AGREEMENT AND PLAN
OF MERGER
between
SOVEREIGN BANCORP, INC.
and
BANKERS CORP.
February 5, 1997
AGREEMENT
TABLE OF CONTENTS
Page
BACKGROUND................................................................ 1
AGREEMENT................................................................. 1
ARTICLE I
THE MERGERS
Section 1.01 Definitions................................................. 1
Section 1.02 The Merger.................................................. 7
Section 1.03 The Bank Merger............................................. 13
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BANKERS
Section 2.01 Organization................................................ 13
Section 2.02 Capitalization.............................................. 14
Section 2.03 Authority; No Violation..................................... 15
Section 2.04 Consents.................................................... 16
Section 2.05 Financial Statements........................................ 17
Section 2.06 Taxes....................................................... 17
Section 2.07 No Material Adverse Effect.................................. 18
Section 2.08 Contracts................................................... 18
Section 2.09 Ownership of Property; Insurance Coverage................... 19
Section 2.10 Legal Proceedings........................................... 20
Section 2.11 Compliance With Applicable Law.............................. 21
Section 2.12 ERISA....................................................... 21
Section 2.13 Brokers, Finders and Financial Advisors..................... 23
Section 2.14 Environmental Matters....................................... 23
Section 2.15 Loan Portfolio.............................................. 23
Section 2.16 Information to be Supplied.................................. 23
(i)
Section 2.17 Securities Documents........................................ 24
Section 2.18 Related Party Transactions.................................. 24
Section 2.19 Schedule of Termination Benefits............................ 24
Section 2.20 Loans....................................................... 25
Section 2.21 Antitakeover Provisions Inapplicable........................ 25
Section 2.22 Quality of Representations.................................. 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Section 3.01 Organization................................................ 25
Section 3.02 Capital Structure........................................... 26
Section 3.03 Authority; No Violation..................................... 27
Section 3.04 Consents.................................................... 28
Section 3.05 Financial Statements........................................ 29
Section 3.06 Taxes....................................................... 29
Section 3.07 No Material Adverse Effect.................................. 29
Section 3.08 Ownership of Property; Insurance Coverage................... 30
Section 3.09 Legal Proceedings........................................... 30
Section 3.10 Compliance With Applicable Law.............................. 31
Section 3.11 Information to be Supplied.................................. 31
Section 3.12 ERISA....................................................... 31
Section 3.13 Securities Documents........................................ 33
Section 3.14 Environmental Matters....................................... 33
Section 3.15 Loan Portfolio.............................................. 33
Section 3.16 Brokers and Finders......................................... 33
Section 3.17 Loans....................................................... 33
Section 3.18 Quality of Representations.................................. 34
(ii)
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Bankers' Business................................ 34
Section 4.02 Access; Confidentiality..................................... 38
Section 4.03 Regulatory Matters and Consents............................. 39
Section 4.04 Taking of Necessary Action.................................. 39
Section 4.05 Certain Agreements.......................................... 41
Section 4.06 No Other Bids and Related Matters........................... 42
Section 4.07 Duty to Advise; Duty to Update Bankers'
Disclosure Schedule......................................... 42
Section 4.08 Conduct of Sovereign's Business............................. 43
Section 4.09 Board and Committee Minutes................................. 43
Section 4.10 Undertakings by Sovereign and Bankers....................... 43
Section 4.11 Employee Benefits and Termination Benefits.................. 46
Section 4.12 Duty to Advise; Duty to Update Sovereign's
Disclosure Schedule......................................... 48
Section 4.13 Affiliate Letter............................................ 48
Section 4.14 Publication of Combined Financial Results................... 48
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Bankers' Obligations under this
Agreement................................................... 49
Section 5.02 Conditions to Sovereign's Obligations under
this Agreement.............................................. 50
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination................................................. 53
Section 6.02 Effect of Termination....................................... 55
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses.................................................... 56
(iii)
Section 7.02 Non-Survival of Representations and
Warranties.................................................. 56
Section 7.03 Amendment, Extension and Waiver............................. 56
Section 7.04 Entire Agreement............................................ 56
Section 7.05 No Assignment............................................... 57
Section 7.06 Notices..................................................... 57
Section 7.07 Captions.................................................... 58
Section 7.08 Counterparts................................................ 58
Section 7.09 Severability................................................ 58
Section 7.10 Governing Law............................................... 58
Exhibit 1 Bankers' Affiliate Agreement
Exhibit 2 Stock Option Agreement (Included as Exh.-99.1)
Exhibit 3 Bank Plan of Merger
Exhibit 4 Form of Agreement Re: Benefits
Exhibit 5 Form of Opinion of Sovereign's Counsel
Exhibit 6 Form of Tax Opinion of Sovereign's
Counsel
Exhibit 7 Form of Opinion of Bankers' Counsel
(iv)
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 5, 1997, is made
by and between SOVEREIGN BANCORP, INC. ("Sovereign"), a Pennsylvania
corporation, having its principal place of business in Wyomissing, Pennsylvania,
and BANKERS CORP. ("Bankers"), a New Jersey corporation, having its principal
place of business in Perth Amboy, New Jersey.
BACKGROUND
1. Sovereign and Bankers desire for Bankers 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 Bankers and affiliates of Bankers, each have
executed in favor of Sovereign, a Letter Agreement dated February 5, 1997, in
the form attached hereto as Exhibit 1, and (b) Bankers granted to Sovereign an
option to acquire, under certain circumstances, Bankers' common stock (the
"Sovereign Option") pursuant to a Stock Option Agreement between Sovereign and
Bankers dated February 5, 1997, attached hereto as Exhibit 2.
3. Sovereign desires to merge Bankers Savings, a New Jersey chartered
savings bank and a wholly-owned subsidiary of Bankers ("Bankers 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 Bankers 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):
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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 Bankers.
Applicable Exchange Ratio shall have the meaning given to such term in
Section 1.02(e)(ii)(A).
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 Bankers 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.
Bank Merger means the merger of Bankers 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.
Bankers Common Stock means the common stock of Bankers described in
Section 2.02(a).
Bankers Disclosure Schedule means a disclosure schedule delivered by
Bankers to Sovereign pursuant to Article II of this Agreement.
Bankers Financials means (i) the audited consolidated financial
statements of Bankers as of December 31, 1995 and for the three years ended
December 31, 1995, including the notes thereto, (ii) the unaudited interim
consolidated financial statements of Bankers as of each calendar quarter
thereafter included in Securities Documents filed by Bankers and (iii) the
unaudited preliminary consolidated financial statements of Bankers as of
December 31, 1996, and for the twelve-month period then ended, including
the preliminary notes thereto.
Bankers Regulatory Reports means the Annual Reports of Bankers on Form
FR Y-6, any Current Report of Bankers on Form FR Y-9C and FR Y-LP filed
with the FRB and the NJDB from December 31, 1994 through the Closing Date
and
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the Reports of Condition and Income of Bankers Savings and accompanying
schedules for each calendar quarter, beginning with the quarter ended
December 31, 1994, through the Closing Date.
Bankers Subsidiaries means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by Bankers, except
any corporation the stock of which is held in the ordinary course of the
lending activities of Bankers Savings.
BCL means the Pennsylvania Business Corporation Law of 1988, as
amended.
BHC Act means the Bank Holding Company Act of 1956, as amended.
Closing Date means the date determined by Sovereign, in its sole
discretion, upon five (5) days prior written notice to Bankers, 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 Bankers shall agree.
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, local or foreign 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.
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FDIA means the Federal Deposit Insurance Act, as amended.
FDIC means the Federal Deposit Insurance Corporation.
FRB means the Federal Reserve Board.
GAAP means generally accepted accounting principles as in effect at
the relevant date.
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
Bankers, any adverse effect on its assets, financial condition or results
of operations which is material to its assets, financial condition or
results of operations on a consolidated basis, except for any material
adverse effect caused by (i) any change in the value of the respective
investment portfolios of Sovereign or Bankers resulting from a change in
interest rates generally or (ii) 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.
Merger means the merger of Bankers with and into Sovereign, with
Sovereign surviving such merger, contemplated by this Agreement.
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 under the
Exchange Act).
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Prospectus/Proxy Statement means the prospectus/proxy statement,
together with any supplements thereto, to be transmitted to holders of
Bankers Common Stock and Sovereign 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 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, the FRB, 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.
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 Bankers pursuant to Article III of this Agreement.
Sovereign Financials means (i) the audited consolidated financial
statements of Sovereign as of December 31, 1995 and for the three years
ended December 31, 1995, including the notes thereto, (ii) the unaudited
interim consolidated financial statements of Sovereign as of each calendar
quarter thereafter included in Securities
5
Documents filed by Sovereign, and (iii) the preliminary unaudited
consolidated financial statements of Sovereign as of December 31, 1996 and
for the twelve 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 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, for the fifteen
consecutive trading days commencing sixteen (16) trading days prior to the
date of determination.
Sovereign Option means the option granted to Sovereign to acquire
shares of Bankers Common Stock referenced in the recitals to this
Agreement.
Sovereign Regulatory Reports means the Annual Reports of Sovereign on
Form H(b)-11, any Current Report of Sovereign on Form H(b)-11 filed with
the OTS from December 31, 1994 through the Closing Date and the Thrift
Financial Reports of Sovereign and accompanying schedules for each calendar
quarter, beginning with the quarter ended December 31, 1994, 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 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.
