Exhibit 2
AGREEMENT AND PLAN OF MERGER
between
SOVEREIGN BANCORP, INC.
and
MAIN STREET BANCORP, INC.
July 16, 2001
ARTICLE I THE MERGERS....................................................... 2
Section 1.01 Definitions................................................... 2
Section 1.02 The Merger.................................................... 10
Section 1.03 The Bank Merger............................................... 22
ARTICLE II REPRESENTATIONS AND WARRANTIES OF MAIN STREET.................... 22
Section 2.01 Organization.................................................. 22
Section 2.02 Capitalization................................................ 23
Section 2.03 Authority; No Violation....................................... 25
Section 2.04 Consents...................................................... 26
Section 2.05 Financial Statements.......................................... 27
Section 2.06 Taxes......................................................... 27
Section 2.07 No Material Adverse Effect.................................... 28
Section 2.08 Contracts..................................................... 28
Section 2.09 Ownership of Property; Insurance Coverage..................... 29
Section 2.10 Legal Proceedings............................................. 30
Section 2.11 Compliance With Applicable Law................................ 31
Section 2.12 ERISA......................................................... 31
Section 2.13 Brokers, Finders and Financial Advisors; Fairness Opinion..... 33
Section 2.14 Environmental Matters......................................... 33
Section 2.15 Allowance for Losses.......................................... 33
Section 2.16 Information to be Supplied.................................... 33
Section 2.17 Securities Documents.......................................... 34
Section 2.18 Related Party Transactions.................................... 34
Section 2.19 Schedule of Termination Benefits.............................. 34
Section 2.20 Loans......................................................... 35
Section 2.21 Takeover Laws................................................. 35
Section 2.22 Labor and Employment Matters.................................. 35
Section 2.23 Quality of Representations.................................... 36
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SOVEREIGN..................... 36
Section 3.01 Organization.................................................. 36
Section 3.02 Capital Structure............................................. 37
Section 3.03 Authority; No Violation....................................... 38
Section 3.04 Consents...................................................... 39
Section 3.05 Financial Statements.......................................... 40
Section 3.06 Taxes......................................................... 40
Section 3.07 No Material Adverse Effect.................................... 41
Section 3.08 Ownership of Property; Insurance Coverage..................... 41
Section 3.09 Legal Proceedings............................................. 41
Section 3.10 Compliance With Applicable Law................................ 42
Section 3.11 Information to be Supplied.................................... 42
Section 3.12 ERISA......................................................... 43
Section 3.13 Securities Documents.......................................... 44
Section 3.14 Environmental Matters......................................... 44
Section 3.15 Allowance for Loan Losses..................................... 44
Section 3.16 Loans......................................................... 44
Section 3.17 Quality of Representations.................................... 45
ARTICLE IV COVENANTS OF THE PARTIES......................................... 45
Section 4.01 Conduct of Main Street's Business............................. 45
Section 4.02 Access; Confidentiality....................................... 49
Section 4.03 Regulatory Matters and Consents............................... 49
Section 4.04 Taking of Necessary Action.................................... 51
Section 4.05 Certain Agreements............................................ 51
Section 4.06 No Other Bids and Related Matters............................. 53
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule............ 54
Section 4.08 Conduct of Sovereign's Business............................... 54
Section 4.09 Current Information........................................... 55
Section 4.10 Undertakings by Sovereign and Main Street..................... 55
Section 4.11 Employee Benefits and Termination Benefits.................... 59
Section 4.12 Affiliate Letter.............................................. 63
Section 4.13 Sovereign Rights Agreement.................................... 63
Section 4.14 Advisory Board................................................ 63
ARTICLE V CONDITIONS........................................................ 64
Section 5.01 Conditions to Main Street's Obligations under this Agreement.. 64
Section 5.02 Conditions to Sovereign's Obligations under this Agreement.... 66
ARTICLE VI TERMINATION, WAIVER AND AMENDMENT................................ 67
Section 6.01 Termination................................................... 67
Section 6.02 Effect of Termination......................................... 70
ARTICLE VII MISCELLANEOUS................................................... 71
Section 7.01 Expenses...................................................... 71
Section 7.02 Non-Survival of Representations and Warranties................ 71
Section 7.03 Amendment, Extension and Waiver............................... 71
Section 7.04 Entire Agreement.............................................. 72
Section 7.05 No Assignment................................................. 72
Section 7.06 Notices....................................................... 72
Section 7.07 Captions...................................................... 73
Section 7.08 Counterparts.................................................. 73
Section 7.09 Severability.................................................. 73
Section 7.10 Governing Law................................................. 74
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 16, 2001, is made
by and between SOVEREIGN BANCORP, INC. ("Sovereign"), a Pennsylvania
corporation, having its principal place of business in Philadelphia,
Pennsylvania, and MAIN STREET BANCORP, INC. ("Main Street"), a Pennsylvania
corporation, having its principal place of business in Reading, Pennsylvania.
BACKGROUND
----------
1. Sovereign and Main Street desire for Main Street to merge with
and into Sovereign, with Sovereign surviving such merger, in accordance with the
laws of the Commonwealth of Pennsylvania and the plan of merger set forth
herein.
2. At or prior to the execution and delivery of this Agreement, (a)
certain directors, officers of Main Street and affiliates of Main Street, each
have executed in favor of Sovereign, a letter agreement dated July 16, 2001, in
the form attached hereto as Exhibit 1, and (b) Main Street is concurrently
granting to Sovereign an option (the "Sovereign Option") to acquire, under
certain circumstances, Main Street Common Stock (as hereinafter defined)
pursuant to a Stock Option Agreement between Sovereign and Main Street, dated
July 16, 2001, attached hereto as Exhibit 2.
3. Sovereign desires to merge Main Street Bank, a Pennsylvania-
chartered commercial bank and a wholly-owned subsidiary of Main Street ("Main
Street Bank"), into and with Sovereign Bank, 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 (as hereinafter
defined).
4. Sovereign and Main Street 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:
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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):
Acquisition Transaction has the meaning given that term in
-----------------------
Section 4.06 of this Agreement.
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.
Aggregate Cash Election Share Number has the meaning given that
------------------------------------
term in Section 1.02(e)(vi).
Aggregate Stock Election Share Number has the meaning given that
-------------------------------------
term in Section 1.02(e)(v).
Agreement means this agreement, and any amendment or supplement
---------
hereto, which constitutes a "plan of merger" between Sovereign and Main
Street.
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 Main Street and to be filed in the PDS in accordance with the
applicable laws of the Commonwealth of Pennsylvania.
Average Final Price shall mean the Sovereign Market Value as of
-------------------
the Effective Date.
Bank Holding Company Act means the Bank Holding Company Act of
------------------------
1956, as amended.
Bank Merger means the merger of Main Street Bank with and into
-----------
Sovereign Bank, with Sovereign Bank surviving such merger, contemplated by
Section 1.03 of this Agreement.
2
Bank Plan of Merger has the meaning given to that term in Section
-------------------
1.03 of this Agreement.
Banking Code means the Pennsylvania Banking Code of 1965, as
------------
amended.
Benefits Schedule has the meaning given to that term in Section
-----------------
2.19.
BCL means the Pennsylvania Business Corporation Law of 1988, as
---
amended.
Business Day means any day on which banks are not required or
------------
authorized to close in the City of Philadelphia.
Cash Consideration has the meaning given that term in Section
------------------
1.02(e)(iii).
Cash Election has the meaning given that term in Section
-------------
1.02(e)(vi).
Cash Election Shares has the meaning given that term in Section
--------------------
1.02(e)(vii).
Cash Proration Factor has the meaning given that term in Section
---------------------
1.02(e)(vii).
Cause has the meaning given that term in Section 4.1(c).
-----
Closing Date means the date determined by Sovereign, in its sole
------------
discretion, upon five (5) days prior written notice to Main Street, 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 Main Street shall agree.
Common Stock Exchange Ratio shall have the meaning given that
---------------------------
term in Section 1.02(e)(iii).
Effective Date means the date specified in the Articles of Merger
--------------
filed in the PDS, which may be the same as the Closing Date.
3
Effective Time means the time specified in the Articles of Merger
--------------
for the effectiveness of the Merger or, if no such time is specified, the
time of filing the Articles of Merger.
Environmental Law means any federal, state or local law, statute,
-----------------
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any Regulatory Authority relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, whether by type or by quantity, including any material
containing any such substance as a component.
Election shall have the meaning given that term in Section
--------
1.02(e)(iii).
Election Date shall have the meaning given that term in Section
-------------
1.02(f)(ii).
ERISA means the Employee Retirement Income Security Act of 1974,
-----
as amended.
Excess Benefit Plans has the meaning given that term in Section
--------------------
4.11(iv).
Exchange Act means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated from time to time
thereunder.
Exchange Agent shall have the meaning given that term in Section
--------------
1.02(f)(i).
FDIA means the Federal Deposit Insurance Act, as amended.
----
FDIC means the Federal Deposit Insurance Corporation.
----
Federal Reserve Board means the Board of Governors of the Federal
---------------------
Reserve System.
4
FSLA means the Fair Labor Standards Act of 1938.
----
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.
---
Labor and Employment Law means any federal, state, local, or
------------------------
foreign law, statute, ordinance, executive order, rule, regulation, code,
consent, order, judgment, decree, injunction or any agreement with any
regulatory authority relating to (i) employment discrimination or
affirmative action, (ii) labor relations, (iii) employee compensation or
benefits, (iv) safety and health, (v) wrongful or retaliatory discharge,
and/or (vi) any other aspect of the employment relationship. Such laws
shall include, but not be limited to, Title VII of the Civil Rights Act of
1964 as amended, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the Family and Medical Leave Act, the Employee
Retirement Income Security Act, the Occupational Safety and Health Act, the
Fair Labor Standards Act, the Fair Credit Collection Act, the Worker
Adjustment and Retraining Notification Act, Executive Order 11246, the
Employee Polygraph Protection Act, the Equal Pay Act, the National Labor
Relations Act, the Older Worker Benefit Protection Act, the Rehabilitation
Act, the Vietnam Era Veterans Readjustment Assistance Act, as well as any
and all state fair employment practices laws, any and all state labor
relations laws, any and all state wage and hour laws, any and all state
wage payment and collection laws, any and all state statutes regarding
wrongful or retaliatory discharge, and federal and state common law
regarding employment discrimination or affirmative action, labor relations,
employee compensation or benefits, safety and health and/or wrongful or
retaliatory discharge and/or related tort claims.
Main Street Advisory Board has the meaning given that term in
--------------------------
Section 4.14.
Main Street Bank Board Designees has the meaning given to that
--------------------------------
term in Section 1.02(d)(iii).
0
Xxxx Xxxxxx Certificates has the meaning given to that term in
------------------------
Section 1.02(f)(ii).
Main Street Common Stock means the common stock of Main Street
------------------------
described in Section 2.02(a).
Main Street Disclosure Schedule means a disclosure schedule
-------------------------------
delivered by Main Street to Sovereign pursuant to this Agreement.
Main Street Financials means (i) the annual audited consolidated
----------------------
financial statements of Main Street as of December 31, 2000 and for the
three years ended December 31, 2000, including the notes thereto and (ii)
the unaudited interim consolidated financial statements of Main Street as
of each calendar quarter thereafter included in Securities Documents filed
by Main Street, including the notes thereto.
Main Street Options has the meaning given that term in Section
-------------------
1.02(g)(i).
Main Street Stock Option Plans means the stock option plans of
------------------------------
Main Street identified in the Main Street Securities Documents.
Main Street Regulatory Reports means the annual or quarterly
------------------------------
reports, and accompanying schedules, of Main Street or Main Street Bank, as
the case may be, filed with the Federal Reserve Board, the FDIC or the PDB
from December 31, 2000 through the Closing Date.
Main Street Subsidiary means (i) any corporation or business
----------------------
trust, 50% or more of the capital stock or equity interests of which are
owned, either directly or indirectly, by Main Street, except any
corporation the stock of which is held in the ordinary course of the
lending activities of Main Street Bank and (ii) MBNK Capital Trust I.
Main Street 401(k) Plan has the meaning given that term in
-----------
Section 4.11(a)(iii).
Material Adverse Effect shall mean, with respect to Sovereign or
-----------------------
Main Street, respectively, any effect that is material and adverse to its
assets, financial condition or results of operations on a consolidated
basis, provided, however, that Material Adverse Effect shall not be deemed
to include (a) any change in the value of the respective investment and
loan portfolios of Sovereign or Main Street resulting from a change in
interest rates generally, (b) any change occurring after the date hereof in
any federal
6
or state law, rule or regulation or in GAAP, which change affects banking
institutions generally, including any changes affecting the Bank Insurance
Fund or the Savings Association Insurance Fund, (c) reasonable expenses
(plus reasonable legal fees, cost and expense relating to any litigation
arising as a result of the Merger and the costs associated with Section
4.11 hereof) incurred in connection with this Agreement and the
transactions contemplated hereby, (d) actions or omissions of a party (or
any of its Subsidiaries) taken with the prior informed written consent of
the other party in contemplation of the transactions contemplated hereby
(including without limitation any actions taken by Main Street pursuant to
Section 4.10(a)(viii) of this Agreement), and (e) any effect with respect
to a party hereto caused, in whole or in substantial part, by the other
party.
Maximum Cash Election Number shall have the meaning given that
----------------------------
term in Section 1.02(e)(vi).
Merger means the merger of Main Street with and into Sovereign,
------
with Sovereign surviving such merger, contemplated by this Agreement.
Merger Consideration means the Cash Consideration or the Stock
--------------------
Consideration, as applicable.
Minimum Stock Election Number has the meaning given that term in
-----------------------------
Section 1.02(e)(iv).
Mixed Election has the meaning given that term in Section
--------------
1.02(e)(viii).
MOU means the memorandum of understanding, dated July 25, 2000,
---
among Xxxx Xxxxxx, Xxxx Xxxxxx Bank, the Federal Reserve Bank of
Philadelphia and the PDB, as amended by an addendum to the memorandum of
understanding, dated January 23, 2001.
Non-Election Shares shall have the meaning given that term in
-------------------
Section 1.02(f)(v).
NYSE means the New York Stock Exchange.
----
OTS means the Office of Thrift Supervision.
---
PDB means the Department of Banking of the Commonwealth of
---
Pennsylvania.
7
PDS means the Department of State of the Commonwealth of
---
Pennsylvania.
Person means any individual, corporation, partnership, limited
------
liability company, limited liability partnership, joint venture,
association, trust or "group" (as that term is defined in Section 13(d)(3)
of the Exchange Act).
Prospectus/Proxy Statement means the prospectus/proxy statement,
--------------------------
together with any supplements thereto, to be transmitted to holders of Main
Street Common Stock in connection with the transactions contemplated by
this Agreement.
Registration Statement means the registration statement on Form
----------------------
S-4, including any pre-effective or post-effective amendments or
supplements thereto, as filed with the SEC under the Securities Act with
respect to the Sovereign Common Stock and Sovereign Stock Purchase Rights
to be issued in connection with the transactions contemplated by this
Agreement.
Regulatory Agreement has the meaning given to that term in
--------------------
Section 2.11 and 3.10 of this Agreement.
Regulatory Authority means any banking agency or department of
--------------------
any federal or state government, including without limitation the OTS, the
Federal Reserve Board, the FDIC, the PDB 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 materials, 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.
8
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 Main Street pursuant to this Agreement.
Sovereign ESOP has the meaning given that term in Section
--------------
4.11(a)(i).
