writ, injunction, or decree known to such counsel, or any federal banking or New
Jersey statute, rule or regulation applicable to First Home or First Home
Savings.
(b) First Home Savings is a validly existing federally-chartered savings
bank organized and in good standing under the laws of the United States of
America. The deposits of First Home Savings are insured to the maximum extent
provided by law by the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation.
(c) There is, to the knowledge of such counsel, no legal, administrative,
arbitration or governmental proceeding or investigation pending or threatened to
which First Home or First Home Savings is a party which would, if determined
adversely to First Home or First Home Savings, have a material adverse effect on
the business, properties, results of operations, or financial condition of First
Home or First Home Savings taken as a whole or which presents a claim to
restrain or prohibit the transactions contemplated by the Agreement and the
Plan, respectively.
(d) No consent, approval, authorization, or order of any federal or state
court or federal or state governmental agency or body, or to such counsel's
knowledge, of any third party, is required for the consummation by First Home or
First Home Savings of the transactions contemplated by the Agreement and the
Plan, except for such consents, approvals, authorizations or orders as have been
obtained or where the failure to obtain such consent, approval, authorization,
or order would not have a material adverse effect on the consummation of the
transaction contemplated by the Agreement and Plan of Merger.
In addition to the foregoing opinions, such counsel shall state that on the
sole basis of such counsel's participation in conferences with officers and
employees of First Home in connection with the preparation of the
Prospectus/Proxy Statement and without other independent investigation or
inquiry, such counsel has no reason to believe that the Prospectus/Proxy
Statement, including any
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amendments or supplements thereto (except for the financial information,
financial statements, notes to financial statements and financial tables,
financial schedules and other financial or statistical data contained therein
and the stock valuation information included or incorporated by reference
therein and except for any information supplied by Sovereign or a party other
than First Home for inclusion therein, as to which counsel need express no
belief), as of the date of mailing thereof and as of the date of the meeting of
shareholders of First Home to approve the merger, contained any untrue statement
of a material fact or omitted to state a material fact necessary to make any
statement therein, in light of the circumstances under which it was made, not
misleading. Counsel may state in delivering such statement, that such counsel
has not independently verified and does not assume any responsibility for the
accuracy, completeness or fairness of any information or statements contained in
the Prospectus/Proxy Statement, except with respect to identified statements of
law or regulations or legal conclusions relating to First Home or First Home
Savings or the transactions contemplated in the Agreement and the Plan and that
it is relying as to materiality as to factual matters on certificates of
officers' and representations of the parties to the Agreement and other factual
representations of First Home and First Home Savings.
Counsel's opinion may provide that (i) such counsel's opinion is governed
by the ABA Third Party Opinion Accord, (ii) such counsel's opinion is limited to
the laws of the State of New Jersey and the banking and securities laws of the
United States of America, and (iii) such counsel relied upon appropriate
certificates of public officials and officers of First Home and First Home
Savings as to certain factual matters.
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