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.
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Section 1.02 The Merger.
(a) Closing. The closing will take place at 10:00 a.m. on the Closing
Date at the offices of Xxxxxxx & Xxx, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxx, unless another time and place are agreed to by the parties hereto;
provided, in any case, that all conditions to closing set forth in Article V
have been satisfied or waived at or prior to the Closing Date. On the Closing
Date, Bankers and Sovereign shall cause the Articles of Merger to be duly
executed and to be filed in the PDS and the NJSOS.
(b) The Merger. Subject to the terms and conditions of this Agreement,
on the Effective Date: Bankers shall merge with and into Sovereign; the separate
existence of Bankers 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 Bankers 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 Bankers 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 directors of
Sovereign Bank as the surviving institution in the Bank Merger shall consist of
(i) those persons holding such office immediately prior to the Effective Date
and (ii) Xxxxxx X. Xxxxxxx. Sovereign shall cause Xx. Xxxxxxx to be appointed as
a director of Sovereign Bank effective as of the
7
effective date of the Bank Merger. Xx. Xxxxxxx shall be appointed to hold office
until the 1998 annual reorganization meeting of the Board of Directors of
Sovereign Bank and until his successor is elected and qualified or otherwise in
accordance with Sovereign Bank's charter and bylaws. Sovereign agrees to use its
best efforts to cause Xx. Xxxxxxx to be renominated as a director of Sovereign
Bank for election at the 1998 and 1999 annual reorganization meetings of the
Board of Directors of Sovereign Bank and agrees to vote its shares of Sovereign
Bank in favor of such election at such meetings.
(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 Bankers (other than shares held in trust, managed, custodial
or nominee accounts and the like or held by mutual funds for which a
subsidiary of Bankers 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) Bankers Common Stock.
(A) Subject to the provisions of subparagraphs (B), (C) and (D)
of this Section 1.02(e)(ii), each share of Bankers Common Stock issued
and outstanding immediately prior to the Effective Date (other than
shares of Bankers Common Stock, if any, then owned by Sovereign or
Bankers or any Bankers 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:
8
(i) if the Sovereign Market Value determined as of the
Effective Date is greater than or equal to $11.00 and less than
or equal to $16.50, then that number of 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, equal to $25.50
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 $11.00, then 2.318 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 $16.50, then 1.545 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 Bankers 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 Bankers Common Stock issued and held in the
treasury of Bankers or owned by Bankers or any Bankers 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 Bankers 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. Each option to acquire Bankers Common Stock shall
be converted into and become an option to acquire that number of shares of
Sovereign Common Stock equal to the number of shares of Bankers Common Stock
covered by the option multiplied by the Applicable Exchange Ratio and the
exercise price for a whole share of Sovereign Common Stock shall
9
be the present stated exercise price of such option divided by the Applicable
Exchange Ratio, such shares to be issuable upon exercise of such options in
accordance with the terms of the respective plans and grant agreements under
which they were issued.
(g) Surrender and Exchange of Bankers Stock Certificates.
(i) Exchange of Certificates. Each holder of shares of Bankers
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 Bankers 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 Bankers 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 Bankers 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 Bankers 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. 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 Bankers Common Stock. Notwithstanding the foregoing,
no party hereto will be liable to any holder of Bankers 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 Bankers Common Stock are surrendered by a Bankers
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.
10
(iii) Exchange Procedures. Each certificate for shares of Bankers
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 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 Bankers
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 Bankers Common Stock transmittal materials for use in exchanging
certificates representing Bankers 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 Bankers
as soon as reasonably possible but in no event later than fifteen (15) business
days following the receipt of certificates representing former shares of Bankers
Common Stock (except in the case of share certificates containing a restrictive
legend or with respect to which stop transfer instructions pertain) 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 Bankers
Certificates. Upon the Effective Date, the stock transfer books for Bankers
Common Stock will be closed and no further transfers of shares of Bankers Common
Stock will thereafter be made or recognized. All certificates for shares of
Bankers Common Stock surrendered pursuant to this Section 1.02(g) will be
cancelled by Sovereign.
(h) Intentionally omitted.
(i) Anti-Dilution Provisions. If, on the Effective Date, (i) the
Applicable Exchange Ratio is determined
11
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
Bankers shareholders who are entitled to receive shares of Sovereign Common
Stock in exchange for shares of Bankers Common Stock shall be adjusted so that
each Bankers 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 $6.00, then the Applicable
Exchange Ratio shall be determined under Section 1.02(e)(ii)(A)(i) as though
such Sovereign Market Value were $12.00. In such event, each Bankers shareholder
would receive 4.25 shares of Sovereign Common Stock in exchange for each share
of Bankers Common Stock, so that the aggregate market value of the Sovereign
Common Stock received would be $25.50.)
12
Section 1.03 The Bank Merger. Sovereign and Bankers shall use their best
efforts to cause Bankers 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 Bankers
shall cause Bankers Savings, to execute and deliver the Bank Plan of Merger
attached hereto as Exhibit 3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BANKERS
Bankers hereby represents and warrants to Sovereign that, except as
specifically set forth in the Bankers Disclosure Schedule delivered to Sovereign
by Bankers on the date hereof:
Section 2.01 Organization.
(a) Bankers is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. Bankers is a bank
holding company duly registered under the BHC. Bankers 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.
Bankers 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.
(b) Bankers Savings is a New Jersey state-chartered savings bank
duly organized and validly existing under the laws of the State of New Jersey.
Bankers 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 Bankers Savings nor any other
Bankers 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.
(c) There are no Bankers Subsidiaries other than Bankers Savings and
those identified in the Bankers Disclosure Schedule. There are no Bankers
Savings Subsidiaries other than those identified in the Bankers Disclosure
Schedule.
(d) The deposits of Bankers Savings are insured by the FDIC to the
extent provided in the Federal Deposit Insurance Act.
13
(e) The respective minute books of Bankers and Bankers Savings and
each other Bankers Subsidiary accurately record, in all material respects, all
material corporate actions of their respective shareholders and boards of
directors (including committees) through the date of this Agreement.
(f) Prior to the date of this Agreement, Bankers has delivered to
Sovereign true and correct copies of the articles of incorporation and bylaws of
Bankers and the charter and bylaws of Bankers Savings as in effect on the date
hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of Bankers consists of (a)
20,000,000 shares of common stock, $0.01 par value ("Bankers Common Stock"), of
which 12,378,184 shares are outstanding, validly issued, fully paid and
nonassessable and free of preemptive rights, and (b) 10,000,000 shares of
preferred stock, $0.01 par value, none of which are issued or outstanding.
Neither Bankers nor Bankers Savings nor any other Bankers 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
Bankers Common Stock, Bankers preferred stock or any other security of Bankers
or any securities representing the right to vote, purchase or otherwise receive
any shares of Bankers Common Stock, Bankers preferred stock or any other
security of Bankers, other than shares issuable under the Sovereign Option and
as set forth in reasonable detail in the Bankers Disclosure Schedule.
(b) The authorized capital stock of Bankers Savings consists of (i)
10,000,000 shares of common stock, par value $5.00 per share ("Bankers Savings
Common Stock"), of which 500,000 shares are outstanding, validly issued, fully
paid, nonassessable, free of preemptive rights and owned by Bankers. Neither
Bankers nor any Bankers 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 Bankers Subsidiary
or any other security of any Bankers 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 Bankers Subsidiary. Either Bankers or Bankers
Savings owns all of the outstanding shares of capital stock of each Bankers
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 Bankers Disclosure Schedule, neither
(i) Bankers, (ii) Bankers Savings nor (iii) any other Bankers Subsidiary, owns
any equity interest, directly or indirectly, treasury stock, in any other
company or controls any
14
other company, except for equity interests held in the investment portfolios of
Bankers Subsidiaries, equity interests held by Bankers Subsidiaries in a
fiduciary capacity, and equity interests held in connection with the commercial
loan activities of Bankers Subsidiaries. There are no subscriptions, options,
warrants, calls, commitments, agreements or other Rights outstanding and held by
Bankers or Bankers Savings with respect to any other company's capital stock or
the equity of any other person.
(d) To the best of Bankers' knowledge, no person or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner
(as defined in Section 13(d) of the Exchange Act) of 5% or more of the
outstanding shares of Bankers Common Stock, except as disclosed in the Bankers
Disclosure Schedule.
Section 2.03 Authority; No Violation.
(a) Bankers has full corporate power and authority to execute and
deliver this Agreement and to complete the transactions contemplated hereby.
Bankers 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 Bankers and the completion by Bankers of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Bankers and, except for approval by the shareholders of
Bankers as required under the NJBCA, Bankers' articles of incorporation and
bylaws and Nasdaq requirements applicable to it, no other corporate proceedings
on the part of Bankers are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Bankers and, subject to approval of the shareholders of Bankers as required
under the NJBCA, Bankers' articles 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 Bankers, enforceable against Bankers 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 Bankers Savings concurrently with the execution and delivery of this
Agreement, will constitute the valid and binding obligation of Bankers Savings,
enforceable against Bankers 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 Bankers, (B)
the execution and delivery of the Bank Plan of Merger by Bankers Savings, (C)
subject to receipt of
15
approvals from the Regulatory Authorities referred to in Section 3.04 hereof and
Bankers' and Sovereign's compliance with any conditions contained therein, the
completion of the transactions contemplated hereby, and (D) compliance by
Bankers or Bankers 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 articles of incorporation or bylaws of Bankers or any Bankers
Subsidiary or the charter and bylaws of Bankers Savings; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Bankers or any Bankers Subsidiary or any of their
respective properties or assets; or (iii) except as set forth in the Bankers
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 Bankers or any Bankers
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 Bankers or any Bankers 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 Bankers.