Sovereign Financials means (i) the annual audited consolidated
--------------------
financial statements of Sovereign as of December 31, 2000 and for the three
years ended December 31, 2000, including the notes thereto and (ii) the
unaudited interim consolidated financial statements of Sovereign as of each
calendar quarter thereafter included in Securities Documents filed by
Sovereign, including the notes thereto.
Sovereign Market Price means, as of any date, the closing sale
----------------------
price of a share of Sovereign Common Stock, as reported on the NYSE.
Sovereign Market Value means, as of any date, the average of the
----------------------
Sovereign Market Prices for the ten consecutive trading days ending on the
trading day preceding the date as of which the Sovereign Market Value is
determined.
Sovereign Option means the option referenced in the recitals to
----------------
this Agreement granted to Sovereign by Main Street to acquire such number
of shares of Main Street Common Stock as shall equal 19.9% of the shares of
Main Street Common Stock outstanding before giving effect to the exercise
of such option.
Sovereign Regulatory Reports means the annual reports of
----------------------------
Sovereign or Sovereign Bank, as the case may be, filed with the OTS from
December 31, 2000 through the Closing Date.
Sovereign Rights Agreement means the Rights Agreement dated as of
--------------------------
September 19, 1989, as amended September 27, 1995, and as further amended
and restated June 21, 2001, between Sovereign and Mellon Investor Services
LLC, 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.
9
Sovereign Subsidiaries means (i) any corporation, 50% or more of
----------------------
the capital stock or equity interests of which are owned, either directly
or indirectly, by Sovereign, except any corporation the stock of which is
held in the ordinary course of the lending activities of a bank, and (ii)
Sovereign Capital Trust I and Sovereign Capital Trust II and any similar
entity sponsored or created by Sovereign.
Sovereign 401(k) Plan has the meaning given that term in Section
---------------------
4.11(a)(ii).
Stock Consideration shall have the meaning given that term in
-------------------
Section 1.02(e)(iii).
Stock Election shall have the meaning given that term in Section
--------------
1.02(e)(iv).
Stock Election Shares shall have the meaning given that term in
---------------------
Section 1.02(e)(v).
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.
Takeover Laws has the meaning given to that term in Section 2.21.
-------------
Section 1.02 The Merger.
----------
(a) Closing. The closing will take place at on the Closing Date
-------
at such time and place as are agreed to by the parties hereto; provided, in any
case, that all conditions to closing set forth in Article V (other than the
delivery of certificates, opinions and other instruments and documents to be
delivered at the closing) have been satisfied or waived at or prior to the
Closing Date. On the Closing Date, Sovereign and Main Street shall cause the
Articles of Merger to be duly executed and to be filed with the PDS.
(b) The Merger. Subject to the terms and conditions of this
----------
Agreement, on the Effective Date: Main Street shall merge with and into
Sovereign; the separate existence of Main Street 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 Main Street shall be
taken and deemed to be transferred to and vested in Sovereign, as the surviving
corporation
10
in the Merger, without further act or deed; all debts, liabilities and duties of
each of Main Street 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.
(c) Sovereign's Articles of Incorporation and Bylaws. On and
------------------------------------------------
after the Effective Date, the articles of incorporation and the bylaws of
Sovereign, as in effect immediately prior to the Effective Date, shall
automatically be and remain the articles of incorporation and bylaws of
Sovereign, as the surviving corporation in the Merger, until thereafter altered,
amended or repealed.
(d) Board of Directors and Officers of Sovereign and Sovereign
----------------------------------------------------------
Bank.
----
(i) On the Effective Date, the Board of Directors of
Sovereign, as the surviving corporation in the Merger, shall consist of
those persons holding such office immediately prior to the Effective Date.
(ii) On the Effective Date, the officers of Sovereign duly
elected and holding office immediately prior to the Effective Date shall be
the officers of Sovereign, as the surviving corporation in the Merger,
existing on such Effective Date.
(iii) On the effective date of the Bank Merger, the Board of
Directors of Sovereign Bank, as the surviving institution in the Bank
Merger, shall consist of (i) those persons holding such office immediately
prior to such effective date and (ii) two (2) additional persons designated
by Main Street prior to the date of mailing the Proxy Statement/Prospectus
who are presently members of Main Street's Board of Directors and who are
reasonably acceptable to Sovereign (the "Main Street Bank Board
Designees"). Sovereign shall cause the Main Street Bank Board Designees to
be appointed as directors of Sovereign Bank effective as of the effective
date of the Bank Merger to hold office until the 2002 annual reorganization
meeting of the Board of Directors of Sovereign Bank. Sovereign agrees to
cause the Main Street Bank Board Designees, or a replacement Main Street
Director, to be renominated as directors of Sovereign Bank for election at
the 2002 , 2003 and 2004 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. In the event that a Main
Street Bank Board Designee is unable or unwilling to serve or is reasonably
unacceptable to Sovereign, a replacement Main Street Board Designee shall
be substituted for such Designee.
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(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) Effect on Sovereign and Main Street Common Stock. At the
------------------------------------------------
Effective Time, by virtue of the Merger and without any action on the part of
Sovereign, Main Street or the holders of any of the following securities the
following shall occur:
(i) Cancellation of Certain Common Stock. Each share of
Main Street Common Stock that is owned by Sovereign, Main Street or any of
their Subsidiaries (other than shares that are held in trust, managed,
custodial or nominee accounts and the like and that are beneficially owned
by third parties) shall be canceled and cease to be issued and outstanding,
and no consideration shall be delivered therefor.
(ii) Certain Sovereign Common Stock Not Affected. Each
issued and outstanding share of Sovereign Common Stock shall, at and after
the Effective Time, continue to be issued and outstanding as an identical
share of Sovereign Common Stock.
(iii) Conversion of Main Street Common Stock.
(A) Each share of Main Street Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares
canceled pursuant to Section 1.02(e)(i) and shares with respect to which
the holder thereof duly exercises the right to dissent, if any, under
applicable law) shall be converted into the right to receive (x) $16.10 in
cash (the "Cash Consideration") or (y) the number of validly issued, fully
paid and nonassessable shares of Sovereign Common Stock (the "Stock
Consideration") determined by dividing $16.10 by the Average Final Price
(the "Common Stock Exchange Ratio"); provided, however, that:
(1) if the Average Final Price is less than
$10.98, the Common Stock Exchange Ratio shall be 1.466; and
(2) if the Average Final Price is greater than
$14.86, the Common Stock Exchange Ratio shall be 1.083.
12
(iv) Stock Election. Subject to the immediately following
sentence, each record holder of Main Street Common Stock, determined
pursuant to Section 1.02(f), shall be entitled to elect to receive shares
of Sovereign Common Stock for such holder's shares of Main Street Common
Stock (a "Stock Election"). Notwithstanding the foregoing, the minimum
number of shares of Main Street Common Stock to be converted into the right
to receive Sovereign Common Stock at the Effective Time will be equal to
70% of the total number of shares of Main Street Common Stock issued and
outstanding as of the close of business on the second trading day prior to
the Effective Time (excluding for this purpose shares to be canceled
pursuant to Section 1.02(e)(i)) (the "Minimum Stock Election Number").
(v) Stock Election Shares. As used herein, the term "Stock
Election Shares" means shares of Main Street Common Stock for which a Stock
Election has been made and the term "Aggregate Stock Election Share Number"
means the aggregate number of shares of Main Street Common Stock covered by
Stock Elections. If the Aggregate Stock Election Share Number equals or
exceeds the Minimum Stock Election Number, each Stock Election Share shall
be converted into the right to receive shares of Sovereign Common Stock.
(vi) Cash Election. Subject to the immediately following
sentence, each record holder of shares of Main Street Common Stock,
determined pursuant to Section 1.02(f), shall be entitled to elect to
receive Cash Consideration for such holder's shares of Main Street Common
Stock (a "Cash Election"). Notwithstanding the foregoing, the maximum
number of shares of Main Street Common Stock to be converted into the right
to receive cash at the Effective Time will be equal to 30% of the total
number of shares of Main Street Common Stock issued and outstanding as of
the close of business on the second trading day prior to the Effective
Time, minus (x) the number of shares of Main Street Common Stock with
respect to which dissenters' rights have been duly exercised (excluding for
this purpose shares to be canceled pursuant to Section 1.02(e)(i)) and (y)
the number of shares represented by options cashed out pursuant to Section
1.02(g)(ii) (together, the "Maximum Cash Election Number").
(vii) Cash Election Shares. As used herein, the term "Cash
Election Shares" means the shares of Main Street Common Stock for which a
Cash Election has been made and the term "Aggregate Cash Election Share
Number" means the aggregate number of shares of Main Street Common Stock
covered by Cash Elections. If the Aggregate Cash
13
Election Share Number exceeds the Maximum Cash Election Number, each Cash
Election Share shall be converted into the right to receive cash or
Sovereign Common Stock in the following manner:
(A) a proration factor (the "Cash Proration Factor")
shall be determined by dividing the Maximum Cash Election Number by
the Aggregate Cash Election Share Number;
(B) the number of Cash Election Shares covered by each
Cash Election that will be converted into the right to receive Cash
Consideration shall be determined by multiplying the Cash Proration
Factor by such number of shares; and
(C) each Cash Election Share other than those shares
converted into the right to receive cash in accordance with Section
1.02(e)(vii)(B) shall be converted into the right to receive Stock
Consideration.
(viii) Mixed Election. Subject to the immediately following
sentence, each record holder of shares of Main Street Common Stock
immediately prior to the Effective Time shall be entitled to elect to
receive shares of Sovereign Common Stock for part of such holder's shares
of Main Street Common Stock and cash for the remaining part of such
holder's shares of Main Street Common Stock (the "Mixed Election" and,
collectively with Stock Election and Cash Election, the "Election"). With
respect to each holder of Main Street Common Stock who makes a Mixed
Election, the shares of Main Street Common Stock such holder elects to be
converted into the right to receive Stock Consideration shall be treated as
Stock Election Shares for purposes of the provisions contained in Sections
1.02(e)(iv) and (v) and the shares such holder elects to be converted into
the right to receive Cash Consideration shall be treated as Cash Election
Shares for purposes of the provisions contained in Sections 1.02(e)(vi) and
(vii).
(ix) Adjustment to Minimum Stock Election Number and Maximum
Cash Election Number. Notwithstanding anything herein to the contrary, the
Minimum Stock Election Number shall be increased and the Maximum Cash
Election Number shall be decreased if, but only to the extent, necessary to
secure the tax opinion required by Sections 5.01(i) and 5.02(i).
(x) Cash in Lieu of Fractional Shares. Notwithstanding
anything herein to the contrary, no fraction of a whole
14
share of Sovereign Common Stock and no scrip or certificate therefore shall
be issued in connection with the Merger. Any former Main Street shareholder
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 multiplied by the Average Final Price.
(f) Form of Election.
----------------
(i) Prior to the Effective Time, Sovereign shall appoint a
bank or trust company subject to the approval of Main Street (which
approval shall not be unreasonably withheld or delayed) as the exchange and
paying agent (the "Exchange Agent") for the payment and exchange of the
Cash and Stock Consideration.
(ii) Sovereign shall prepare a form of election (the "Form
of Election") subject to the approval of Main Street (which approval shall
not be unreasonably withheld or delayed) to be mailed by the Exchange Agent
to the record holders of Main Street Common Stock not more than 60 Business
Days or less than 20 Business Days prior to the election Date. The Form of
Election shall be used by each record holder of shares of Main Street
Common Stock who wishes to elect to receive Sovereign Common Stock or cash
for any or all shares of Main Street Common Stock held by such holder,
subject to the provisions of Section 1.02(e). The Exchange Agent shall use
reasonable efforts to make the Form of Election available to all persons
who become holders of Main Street Common Stock during the period between
the record date (for the mailing of the Form of Election) and the Election
Date. Any holder's election shall have been properly made only if the
Exchange Agent shall have received at its designated office, by 5:00 p.m.,
New York City time, on the Business Day specified in the Form of Election
(or a later Business Day specified by Sovereign in a subsequent press
release) (the "Election Date", which Election Date shall be two Business
Days prior to the date on which the Effective Time will occur, a Form of
Election properly completed and signed and accompanied by certificates that
immediately prior to the Effective Time represented issued and outstanding
shares of Main Street Common Stock (the "Main Street Certificates")
representing the shares of Main Street Common Stock to which such Form of
Election relates, duly endorsed in blank or otherwise in form acceptable
for transfer on the books of Main Street (or by an appropriate guarantee of
delivery of such Main Street Certificates as set forth in such Form of
Election from a firm which is an "eligible guarantor institution" (as
defined in Rule 17ad-15 under the Exchange Act); that such
00
Xxxx Xxxxxx Certificates are in fact delivered to the Exchange Agent by the
time set forth in such guarantee of delivery).
(iii) Any Form of Election may be revoked by the stockholder
submitting it to the Exchange Agent only by written notice received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Election
Date. If a Form of Election is revoked, the Main Street Certificate or Main
Street Certificates (or guarantees of delivery, as appropriate) for the
shares of Main Street Common Stock to which such Form of Election relates
shall be promptly returned by the Exchange Agent to the stockholder of Main
Street submitting the same.
(iv) Sovereign shall have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether,
Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The
decision of Sovereign or the Exchange Agent in such matters shall be
conclusive and binding. Neither Sovereign nor the Exchange Agent shall be
under any obligation to notify any person of any defect in a Form of
Election submitted to the Exchange Agent. The Exchange Agent shall also
make all computations contemplated by Section 1.02(e) and all such
computations shall be conclusive and binding on the holder of shares of
Main Street Common Stock.
(v) For the purposes hereof, a holder of shares of Main
Street Common Stock who does not submit a Form of Election which is
subsequently received by the Exchange Agent prior to the Election Date (the
"Non-Election Shares") shall be deemed not to have made a Cash Election,
Stock Election or Mixed Election. If Sovereign or the Exchange Agent shall
determine that any purported Election was not properly made, the shares
subject to such improperly made Election shall be treated as Non-Election
Shares. Non-Election Shares shall be treated as Stock Election Shares.
(g) Stock Options.
-------------
(i) On the Effective Date, each option to acquire Main
Street Common Stock which is then outstanding ("Main Street Option"),
whether or not exercisable, shall cease to represent a right to acquire
shares of Main Street Common Stock and shall be converted automatically
into an option to purchase shares of Sovereign Common Stock and the
corresponding number of Sovereign Stock Purchase Rights, and Sovereign
shall assume each Main Street Option, in accordance with the terms of the
16
applicable Main Street Stock Option Plan and/or stock option agreement by
which it is evidenced, except that from and after the Effective Date, (i)
Sovereign and its Board of Directors or a duly authorized committee thereof
shall be substituted for Main Street and Main Street's Board of Directors
or duly authorized committee thereof administering such Main Street Stock
Option Plan, (ii) each Main Street Option assumed by Sovereign may be
exercised solely for shares of Sovereign Common Stock and Sovereign Stock
Purchase Rights, (iii) the number of shares of Sovereign Common Stock
subject to such Main Street Option shall be equal to the number of shares
of Main Street Common Stock subject to such Main Street Option immediately
prior to the Effective Date multiplied by the Common Stock Exchange Ratio,
provided that any fractional shares of Sovereign Common Stock resulting
from such multiplication shall be rounded down to the nearest share, and
(iv) the per share exercise price under each such Main Street Option shall
be adjusted by dividing the per share exercise price under each such Main
Street Option by the Common Stock Exchange Ratio, provided that such
exercise price shall be rounded down to the nearest cent. Notwithstanding
clauses (iii) and (iv) of the preceding sentence, each Main Street Option
which is an "incentive stock option" shall be adjusted as required by
Section 424 of the IRC, and the regulations promulgated thereunder, so as
not to constitute a modification, extension or renewal of the option within
the meaning of Section 424(h) of the IRC. Sovereign and Main Street agree
to take all necessary steps to effect the foregoing provisions of this
Section 1.02(g).