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 Bankers under the NJBCA, and
the approval of the Bank Plan of Merger by Bankers as sole shareholder of
Bankers Savings under the FDIA, and by the Bankers Savings 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 Bankers or the Bank Plan of Merger by Bankers Savings, and (b)
the completion by Bankers of the transactions contemplated hereby or by Bankers
Savings of the Bank Merger. Bankers 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 Bankers' 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 Bankers are not entitled to exercise dissenters' rights in
connection with the
16
transactions contemplated by this Agreement under federal or New Jersey law.
Section 2.05 Financial Statements.
(a) Bankers has previously delivered, or will deliver, to Sovereign
the Bankers Regulatory Reports. The Bankers 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 Bankers as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
(b) Bankers has previously delivered to Sovereign the Bankers
Financials. The Bankers Financials have been, or will be, prepared in accordance
with generally accepted accounting principles and practices applied on a
consistent basis throughout the periods covered by such statements, and fairly
present, or will fairly present, the consolidated financial position, results of
operations and cash flows of Bankers as of and for the periods ending on the
dates thereof, in accordance with generally accepted accounting principles
applied on a consistent basis.
(c) At the date of each balance sheet included in the Bankers
Financials or the Bankers Regulatory Reports, neither Bankers nor Bankers
Savings (as the case may be) had, or will 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 Bankers Financials or
Bankers 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) Bankers and the Bankers Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). Bankers has duly
filed, and will file, all federal, state and local tax returns required to be
filed by or with respect to Bankers and all Bankers 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
17
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 Bankers and any
Bankers 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 Bankers or any
Bankers Subsidiary.
Section 2.07 No Material Adverse Effect. Bankers has not suffered any
Material Adverse Effect since December 31, 1996.
Section 2.08 Contracts.
(a) Except as described in Bankers' proxy statement for its April
26, 1996 annual meeting of shareholders and Annual Reports on Form 10-K for the
years ended December 31, 1993, 1994 and 1995, previously delivered to Sovereign,
in the footnotes to the audited consolidated financial statements of Bankers as
of December 31, 1995, and for the three years ended December 31, 1995, or in the
Bankers Disclosure Schedule, neither Bankers nor any Bankers 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 Bankers or
any Bankers 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 Bankers or any
Bankers Subsidiary; (iii) any collective bargaining agreement with any labor
union relating to employees of Bankers or any Bankers Subsidiary; (iv) any
agreement which by its terms limits the payment of dividends by any Bankers
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 Bankers or any Bankers Subsidiary is an obligor to any person, which
instrument evidences or relates to indebtedness other than deposits, repurchase
agreements, 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 Bankers
Subsidiary to engage in any type of banking or bank-related business permissible
under law.
18
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 2.08(a) or described in the Bankers proxy
statement for its April 26, 1996 annual meeting of shareholders or in a footnote
to such audited consolidated financial statements, have been provided to
Sovereign on or before the date hereof, are listed on the Bankers Disclosure
Schedule and are in full force and effect on the date hereof and neither Bankers
nor any Bankers Subsidiary (nor, to the knowledge of Bankers, 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 Bankers. Except as set forth in the
Bankers 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
Bankers Disclosure Schedule, none of the employees (including officers) of
Bankers or any Bankers Subsidiary, possess the right to terminate their
employment as a result of the execution of this Agreement. Except as set forth
in the Bankers Disclosure Schedule, no plan, employment agreement, termination
agreement, or similar agreement or arrangement to which Bankers or any Bankers
Subsidiary is a party or under which Bankers or any Bankers 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 Bankers 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 Bankers or any Bankers 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 Bankers or any
Bankers Subsidiary to provide a benefit in the form of Bankers Common Stock or
determined by reference to the value of Bankers Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in the Bankers Disclosure Schedule, Bankers
and the Bankers 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 Bankers or any Bankers 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 Bankers Regulatory Reports and in the Bankers Financials
or acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value, in the ordinary
19
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 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. Bankers and the
Bankers Subsidiaries, as lessee, have the right under valid and subsisting
leases of real and personal properties used by Bankers 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 Bankers
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 Bankers Financials.
(b) With respect to all agreements pursuant to which Bankers or any
Bankers Subsidiary has purchased securities subject to an agreement to resell,
if any, Bankers or such Bankers 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) Bankers and the Bankers Subsidiaries currently maintain
insurance considered by Bankers to be reasonable for their respective operations
and similar in scope and coverage to that maintained by other businesses
similarly engaged. Neither Bankers nor any Bankers 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 Bankers or Bankers Savings under such
policies. All such insurance is valid and enforceable and in full force and
effect, and within the last three years Bankers has received each type of
insurance coverage for which it has applied and during such periods has not been
denied indemnification for any material claims submitted under any of its
insurance policies.
Section 2.10 Legal Proceedings. Except as disclosed in the Bankers
Disclosure Schedule, neither Bankers nor any Bankers Subsidiary is a party to
any, and there are no pending or, to the best of Bankers' knowledge, threatened
legal, administrative, arbitration or other proceedings, claims (whether
asserted or unasserted), actions or governmental investigations or inquiries of
any nature (i) against Bankers or any Bankers Subsidiary, (ii) to which Bankers
or any Bankers Subsidiary's assets are or may be subject, (iii) challenging the
validity or
20
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Bankers 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.
Section 2.11 Compliance With Applicable Law.
(a) Bankers and Bankers 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.
(b) Except as disclosed in the Bankers Disclosure Schedule, neither
Bankers nor any Bankers Subsidiary has received any notification or
communication from any Regulatory Authority (i) asserting that Bankers or any
Bankers 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 Bankers or any Bankers Subsidiary; (iii) requiring or threatening to require
Bankers or any Bankers Subsidiary, or indicating that Bankers or any Bankers
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 Bankers or any
Bankers 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 Bankers or any
Bankers 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 Bankers nor any Bankers Subsidiary has consented to or
entered into any Regulatory Agreement, except as heretofore disclosed to
Sovereign.
Section 2.12 ERISA. Bankers has previously delivered to Sovereign true
and complete copies of all employee pension benefit plans within the meaning of
ERISA Section 3(2), profit sharing plans, stock purchase plans, deferred
compensation and supplemental income plans, supplemental executive retirement
plans, employment agreements, annual or long term incentive plans, settlement
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
21
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 Bankers Disclosure Schedule, maintained 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 Bankers or any Bankers 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. The pension plan has not 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 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(b) occurred with respect to any such pension plan. Neither Bankers, any
Bankers Subsidiary nor any other pension plan maintained by Bankers or any
Bankers 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 Bankers, 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. 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 Bankers nor any Bankers Subsidiary
has incurred or is subject to any liability under ERISA Section 4201 for a
complete or partial withdrawal from a multi-employer 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 Bankers or any Bankers Subsidiary which
would result in the imposition, directly or indirectly, of an excise tax under
IRC 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 Bankers. Bankers and the Bankers Subsidiaries provide
22
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. With respect to the outstanding loan to Bankers'
employee stock ownership plan, only one payment remains to be made in an amount
not to exceed $300,000 and such payment is due and payable in 1997.
Section 2.13 Brokers, Finders and Financial Advisors. Except for
Bankers' engagement of Alex. Xxxxx & Sons Incorporated ("Alex. Xxxxx") in
connection with transactions contemplated by this Agreement, neither Bankers nor
any Bankers 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 Bankers 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 Bankers
Financials. The Bankers Disclosure Schedule shall contain as an exhibit the
engagement letter between Bankers and Alex. Xxxxx.
Section 2.14 Environmental Matters. To the knowledge of Bankers, neither
Bankers nor any Bankers Subsidiary, nor any properties owned or operated by
Bankers or any Bankers Subsidiary 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 Bankers. 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 Bankers, threatened, relating to the liability
of any property owned or operated by Bankers or any Bankers Subsidiary under any
Environmental Law.
Section 2.15 Loan Portfolio. The allowance for loan losses reflected,
and to be reflected, in the Bankers Regulatory Reports, and shown, and to be
shown, on the balance sheets contained in the Bankers Financials have been, and
will be, established in accordance with the requirements of generally accepted
accounting principles and all applicable regulatory criteria.
Section 2.16 Information to be Supplied. The information to be supplied
by Bankers and Bankers Savings for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact
23
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 Bankers
for inclusion in the Applications will, at the time such documents are filed
with any Regulatory Authority, be accurate in all material aspects.