(ii) Notwithstanding the provisions of Section 1.02(g)(i),
to the extent permitted by the Main Street Stock Option Plans, all Main
Street Options exercisable on the Effective Date held by persons holding
2,000 or fewer Main Street options in the aggregate shall be cancelled and
the holder thereof shall receive cash in complete satisfaction for such
Main Street Options in an amount equal to the positive difference between
the Cash Consideration and the exercise price for each such Main Street
Option; provided, however, that if no positive difference exists between
the Cash Consideration and the exercise price for a Main Street Option
covered by this Section 1.02(g)(ii), such Main Street Option shall be
converted in the manner specified in Section 1.02(g)(i).
(iii) Within 90 days after the Effective Date, Sovereign
shall file a registration statement on Form S-8 (or any other successor or
appropriate form) with respect to the shares of Sovereign Common Stock and
Sovereign Stock Purchase Rights subject to the options referenced in
17
this Section 1.02(g), and shall use its reasonable best efforts to maintain
the current status of the prospectus or prospectuses contained therein for
so long as such options remain outstanding.
(h) Surrender and Exchange of Main Street Stock Certificates.
--------------------------------------------------------
(i) Exchange Fund. At or prior to the Effective Time,
Sovereign shall deposit with the Exchange Agent, in trust for the benefit
of holders of shares of Main Street Common Stock sufficient cash and
certificates representing shares of Sovereign Common Stock to make all
payments and deliveries to shareholders of Main Street pursuant to Section
1.02(e). Any cash and certificates for Sovereign Common Stock deposited
with the Exchange Agent shall hereinafter be referred to as the "Exchange
Fund."
(ii) Exchange Procedures. As soon as reasonably practicable
after the Effective Time (and in any case no later than five (5) days
thereafter), Sovereign shall cause the Exchange Agent to mail to each
record holder of a certificate that immediately prior to the Effective Time
represented issued and outstanding shares of Main Street Common Stock a
letter of transmittal which shall specify that delivery of the Main Street
Certificates shall be effected, and risk of loss and title to the Main
Street Certificates shall pass, only upon delivery of the Main Street
Certificates to the Exchange Agent, and which letter shall be in customary
form and have such other provisions as Sovereign may reasonably specify and
instructions for effecting the surrender of such Main Street Certificates
in exchange for the Cash Consideration and/or the Stock Consideration, as
the case may be. Upon surrender of a Main Street Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other
documents as may reasonably be required by the Exchange Agent, the holder
of such Main Street Certificate shall be entitled to receive in exchange
therefor (A) a certificate representing, in the aggregate, the whole number
of shares of Sovereign Common Stock that such holder has the right to
receive pursuant to Section 1.02(e) and/or (B) a check in the amount equal
to the cash that such holder has the right to receive pursuant to Section
1.02(e). No interest will be paid or will accrue on any cash payment
pursuant to Section 1.02(e). In the event of a transfer of ownership of
Main Street Common Stock which is not registered in the transfer records of
Main Street, a certificate representing, in the aggregate, the proper
number of shares of Sovereign
18
Common Stock and/or a check in the proper amount pursuant to Section
1.02(e) may be issued with respect to such Main Street Common Stock, as the
case may be, to such a transferee if the Main Street Certificate formerly
representing such shares of Main Street Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. Persons who have submitted an effective Form of
Election as provided in Section 1.02(f) and surrendered Main Street
Certificates as provided therein shall be treated as if they have properly
surrendered Main Street Certificates together with the letter of
transmittal pursuant to this Section 1.02(h).
(iii) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to shares of
Sovereign Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Main Street Certificate with
respect to the shares of Sovereign Common Stock that such Main Street
Certificate holder would be entitled to receive upon surrender of such Main
Street Certificate until such holder shall surrender such Main Street
Certificate in accordance with Section 1.02(h)(ii). Subject to the effect
of applicable laws, following surrender of any such Main Street
Certificate, there shall be paid to such holder of shares of Sovereign
Common Stock issuable in exchange therefor, without interest, (a) promptly
after the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Sovereign Common Stock and (b) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and
a payment date subsequent to such surrender payable with respect to such
whole shares of Sovereign Common Stock.
(iv) No Further Ownership Rights. All shares of Sovereign
Common Stock issued and cash paid upon conversion of shares of Main Street
Common Stock in accordance with the terms of this Agreement shall be deemed
to have been issued or paid in full satisfaction of all rights pertaining
to the shares of Main Street Common Stock.
(v) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Main Street
Certificates for twelve (12) months after the Effective Date shall be
delivered to Sovereign or otherwise on the instructions of Sovereign and
any
19
holders of the Main Street Certificates who have not previously complied
with this Section 1.02(h) shall thereafter look only to Sovereign for the
Merger Consideration with respect to the shares of Main Street Stock
formerly represented thereby to which such holders are entitled pursuant to
Section 1.02(e) any cash in lieu of fractional shares of Sovereign Common
Stock to which such holders are entitled pursuant to Section 1.02(e)(x) and
any dividends or distributions with respect to shares of Sovereign Common
Stock to which such holders are entitled pursuant to Section 1.02(h)(iii).
(vi) No Liability. None of Sovereign, Main Street, any of
their respective Affiliates or the Exchange Agent shall be liable to any
Person in respect of any Merger Consideration from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(vii) Investment of the Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund as reasonably directed
by Sovereign; provided that, such investments shall be in obligations of or
guaranteed by the United States of America and backed by a full faith and
credit of the United States of America or in commercial paper obligations
rated P-1 and A-1 or better by Xxxxx'x Investors Service, Inc. and Standard
& Poor's Corporation, respectively. Any interest and other income resulting
from such investments shall be payable to Sovereign.
(viii) Lost Certificates. If any Main Street Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Main Street Certificate to be
lost, stolen or destroyed and, if required by Sovereign the posting by such
Person of a bond in such reasonable amount as Sovereign may direct as
indemnity against any claim that may be made against it with respect to
such Main Street Certificate, the Exchange Agent will deliver in exchange
for such lost, stolen, or destroyed Main Street Certificate the applicable
Merger Consideration with respect to the shares of Main Street Common Stock
formerly represented thereby, any cash in lieu of fractional shares of
Sovereign Common Stock to which the holders thereof are entitled pursuant
to Section 1.02(e)(x), and any dividends or other distributions on shares
of Sovereign Common Stock to which the holders thereof are entitled
pursuant to Section 1.02(h)(iii).
(ix) Withholding Rights Sovereign shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Main Street Stock such amounts as
20
it is required to deduct and withhold with respect to the making of such
payment under the IRC and the rules and regulations promulgated thereunder,
or any provisions of state, local or foreign tax law. To the extent that
amounts are so withheld by Sovereign, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of the shares of Main Street Common Stock in respect of which such
deduction and withholding was made by Sovereign.
(x) Stock Transfer Books. At the close of business on the
Effective Date, the stock transfer books of Main Street with respect to
Main Street Common Stock issued and outstanding prior to the Effective Time
shall be closed and, thereafter, there shall be no further registration of
transfers on the records of Main Street of shares of Main Street Common
Stock issued and outstanding prior to the Effective Time. From and after
the Effective Time, the holders of Main Street Certificates shall cease to
have any rights with respect to such shares of Main Street Common Stock
formerly represented thereby, except as otherwise provided herein or by
law. On or after the Effective Time, any Main Street Certificates presented
to the Exchange Agent or Sovereign for any reason shall be exchanged for
the applicable Merger Consideration with respect to the shares of Sovereign
or Main Street Common Stock, as the case may be, formerly represented
thereby, any cash in lieu of fractional shares of Sovereign Common Stock to
which the holders thereof are entitled pursuant to Section 1.02(e)(x), and
any dividends or other distributions on shares of Sovereign Common Stock to
which the holders thereof are entitled pursuant to Section 1.02(h)(iii).
(i) Anti-Dilution Provisions. If Sovereign shall, at any time
------------------------
before the Effective Date, (A) issue a dividend in shares of Sovereign Common
Stock, (B) combine the outstanding shares of Sovereign Common Stock into a
smaller number of shares, (C) subdivide the outstanding shares of Sovereign
Common Stock, or (D) reclassify the shares of Sovereign Common Stock, then, in
any such event, the number of shares of Sovereign Common Stock to be delivered
to Main Street shareholders who are entitled to receive shares of Sovereign
Common Stock in exchange for shares of Main Street Common Stock shall be
adjusted so that each Main Street 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 immediately prior to the
happening of such event. (By way of illustration, if Sovereign declares a stock
dividend of 7% payable with respect to a record date on or prior to the
Effective Date, the Common Stock Exchange Ratio shall be adjusted upward by 7%).
In addition, in the event that, prior to the Effective Date, Sovereign enters
into an
21
agreement pursuant to which shares of Sovereign Common Stock would be converted
into shares or other securities or obligations of another corporation, proper
provision shall be made in such agreement so that each Main Street shareholder
entitled to receive shares of Sovereign Common Stock in the Merger shall be
entitled to receive such number of shares or other securities or amount of
obligations of such other corporation as such shareholder would be entitled to
receive if the Effective Date had occurred immediately prior to the happening of
such event.
Section 1.03 The Bank Merger. Sovereign and Main Street shall use
---------------
their best efforts to cause Main Street Bank to merge with and into Sovereign
Bank, with Sovereign Bank surviving such merger, concurrently with ,or 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 Main Street shall cause Main Street Bank, to execute
and deliver a bank plan of merger (the "Bank Plan of Merger") in a form
acceptable to Sovereign and Main Street.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MAIN STREET
---------------------------------------------
Main Street hereby represents and warrants to Sovereign that, except
as specifically set forth in the Main Street Disclosure Schedule delivered to
Sovereign by Main Street on the date hereof:
Section 2.01 Organization.
------------
(a) Main Street is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Main Street is a bank holding company duly registered under the
Bank Holding Company Act. Main Street 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. Main
Street is qualified or licensed to do business as a foreign corporation in each
jurisdiction in which it is required to be so qualified or licensed as the
result of the ownership or leasing of property or the conduct of its business
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect on Main Street.
(b) Main Street Bank is a commercial bank duly organized and
validly existing under the laws of the Commonwealth of Pennsylvania. Main Street
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
22
assets now owned and being operated by it. Main Street Bank and each other Main
Street Subsidiary is qualified or licensed to do business as a foreign
corporation in each jurisdiction in which it is required to be so qualified or
licensed as the result of the ownership or leasing of property or the conduct of
its business, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on Main Street.
(c) There are no Main Street Subsidiaries other than Main Street
Bank and those identified in the Main Street Disclosure Schedule.
(d) The deposits of Main Street Bank are insured by the FDIC to
the extent provided in the FDIA.
(e) The respective minute books of Main Street and Main Street
Bank and each other Main Street Subsidiary accurately record, in all material
respects, all material corporate actions of their respective shareholders and
boards of directors (including committees).
(f) Prior to the date of this Agreement, Main Street has
delivered to Sovereign true and correct copies of the articles of incorporation
and bylaws of Main Street, the charter and bylaws of Main Street Bank and the
articles of incorporation and bylaws of each other Main Street Subsidiary, each
as in effect on the date hereof.
Section 2.02 Capitalization.
--------------
(a) The authorized capital stock of Main Street consists of (i)
50,000,000 shares of common stock, $1.00 par value per share ("Main Street
Common Stock"), of which 10,470,380 shares are outstanding, validly issued,
fully paid and nonassessable and free of preemptive rights and (ii) 5,000,000
shares of preferred stock, $10.00 par value per share, none of which are issued
or outstanding. Neither Main Street nor Main Street Bank nor any other Main
Street 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 Main Street Common Stock, Main Street preferred
stock or any other security of Main Street or any securities representing the
right to vote, purchase or otherwise receive any shares of Main Street Common
Stock, Main Street preferred stock or any other security of Main Street, other
than (i) shares issuable under the Sovereign Option, (ii) 559,684 shares
issuable or to be issued under Main Street Stock Option Plans or stock options
otherwise granted by the Main Street Board of Directors and evidenced by written
stock option agreements, and as set forth in
23
reasonable detail (including the weighted average exercise price of all such
options) in the Main Street Disclosure Schedule, (iii) capital securities issued
by MBNK Capital Trust I and (iv) shares issuable under Main Street's Dividend
Reinvestment Plan and 401(k) Retirement Savings Plan.
(b) The authorized capital stock of Main Street Bank consists
exclusively of (i) 3,000,000 shares of common stock, $5.00 par value ("Main
Street Bank Common Stock"), of which 2,460,263 shares are outstanding, validly
issued, fully paid, nonassessable, free of preemptive rights, all of which are
owned by Main Street free and clear of any lien, security interests, pledges,
charges and restrictions of any kind or nature. Neither Main Street nor any Main
Street 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 Main Street Subsidiary
or any other security of any Main Street 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 Main Street Subsidiary. Either Main
Street or Main Street Bank owns all of the outstanding shares of capital stock
of each Main Street Subsidiary free and clear of all liens, security interests,
pledges, charges, encumbrances, agreements and restrictions of any kind or
nature, except that, in the case of Main Street Capital Trust I, Main Street
owns 100% of the common securities and, in the case of ABC Mortgage Company, Net
Mortgage Company, and Xxxxxxx Mortgage Company, Main Street Bank owns 80%, 75%,
and 80% of the outstanding shares of capital stock of each, respectively.
(c) Neither (i) Main Street, (ii) Main Street Bank, nor (iii)
any other Main Street Subsidiary, owns any equity interest, directly or
indirectly, treasury stock, in any other company or controls any other company,
except for equity interests held in the investment portfolios of Main Street
Subsidiaries, equity interests held by Main Street Subsidiaries in a fiduciary
capacity, equity interests held in connection with the commercial loan
activities of Main Street Subsidiaries and except that in the case of Main
Street Capital Trust I, Main Street owns 100% of the common securities and, in
the case of ABC Mortgage Company, Net Mortgage Company, and Xxxxxxx Mortgage
Company, Main Street Bank owns 80%, 75%, and 80% of the outstanding shares of
capital stock of each, respectively. There are no subscriptions, options,
warrants, calls, commitments, agreements or other Rights outstanding and held by
Main Street or Main Street Bank with respect to any other company's capital
stock or the equity of any other person.
24
(d) To the best of Main Street's knowledge, except as disclosed
in Main Street's proxy statement dated March 30, 2001, 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 Main Street Common Stock.
Section 2.03 Authority; No Violation.
-----------------------
(a) Main Street has full corporate power and authority to
execute and deliver this Agreement and to complete the transactions contemplated
hereby. Main Street Bank has full corporate power and authority to execute and
deliver the Bank Plan of Merger and to complete the Bank Merger. The execution
and delivery of this Agreement by Main Street and the completion by Main Street
of the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Main Street and, except for approval by the
shareholders of Main Street as required under the BCL, Main Street's articles of
incorporation and bylaws and Nasdaq Stock Market requirements applicable to it,
no other corporate proceedings on the part of Main Street are necessary to
complete the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Main Street and, subject to (i) approval of
the shareholders of Main Street as required under the BCL, Main Street's
articles of incorporation and bylaws and Nasdaq Stock Market requirements
applicable to it and (ii) receipt of the required approvals from Regulatory
Authorities described in Section 3.04 hereof and compliance with such required
approvals, constitutes the valid and binding obligation of Main Street,
enforceable against Main Street in accordance with its terms, subject further 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 Main Street Bank
concurrently with the execution and delivery of this Agreement, will constitute
the valid and binding obligation of Main Street Bank, enforceable against Main
Street Bank 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 Main
Street, (B) the execution and delivery of the Bank Plan of Merger by Main Street
Bank, (C) subject to receipt of approvals from the Regulatory Authorities
referred to in Section 3.04 hereof and Main Street's and Sovereign's compliance
with any conditions contained therein, the completion of the transactions
contemplated hereby, and (D) compliance by Main Street or Main Street Bank with
25
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 Main Street or any Main Street Subsidiary; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Main Street or any Main Street 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
Main Street or any Main Street 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 Main
Street or any Main Street 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 Main Street.