Section 2.17 Securities Documents. Bankers has delivered to Sovereign
copies of its (i) annual reports on SEC Form 10-K for the years ended December
31, 1995, 1994 and 1993, (ii) quarterly reports on SEC Form 10-Q for the
quarters ended March 31, 1996, June 31, 1996 and September 30, 1996 and (iii)
proxy materials used or for use in connection with its meetings of shareholders
held in 1996, 1995 and 1994. 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
Bankers Disclosure Schedule, (ii) in the proxy statement for use in connection
with Bankers' 1996 annual meeting of shareholders or (iii) in the footnotes to
the Bankers Financials, Bankers is not a party to any transaction (including any
loan or other credit accommodation) with any Affiliate of Bankers (except a
Bankers Subsidiary). Except as disclosed in the Bankers Disclosure Schedule or
in Bankers' proxy statement for its April 26, 1996 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 unfavorable features. Except as set
forth on the Bankers Disclosure Schedule, no loan or credit accommodation to any
Affiliate of Bankers 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 Bankers nor Bankers 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 Bankers Savings is
inappropriate.
Section 2.19 Schedule of Termination Benefits. The Bankers Disclosure
Schedule includes a schedule of the present value as of June 30, 1997 of
termination benefits and related payments that would be payable to the
individuals identified thereon, excluding any options to acquire Bankers 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 Bankers solely
for the benefit of officers of Bankers or Bankers Subsidiaries (the "Benefits
Schedule"), assuming their employment
24
is terminated as of June 30, 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 December
31, 1995, amounts payable under any Bankers directors deferred compensation plan
was $465,000 and all amounts payable thereunder have been accrued.
Section 2.20 Loans. Each loan reflected as an asset in the Bankers
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 Bankers.
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
Bankers 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 Bankers that, except as set
forth in the Sovereign Disclosure Schedule delivered by Sovereign to Bankers 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
25
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 Federal Deposit Insurance Act.
(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 Bankers 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)
100,000,000 shares of common stock, no par value ("Sovereign Common Stock"), of
which, at the date of this Agreement, no shares were issued and held by
Sovereign as treasury stock and 53,096,912 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 1,378,672 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,
(iii) the deemed rights to acquire Sovereign Stock possessed by holders of the
common stock of First State Financial Services, Inc. under the Agreement and
Plan of Merger between Sovereign and First State Financial Services, Inc. dated
26
June 24, 1996, as amended, contingent upon completion of the transactions
contemplated thereby and (iv) shares issuable as a result of the 6-for-5
stock split to be effected by Sovereign on March 14, 1997. As of December 31,
1996, Sovereign had approximately 8,500 shareholders of record.
(b) To the best of Sovereign's knowledge, except as disclosed in
Sovereign's proxy statement dated March 15, 1996, 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 or encumbrance. 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, except for approval of the shareholders of
Sovereign under Nasdaq requirements applicable to it, 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 approval by the shareholders of Sovereign
under Nasdaq requirements applicable to it and 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.
27
(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 Bankers' 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.
Section 3.04 Consents. Except for consents, approvals, filings and
registrations from or with the OTS, the FRB, the FDIC and the NJDB, the SEC, and
state "blue sky" authorities, and compliance with any conditions contained
therein, and the approval of this Agreement by the shareholders of Sovereign in
accordance with Nasdaq requirements applicable to it, and the approval of the
Bank Plan of Merger by Sovereign as sole shareholder of Sovereign Bank under the
FDIA, 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
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
28
not required, will object to the completion of the transactions contemplated by
this Agreement.
Section 3.05 Financial Statements.
(a) Sovereign has previously delivered, or will deliver, to Bankers
the Sovereign Financials. The Sovereign Financials have been, or will be,
prepared in accordance with generally accepted accounting principles and
practices 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 generally accepted
accounting principles. Sovereign will make the Sovereign Regulatory Reports
available to Bankers for inspection.
(b) At the date of each balance sheet included in the Sovereign
Financials, 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 December 31, 1996.
29
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 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.
30
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 the assets, business, financial condition, business prospects or
results of operations of Sovereign and its Subsidiaries taken as a whole.
(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 Bankers.
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) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act, 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, be accurate in all material
aspects.
Section 3.12 ERISA. Sovereign has previously made available to Bankers
true and complete copies of the employee
31
pension benefit plans within the meaning of ERISA Section 3(2), profit sharing
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, maintained 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 nor any Sovereign Subsidiary, and no 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. 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 any liability under ERISA Section 4201 for
a complete or partial withdrawal from a multi-employer plan. All "employee
benefit plans," as defined in ERISA Section 3(3), comply and in 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
32
health plans for separating employees 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 Bankers copies of its (i) annual reports on SEC Form 10-K for the
years ended December 31, 1995, 1994, and 1993, (ii) quarterly reports on SEC
Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996, (iii) current reports on SEC Form 8-K dated February 15, 1996, June 3,
1996, October 31, 1996 and November 26, 1996, and (iv) proxy statement dated
March 15, 1996 used in connection with its annual meeting of shareholders held
in April 1996. 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 owned or
operated by Sovereign or any Sovereign Subsidiary 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 Loan Portfolio. 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 generally
accepted accounting principles and all applicable regulatory criteria.
Section 3.16 Brokers and Finders. 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 (ii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms,
33
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 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.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Bankers' Business.
(a) From the date of this Agreement to the Closing Date, Bankers and
each Bankers 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. Bankers will use its reasonable good
faith efforts, and will cause Bankers 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 Bankers and Bankers 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, Bankers will not, and Bankers will not permit any
Bankers Subsidiary to:
(i) amend or change any provision of its certificate or articles
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) Bankers may issue
shares of Bankers 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 Bankers Common Stock under
the Bankers Stock Option Plans and (B) Bankers may pay a regular
quarterly cash dividend, not to exceed $.16 per share of Bankers
Common Stock outstanding. As promptly as
34
practicable following the date of this Agreement, the Board of
Directors of Bankers 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 Bankers 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 Bankers shareholders to receive
two dividends either from Bankers or from Bankers and Sovereign in any
quarter or to deny or prohibit them from receiving one dividend from
Bankers or Sovereign in any quarter. Subject to applicable regulatory
restrictions, if any, Bankers Savings may pay a cash dividend, in the
aggregate, sufficient to fund any dividend by Bankers permitted
hereunder;
(iii) grant any severance or termination pay (other than pursuant
to written policies or written agreements of Bankers or Bankers
Subsidiaries in effect on the date hereof and provided to Sovereign
prior to the date hereof) to, or enter into any new or amend any
existing employment agreement with, or increase the compensation of,
any employee, officer or director of Bankers or any Bankers
Subsidiary, except for routine periodic increases, individually and in
the aggregate, in accordance with past practice;
(iv) merge or consolidate Bankers or any Bankers Subsidiary with
any other corporation; sell or lease all or any substantial portion of
the assets or business of Bankers or any Bankers 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 Bankers 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
Bankers Subsidiary of its certificate of authority to maintain, or
file an application for the relocation of, any existing branch office,
or file an application for a certificate of authority to establish a
new branch office;
(v) sell or otherwise dispose of the capital stock of Bankers
Savings or sell or otherwise dispose of any asset of Bankers or of any
Bankers Subsidiary other than in the ordinary course of business
consistent with past practice; subject any asset of Bankers or of any
Bankers 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
35
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 Bankers 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;
(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 Bankers or Bankers 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 Bankers or any Bankers 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 that 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 Bankers may contribute to
the Bankers pension plan an amount not to exceed the minimum amount
required under ERISA or the IRC only if (A) such amount is usual and
ordinary, consistent with past practice and (B) Bankers obtains an
opinion of legal counsel that the full amount of such contribution
will be deductible by Bankers for federal tax purposes, and further
provided that in no event will Bankers make any contribution to the
Bankers pension plan; and provided, further, that Bankers Savings may
(C) contribute to its Employee Stock Ownership Plan ("ESOP") an amount
sufficient to repay all outstanding loans obtained by the ESOP to
finance the purchase of Bankers Common Stock for the ESOP, allocate
any Bankers Common Stock released from a suspense account as a result
of such repayment among the participants eligible for such allocation
and terminate the ESOP (with full vesting of all participants'
accounts as required by ERISA) prior to the Closing Date and (D) amend
The Retirement Plan of Bankers Savings in RSI Retirement Trust
("Retirement Plan") to provide that participants in the Retirement
Plan whose termination of service occurs subsequent to the Closing
Date under circumstances entitling them to severance benefits in
accordance with the severance policy described in Section 4.11(c)
shall be entitled to
36
elect to receive payment of their retirement benefits under the
Retirement Plan in the form of an immediate lump sum (determined in
accordance with the requirements of the IRC) as of the date of their
termination of service;
(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.;
(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 Bankers
Disclosure Schedule; provided that Sovereign will not unreasonably
withhold its consent with respect to any request by Bankers for
permission to increase, compromise, extend, renew or modify any loan
subject to this provision;
(xii) except as set forth on the Bankers Disclosure Schedule,
enter into, renew, extend or modify any other transaction with any
Affiliate;
(xiii) enter into any interest rate swap or similar commitment,
agreement or arrangement;
(xiv) except for the execution of this Agreement, 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 Bankers or any Bankers Subsidiary to do any of
the following: (i) make any capital expenditure of $100,000 or more not
disclosed on Bankers 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 Bankers or a Bankers Subsidiary or repurchase agreements made, in
each case, in the ordinary course of business; or (iii) undertake or enter any
lease, contract or
37
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
Bankers or any Bankers 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,
Bankers or Sovereign, as the case may be, shall afford to, and shall cause each
Bankers 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 Bankers 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) Bankers 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, Bankers shall permit
employees of Sovereign reasonable access to and participation in matters
relating to problem loans, loan restructurings and loan work-outs of Bankers and
the Bankers 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 Bankers or any Bankers
Subsidiary to obtain an appraisal by an independent third party experienced in
such matters, and mutually satisfactory to Sovereign and Bankers, of the assets
or property securing any loan made by Bankers or any Bankers Subsidiary.
(d) If the transactions contemplated by this Agreement shall not be
consummated, Bankers 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. Bankers and Sovereign shall
38
each give prompt notice to the other party of any contemplated disclosure where
such disclosure is so legally required.
Section 4.03 Regulatory Matters and Consents.
(a) Sovereign and Bankers will prepare all Applications and make all
filings for, and use their 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.
(b) Bankers will furnish Sovereign with all information concerning
Bankers and Bankers Subsidiaries as may be necessary or advisable in connection
with any Application or filing made by or on behalf of Sovereign to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement.
(c) Sovereign will promptly furnish Bankers with copies of all
material written communications to, or received by Sovereign or any Sovereign
Subsidiary from, any Regulatory Authority in respect of the transactions
contemplated hereby, except information which is filed by Sovereign which is
designated as confidential or contains an earnings projection.
(d) Sovereign will furnish Bankers with (i) copies of all
Applications prior to filing with any Regulatory Authority and provide Bankers a
reasonable opportunity to suggest changes to such Applications, which suggested
changes Sovereign may, in its reasonable discretion accept or reject, (ii)
copies of all Applications filed by Sovereign and (iii) copies of all documents
filed by Sovereign under the Securities Exchange Act of 1934, as amended.
(e) Bankers will cooperate with Sovereign in the foregoing matters
and will furnish Sovereign with all information concerning Bankers and Bankers
Subsidiaries as may be necessary or advisable in connection with any Application
or filing (including the Registration Statement and any report filed with the
SEC) made by or on behalf of Sovereign to any Regulatory Authority in connection
with the transactions contemplated by this Agreement, and such information will
be accurate and complete in all material respects. In connection therewith,
Bankers will provide certificates and other documents reasonably requested by
Sovereign.
Section 4.04 Taking of Necessary Action.
(a) Sovereign and Bankers shall each use its best efforts in good
faith, and each of them shall cause its Subsidiaries to use their best efforts
in good faith, to (i) furnish such information as may be required in connection
39
with the preparation of the documents referred to in Section 4.03 of this
Agreement, and (ii) 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 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 Bankers
nor any Bankers Subsidiary shall agree to make any payments or modifications to
agreements in connection therewith without the prior written consent of
Sovereign, 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 Bankers or from exercising
its rights under this Agreement or the Option Agreement.
(b) Bankers and Sovereign shall promptly prepare a Prospectus/Proxy
Statement to be mailed to their respective shareholders in connection with the
meetings of their respective shareholders and 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 Bankers 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 Bankers, 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 Bankers with as many copies of such Registration
Statement and all amendments thereto promptly upon the filing thereof as Bankers
may reasonably request.
40
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 Bankers 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 Bankers, any of the Bankers' 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 Articles of Incorporation and By-Laws of Bankers. On or after
the Effective Date, Sovereign shall indemnify, defend and hold harmless all
prior and then-existing directors and officers of Bankers and Bankers Savings,
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 Bankers or any Bankers 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 Bankers or Bankers Savings
as of the date hereof including the right to advancement of expenses, provided,
however, that any such officer, director or employee of Bankers or Bankers
Savings may not be indemnified by Sovereign and/or Sovereign Bank if such
indemnification is prohibited by applicable law.
(b) Sovereign shall maintain Bankers' 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 Bankers for such insurance (the "Maximum
Amount"). If the amount of the annual premiums necessary to maintain or procure
such insurance coverage exceeds the Maximum
41
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 Bankers Disclosure
Schedule. Sovereign further agrees to honor (i) the "pay-to-stay" bonus
provisions of certain confidentiality agreements in an amount not to exceed
$160,000 in the aggregate, and (ii) the Non-Executive Severance Plan, in
accordance with the terms of the relevant agreement or plan document as
summarized in Section 4.11(c). With respect to individuals with the title of
Vice President or higher who are not otherwise covered by an employment contract
or a special termination agreement, the aggregate amount of payments under the
Non-Executive Severance Plan will not exceed $175,000.
Section 4.06 No Other Bids and Related Matters. So long as this
Agreement remains in Effect, Bankers shall not, nor shall it permit any Bankers
Subsidiary or any other Affiliate of Bankers or any officer, director or
employee of any of them, or any investment banker, attorney, accountant or other
representative retained by Bankers, any Bankers Subsidiary or any other Bankers
Affiliate to, directly or indirectly, solicit, encourage, initiate or engage in
discussions or negotiations with, or respond to requests for information,
inquiries, or other communications from, any person other than Sovereign
concerning the fact of, or the terms and conditions of, this Agreement, or
concerning any acquisition of Bankers, any Bankers Subsidiary, or any assets or
business thereof (except that Bankers' officers may respond to inquiries from
analysts, Regulatory Authorities and holders of Bankers Common Stock in the
ordinary course of business). Bankers shall notify Sovereign immediately if (i)
any such discussions or negotiations are sought to be initiated with Bankers by
any person other than Sovereign, or (ii) if any such requests for information,
inquiries, proposals or communications are received from any person other than
Sovereign, or analysts, Regulatory Authorities and holders of Bankers Common
Stock in the ordinary course of business.
Section 4.07 Duty to Advise; Duty to Update Bankers' Disclosure
Schedule. Bankers shall promptly advise Sovereign of any change or event having
a Material Adverse Effect on it or on any Bankers Subsidiary or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any
42
of its representations, warranties or covenants set forth herein. Bankers shall
update Bankers' 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 the Bankers
Disclosure Schedule. The delivery of such updated Schedule shall not relieve
Bankers 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 5.02(c) hereof.
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.
Section 4.09 Board and Committee Minutes. Bankers shall provide to
Sovereign, within 30 days after any meeting of the Board of Directors of Bankers
or any Bankers Subsidiary, or any committee thereof, or any senior management
committee, a copy of the minutes of such meeting, except that with respect to
any meeting held within 30 days of the Closing Date, such minutes shall be
provided to Sovereign prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and Bankers.
(a) From and after the date of this Agreement, Bankers shall:
(i) Voting by Directors. Recommend to all members of Bankers'
Board of Directors to vote all shares of Bankers' 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
Bankers or any Bankers Subsidiary on the date hereof;
(iii) Approval of Bank Plan of Merger. Approve the Bank Plan of
Merger as sole shareholder of Bankers Savings and obtain the approval
of, and cause the execution and delivery of, the Bank Plan of Merger
by Bankers Savings;
(iv) Proxy Solicitor. If Sovereign requests and agrees to bear
the expense thereof, retain a proxy solicitor in connection with the
solicitation of Bankers shareholder approval of this Agreement;
43
(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 their 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 best efforts to obtain an extension of any contract
with an outside service bureau or other vendor of services to Bankers
or any Bankers Subsidiary, on terms and conditions mutually acceptable
to Bankers and Sovereign;
(vii) Committee Meetings. Permit a representative of Sovereign,
who is reasonably acceptable to Bankers, to attend all committee
meetings of Bankers and Bankers Savings management including, without
limitation, any loan or asset/liability committee. Bankers shall
respond reasonably and in good faith to any request of Sovereign to
permit a representative of Sovereign, who is reasonably acceptable to
Bankers, to attend any meeting of Bankers' Board of Directors or the
Executive Committee thereof;
(viii) List of Nonperforming Assets. Provide Sovereign, within
ten (10) days of the end of each calendar month, a written list of
nonperforming assets (as defined in Section 5.02(q)) as of the end of
such month; and
(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 Bankers to those of
Sovereign (as such practices and methods are to be applied to Bankers
from and after the Closing Date) and Sovereign's plans with respect to
the conduct of the business of Bankers following the Merger and
otherwise to reflect Merger-related expenses and costs incurred by
Bankers, provided, however, that Bankers shall not be required to take
such action (A) more than thirty 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, Bankers shall provide Sovereign a written statement, certified
without personal liability by the chief executive officer of Bankers
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
44
date; and no accrual or reserve made by Bankers or any Bankers
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.
(b) From and after the date of this Agreement, Sovereign and Bankers
shall each:
(i) Shareholders Meetings. Submit this Agreement to its
shareholders for approval at a meeting to be held as soon as
practicable, and use their respective best efforts to cause their
Boards of Director to unanimously recommend approval of this Agreement
to their respective shareholders;
(ii) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the
Applications, (B) the Registration Statement and related filings under
state securities laws covering the Sovereign Common Stock and related
Sovereign Stock Purchase Rights to be issued pursuant to the Merger,
(C) all other documents necessary to obtain any other approvals and
consents required to effect the completion of the Merger and the Bank
Merger, and (D) all other documents contemplated by this Agreement;
(iii) Identification of Bankers' Affiliates. Cooperate with the
other and use its best efforts to identify those persons who may be
deemed to be Affiliates of Bankers;
(iv) 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 Bankers shareholders,
Bankers' internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any
disclosure which its counsel deems necessary;
(v) 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;
45
(vi) Maintenance of Books and Records. Maintain, and cause their
respective Subsidiaries to maintain, books of account and records in
accordance with generally accepted accounting principles applied on a
basis consistent with those principles used in preparing the financial
statements heretofore delivered;
(vii) Delivery of Securities Documents. Deliver to the other,
copies of all Securities Documents simultaneously with the filing
thereof;
(viii) 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; or
Section 4.11 Employee Benefits and Termination Benefits.