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 Main Street under the BCL,
Main Street's articles of incorporation and bylaws, and Nasdaq Stock Market
requirements applicable to it, and the approval of the Bank Plan of Merger by
Main Street as sole shareholder of Main Street Bank under the Banking Code, and
by the Main Street 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 Main Street
or the Bank Plan of Merger by Main Street Bank, and (b) the completion by Main
Street of the transactions contemplated hereby or by Main Street Bank of the
Bank Merger. As of the date hereof, Main Street 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 Main Street's ability to complete the transactions contemplated
by this Agreement or that (ii) any public body or authority, the consent or
approval of which is not required or any filing with which is not required, will
object to the completion of the transactions contemplated by this Agreement.
26
Section 2.05 Financial Statements.
--------------------
(a) Main Street has previously delivered or will deliver to
Sovereign the Main Street Regulatory Reports. The Main Street 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 Main Street as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
(b) Main Street has previously delivered to Sovereign the Main
Street Financials. The Main Street Financials have been, or will be, prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements, except as noted therein, and fairly present, or will
fairly present, the consolidated financial position, results of operations and
cash flows of Main Street as of and for the periods ended on the dates thereof,
in accordance with GAAP applied on a consistent basis, except as noted therein.
(c) At the date of each balance sheet included in the Main
Street Financials or the Main Street Regulatory Reports, neither Main Street nor
Main Street Bank (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 Main Street
Financials or Main Street 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. Main Street and the Main Street Subsidiaries are
-----
members of the same affiliated group within the meaning of IRC Section 1504(a).
Main Street has duly filed, and will file, all federal, state and local tax
returns required to be filed by or with respect to Main Street and all Main
Street 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 and related balance sheet accruals (if required)
for the payment of all federal, state and local taxes which have been incurred
by or are due or claimed
27
to be due from Main Street and any Main Street 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 2.07 No Material Adverse Effect. Main Street has not suffered
--------------------------
any Material Adverse Effect since March 31, 2001.
Section 2.08 Contracts.
---------
(a) Except as described in this Agreement, or in the Main Street
Disclosure Schedule, neither Main Street nor any Main Street 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 Main
Street or any Main Street 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
Main Street or any Main Street Subsidiary; (iii) any collective bargaining
agreement with any labor union relating to employees of Main Street or any Main
Street Subsidiary; (iv) any agreement which by its terms limits the payment of
dividends by any Main Street 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 Main Street or any Main Street Subsidiary is an
obligor to any person, which instrument evidences or relates to indebtedness
other than deposits, repurchase agreements, Federal Home Loan Bank advances and
repurchases, bankers acceptances and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to Sovereign or any Sovereign
Subsidiary; or (vi) any contract (other than this Agreement) limiting the
freedom of Main Street or any Main Street Subsidiary to engage in any type of
banking or bank-related business permissible under law.
(b) True and correct copies of agreements, plans, arrangements
and instruments referred to in Section 2.08(a) have been provided to Sovereign
on or before the date hereof, are listed on the Main Street Disclosure Schedule
and are in full force and effect on the date hereof and neither Main Street nor
any Main Street Subsidiary (nor, to the knowledge of Main Street, 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,
28
plan, arrangement or instrument which breach has resulted in or will result in a
Material Adverse Effect with respect to Main Street. Except as described in this
Agreement or as set forth in the Main Street Disclosure Schedule, (i) 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,
(ii) none of the employees (including officers) of Main Street or any Main
Street Subsidiary, possess the right to terminate their employment as a result
of the execution of this Agreement, (iii) no plan, employment agreement,
termination agreement, or similar agreement or arrangement to which Main Street
or any Main Street Subsidiary is a party or under which Main Street or any Main
Street 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, and (iv) 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 Main Street or any
Main Street 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 Main Street or any Main Street
Subsidiary to provide a benefit in the form of Main Street Common Stock or
determined by reference to the value of Main Street Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
-----------------------------------------
(a) Main Street and the Main Street 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 Main Street or
any Main Street 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 Main Street
Regulatory Reports and in the Main Street Financials or acquired subsequent
thereto (except to the extent that such assets and properties have been disposed
of for fair value, in the ordinary course of business, since the date of such
balance sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items which secure repurchase agreements
and liabilities for borrowed money from a Federal Home Loan Bank, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith
and (iii) items permitted under Article IV. Main Street and the Main Street
Subsidiaries, as lessee, have the right under valid and subsisting leases of
real and personal properties used by Main Street and its Subsidiaries in the
conduct of their businesses to occupy or use all such properties as presently
occupied and used by each of them. Such existing leases and
29
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 Main Street Financials.
(b) With respect to all agreements pursuant to which Main Street
or any Main Street Subsidiary has purchased securities subject to an agreement
to resell, if any, Main Street or such Main Street 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) Main Street and the Main Street Subsidiaries currently
maintain insurance considered by Main Street to be reasonable for their
respective operations and similar in scope and coverage to that maintained by
other businesses similarly engaged. Neither Main Street nor any Main Street
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 Main Street
or Main Street Bank under such policies. All such insurance is valid and
enforceable and in full force and effect, and within the last three years Main
Street and Main Street Bank have received each type of insurance coverage for
which they have applied and during such periods have not been denied
indemnification for any material claims submitted under any of their insurance
policies.
Section 2.10 Legal Proceedings. Except as set forth in the Main Street
-----------------
Disclosure Schedule, neither Main Street nor any Main Street Subsidiary is a
party to any, and there are no pending or, to the best of Main Street's
knowledge, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature (i) against Main Street or any Main Street
Subsidiary, (ii) to which Main Street or any Main Street 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 Main Street to perform under this Agreement, except for
any proceedings, claims, actions, investigations or inquiries referred to in
clauses (i) or (ii) which, if adversely determined, individually or in the
aggregate, could not be reasonably expected to have a Material Adverse Effect on
Main Street.
30
Section 2.11 Compliance With Applicable Law.
------------------------------
(a) Main Street and Main Street 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 Main Street.
(b) Except for the MOU or as disclosed on the Main Street
Disclosure Schedule, (i) Main Street and each Main Street Subsidiary is in
substantial compliance with all of the statutes, regulations or ordinances which
each Regulatory Authority applicable to them enforces; (ii) no Regulatory
Authority has threatened to revoke any license, franchise, permit or
governmental authorization which is material to Main Street or any Main Street
Subsidiary required or threatened to require Main Street or any Main Street
Subsidiary, to enter into a cease and desist order or memorandum of
understanding with it; and (iii) no Regulatory Authority has restricted or
limited the operations of Main Street or any Main Street Subsidiary, including
without limitation any restriction on the payment of dividends (any such
memorandum or order described in this sentence is hereinafter referred to as a
"Regulatory Agreement"). Neither Main Street nor any Main Street Subsidiary has
consented to or entered into any Regulatory Agreement, except for the MOU. Main
Street has no reason to believe that it will not receive regulatory approval for
the Merger. Main Street received a rating of "satisfactory" in connection with
its last CRA examination. On the date of the Agreement Main Street has no reason
to believe that it is not in substantial compliance with the material terms of
the MOU.
Section 2.12 ERISA. Main Street has previously delivered to Sovereign
-----
true and complete copies of all employee pension benefit plans within the
meaning of ERISA Section 3(2), including profit sharing plans, employee stock
ownership plan, stock purchase plans, deferred compensation and supplemental
income plans, supplemental executive retirement plans, employment agreements,
annual executive and administrative incentive plan or long term incentive plans,
severance plans, policies and agreements, group insurance plans, and all other
employee welfare benefit plans within the meaning of ERISA Section 3(1)
(including vacation pay, sick leave, short-term disability, long-term
disability, and medical plans) and all other employee benefit plans, policies,
agreements and arrangements, all of which are set forth in the Main Street
Disclosure Schedule,
31
sponsored or contributed to for the benefit of the employees or former employees
(including retired employees) and any beneficiaries thereof or directors or
former directors of Main Street or any Main Street 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 Main Street, any Main Street Subsidiary, nor
any pension plan maintained by Main Street or any Main Street 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 Main Street, except liabilities to the Pension Benefit
Guaranty Corporation pursuant to ERISA Section 4007, all of which have been
fully paid, nor has any reportable event under ERISA Section 4043 occurred with
respect to any such pension plan which would result in a Material Adverse
Effect. With respect to each of such plans that is subject to Title IV of ERISA,
the present value of the accrued benefits under such plan, based upon the
actuarial assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed the then
current value of the assets of such plan allocable to such accrued benefits.
Neither Main Street nor any Main Street Subsidiary has incurred or is subject to
any liability under ERISA Section 4201 for a complete or partial withdrawal from
a multiemployer plan. All "employee benefit plans," as defined in ERISA Section
3(3), comply and within the past six (6) years have complied in all material
respects with (i) relevant provisions of ERISA and (ii) in the case of plans
intended to qualify for favorable income tax treatment, provisions of the IRC
relevant to such treatment. No prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under ERISA Section
408 or any transaction prohibited under IRC Section 4975) has occurred within
the past six (6) years with respect to any employee benefit plan maintained by
Main Street or any Main Street Subsidiary which would result in the imposition,
directly or indirectly, of an excise tax under IRC Section 4975 or other penalty
under ERISA or the IRC, which, individually or in the aggregate, has resulted in
or will result in a Material Adverse Effect with respect to Xxxx Xxxxxx. Xxxx
Xxxxxx and the Main Street Subsidiaries provide continuation coverage under
group health plans for separating employees and "qualified beneficiaries" in
accordance with the provisions of IRC Section 4980B(f). Such group health plans
are in material compliance with Section 1862(b)(1) of the Social Security Act.
32
Section 2.13 Brokers, Finders and Financial Advisors; Fairness
-------------------------------------------------
Opinion. Except for Main Street's engagement of XxXxxxxxx, Xxxx & Xxxxxx, Inc.
-------
("MBD") in connection with transactions contemplated by this Agreement, neither
Main Street nor any Main Street 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 Main Street 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 Main Street Financials. The Main Street Disclosure Schedule
shall contain as an exhibit the engagement letter between Main Street and MBD.
MBD has provided Main Street with its oral opinion to the effect that, as of the
date of approval of this Agreement by the Board of Directors of Main Street, the
Merger Consideration is fair to shareholders of Main Street in the Merger from a
financial point of view.
Section 2.14 Environmental Matters. To the knowledge of Main Street,
---------------------
except as set forth on the Main Street Disclosure Schedule, neither Main Street
nor any Main Street Subsidiary, nor any properties operated by Main Street or
any Main Street Subsidiary during Main Street's use or ownership has been or is
in violation of or liable under any Environmental Law which violation or
liability, individually or in the aggregate, resulted in, or will result, in a
Material Adverse Effect with respect to Main Street. 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 Main Street,
threatened, relating to the liability of any property owned or operated by Main
Street or any Main Street Subsidiary under any Environmental Law.
Section 2.15 Allowance for Losses. The allowance for loan losses
--------------------
reflected, and to be reflected, in the Main Street Regulatory Reports, and
shown, and to be shown, on the balance sheets contained in the Main Street
Financials have been, and will be, established in accordance with the
requirements of GAAP and all applicable regulatory criteria.
Section 2.16 Information to be Supplied. The information to be
--------------------------
supplied by Main Street and Main Street Bank for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) and/or any information Main
Street filed with the SEC under the Exchange Act which is incorporated by
reference into the Registration Statement (including the Prospectus/Proxy
33
Statement) will not, at the time the Registration Statement is declared
effective pursuant to the Securities Act and as of the date the Prospectus/Proxy
Statement is mailed to shareholders of Main Street and up to and including the
date of the meeting of shareholders of Main Street to which such
Prospectus/Proxy Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by Main Street for inclusion in the Applications will, at the time such
documents are filed with any Regulatory Authority and up to and including the
date of the attainment of any required regulatory approvals or consents, be
accurate in all material respects.
Section 2.17 Securities Documents. The Securities Documents filed or
--------------------
to be filed by Main Street under the Exchange Act at any time since December 31,
2000 complied or will comply, 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 in the
--------------------------
Securities Documents filed by Main Street, in the footnotes to the Main Street
Financials, or in the Main Street Disclosure Schedule, Main Street is not a
party to any transaction (including any loan or other credit accommodation, but
excluding deposits in the ordinary course of business) with any Affiliate of
Main Street (except a Main Street Subsidiary). All such transactions (a) were
made in the ordinary course of business, (b) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other Persons, and (c) did not involve more
than the normal risk of collectability or present other risks or unfavorable
features. No loan or credit accommodation to any Affiliate of Main Street 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 Main Street nor Main Street Bank 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 Main Street Bank is inappropriate.
Section 2.19 Schedule of Termination Benefits. The Main Street
--------------------------------
Disclosure Schedule includes a schedule of the present value as of March 31,
2002 of the maximum amount of termination benefits and related payments which
would be payable to the individuals identified thereon, excluding any options to
acquire Main Street Common Stock granted to such individuals, under any and all
employment agreements, special termination agreements, supplemental executive
34
retirement plans, deferred bonus plans, deferred compensation plans, salary
continuation plans, or any other pension benefit or welfare benefit plan
maintained by Main Street solely for the benefit of executive officers of Main
Street or any Main Street Subsidiary (the "Benefits Schedule"), assuming that
the Closing Date occurs on March 31, 2002 and that the employment of such
individuals terminates immediately thereafter. No other individuals are entitled
to benefits under any such plans. The amounts paid to the individuals identified
in Schedule 2.19 shall not exceed the amounts set forth thereon adjusted to
reflect changes in interest rates and in actual as opposed to estimated
compensation data (except for the bonus amounts). To the best knowledge of Main
Street, both (i) the present value of the maximum amount of termination benefits
and related payments specified, including required gross-up payments under
Section 280G of the IRC, on the Benefits Schedule with respect to each named
individual and (ii) the maximum aggregate amount set forth on the Benefits
Schedule are true and correct in all material respects. Except as set forth in
Main Street Disclosure Schedule, as of the date of this Agreement, no Main
Street director had deferred any compensation accrued by Main Street.
Section 2.20 Loans. Each loan reflected as an asset in the Main Street
-----
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 Main Street.
Section 2.21 Takeover Laws. Main Street has taken all action required
-------------
to be taken by it in order to exempt this Agreement, the Bank Plan of Merger and
the Option Agreement and the transactions contemplated hereby and thereby from,
and this Agreement, the Bank Plan of Merger and the Option Agreement and the
transactions contemplated hereby and thereby are exempt from, the requirements
of any "moratorium," "control share," "fair price," "affiliate transaction,"
"business combination," or other antitakeover laws and regulations of any
jurisdiction (collectively, the "Takeover Laws"), including, without limitation,
the Commonwealth of Pennsylvania.