(a) Employee Benefits. On and after the Effective Date, the employee
pension and welfare benefit plans of Sovereign and Bankers may, at Sovereign's
election and subject to the requirements of the IRC, continue to be maintained
separately or consolidated, provided, however, that Bankers employees shall
receive benefits at least as favorable, in the aggregate, as the benefits to
which they were entitled on December 31, 1996. In the event of a consolidation
of any or all of such plans or in the event of termination of the Bankers
benefit plans, Bankers and Bankers Savings employees shall receive credit for
service with Bankers or Bankers Savings under any Sovereign benefit plan, or new
Sovereign benefit plan in which such employees would be eligible to enroll for
purposes of eligibility and vesting determination. In the event of any
termination of or consolidation of any Bankers or Bankers Savings health plan
with any Sovereign health plan, all employees of Bankers or Bankers Savings and
all retired employees at Bankers and Bankers Savings who were eligible for
continued coverage under the terminated plan shall have immediate coverage under
any successor health plan without the necessity of satisfying a waiting period
for coverage of any pre-existing condition. Except as provided in Section
4.11(c) below, in the event of a termination or consolidation of any Bankers or
Bankers Savings health plan, terminated Bankers or Bankers 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. Bankers shall cause to be delivered to
Sovereign concurrently with the execution of this Agreement with respect to each
individual named on the Benefits Schedule included in the Bankers Disclosure
Schedule, the written acknowledgment of each such individual in the form
attached
46
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 benefit or welfare plan maintained by
Bankers solely for the benefit of officers of Bankers or Bankers Subsidiaries
assuming a termination of such individual's employment on June 30, 1997,
subsequent to the Closing Date. Bankers 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 Bank will follow the Banker Savings
severance policy as to any employee of Bankers Savings whose employment is
terminated in connection with the Merger 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 or in a location within 50 miles from Bankers' headquarters,
within three (3) months of the Effective Date (excluding any employee who has an
existing employment or special termination agreement or whose employment is
terminated for non-performance or other cause). Payment under such policy shall
be equal to one week's pay for each year of service, but no less than 14 weeks'
pay for officers with the rank of vice president or above and no less than four
weeks' pay for non-officers. Part-time employees' payments shall be determined
based on an average week's pay based on their annual compensation for the most
recent full year. An employee entitled to payment under the foregoing severance
policy shall also be eligible for continued participation in the health
insurance plan maintained by Bankers Savings or Sovereign that such employee
would have been eligible for if such employee's employment had not been
terminated, or similar health insurance coverage to be provided by Sovereign, at
the same level of coverage and employee co-payment requirements as applicable to
such employee immediately prior to such termination. Such health insurance
coverage shall continue for (i) one month in the case of an employee with less
than six years of service, (ii) two months in the case of an employee with at
least (6) six, but not more than 10, years of service, (iii) three months in the
case of an employee with at least 11, but not more than 15, years of service and
(iv) four months in the case of an employee with 16 or more years of service.
The benefits provided to terminated Bankers and Bankers Savings employees under
this subsection are the only severance benefits payable by Bankers or Bankers
Savings under
47
any plan or policy and shall 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.
(d) Intention Regarding Future Employment. It is the intent of
Sovereign Bank in connection with reviewing applicants for employment positions
to give any Bankers Savings employee who is terminated within three (3) months
of the Effective Date the same consideration as is afforded Sovereign Bank
employees for such positions in accordance with existing formal or informal
polices for a period of three (3) months from such date of termination.
Section 4.12 Duty to Advise; Duty to Update Sovereign's Disclosure
Schedule. Sovereign shall promptly advise Bankers of any change or event having
a Material Adverse Effect on it or on any Sovereign Subsidiary 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.
Sovereign shall update Sovereign's 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 the Sovereign Disclosure Schedule. The delivery of such updated Schedule
shall not relieve Sovereign 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) hereof.
Section 4.13 Affiliate Letter. No later than five days after the date
of this Agreement, Bankers shall cause to be delivered to Sovereign the Letter
Agreement attached hereto as Exhibit 1, executed by each director and officer
set forth thereon.
Section 4.14 Publication of Combined Financial Results. Sovereign
shall use reasonable efforts to publish as soon as possible, but no later than
30 days after the end of the first month after the Effective Date in which there
are at least 30 days of post-Merger combined operations (which month may be the
month in which the Effective Date occurs), combined revenues and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135, provided, however, that Sovereign may delay publishing
such information for such period of times as it, in its good faith reasonable
judgment, deems necessary or desirable to achieve a bona fide corporate purpose.
48
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Bankers' Obligations under this Agreement.
The obligations of Bankers hereunder shall be subject to satisfaction at or
prior to the Closing Date of each of the following conditions, unless waived by
Bankers 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 Bankers 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;
(d) Approvals of Regulatory Authorities. Sovereign shall have
received all required approvals of Regulatory Authorities of the Merger, and
delivered copies thereof to Bankers; 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 December 31, 1996, there shall
not have occurred any Material Adverse Effect with respect to Sovereign;
(g) Officer's Certificate. Sovereign shall have delivered to Bankers
a certificate, dated the Closing Date and
49
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. Bankers shall have received an
opinion of Xxxxxxx & Xxx, counsel to Sovereign, dated the Closing Date, in form
and substance reasonably satisfactory to Bankers 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;
(j) Tax Opinion. Bankers shall have received an opinion of Xxxxxxx &
Xxx, substantially to the effect set forth on Exhibit 6 attached hereto;
(k) Approval of Bankers' Shareholders. This Agreement shall have
been approved by the shareholders of Bankers by such vote as is required under
Bankers' articles of incorporation and bylaws or under Nasdaq requirements
applicable to it; and
(l) Investment Banking Opinion. Bankers shall have received an oral
opinion from Alex. Xxxxx on or before the date of this Agreement and updated in
writing as of a date within five (5) days of mailing the Prospectus/Proxy
Statement, to the effect that the consideration to be received by shareholders
of Bankers pursuant to this Agreement 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, Bankers and Bankers 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 Bankers and Bankers
Savings; and Sovereign shall have received certified copies of the resolutions
evidencing such authorizations;
50
(b) Covenants. The obligations and covenants of Bankers, 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 Bankers;
(c) Representations and Warranties. The representations and
warranties of Bankers 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,
result in a Material Adverse Effect with respect to Bankers;
(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 December 31, 1996, there shall
not have occurred any Material Adverse Effect with respect to Bankers.
(g) Officer's Certificate. Bankers shall have delivered to Sovereign
a certificate, 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 Bankers' Counsel. Sovereign shall have received an
opinion of Xxxxxxx Xxxxxxxx & Wood, counsel to Bankers, 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
51
respect to the transactions contemplated by this Agreement, shall
have been obtained;
(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 an opinion from
Ernst & Young 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 4.11(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;
(m) Liquidation Account. Neither the Merger or consummation of the
Bank Plan of Merger shall require Sovereign, Bankers or any Subsidiary of either
to distribute to depositors the liquidation account established by Bankers
Savings in connection with its conversion from mutual to stock form;
(n) Pension Plans. With respect to each pension plan subject to
Title IV of ERISA, (i) the present value of the accrued benefits under such plan
shall not, as of the Closing Date, exceed the then current value of the assets
of such plan allocable to such accrued benefits and (ii) no amounts shall be
contributed by Bankers or any Bankers Subsidiary to any such pension plan in the
one year period preceding the Closing Date;
(o) Approval of Sovereign's Shareholders. This Agreement shall have
been approved by the shareholders of Sovereign by such vote as is required under
Sovereign's articles of incorporation and bylaws or under Nasdaq requirements
applicable to it; and
(p) Investment Banking Opinion. Sovereign shall have received an
oral opinion from Xxxx, Xxxx & Co., Inc. on or before the date of this Agreement
and updated in writing as of a date within five (5) days of mailing the
Prospectus/Proxy Statement to the effect that the Merger is fair to Sovereign.
52
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 Bankers:
(i) if there shall have been any breach of any representation,
warranty, covenant or other obligation of Sovereign which results in a
Material Adverse Effect with respect to Sovereign, on the one hand, or
of Bankers which results in a Material Adverse Effect with respect to
Bankers, on the other hand, and such breach cannot be, or shall not
have been, remedied within 30 days after receipt by such other party
of notice in writing specifying the nature of such breach and
requesting that it be remedied;
(ii) if the Closing Date shall not have occurred on or before
October 31, 1997, unless the failure of such occurrence shall be due
to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth in this Agreement required
to be performed or observed by such party on or before the Closing
Date; or
(iii) if either party has been informed in writing by a
Regulatory Authority whose approval or consent has been requested that
such approval or consent is unlikely to be granted, unless the failure
of such occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements set
forth herein required to be performed or observed by such party on or
before the Closing Date; or
(c) By Bankers, on the Closing Date if both of the following
conditions are satisfied:
(1) the Sovereign Market Value as of the close of business on the
Determination Date shall be less than $10.31; and
(2) (i) the quotient obtained by dividing the Sovereign Market
Value as of the close of business on the Determination Date by $13.75
(such number being referred to herein as the "Sovereign Ratio") shall
be less than (ii) the quotient obtained by dividing the Index Price on
the Determination Date by the Index Price on the Starting Date and
subtracting 0.15 from the quotient in this clause (2)(ii).
53
subject, however, to the following: If Bankers shall elect to terminate this
Agreement pursuant to this Section 6.01(c), it shall give written notice thereof
to Sovereign on the Closing Date; but provided further, that Sovereign shall
have the option to elect to increase the Exchange Ratio to equal the quotient
obtained by dividing $23.90 by the Sovereign Market Value determined as of the
close of business on the Determination Date, 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 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).
For purposes of this Section 6.01(c), the following terms shall have
the meanings indicated.
"Determination Date" shall mean the date immediately preceding the
Closing Date.
"Index Group" shall mean the fifteen thrift holding companies listed
below, the common stocks of all of which shall be publicly traded and as to
which there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization.
In the event that any such company or companies are removed from the Index
Group, the weights (which have been determined based upon the number of shares
of outstanding common stock) redistributed proportionately for purposes of
determining the Index Price. The fifteen thrift holding companies and the
weights attributed to them are as follows:
54
Thrift Holding Companies % Weighting
------------------------ -----------
GreenPoint Financial Corp. 8.56%
Charter One Financial 8.37%
Dime Bancorp, Inc. 18.88%
TCF Financial Corp. 6.26%
Glendale Federal Bank, FSB 8.98%
Washington Federal, Inc. 7.77%
First Financial Corp. 6.63%
Long Island Bancorp, Inc. 4.41%
Bank United Corp. 5.69%
Astoria Financial Corporation 3.87%
Peoples Heritage Finl Group 5.09%
Coast Savings Financial 3.35%
Commercial Federal Corporation 3.87%
Collective Bancorp, Inc. 3.68%
Xxxxxx Financial Corp. 4.59%
Total 100.00%
======
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing sales
prices of the companies composing the Index Group (reported as provided with
respect to the Sovereign Market Value).
"Starting Date" shall mean February 4, 1997.
If any company belonging to the Index Group or Sovereign declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or Sovereign
shall be appropriately adjusted for the purposes of applying this
Section 6.01(c).
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 Bankers 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.
55
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 set forth
in Sections 1.02(d)(i) and (iii), 1.02(g), 4.05, and 4.11(a) and (c) which will
survive the Merger, shall terminate on the Closing Date; provided, however, that
the covenants contained in Sections 4.11(a) and (c) shall survive the Merger
only for a period of one (1) year.
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.
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(d)(i) and (iii),
1.02(g), 4.05, and 4.11(a) and (c) with respect to indemnification,
56
employee benefits and certain other matters, and provided, further, that any
such rights, remedies, obligations or liabilities conferred pursuant to Sections
4.11(a) and (c) shall terminate and expire one (1) year from the Effective Date.
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, Esquire and
Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
(b) If to Bankers, to:
Bankers Corp.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Chairman, President and Chief
Executive Officer
Telecopy No.: (000) 000-0000
57
with copies to:
Xxxxxxx Xxxxxxxx & Wood
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Omer X.X. Xxxxxxxx, 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
BANKERS CORP.
By /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx,
Chairman, President and
Chief Executive Officer
58
Exhibit 1
February 5, 1997
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and Bankers Corp. ("Bankers")
desire to enter into an agreement dated February 5, 1997 ("Agreement"), pursuant
to which, subject to the terms and conditions set forth therein, (a) Bankers
will merge with and into Sovereign with Sovereign surviving the merger, and (b)
shareholders of Bankers will receive common stock of Sovereign in exchange for
common stock of Bankers 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
Bankers of the Agreement, that the undersigned, being directors, executive
officers and major shareholders of Bankers, execute and deliver to Sovereign
this Letter Agreement.
Each of the undersigned, in order to induce Sovereign to execute and
deliver to Bankers the Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all
meetings of shareholders of Bankers called to vote for approval of the Merger so
that all shares of common stock of Bankers then owned by the undersigned will be
counted for the purpose of determining the presence of a quorum at such meetings
and to vote all such shares (i) 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
Bankers), and (ii) against approval or adoption of any other merger, business
combination, recapitalization, partial liquidation or similar transaction
involving Bankers;
(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 Bankers, to approve or adopt the Agreement;
Sovereign Bancorp, Inc.
February 5, 1997
Page 2
(c) Agrees to use reasonable best efforts to cause the
Merger to be consummated;
(d) Agrees not to sell, transfer or otherwise dispose of any
common stock of Bankers on or prior to the record date for the meeting of
Bankers shareholders to vote on the Merger;
(e) Except as permitted by Section 4.06 of the Agreement,
agrees not to solicit, initiate or engage in any negotiations or discussions
with any party other than Sovereign with respect to any offer, sale, transfer or
other disposition of, any shares of common stock of Bankers now or hereafter
owned by the undersigned;
(f) 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;
(g) 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 Bankers 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 Bankers have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies;
(h) Agrees that Sovereign shall not be bound by any attempted
sale of any shares of Sovereign common stock, and
Sovereign Bancorp, Inc.
February 5, 1997
Page 3
Sovereign's transfer agent 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;
(i) Acknowledges and agrees that the provisions of
subparagraphs (f), (g) and (h) hereof also apply to shares of Sovereign common
stock received in the Merger (or any shares of Bankers common stock or of
Sovereign common stock, whether or not received in the Merger, for the period
referred to in subparagraph (g) 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;
(j) 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 (g) hereof; and
(k) 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
Sovereign Bancorp, Inc.
February 5, 1997
Page 4
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,
----------------------------------
Name
----------------------------------
Title
Exhibit 2
(Intentionally Omitted)
Exhibit 3
BANK PLAN OF MERGER
THIS BANK PLAN OF MERGER ("Plan of Merger") dated February 5, 1997, is
by and between SOVEREIGN BANK, a Federal Savings Bank ("Sovereign Bank"), and
BANKERS SAVINGS ("Bankers 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. Bankers Savings is a New Jersey state-chartered savings bank and a
wholly-owned subsidiary of Bankers Corp., a New Jersey corporation ("Bankers").
The authorized capital stock of Bankers Savings consists of 10,000,000 shares of
common stock, par value $5.00 per share ("Bankers Savings Common Stock"), of
which at the date hereof 500,000 shares are issued and outstanding.
3. The respective Boards of Directors of Sovereign Bank and Bankers
Savings deem the merger of Bankers 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 Bankers
Savings have adopted resolutions approving this Plan of Merger. The respective
Boards of Directors of Sovereign and Bankers have adopted resolutions approving
an Agreement dated February __, 1997 (the "Agreement") between Sovereign and
Bankers, pursuant to which this Plan of Merger is being executed by Sovereign
Bank and Bankers 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, the Commonwealth of Pennsylvania,
and the State of New Jersey Sovereign Bank and Bankers 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, the Commonwealth of Pennsylvania, and the
1
State of New Jersey on the Effective Date (as that term is defined in Article V
hereof): Bankers Savings shall merge with and into Sovereign Bank; the separate
existence of Bankers Savings shall cease; and Sovereign Bank shall be the
surviving corporation (such transaction referred to herein as the "Merger" and
Sovereign Bank, as the surviving corporation in the Merger, referred to herein
as the "Surviving 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 automatically
be and remain the Charter and Bylaws of the Surviving Bank, until altered,
amended or repealed.
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 and Xxxxxx X.
Xxxxxxx. The names and residence addresses of the directors are:
Name Residence Address
---- -----------------
Xxxxxx X. Xxxxxxx 00 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Xxxxx Hard 00 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx X. Xxxx Xxxxxxx Xxxx, Xxxxxx Xxxxxx
Xxxxx, Xxx Xxxxxx 00000
Xxxxxx X. Xxxxx 000 Xxxxx Xxxxx, Xxxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxx 000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Xxxxxxx X. Xxxx 0000 Xxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxx X. Xxxxxxxxxxx 000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx X. Xxxxxxx 00 Xxxxxx Xxxxx
Xxxxxxx, Xxx Xxxxxx 00000
2
Xxxxxxx X. Xxxxxxx, III 0 Xxxxxx Xxxx Xxxxx
Xxx Xxxxx, Xxx Xxxxxx 00000
Xxxxxx X. Xxxxxxxxx X.X. #00, Xxx 000X
Xxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxxxx X. Xxxxxxxxx Four Trent Place
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxx 0000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Xxx X. Xxxxx 00 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx X. Xxxxxx Xxxxx Run and Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
G. Xxxxxx Xxxxxx 00 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxxxx 00000
Xx. Xxxx X. Xxxxxx 000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxxx Xxxxxxx, Xx. 000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
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 Residence Address
---- -----------------
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
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.
3
4.2 Stock of Bankers Savings. Each share of Bankers Savings Common Stock
issued and outstanding immediately prior to the Effective Date, and each share
of Bankers Savings Common Stock issued and held in the treasury of Bankers 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 all filings with
government agencies, as may be required under applicable laws and regulations
for the Merger to become effective, are made and accepted by the applicable
agencies (the "Effective Date").