Section 2.22 Labor and Employment Matters. To the knowledge of Main
----------------------------
Street, neither Main Street nor any Main Street Subsidiary, nor any facilities
35
owned or operated by Main Street or any Main Street Subsidiary has been or is in
violation of or is liable under any Labor and Employment Law, which violation or
liability, individually or in the aggregate, resulted in, or will result in, a
Material Adverse Effect with respect to Main Street. There are no legal,
administrative, arbitration or other proceedings, demands, claims, notices,
audits or investigations (including without limitation notices, demand letters
or requests for information from any federal, state or local commission, agency
or board) instituted or pending, or to the knowledge of Main Street threatened,
relating to the liability of Main Street or any Main Street Subsidiary under any
Labor and Employment Law.
Section 2.23 Quality of Representations. The representations made by
--------------------------
Main Street 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 Main Street that, except
as set forth in the Sovereign Disclosure Schedule delivered by Sovereign to Main
Street on or prior to the date hereof:
Section 3.01 Organization.
------------
(a) Sovereign is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
Sovereign is a savings and loan holding company duly registered under the HOLA.
Sovereign has the corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the properties and
assets now owned and being operated by it. Each Sovereign Subsidiary is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and each possesses full corporate power and
authority to carry on its respective business and to own, lease and operate its
properties as presently conducted. Neither Sovereign nor any Sovereign
Subsidiary is required by the conduct of its business or the ownership or
leasing of its assets to qualify to do business as a foreign corporation in any
jurisdiction other than the Commonwealth of Pennsylvania and the states of
Delaware, New Jersey, Massachusetts, Connecticut, Rhode Island, and New
Hampshire, 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
36
Bank has the corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the properties and
assets now owned and being operated by it.
(c) The deposits of Sovereign Bank are insured by the FDIC to
the extent provided in the FDIA.
(d) The respective minute books of Sovereign and Sovereign Bank
accurately record in all material respects all material corporate action of
their respective shareholders and boards of directors (including committees)
through the date of this Agreement.
(e) Prior to the execution of this Agreement, Sovereign has
delivered to Main Street 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)
400,000,000 shares of common stock, no par value ("Sovereign Common Stock"), of
which, at the date of this Agreement, 109,188 shares were issued and held by
Sovereign as treasury stock and 246,907,687 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, no shares are
issued or outstanding. 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 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) securities issued by Sovereign
Capital Trust I and (iv) securities issued by Sovereign Capital Trust II.
(b) To the best of Sovereign's knowledge, except as disclosed in
Sovereign's proxy statement dated March 26, 2001, 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) Except as disclosed in the Sovereign Disclosure Schedule,
Sovereign owns all of the capital stock of Sovereign Bank, free and clear
37
of any lien, security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature and either Sovereign or Sovereign Bank owns
all of its shares of capital stock of each other Sovereign Subsidiary free and
clear of all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature. Except for the Sovereign
Subsidiaries, Sovereign does not possess, directly or indirectly, any material
equity interest in any corporation, except for equity interests held in the
investment portfolios of Sovereign Subsidiaries, equity interests held by
Sovereign Subsidiaries in a fiduciary capacity, and equity interests held in
connection with the commercial loan activities of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
-----------------------
(a) Sovereign has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Sovereign Bank has full corporate power and authority to execute and
deliver the Bank Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by Sovereign and the completion by Sovereign of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Sovereign, and no other corporate proceedings on the part
of Sovereign are necessary to complete the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Sovereign
and, subject to receipt of the required approvals of Regulatory Authorities
described in Section 3.04 hereof, constitutes the valid and binding obligation
of Sovereign, enforceable against Sovereign in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity. The Bank Plan of Merger, upon its execution and delivery
by Sovereign Bank concurrently with the execution and delivery of this
Agreement, will constitute the valid and binding obligation of Sovereign Bank,
enforceable against Sovereign Bank in accordance with its terms, subject to
applicable conservatorship and receivership provisions of the FDIA, or
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by
Sovereign, (B) the execution and delivery of the Bank Plan of Merger by
Sovereign Bank, (C) subject to receipt of approvals from the Regulatory
Authorities referred to in Section 3.04 hereof and Main Street's and Sovereign's
compliance with any conditions contained therein, the consummation of the
transactions contemplated hereby, and (D) compliance by Sovereign or Sovereign
38
Bank with any of the terms or provisions of this Agreement 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 Federal Reserve Board, the PDB, the
NYSE, the SEC, and state "blue sky" authorities, and compliance with any
conditions contained therein, and the approval of the Bank Plan of Merger by
Sovereign as sole shareholder of Sovereign Bank under the HOLA, and by the
Sovereign Bank Board of Directors, no consents or approvals of, or filings or
registrations with, any public body or authority are necessary, and no consents
or approvals of any third parties are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by Sovereign or the Bank Plan
of Merger by Sovereign Bank, and (b) the completion by Sovereign of the
transactions contemplated hereby or by Sovereign Bank of the Bank Merger.
Sovereign has no reason to believe that (i) any required consents or approvals
will not be received or will be received with conditions, limitations or
restrictions unacceptable to it or which would adversely impact Sovereign's or
Sovereign Bank's ability to complete the transactions contemplated by this
Agreement or that (ii) any public body or authority, the consent or approval of
which is not required or any filing with which is not required, will object to
the completion of the transactions contemplated by this Agreement.
39
Section 3.05 Financial Statements.
--------------------
(a) Sovereign has made, or will make, the Sovereign Regulatory
Reports available to Main Street for inspection. The Sovereign Regulatory
Reports have been, or will be, prepared in all material respects in accordance
with applicable regulatory accounting principles and practices throughout the
periods covered by such statements, and fairly present, or will fairly present
in all material respects, the financial position, results of operations, and
changes in shareholders' equity of Sovereign as of and for the periods ended on
the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
(b) Sovereign has previously delivered, or will deliver, to Main
Street the Sovereign Financials. The Sovereign Financials have been, or will be,
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered by the Sovereign Financials, except as noted therein and fairly
present, or will fairly present, the consolidated financial position, results of
operations and cash flows of Sovereign as of and for the periods ending on the
dates thereof, in accordance with GAAP applied on a consistent basis throughout
the periods covered by the Sovereign Financials, except as noted therein.
Sovereign will make the Sovereign Regulatory Reports available to Main Street
for inspection.
(c) At the date of each balance sheet included in the Sovereign
Financials or Sovereign Regulatory Reports, Sovereign did not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
Sovereign Financials or in the footnotes thereto which are not fully reflected
or reserved against therein or disclosed in a footnote thereto, except for
liabilities, obligations or loss contingencies which are not material in the
aggregate and which are incurred in the ordinary course of business, consistent
with past practice, and except for liabilities, obligations or loss
contingencies which are within the subject matter of a specific representation
and warranty herein and subject, in the case of any unaudited statements, to
normal recurring audit adjustments and the absence of footnotes.
Section 3.06 Taxes. Sovereign and the Sovereign Subsidiaries are
-----
members of the same affiliated group within the meaning of IRC Section 1504(a).
Sovereign has duly filed, and will file, all federal, state and local tax
returns required to be filed by or with respect to Sovereign and all Sovereign
Subsidiaries on or prior to the Closing Date (all such returns being accurate
and correct in all material respects) and has duly paid or will pay, or made or
will make, provisions
40
and related balance sheet accruals (if required) 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, 2000.
Section 3.08 Ownership of Property; Insurance Coverage.
-----------------------------------------
(a) Sovereign and the Sovereign Subsidiaries have good and, as
to real property, marketable title to all assets and properties owned by
Sovereign or any of its Subsidiaries in the conduct of their businesses, whether
such assets and properties are real or personal, tangible or intangible,
including assets and property reflected in the balance sheets contained in the
Sovereign Financials and in the Sovereign Regulatory Reports or acquired
subsequent thereto (except to the extent that such assets and properties have
been disposed of for fair value, in the ordinary course of business, since the
date of such balance sheets), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
for borrowed money and that are described in the Sovereign Disclosure Schedule
or permitted under Article IV hereof, and (ii) statutory liens for amounts not
yet delinquent or which are being contested in good faith. Sovereign and the
Sovereign Subsidiaries, as lessee, have the right under valid and subsisting
leases of real and personal properties used by Sovereign and its Subsidiaries in
the conduct of their businesses to occupy and use all such properties as
presently occupied and used by each of them.
(b) Sovereign and the Sovereign Subsidiaries currently maintain
insurance in amounts considered by Sovereign to be reasonable for their
respective operations, and such insurance is similar in scope and coverage to
that maintained by other businesses similarly engaged. Neither Sovereign nor any
Sovereign Subsidiary has received notice from any insurance carrier that (i)
such insurance will be cancelled or that coverage thereunder will be reduced or
eliminated or (ii) premium costs with respect to such insurance will be
substantially increased.
Section 3.09 Legal Proceedings. Neither Sovereign nor any Sovereign
-----------------
Subsidiary is a party to any, and there are no pending or, to the best of
Sovereign's knowledge, threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations or inquiries of any
41
nature (i) against Sovereign or any Sovereign Subsidiary, (ii) to which
Sovereign's or any Sovereign Subsidiary's assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of Sovereign to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii) which,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on Sovereign.
Section 3.10 Compliance With Applicable Law.
------------------------------
(a) Sovereign and the Sovereign Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on Sovereign.
(b) Except as disclosed on the Sovereign Disclosure Schedule,
(i) Sovereign and each Sovereign Subsidiary is in substantial compliance with
all of the statutes, regulations or ordinances which each Regulatory Authority
applicable to them enforces; (ii) no Regulatory Authority has threatened to
revoke any license, franchise, permit or governmental authorization which is
material to Sovereign or any Sovereign Subsidiary or required or threatened to
require Sovereign or any Sovereign Subsidiary to enter into a cease and desist
order or memorandum of understanding with it and (iii) no Regulatory authority
has restricted or limited the operations of Sovereign or any Sovereign
Subsidiary, including without limitation any restriction on the payment of
dividends (any such memorandum or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Sovereign received a
rating of "satisfactory" in connection with its last CRA examination.
Section 3.11 Information to be Supplied. The information to be
--------------------------
Sovereign for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) and/or any information Sovereign filed with the SEC
under the Exchange Act which is incorporated by reference into the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act and
as of the date the Prospectus/Proxy Statement is mailed to shareholders of Main
Street and up to and including the date of the meeting of shareholders of Main
Street to which such Prospectus/Proxy Statement relates, contain any untrue
statement of a
42
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by Sovereign for inclusion in the Applications will, at the time such documents
are filed with any Regulatory Authority and up to and including the date(s) of
the obtainment of any required regulatory approvals or consents, be accurate in
all material aspects.
Section 3.12 ERISA. Sovereign has previously made available to Main
-----
Street true and complete copies of the employee pension benefit plans within the
meaning of ERISA Section 3(2), profit sharing plans, employee stock ownership
plans, stock purchase plans, deferred compensation and supplemental income
plans, supplemental executive retirement plans, annual incentive plans, group
insurance plans, and all other employee welfare benefit plans within the meaning
of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), and all other employee
benefit plans, policies, agreements and arrangements, all of which are set forth
on the Sovereign Disclosure Schedule, sponsored or contributed to for the
benefit of the employees or former employees (including retired employees) and
any beneficiaries thereof or directors or former directors of Sovereign or any
Sovereign Subsidiary, together with (i) the most recent actuarial (if any) and
financial reports relating to those plans which constitute "qualified plans"
under IRC Section 401(a), (ii) the most recent annual reports relating to such
plans filed by them, respectively, with any government agency, and (iii) all
rulings and determination letters which pertain to any such plans. Neither
Sovereign, any Sovereign Subsidiary, nor any pension plan maintained by
Sovereign or any Sovereign Subsidiary, has incurred, directly or indirectly,
within the past six (6) years any liability under Title IV of ERISA (including
to the Pension Benefit Guaranty Corporation) or to the IRS with respect to any
pension plan qualified under IRC Section 401(a) which liability has resulted in
or will result in a Material Adverse Effect with respect to Sovereign, except
liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any reportable event
under ERISA Section 4043 occurred with respect to any such pension plan which
would result in a Material Adverse Effect. With respect to each of such plans
that is subject to Title IV of ERISA, the present value of the accrued benefits
under such plan, based upon the actuarial assumptions used for funding purposes
in the plan's most recent actuarial report did not, as of its latest valuation
date, exceed the then current value of the assets of such plan allocable to such
accrued benefits. Neither Sovereign nor any Sovereign Subsidiary has incurred or
is subject to any liability under ERISA Section 4201 for a complete or partial
withdrawal from a multiemployer plan. All "employee benefit plans," as defined
in ERISA Section 3(3), comply and within the past six
43
(6) years have complied in all material respects with (i) relevant provisions of
ERISA, and (ii) in the case of plans intended to qualify for favorable income
tax treatment, provisions of the IRC relevant to such treatment. No prohibited
transaction (which shall mean any transaction prohibited by ERISA Section 406
and not exempt under ERISA Section 408 or any transaction prohibited under IRC
Section 4975) has occurred within the past six (6) years with respect to any
employee benefit plan maintained by Sovereign or any Sovereign Subsidiary that
would result in the imposition, directly or indirectly, of an excise tax under
IRC Section 4975 or other penalty under ERISA or the IRC, which individually or
in the aggregate, has resulted in or will result in a Material Adverse Effect
with respect to Sovereign. Sovereign and the Sovereign Subsidiaries provide
continuation coverage under group health plans for separating employees and
"qualified beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in compliance with Section 1862(b)(1) of
the Social Security Act.
Section 3.13 Securities Documents. The Securities Documents filed or
--------------------
to be filed by Sovereign under the Exchange Act at any time since December 31,
2000 complied or will comply, at the time filed with the SEC, in all material
respects, with the Exchange Act and the applicable rules and regulations of the
SEC.
Section 3.14 Environmental Matters. To the knowledge of Sovereign,
---------------------
neither Sovereign nor any Sovereign Subsidiary, nor any properties operated by
Sovereign or any Sovereign Subsidiary during Sovereign's use or ownership has
been or is in violation of or liable under any Environmental Law which violation
or liability, individually or in the aggregate, resulted in or will result in a
Material Adverse Effect with respect to Sovereign. There are no actions, suits
or proceedings, or demands, claims, notices or investigations (including without
limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of Sovereign,
threatened, relating to the liability of any property owned or operated by
Sovereign or any Sovereign Subsidiary under any Environmental Law.
Section 3.15 Allowance for Loan Losses. The allowance for loan losses
-------------------------
reflected, and to be reflected, in the Sovereign Regulatory Reports, and shown,
and to be shown, on the balance sheets contained in the Sovereign Financials
have been, and will be, established in accordance with the requirements of GAAP
and all applicable regulatory criteria.
Section 3.16 Loans. Each loan reflected as an asset in the Sovereign
-----
Financial Statements (i) is evidenced by notes, agreements or other evidences of
44
indebtedness which are true, genuine and correct (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Sovereign.
Section 3.17 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 Main Street's Business.
---------------------------------
(a) From the date of this Agreement to the Closing Date, Main
Street and each Main Street 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. Main Street will use its
reasonable good faith efforts, and will cause Main Street Bank 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 Main Street and Main Street 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, Main Street will not, and
Main Street will not permit any Main Street Subsidiary to:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of
its capital stock or issue or grant any option, warrant, call, commitment,
subscription, Right or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into
shares of such stock, except as contemplated by Section 4.11 of this
Agreement, or split, combine or reclassify any shares of capital stock, or
declare, set aside or pay any
45
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any shares of capital stock, except that (A) Main Street
may issue shares of Main Street Common Stock upon the valid exercise of
outstanding options to acquire Main Street Common Stock under the Main
Street Stock Option Plans, or pursuant to written stock option agreements
set forth in the Main Street Disclosure Schedule, in accordance with
Section 4.11 of this Agreement, (B) Main Street may pay a regular quarterly
cash dividend, not to exceed the lesser of $.05 per share of Main Street
Common Stock outstanding, or any amount permitted under the MOU or
otherwise by Main Street's Regulatory Authorities and (C) Main Street may
issue shares of Main Street Common Stock pursuant to the Sovereign Option.