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date: the separate existence of
Bankers Savings shall cease; and all of the property (real, personal and mixed),
rights, powers, duties and obligations of Bankers Savings shall be taken and
deemed to be transferred to and vested in the Surviving Bank, without further
act or deed, as provided by applicable laws and regulations.
6.2 Savings Accounts. After the Effective Date, Sovereign Bank will
continue to issue savings accounts on the same basis as immediately prior to the
Effective Date.
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 Bankers Savings' liquidation account for the benefit of eligible
account holders shall automatically be deemed assumed 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 Bankers 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.
4
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
5
America and, in the absence of controlling Federal law, in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Sovereign Bank and Bankers 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, a Federal Savings
Bank
By
--------------------------------
Xxx X. Xxxxx,
President
BANKERS SAVINGS
By
--------------------------------
Xxxxxx X. Xxxxxxx,
Chairman of the Board,
President and Chief
Executive Officer
6
EXHIBIT "A"
to Plan of Merger
SOVEREIGN BANK
BRANCH LOCATIONS
7
EXHIBIT 4
Form of Agreement Re: Benefits
February , 1997
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Gentlemen:
I, the undersigned, hereby acknowledge and agree that an amount not to
exceed a present value of $__________ (based on a 6% per annum discount factor)
is the maximum amount that I would be entitled to receive from Bankers, any
Bankers 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 Bankers or any
Bankers subsidiary (or any of their respective successors or assigns) is
terminated for any reason, whether voluntarily or involuntarily, on June 30,
1997, and following the Closing Date of the transaction described in the
Agreement and Plan of Merger dated as of February 5, 1997 between Sovereign
Bancorp, Inc. and Bankers Corp. (the "Agreement"). All capitalized terms used
herein but not defined herein shall have the meanings given to them in the
Agreement.
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 in the
event of my termination of employment on or after the Closing Date, as defined
in the Agreement, and may be subject to adjustment upon an actual termination of
my employment to reflect increases in my
Sovereign Bancorp, Inc.
February __, 1997
Page 2
compensation and benefits due to the passage of time or in accordance with the
terms of Bankers' employee benefit plans and past practices for routine
increases.
Sincerely,
Acknowledged and Agreed to:
SOVEREIGN BANK, INC.
By________________________
Title_____________________
EXHIBIT 5
FORM OF OPINION OF COUNSEL TO SOVEREIGN
Bankers 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 full corporate power to
carry out the transactions contemplated in 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 duly
and validly authorized by all necessary corporate action on the part of
Sovereign and Sovereign Bank, and the Agreement and the Plan constitute valid
and legally binding obligations of Sovereign and Sovereign Bank, respectively,
except as 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 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
1
the 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 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.
(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 [and the NJDOB] in accordance with the Agreement and
the Plan, the mergers of Sovereign and Bankers and of Sovereign Bank and Bankers
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 Bankers and Sovereign contemplated by the
Agreement have been duly authorized and will, when issued 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).
(g) 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 schedules and other financial or
statistical data contained therein and except for any information supplied by
Bankers or Bankers 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 opinion, 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.
2
EXHIBIT 6
FORM OF TAX OPINION OF XXXXXXX & XXX
Sovereign and Bankers shall have received an opinion of Xxxxxxx & Xxx
substantially to the effect that, under the provisions of the IRC:
1. Provided the Merger qualifies as a statutory merger under applicable
law, the transfer by Bankers of all of its assets to Sovereign in exchange for
Sovereign Common Stock (including fractional share interests) and the assumption
by Sovereign of all of Bankers' liabilities will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the IRC.
2. Bankers and Sovereign will each be "a party to a reorganization"
within the meaning of Section 368(b) of the IRC.
3. Neither Bankers nor Sovereign will recognize any gain or loss upon
the transfer of Bankers' assets to Sovereign in exchange solely for Sovereign
Common Stock (including fractional share interests) and the assumption by
Sovereign of the liabilities of Bankers.
4. The basis of the Bankers assets in the hands of Sovereign will be
the same as the basis of such assets in the hands of Bankers immediately prior
to the Merger.
5. The holding period of the assets of Bankers to be received by
Sovereign will include the period during which the assets were held by Bankers.
6. No gain or loss will be recognized by the shareholders of Bankers on
the receipt of Sovereign Common Stock (including fractional share interests)
solely in exchange for their shares of Bankers Common Stock.
7. The basis of the Sovereign Common Stock (including fractional share
interests) to be received by the Bankers shareholders in the Merger will be the
same as the basis of the Bankers Common Stock surrendered in exchange therefor.
8. The holding period of the Sovereign Common Stock (including
fractional share interests) to be received by the Bankers shareholders in the
Merger will include the period during which the Bankers shareholders held their
Bankers Common Stock, provided the shares of Bankers Common Stock are held as a
capital asset on the Effective Date.
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
1
treated as having been received as distribution in full payment in exchange for
the fractional share interests redeemed, as provided in Section 302(a)
of the IRC.
10. The Sovereign Stock Purchase Rights transferred with the shares of
Sovereign Common Stock will not constitute "other property" within the meaning
of Section 356(a)(1)(B) of the IRC.
11. As provided in Section 381(c)(2) of the IRC and related Treasury
regulations, Sovereign will succeed to and take into account the earnings and
profits, or deficit in earnings and profits, of Bankers as of the Effective
Date. Any deficit in the earnings and profits of Sovereign or Bankers will be
used only to offset the earnings and profits accumulated after the Merger.
12. Pursuant to Section 381(a) of the IRC and related Treasury
regulations, Sovereign will succeed to and take into account the items of
Bankers described in Section 381(c) of the IRC. Such items will be taken into
account by Sovereign subject to the conditions and limitations of Sections 381,
382, 383, and 384 of the IRC and the Treasury regulations thereunder.
13. Provided the Bank Merger constitutes a statutory merger under
applicable law, the Bank Merger will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the IRC.
14. Bankers Savings and Sovereign Bank will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
15. Neither Bankers Savings nor Sovereign Bank will recognize any gain
or loss upon the transfer of Bankers Savings' assets to Sovereign Bank in
constructive exchange solely for Sovereign Bank common stock and the assumption
by Sovereign Bank of the liabilities of Bankers Savings.
16. The basis of the Bankers Savings assets in the hands of Sovereign
Bank will be the same as the basis of such assets in the hands of Bankers
Savings immediately prior to the Bank Merger.
17. The holding period of the Bankers Savings assets in the hands of
Sovereign Bank will include the period during which such assets were held by
Bankers Savings.
18. No gain or loss will be recognized by Sovereign, as the shareholder
of Bankers Savings, upon the constructive receipt of shares of Sovereign Bank
common stock in exchange for the Bankers 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
2
stock immediately before the Bank Merger, increased by the basis of the Bankers
Savings common stock surrendered in the constructive exchange.
20. As provided in Section 381(c)(2) of the IRC and related Treasury
regulations, Sovereign Bank will succeed to and take into account the earnings
and profits, or deficit in earnings and profits, of Bankers Savings as of the
effective date of the Bank Merger. Any deficit in the earnings and profits of
Sovereign Bank or Bankers Savings will be used only to offset the earnings and
profits accumulated after the Bank Merger.
21. Pursuant to Section 381(a) of the IRC and related Treasury
regulations, Sovereign Bank will succeed to and take into account the items of
Bankers Savings described in Section 381(c) of the IRC. Such items will be taken
into account by Sovereign Bank subject to the conditions and limitations of
Sections 381, 382, 383, and 384 of the IRC and the Treasury regulations
thereunder.
3
EXHIBIT 7
FORM OF OPINION OF COUNSEL TO BANKERS
Sovereign shall have received from counsel to Bankers, an
opinion, dated as of the Closing Date, substantially to the effect that, subject
to normal exceptions and qualifications:
(a) Bankers and Bankers Savings have full corporate power to
carry out the transactions contemplated in 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 duly
and validly authorized by all necessary corporate action on the part of Bankers
and Bankers Savings, and the Agreement and the Plan constitute a valid and
legally binding obligation, in accordance with their respective terms, of
Bankers and Bankers Savings, respectively, except as 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 and the Plan, nor compliance by
Bankers and Bankers 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 Bankers or the charter or bylaws of Bankers Savings,
or (B) based on certificates of officers and without independent verification,
to the knowledge of such counsel, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Bankers or Bankers 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
Bankers or Bankers 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 statute, rule or regulation applicable to Bankers
or Bankers Savings.
(b) Bankers Savings is a validly existing state-chartered bank
organized and in good standing under the laws of the State of New Jersey. The
deposits of Bankers Savings 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 Bankers or Bankers Savings is a party which would, if
determined adversely to Bankers or Bankers Savings, have a material adverse
effect on the
1
business, properties, results of operations, or condition, financial or
otherwise, of Bankers or Bankers 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 of
any third party, is required for the consummation by Bankers or Bankers Savings
of the transactions contemplated by the Agreement and the Plan, except for such
consents, approvals, authorizations or orders as have been obtained.
(e) On the sole basis of such counsel's participation in
conferences with officers and employees of Bankers 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 amendments or supplements thereto
(except for the financial information, financial statements, financial schedules
and other financial or statistical data contained therein and except for any
information supplied by Sovereign 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 Bankers 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 opinion,
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
Bankers or Bankers Savings or the transactions contemplated in the Agreement and
the Plan.
2