Nothing contained in this Section 4.01(ii) or in any other Section of this
Agreement shall be construed to permit Main Street shareholders to receive
two dividends either from Main Street or from Main Street and Sovereign in
any quarter or to deny or prohibit them from receiving one dividend from
Main Street or Sovereign in any quarter and Main Street shall cooperate
with Sovereign to coordinate dividend payment dates and record dates in the
quarter in which the Closing is anticipated to occur to achieve such
results; subject to applicable regulatory restrictions, if any, Main Street
Bank may pay a cash dividend, in the aggregate, sufficient to fund any
dividend by Main Street permitted hereunder;
(iii) grant any severance or termination pay (other than
pursuant to written policies or written agreements of Main Street or Main
Street Subsidiaries in effect on the date hereof and provided to Sovereign
prior to the date hereof, as contemplated by this Agreement, or as
otherwise agreed to in writing by Sovereign and Main Street) to, or enter
into any new or amend any existing employment agreement with, or increase
the compensation of, any employee, officer or director of Main Street or
any Main Street Subsidiary, except for routine periodic increases,
individually and in the aggregate, in accordance with past practice;
(iv) merge or consolidate Main Street or any Main Street
Subsidiary with any other corporation; sell or lease all or any substantial
portion of the assets or business of Main Street or any Main Street
Subsidiary, except for the pending sale of two branches set forth on the
Main Street Disclosure Schedule; 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 Main
Street Subsidiary and any other person; enter into a purchase and
assumption
46
transaction with respect to deposits and liabilities; permit the revocation
or surrender by any Main Street 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
Main Street Bank or sell or otherwise dispose of any asset of Main Street
or of any Main Street Subsidiary other than in the ordinary course of
business consistent with past practice; subject any asset of Main Street or
of any Main Street Subsidiary to a lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase agreements,
bankers acceptances, "treasury tax and loan" accounts established in the
ordinary course of business and transactions in "federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other
than in the ordinary course of business consistent with past practice;
incur any indebtedness for borrowed money (or guarantee any indebtedness
for borrowed money), except in the ordinary course of business consistent
with past practice;
(vi) take any action which would result in any of the
representations and warranties of Main Street set forth in this Agreement
becoming untrue as of any date after the date hereof or in any of the
conditions set forth in Article V hereof not being satisfied, except in
each case as may be required by applicable law;
(vii) change any method, practice or principle of
accounting, except as may be required from time to time by GAAP (without
regard to any optional early adoption date) or any Regulatory Authority
responsible for regulating Main Street or Main Street Bank;
(viii) waive, release, grant or transfer any rights of value
or modify or change in any material respect any existing material agreement
to which Main Street or any Main Street Subsidiary is a party, other than
in the ordinary course of business, consistent with past practice;
(ix) implement any pension, retirement, profit sharing,
bonus, welfare benefit or similar plan or arrangement which was not in
effect on the date of this Agreement, or materially amend any existing plan
or arrangement except to the extent such amendments do not result in an
increase in cost; provided, however, that Main Street may contribute to the
Main Street 401(k) plan, to the extent set forth in the Main Street
Disclosure Schedule;
47
(x) purchase any security for its investment portfolio
not rated "A" or higher by either Standard & Poor's Corporation or Xxxxx'x
Investor Services, Inc. or otherwise alter, in any material respect, the
mix, maturity, credit or interest rate risk profile of its portfolio of
investment securities or its portfolio of mortgage-backed securities;
(xi) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit) to
any borrower or group of affiliated borrowers in excess of $2,000,000 in
the aggregate, or increase, compromise, extend, renew or modify any
existing loan or commitment outstanding in excess of $2,000,000, except for
any commitment disclosed on the Main Street Disclosure Schedule;
(xii) except as set forth on the Main Street Disclosure
Schedule or except in the ordinary course of business consistent with past
practice, enter into, renew, extend or modify any other transaction with
any Affiliate other than deposit and loan transactions in the ordinary
course of business and which are in compliance with applicable laws and
regulations;
(xiii) enter into any interest rate swap or similar
commitment, agreement or arrangement;
(xiv) except for the execution of this Agreement, or
resulting therefrom, take any action that would give rise to a right of
payment to any individual under any employment agreement; or
(xv) 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 Main Street or any Main Street Subsidiary to do
any of the following: (i) make any capital expenditure of $100,000 or more not
disclosed on Main Street 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 $500,000, other than the
pending sale of two branches set forth on the Main Street Disclosure Schedule
and 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 Main Street or a Main Street Subsidiary or repurchase
agreements made, in each case, in the ordinary course of business; (iii)
undertake or enter any lease,
48
contract or other commitment for its account, other than in the normal course of
providing credit to customers as part of its banking business, involving a
payment by Main Street or any Main Street 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,
Main Street or Sovereign, as the case may be, shall afford to, and shall cause
each Main Street 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 Main Street 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) Main Street 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, Main Street
shall permit employees of Sovereign reasonable access to and participation in
matters relating to problem loans, loan restructurings and loan work-outs,
investments, derivatives, and other asset/liability activities of Main Street
and the Main Street 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.
(d) If the transactions contemplated by this Agreement shall not
be consummated, Main Street and Sovereign will continue to comply with the terms
of the confidentiality agreement dated July 12, 2001.
Section 4.03 Regulatory Matters and Consents.
-------------------------------
(a) Main Street and Sovereign shall prepare a Prospectus/Proxy
Statement to be mailed to shareholders of Main Street in connection with the
meeting of shareholders of Main Street to consider and the
49
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, following the preparation
thereof, file the Registration Statement with the SEC and Main Street 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 Main Street, 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 Main Street with as many
copies of such Registration Statement and all amendments thereto promptly upon
the filing thereof as Main Street may reasonably request.
(b) Sovereign and Main Street will prepare all Applications to
Regulatory Authorities and make all filings for, and use their reasonable best
efforts to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and authorizations of all
Regulatory Authorities necessary or advisable to complete the transactions
contemplated by this Agreement.
(c) Main Street will furnish Sovereign with all information
concerning Main Street and Main Street Subsidiaries as may be reasonably
necessary or advisable in connection with the Registration Statement and any
Application or filing made by or on behalf of Sovereign to any Regulatory
Authority in connection with the transactions contemplated by this Agreement and
the Bank Plan of Merger.
(d) Sovereign and Main Street shall have the right to review in
advance, and to the extent practicable each will consult with the other on, all
information which appears in any filing made with or written materials submitted
to the SEC, any Regulatory Authority or any third party in connection with the
transactions contemplated by this Agreement and the Bank Plan of Merger. In
exercising the foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and
50
authorizations of the SEC, Regulatory Authorities and third parties necessary or
advisable to consummate the transactions contemplated by this Agreement and the
Bank Plan of Merger and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated hereby and
thereby.
(e) Sovereign will promptly furnish Main Street with copies of
all written communications to, or received by Sovereign or any Sovereign
Subsidiary from, any Regulatory Authority in respect of the transactions
contemplated hereby.
Section 4.04 Taking of Necessary Action. Sovereign and Main Street
--------------------------
shall each use its best efforts in good faith, and each of them shall cause its
Subsidiaries to use their reasonable best efforts in good faith, to take or
cause to be taken all action necessary or desirable on its part using its best
efforts so as to permit completion of the Merger and the Bank Merger, as soon as
practicable after the date hereof, including, without limitation, (A) obtaining
the consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose consent or approval
is required or desirable for consummation of the transactions contemplated
hereby (including assignment of leases without any change in terms), provided
that neither Main Street nor any Main Street 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 Main Street or from exercising its rights under this Agreement or
the Stock Option Agreement.
Section 4.05 Certain Agreements.
------------------
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative, in
which any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Date, a director or officer or
employee of Main Street 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 Main Street, any of the Main Street's
Subsidiaries or any of their respective predecessors or (ii) this Agreement or
any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the
51
Effective Date, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto to the extent permitted or required by the
BCL and the articles of incorporation and bylaws of Main Street. On or after the
Effective Date, Sovereign shall indemnify, defend and hold harmless all prior
and then-existing directors and officers of Main Street and any Main Street
Subsidiary, against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement (with the
approval of Sovereign which approval shall not be unreasonably withheld) of or
in connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of Main Street or any Main
Street 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 Main
Street or any Main Street Subsidiary as of the date hereof including the right
to advancement of expenses, provided, however, that any such officer, director
or employee of Main Street or any Main Street Subsidiary shall not be
indemnified by Sovereign and/or Sovereign Bank if such indemnification is
prohibited by applicable law.
(b) Sovereign shall maintain Main Street's existing directors'
and officers' liability insurance policy (or a policy providing comparable
coverage amounts on terms generally no less favorable, including Sovereign's
existing policy if it meets the foregoing standard) covering persons who are
currently covered by such insurance for a period of five years after the
Effective Date; provided, however, that in no event shall Sovereign be obligated
to expend, in order to maintain or provide insurance coverage pursuant to this
Section 4.05(b), any amount per annum in excess of 150% of the amount of the
annual premiums paid as of the date hereof by Main Street for such insurance
(the "Maximum Amount"). If the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount,
Sovereign shall use all reasonable efforts to maintain the most advantageous
policies of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Amount. In the event that Sovereign acts as its own insurer
for all of its directors and officers with respect to matters typically covered
by a directors' and officers' liability insurance policy, Sovereign's
obligations under this Section 4.05(b) may be satisfied by such self insurance,
so long as its senior debt ratings by Standard & Poor's Corporation and Xxxxx'x
Investors Services, Inc. are not lower than such ratings as of the date hereof.
52
(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 Main Street
Disclosure Schedule. In the event that any employee of Main Street who is a
party to an employment contract or a special termination agreement with Main
Street, or who is covered by Main Street's change in control policy (as
identified on Main Street's Disclosure Schedule), is offered and accepts
employment with Sovereign or any Sovereign subsidiary, Sovereign shall pay to
each such individual within five (5) days of the Effective Date, fifty percent
(50%) of the total amount to which such individual is entitled under such
agreement or policy and shall pay the remaining fifty percent (50%) of such
total amount in the event, but only in the event, that such employee's
employment with Sovereign or a Sovereign Subsidiary terminates on or prior to
the first annual anniversary date of the Effective Date.
(d) In the event that Sovereign or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 4.05.
(e) Sovereign agrees that, effective with the Effective Date, it
shall assume Main Street's 9.25% Subordinated Debentures due December 31, 2029
and all of Main Street's obligations under the related trust indenture, and
shall take all action necessary or appropriate in accordance therewith,
including, if required by the trustee, execution of a supplemental indenture and
other appropriate documents or certificates.
Section 4.06 No Other Bids and Related Matters. So long as this
---------------------------------
Agreement remains in effect, Main Street shall not and Main Street shall not
authorize or permit any of its directors, officers, employees or agents, to
directly or indirectly (i) solicit, initiate or encourage any inquiries relating
to, or the making of any proposal which relates to, an Acquisition Transaction
(as defined below) (ii) respond to any inquiry relating to an Acquisition
Transaction, except as otherwise advised in a written legal opinion of outside
counsel to Main Street to the effect that a failure to do so would result in a
breach of their fiduciary obligations under Pennsylvania law (provided that a
copy of such written opinion shall have been provided to Sovereign together with
a written notice that Main Street intends to respond to the inquiry no earlier
than three (3) Business Days following receipt by Sovereign of such notice),
(iii) recommend or endorse an Acquisition Transaction, (iv) participate in any
discussions or negotiations
53
regarding an Acquisition Transaction, (v) provide any third party (other than
Sovereign or an affiliate of Sovereign) with any nonpublic information in
connection with any inquiry or proposal relating to an Acquisition Transaction,
(vi) enter into an agreement with any other party with respect to an Acquisition
Transaction or (vii) fail to recommend and support the Merger to Main Street
shareholders. Main Street will immediately cease and cause to be terminated any
existing activities, discussions or negotiations previously conducted with any
parties other than Sovereign with respect to any of the foregoing, and will take
all actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 4.06. Main Street will notify Sovereign orally (within one day)
and in writing (as promptly as practicable) if any inquiries or proposals
relating to an Acquisition Transaction are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, Main Street. As used in this Agreement,
"Acquisition Transaction" shall mean one of the following transactions with a
party other than Sovereign of an affiliate of Sovereign (i) a merger or
consolidation, or any similar transaction, involving Main Street or a Main
Street Subsidiary, (ii) a purchase, lease or other acquisition of all or a
substantial portion of the assets or liabilities of Main Street or a Main Street
Subsidiary or (iii) a purchase or other acquisition (including by way of share
exchange, tender offer, exchange offer or otherwise) of a substantial interest
in any class or series of equity securities of Main Street or a Main Street
Subsidiary.
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule. Each
--------------------------------------------------
party shall promptly advise the other party of any change or event having a
Material Adverse Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Each party shall update its respective
Disclosure Schedule as promptly as practicable after the occurrence of an event
or fact which, if such event or fact had occurred prior to the date of this
Agreement, would have been disclosed in such Disclosure Schedule. The delivery
of such updated Schedule shall not relieve a party from any breach or violation
of this Agreement and shall not have any effect for the purposes of determining
the satisfaction of the condition set forth in Sections 5.01(c) and 5.02(c)
hereof, as applicable.
Section 4.08 Conduct of Sovereign's Business. From the date of this
-------------------------------
Agreement to the Closing Date, Sovereign will use its reasonable good faith
efforts to (i) preserve its business organizations intact, (ii) maintain good
relationships with employees, and (iii) preserve for itself the goodwill of
customers of Sovereign and Sovereign Subsidiaries and others with whom business
relationships exist.
54
Section 4.09 Current Information.
-------------------
(a) During the period from the date of this Agreement to the
Effective Date, each party shall, upon the request of the other party, cause one
or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of the other party regarding its financial
condition, operations and business and matters relating to the completion of the
transactions contemplated hereby. Within fifteen (15) days after the end of each
month, Main Street will deliver to Sovereign a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month.
(b) Main Street shall provide to Sovereign a copy of the minutes
of any meeting of the Board of Directors of Main Street or any Main Street
Subsidiary, or any committee thereof, or any senior management committee,
promptly after such minutes are approved at a subsequent meeting of the board or
committee, but in any event within thirty (30) days of the meeting of such board
or committee to which such minutes relate, except that with respect to any
meeting held within thirty (30) days of the Closing Date, such minutes shall be
provided prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and Main Street.
-----------------------------------------
(a) From and after the date of this Agreement, Main Street
shall:
(i) Voting by Directors. Use its best efforts to cause all
-------------------
members of Main Street's Board of Directors to vote all shares of Main
Street's Common Stock beneficially owned by each such director in favor of
this Agreement and to recommend to shareholders of Main Street and
otherwise support the Merger;
(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 Main Street or any Main Street Subsidiary on the date hereof;
(iii) Approval of Bank Plan of Merger. Approve the Bank Plan
-------------------------------
of Merger as sole shareholder of Main Street Bank and obtain the approval
of, and cause the execution and delivery of, the Bank Plan of Merger by
Main Street Bank;
55
(iv) Proxy Solicitor. If Sovereign requests and agrees to
---------------
bear the expense thereof, retain a proxy solicitor in connection with the
solicitation of Main Street shareholder approval of this Agreement;
(v) Outside Service Bureau Contracts. If requested to do
--------------------------------
so by Sovereign, use its reasonable best efforts to obtain an extension of
any contract with an outside service bureau or other vendor of services to
Main Street or any Main Street Subsidiary, on terms and conditions mutually
acceptable to Main Street and Sovereign;
(vi) Committee Meetings. Permit a representative of
------------------
Sovereign, who is reasonably acceptable to Main Street, to attend all
committee meetings of Main Street and Main Street Bank management
including, without limitation, any loan or asset/liability committee;
(vii) List of Nonperforming Assets. Provide Sovereign,
----------------------------
within ten (10) days after the quarterly meeting of its Asset Review
Committee, a written list of nonperforming assets as of the end of such
month;
(viii) Reserves and Merger-Related Costs. On or after
---------------------------------
January 1, 2002, but 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 Main
Street to those of Sovereign (as such practices and methods are to be
applied to Main Street from and after the Closing Date) and Sovereign's
plans with respect to the conduct of the business of Main Street following
the Merger and otherwise to reflect Merger-related expenses and costs
incurred by Main Street, provided, however, that Main Street shall not be
required to take such action (A) more than five (5) days prior to the
Effective Date; and (B) unless Sovereign agrees in writing that all
conditions to closing set forth in Section 5.02 have been satisfied or
waived (except for the expiration of any applicable waiting periods); prior
to the delivery by Sovereign of the writing referred to in the preceding
clause, Main Street shall provide Sovereign a written statement, certified
without personal liability by the chief executive officer of Main Street
and dated the date of such writing, that the representation made in Section
2.15 hereof is true as of such date or, alternatively, setting forth in
detail the circumstances that prevent such representation from being true
as of such date; and no accrual or reserve made by Main Street or any Main
Street 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
56
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;
(ix) Shareholders' Meeting. Main Street shall take all
---------------------
action necessary to properly call and convene a special meeting of its
shareholders as soon as reasonably practicable to consider and vote upon
this Agreement and the transactions contemplated hereby; the Board of
Directors of Main Street shall recommend that the shareholders of Main
Street, approve this Agreement and the transactions contemplated hereby;
(x) Personnel Information. Deliver to Sovereign, if not
---------------------
done so heretofore, schedule(s) of all employees including pertinent
information concerning each such employee as reasonably requested by
Sovereign and sorted as reasonably requested by Sovereign; such schedule(s)
shall be updated as necessary to reflect in a timely manner any deletions
or additions; make available for inspection and copying by Sovereign all
personnel records;
(xi) Personnel Additions and Terminations. If requested
------------------------------------
by Sovereign, advise and consult with Sovereign regarding the hiring or
termination of any employee;
(xii) Employment Policies. Deliver to Sovereign all
-------------------
personnel policy manuals, memoranda and postings, and all employee
handbooks or other communications with employees regarding personnel
policies and practices; furnish additional information as reasonably
requested by Sovereign with respect to such policies and practices and any
others not covered by any such written materials;
(xiii) WARN Notices. Assist Sovereign as reasonably
------------
requested by it in connection with Sovereign providing notices to affected
employees under the Workers Adjustment and Retraining Notification Act or
complying with any other Labor and Employment Law;
(xiv) Employment Law Claims. Inform Sovereign promptly
---------------------
upon receiving notice of any legal, administrative, arbitration or other
proceedings, demands, notices, audits or investigations (by any federal,
state or local commission, agency or board) relating to the alleged
liability of Main Street or any Main Street Subsidiary under any Labor and
Employment Law;
57
(xv) MOU. Use its best efforts to cause the termination
---
of the MOU prior to the Closing Date; and
(xvi) Bond Portfolio Hedge. Within ten (10) Business Days
--------------------
of this Agreement, take, in consultation with Sovereign, such actions as
are necessary in the reasonable judgment of Main Street and Sovereign to
hedge Main Street's bond portfolio on a basis reasonably satisfactory to
Sovereign.
(b) From and after the date of this Agreement, Sovereign and
Main Street shall each:
(i) Identification of Main Street's Affiliates.
------------------------------------------
Cooperate with the other and use its best efforts to identify those persons
who may be deemed to be Affiliates of Main Street;
(ii) Public Announcements. Cooperate and cause its
--------------------
respective officers, directors, employees and agents to cooperate in good
faith, consistent with their respective legal obligations, in the
preparation and distribution of, and agree upon the form and substance of,
any press release related to this Agreement and the transactions
contemplated hereby, and any other public disclosures related thereto,
including without limitation communications to Main Street shareholders,
Main Street's internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any disclosure
which its counsel deems necessary under applicable law;
(iii) Maintenance of Insurance. Maintain, and cause their
------------------------
respective Subsidiaries to maintain, insurance in such amounts as are
reasonable to cover such risks as are customary in relation to the
character and location of its properties and the nature of its business;
(iv) Maintenance of Books and Records. Maintain, and
--------------------------------
cause their respective Subsidiaries to maintain, books of account and
records in accordance with GAAP applied on a basis consistent with those
principles used in preparing the financial statements heretofore delivered;
(v) Delivery of Securities Documents. Deliver to the
--------------------------------
other, copies of all Securities Documents simultaneously with the filing
thereof; and
(vi) Taxes. File all federal, state, and local tax
-----
returns required to be filed by them or their respective Subsidiaries on or
before the
58
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
and provide or properly accrual for taxes not yet due and payable.
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 Main Street (as well
as any other plan of Main Street providing for benefits not subject to ERISA)
may, at Sovereign's election and subject to the requirements of the IRC,
continue to be maintained separately or consolidated or terminated, except as
set forth below. In connection with implementation of the foregoing, the
following provisions and guidelines shall apply:
(i) Sovereign Employee Stock Ownership Plan ("Sovereign
---------------------------------------------------
ESOP"). Employees of Main Street and Main Street Subsidiaries who become
-----
employees of Sovereign or a Sovereign Subsidiary shall become entitled to
participate in the Sovereign ESOP in accordance with its terms by treating
them as newly employed individuals without any prior service credit under
such plan.
(ii) Sovereign 401(k) Retirement Plan ("Sovereign 401(k)
---------------------------------------------------
Plan"). Employees of Main Street and Main Street Subsidiaries who become
-----
employees of Sovereign or a Sovereign Subsidiary shall become entitled to
participate in the Sovereign 401(k) Plan in accordance with its terms. In
this regard, each such employee shall (A) receive, for purposes of
participation and vesting only, credit for all service with Main Street or
a Main Street Subsidiary credited to each such employee under Main Street's
401(k) Plan as of the Effective Date, and (B) enter the Sovereign 401(k)
Plan as soon as administratively feasible following completion of three (3)
months of service (within the meaning of the Sovereign 401(k) Plan) with
either Main Street or Sovereign, or both.
(iii) Main Street Savings Plan ("Main Street 401(k) Plan").
--------------------------------------------------
After the Effective Date, Sovereign will initially continue to maintain
Main Street's 401(k) Plan until its participants generally become eligible
to participate in the Sovereign 401(k) Plan. Thereafter, Sovereign shall
have the right, but not the obligation, to combine the two plans on such
terms as it deems appropriate and in accordance with applicable law.
(iv) Sovereign and Main Street Nonqualified Deferred
-----------------------------------------------
Compensation Plans ("Excess Benefit Plans"). Following the Merger,
------------------------------------------
59
Sovereign will, as soon as administratively feasible, consolidate the
Excess Benefit Plans maintained by Sovereign and Main Street to supplement
certain pension benefits lost by some employees by reason of limitations
contained in the IRC. Such consolidation shall be effected in such a manner
that no person receive redundant benefits or lose existing benefits. The
intent of the preceding sentence is that affected employees of Main Street
and Main Street Subsidiaries generally shall be entitled only to the sum of
(A) the benefits accrued under the Main Street Excess Benefit Plan(s) as of
the plan consolidation, and (B) the benefits accrued thereafter under the
combined Excess Benefit Plan.
(v) Welfare Benefit Plans. After the Effective Date, the
---------------------
welfare benefit plans of Sovereign and Main Street (and their respective
subsidiaries) shall initially remain unchanged. Sovereign shall undertake a
study, in consultation with appropriate professional advisors, with a view
toward the possible combination of some or all of such plans or the
benefits provided thereunder. Following such study, Sovereign shall take
such action with respect to such plans (which may include the
implementation of new benefits, reduction or elimination of some benefits,
and the alteration of the respective cost allocation between employer and
employee) as it deems appropriate under the circumstances. In the event of
any termination of or consolidation of a Main Street welfare plan with any
Sovereign welfare plan, all employees of Main Street and Main Street
Subsidiaries who are eligible for continued coverage under the Main Street
welfare plan shall have immediate coverage under any successor welfare plan
without the necessity of satisfying a waiting period for coverage of any
pre-existing condition. Sovereign does not provide welfare benefits to
retired employees.
(vi) Main Street Bonus Plans and Arrangements. Main Street
----------------------------------------
may continue to administer such bonus programs and arrangements as are
disclosed pursuant to this Agreement through the Effective Date, with such
equitable modifications as may be appropriate to take into account the
circumstances of the Merger and the timing thereof; provided, however, that
aggregate payments under Main Street bonus plans and arrangements for the
fiscal year ending December 31, 2001 shall not exceed the amount set forth
in the Main Street Disclosure Schedule. For purposes of determining
expenses of Main Street under the Main Street bonus plans and arrangements,
any expenses incurred by Main Street as a result of Section 4.10(a)(viii)
of this Agreement, as a result of the bond fund hedge referenced in Section
4.10(a)(xiv) of this Agreement or as a result of any loss of earnings
resulting from a replacement, at the request of Sovereign, of
60
U.S. government agency obligations held in Main Street's investment
portfolio shall be disregarded.
(vii) Other Main Street Plans. From the date of this
-----------------------
Agreement through the Effective Date of the Merger, without the prior
written consent of Sovereign and except as otherwise expressly permitted by
this Agreement, no further benefits, grants or awards shall be made
available under any other Main Street plans to employees or directors,
including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, and performance shares.
(b) Termination Benefits. Main Street shall use its reasonable
--------------------
best efforts to cause to be delivered to Sovereign within five (5) Business Days
following execution of this Agreement with respect to each executive officer
named on the Benefits Schedule included in the Main Street Disclosure Schedule,
the written acknowledgment of each such individual in the form attached hereto
as Exhibit 3 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 maximum amount that would be due to such individual under any
employment agreement, special termination agreement, supplemental executive
retirement plan, deferred bonus plan, deferred compensation plan, salary
continuation plan, or any other pension benefit or welfare benefit plan
maintained by Main Street solely for the benefit of officers of Main Street or
Main Street Subsidiaries assuming a termination of such individual's employment
on January 1, 2002 and assuming December 31, 2001 as the Closing Date. Main
Street and Sovereign acknowledge and agree that the amounts shown on the
Benefits Schedule and the letter of acknowledgment for each officer named herein
reflect a good faith estimate of the maximum amounts that will be payable to
such individuals under the circumstances described and may be subject to
adjustment upon an actual termination of employment in order to reflect
increases in such individuals' compensation and benefit plans consistent with
past practices for routine periodic increases.
(c) Severance Policy. Sovereign agrees to cause Sovereign Bank
----------------
to provide severance pay, as set forth below, to any full-time, active employee
of Main Street whose employment is terminated hereafter in connection with the
Merger up to twelve (12) months beyond the Effective Date, because (i) such
employee's position is eliminated, or (ii) such employee is not offered or
retained in comparable employment (i.e., a position of generally similar job
description or responsibilities in a location within a thirty (30)-mile radius
from either such employee's work location with Main Street or residence),
excluding any
61
employee (i) who has an existing employment or consulting agreement with Main
Street or any Main Street Subsidiary,(ii) who has accepted an offer from
Sovereign of noncomparable employment or (iii) whose employment is terminated
for Cause (as defined below), provided such employee executes such documentation
--------
as Sovereign may reasonably require, including Sovereign's customary form of
release and provided such employee does not leave employment with Main Street or
Sovereign prior to the date the systems conversion occurs. The severance Pay to
be provided by Sovereign under this subsection shall equal two (2) weeks' pay
for each full year of continuous service (determined based on the date of the
employee's commencement of employment with Main Street) with a minimum severance
benefit of eight (8) weeks' pay and a maximum severance benefit of fifty-two
(52) weeks' pay. For purposes of this Section 4.11(c), "Cause" shall mean
termination because of the employee's personal dishonesty, failure to meet
established performance goals and standards, misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties or
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses). The benefits provided to terminated Main Street employees
under this subsection are the only severance benefits payable by Main Street to
such employees (excluding severance benefits provided under existing employment
or consulting agreements or as otherwise required by law), except for employees
who do not execute the documentation required by Sovereign, which employees
shall be entitled to the termination benefits provided under Main Street's
normal severance policies. The benefits payable to Main Street's employees under
this subsection or otherwise shall in any event be in lieu of any termination
benefits to which such employees would otherwise be entitled under Sovereign's
or Sovereign Bank's severance policies or programs then in effect.
(d) Intention Regarding Future Employment. Sovereign and
-------------------------------------
Sovereign Bank shall use their reasonable best efforts to inform the employees
of Main Street at least sixty (60) days prior to the Effective Date of the
likelihood of such employees having continued employment with Sovereign Bank
following the Effective Date and, where appropriate in Sovereign Bank's
judgment, it will consider for employment opportunities at Sovereign Bank such
employees who would otherwise be terminated.
(e) Retention Bonuses. Notwithstanding Section 4.11(c), each
-----------------
employee of Main Street or of Main Street Bank identified in the Main Street
Disclosure Schedule shall be entitled to receive a "retention" bonus from Main
Street (or the applicable Main Street Subsidiary) as determined by the executive
officers of Main Street (after consultation with Sovereign) and as set forth on
the Main Street Disclosure Schedule in the event that such employee remains an
62
employee of Main Street (or the applicable Main Street Subsidiary), until the
date the systems conversion occurs (or such other date established or adjusted
by Sovereign not to exceed forty-five 45 days following the date the system
conversion occurs) or is terminated prior to the date of the systems conversion,
but after the Effective Date, and satisfactorily fulfills the duties and
responsibilities of the position of such employee of Main Street (or the
applicable Main Street Subsidiary) through the employee's termination date;
provided, however, that retention bonuses, in the aggregate, shall not exceed
$500,000.
(f) Outplacement Services. Sovereign shall provide customary
---------------------
outplacement services to all Main Street employees, including executive
officers, whose employment is terminated in connection with the Merger.
Section 4.12 Affiliate Letter. Main Street shall use its best
----------------
efforts to cause to be delivered to Sovereign, concurrently with the execution
of this Agreement or within five (5) Business Days thereafter, the Letter
Agreement attached hereto as Exhibit 1, executed by each director, officer and
any Affiliate of Main Street.
Section 4.13 Sovereign Rights Agreement. Sovereign agrees that any
--------------------------
Sovereign Rights issued pursuant to the Sovereign Rights Agreement shall be
issued with respect to each share of Sovereign Common Stock issued pursuant to
the terms hereof regardless whether there has occurred a "Distribution Date"
under the terms of such Sovereign Rights Agreement prior to the Effective Date,
as well as to take all action necessary or advisable to enable the holder of
each such share of Sovereign Common Stock to obtain the benefit of such
Sovereign Stock Purchase Rights notwithstanding their prior distribution,
including without limitation, amendment of the Sovereign Rights Agreement.
Section 4.14 Advisory Board. On the Effective Date, Sovereign Bank
--------------
shall establish the Main Street Advisory Board (the "Main Street Advisory
Board"), which shall consist of all members of the Main Street Board immediately
prior to the Effective Date other than such members who become directors of
Sovereign Bank. The Main Street Advisory Board shall be maintained for a term of
thirty-six (36) months from the Effective Date. Each member of the Main Street
Advisory Board shall be paid for services as such the greater of the fees for
such service according to the fee schedule to be established by Sovereign, or
Main Street's existing fee schedule set forth in Main Street Disclosure
Schedule; provided, however, that notwithstanding anything else in this Section
4.14, (i) if a member fails to attend at least 25% of the meetings of the Main
Street Advisory Board called within any year, such member will not have any
rights to additional fees thereafter as a Main Street Advisory Board member;
(ii) no attendance fees
63
shall be paid for meetings not actually attended; and (iii) Sovereign Bank shall
have no obligation to continue the services of any advisory director who, in the
reasonable judgment of Sovereign Bank, acts in a manner detrimental to Sovereign
Bank. In the event that Sovereign Bank terminates, suspends or disbands the Main
Street Advisory Board, fails to require or request the attendance of a member
with respect to at least ten (10) meetings of the Main Street Advisory Board
and/or committee thereof within a single year or removes a member of the Main
Street Advisory Board other than because such member acted in a manner
detrimental to Bank, in each case prior to the end of the thirty-six (36) month
period contemplated by this Section 4.14 and subject to the proviso of the
preceding sentence, any member affected by any such action or failure shall
nonetheless be paid the full fees (assuming at least ten (10) meetings annually
had been held) pursuant to clause (i) of the preceding sentence or the amount
contemplated by clause (ii) thereof, whichever is greater, with respect to such
thirty-six (36) month period. In no event shall aggregate annual fees payable to
the Main Street Advisory Board exceed $123,900 (the average of the aggregate
annual fees paid in each of 1998, 1999 and 2000).
ARTICLE V
CONDITIONS
----------
Section 5.01 Conditions to Main Street's Obligations under this
--------------------------------------------------
Agreement. The obligations of Main Street hereunder shall be subject to
---------
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Main Street 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 Main Street 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;
64
(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 Main Street; 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, 2000,
--------------------------
there shall not have occurred any Material Adverse Effect with respect to
Sovereign;
(g) Officer's Certificate. Sovereign shall have delivered to
---------------------
Main Street a certificate and such other documents, dated the Closing Date and
signed, without personal liability, by its chairman or president, to the effect
that the conditions set forth in subsections (a) through (e) of this Section
5.01 have been satisfied, to the best knowledge of the officer executing the
same;
(h) Registration Statement. The Registration Statement shall
----------------------
be effective under the Securities Act and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained and neither the Registration Statement nor any such
approval by state securities or "blue sky" authorities shall be subject to a
stop order or threatened stop order by the SEC or any such authority;
(i) Tax Opinion. Main Street shall have received an opinion of
-----------
Xxxxxxx & Xxx, P.C. substantially to the effect set forth on Exhibit 4 attached
hereto;
65
(j) NYSE Listing. The shares of Sovereign Common Stock that
------------
may be issued in the Merger shall have been approved for listing, subject to
official notice of issuance.
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, Main Street and Main Street 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
Main Street and Main Street Bank; and Sovereign shall have received certified
copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of Main Street,
---------
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 Main Street;
(c) Representations and Warranties. The representations and
------------------------------
warranties of Main Street 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 Main Street;
(d) Approvals of Regulatory Authorities. Sovereign shall have
-----------------------------------
received all required approvals of Regulatory Authorities for 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;
66
(f) No Material Adverse Effect. Since December 31, 2000,
--------------------------
there shall not have occurred any Material Adverse Effect with respect to Main
Street;
(g) Officer's Certificate. Main Street shall have delivered
---------------------
to Sovereign a certificate and such other documents, dated the Closing Date and
signed, without personal liability, by its chairman of the board or president,
to the effect that the conditions set forth in subsections (a) through (e) of
this Section 5.02 have been satisfied, to the best knowledge of the officer
executing the same;
(h) Registration Statement. The Registration Statement shall
----------------------
be effective under the Securities Act and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained and neither the Registration Statement nor any such
approval by state securities or "blue sky" authorities shall be subject to a
stop order or threatened stop order by the SEC or any such authority;
(i) Tax Opinion. Sovereign shall have received an opinion of
-----------
Xxxxxxx & Xxx, P.C. substantially to the effect set forth on Exhibit 4 attached
hereto;
(j) Phase I Environmental Audit Results. The results of any
-----------------------------------
"phase I environmental audit" conducted pursuant to Section 4.10(a)(ii) with
respect to owned or occupied bank premises shall be reasonably satisfactory to
Sovereign; provided, however, that (i) any such environmental audit must be
initiated within 30 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(j) within 15 days of receiving the results of such
environmental audit and (iii) Sovereign may not terminate this Agreement under
this Section 5.02(j) unless the results of such audits result in a Material
Adverse Effect on Sovereign.
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 Main Street:
67
(i) if the Closing Date shall not have occurred on or
before March 31, 2002, unless the failure of such occurrence shall be due
to the failure of the party seeking to terminate this Agreement to perform
or observe, in any material respect, its agreements set forth in this
Agreement required to be performed or observed by such party on or before
the Closing Date; provided, however, that such date may be extended to June
30, 2002 by Sovereign by written notice to Main Street if the Closing shall
not have occurred because of the failure to obtain approval from one or
more Regulatory Authorities whose approval is required in connection with
this Agreement; or
(ii) if either party has received a final unappealable
administrative order from a Regulatory Authority whose approval or consent
has been requested that such approval or consent will not be granted;
(iii) unless in the case of both Section 6.01(b)(i) and
6.01(b)(ii) hereof the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe in any material respect its agreements set forth herein required to
be performed or observed by such party on or before the Closing Date.
(c) by Main Street if Main Street's shareholders fail to approve
this Agreement at the special meeting of Main Street shareholders called for
that purpose; provided a period of at least thirty days elapsed between the date
of mailing the Proxy Statement/Prospectus and that a quorum is present at such
special meeting.
(d) By Main Street, 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 $9.04; and
(2) (i) the quotient obtained by dividing the Sovereign Market
Value as of the close of business on the Determination Date by $12.92 (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); provided, however, that if
Sovereign delivers to Main Street on the Closing Date a written notice
increasing the Common Stock Exchange Ratio to an amount which, when
68
multiplied by the Sovereign Market Value equals $10.98, then no Termination
of this Agreement shall occur under this Section 6.01(k).
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 ten bank or 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 acquirer'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 eight thrift holding companies and the weights
attributed to them are as follows:
Bank or Thrift Holding Companies % Weighting
-------------------------------- -----------
M&T Bank Corp 21.46%
Charter One Financial, Inc. 18.47%
North Fork Bancorp, Inc. 14.27%
Greenpoint Financial Corp 11.06%
Banknorth Group, Inc 8.75%
Astoria Financial Corp 8.25%
Xxxxxx Financial Corp 4.70%
Xxxxxxx Financial Corp 4.56%
Valley National Bancorp 6.21%
Susquehanna Bancshares, Inc 2.28%
------
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 the day prior to announcement of this
Agreement.
69
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); or
(e) By Sovereign at any time prior to the Closing Date if the
Board of Directors of Main Street shall have (i) failed to recommend and endorse
this Agreement and the transactions contemplated hereby, (ii) withdrawn,
modified or changed in a manner adverse to Sovereign its approval or
recommendation of this Agreement and the transactions contemplated hereby, or
(iii) recommended or endorsed another Acquisition Transaction.
(f) At any time on or prior to the Effective Date, by Main
Street in writing if Sovereign has, or by Sovereign in writing if Main Street
has, in any material respect, breached (i) any material covenant or undertaking
contained herein or (ii) any representation or warranty contained herein, which
in the case of a breach referred to in subclause (i) or (ii) above by Sovereign
would have a Material Adverse Effect on Sovereign and in case of a breach
referred to in subclause (i) or (ii) above by Main Street would have a Material
Adverse Effect on Main Street, in any case if such breach has not been
substantially cured by the earlier of thirty (30) days after the date on which
written notice of such breach is given to the party committing such breach or
the Effective Date or if on such date such breach no longer causes a Material
Adverse Effect.
Section 6.02 Effect of Termination.
---------------------
(a) 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)(ii) 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
Main Street to the other, except for any liability arising out of any uncured
willful breach of any covenant or other agreement contained in this Agreement,
except for any fraudulent breach of a representation or warranty.
(b) Notwithstanding anything set forth in Section 6.02(a), in
the event this Agreement is terminated by Main Street or Sovereign pursuant to
Section 6.01(b)(i) or (ii) as a result of Sovereign's failure to obtain approval
or consent from a Regulatory Authority whose approval or consent has been
requested, for any reason other than a reason resulting from a breach of a
representation or warranty by Main Street, Sovereign shall pay Main Street,
within fifteen (15) days of Sovereign's receipt of a written demand therefor,
agreed upon
70
liquidated damages in the amount of $2,000,000. Such payment shall c onstitute
the sole and exclusive remedy of Main Street for termination of the Agreement as
a result of failure to obtain the approval of required Regulatory Authorities.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Expenses. Except for the cost of printing and mailing
--------
the Proxy Statement/Prospectus which shall be shared equally, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and Warranties. All
----------------------------------------------
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants that by
their terms are to be performed after the Effective Date, including without
limitation the covenants set forth in Sections 1.02(g), 1.02(h), 4.05, and
4.11(a), (c), (e) and (f) which will survive the Merger, shall terminate on the
Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject to applicable
-------------------------------
law, at any time prior to the consummation of the transactions contemplated by
this Agreement, the parties may (a) amend this Agreement, (b) extend the time
for the performance of any of the obligations or other acts of either party
hereto, (c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (d) waive
compliance with any of the agreements or conditions contained in Articles IV and
V hereof or otherwise provided that any amendment, extension or waiver granted
or executed after shareholders of Main Street have approved this Agreement shall
not modify either the amount or the form of the consideration to be provided
hereby to holders of Main Street Common Stock upon consummation of the Merger or
otherwise materially adversely affect the shareholders of Main Street without
the approval of the shareholders who would be so affected. This Agreement may
not be amended except by an instrument in writing authorized by the respective
Boards of Directors and signed, by duly authorized officers, on behalf of the
parties hereto. Any agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in writing signed by a
duly authorized officer on behalf of such party, but such waiver or failure to
insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
71
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(g), 1.02(h), 4.05, and 4.11(a), (c) and (f).
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 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxx, Senior Vice President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxx, P.C.
000 Xxxxx Xxxxx Xxxxxx, X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esquire
and
Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
72
(b) If to Main Street, to:
Main Street Bancorp, Inc.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx,
President and Chief Executive Officer
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxx & Xxxxx LLP
One South Market Square, 12 floor, X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, 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.
73
Section 7.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic internal law of the Commonwealth of
Pennsylvania, excluding its conflicts of law principles.
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/ Xxxx X. XxXxxxxx
-----------------------------------------
Xxxx X. XxXxxxxx
MAIN STREET BANCORP, INC.
By /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxx,
President and Chief Executive Officer
74
EXHIBIT 1
FORM OF AFFILIATE LETTER
------------------------
July 16, 2001
Sovereign Bancorp, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and Main Street Bancorp, Inc. ("Main
Street") desire to enter into an agreement dated July 16, 2001 ("Agreement"),
pursuant to which, subject to the terms and conditions set forth therein, (a)
Main Street will merge with and into Sovereign with Sovereign surviving the
merger and (b) shareholders of Main Street will receive common stock of
Sovereign and/or cash in exchange for common stock of Main Street 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
Main Street of the Agreement, that the undersigned, being a director, executive
officer and/or major shareholder of Main Street, execute and deliver to
Sovereign this Letter Agreement.
The undersigned, in order to induce Sovereign to execute the Agreement,
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of Main Street called to vote for approval of the Agreement and the
Merger so that all shares of common stock of Main Street then owned by the
undersigned or over which the undersigned exercises voting control
(collectively, "Shares") will be counted for the purpose of determining the
presence of a quorum at such meetings, and agrees to vote or cause to be voted
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 Main Street) and (ii)
against approval or adoption of any other merger, business combination,
recapitalization, asset sale, partial liquidation or similar transaction
involving Main Street;
75
(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 Main
Street, to approve or adopt the Agreement;
(c) Agrees to recommend the Merger to shareholders of Main Street and not
to withdraw or modify such recommendation if the undersigned is a member of the
Board of Directors of Main Street, and to otherwise use reasonable best efforts
to cause the Merger to be completed;
(d) Except as required by law, agrees that the undersigned will not, and
will not permit any company, trust or other entity controlled by the undersigned
to, contract to sell, sell or otherwise transfer or dispose of any of the Shares
or any interest therein or any voting rights with respect thereto, other than
subsequent to the shareholder meeting of Main Street held in connection with the
vote on the Agreement or pursuant to a gift where the donee has agreed in
writing to abide by the terms of this agreement in a form reasonably
satisfactory to Sovereign.
(e) 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, 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;
(f) Agrees that neither Main Street nor Sovereign shall be bound by any
attempted sale of any shares of Main Street Common Stock or Sovereign common
stock, respectively, and 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
76
common stock owned by the undersigned may be endorsed with a restrictive legend
consistent with the terms of this Letter Agreement;
(g) Acknowledges and agrees to use reasonable efforts to cause the
provisions of subparagraph (e) hereof to be observed with respect to shares of
Sovereign common stock received in the Merger owned by (i) his or her spouse,
(ii) any of his or her relatives or relatives of his or her spouse occupying his
or her home, (iii) any trust or estate in which he or she, his or her spouse, or
any such relative owns at least a 10% beneficial interest or of which any of
them serves as trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any affiliate of the
undersigned, his or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest;
(h) Represents that the undersigned has 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.
_____________________________
It is understood and agreed that the provisions of subparagraphs (a), (b) and
(c) of this Letter Agreement relate solely to the capacity of the undersigned as
a shareholder or other beneficial owner of shares of Main Street common stock
and is not in any way intended to affect the exercise by the undersigned of the
undersigned's responsibilities as a director or officer of Main Street. It is
further understood and agreed that such subparagraphs of this Letter Agreement
are not in any way intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in respect of any shares
of Main Street common stock held or controlled by the undersigned as of the date
hereof.
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement.
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same Letter Agreement.
This Letter Agreement shall inure to the benefit of Sovereign, and shall be
binding on the undersigned and his or her executors, personal representatives,
77
administrators, heirs, legatees, guardians and other personal representatives.
This Agreement shall survive the death or incapacity of the undersigned.
The undersigned agrees that, in the event of his or her breach of this
Letter Agreement, Sovereign shall be entitled to such remedies and relief
against the undersigned as are available at law or in equity. The undersigned
acknowledges that there is not an adequate remedy at law to compensate Sovereign
for a violation of this agreement, and irrevocably waives, to the extent
permitted by law, any defense that he or she might have based on the adequacy of
a remedy at law which might be asserted as a bar to specific performance,
injunctive relief, or other equitable relief. The undersigned agrees to the
granting of injunctive relief without the posting of any bond and further agrees
that, if any bond shall be required, such bond shall be in a nominal amount.
Please confirm, intending to be legally bound, that the foregoing correctly
states the understanding between the undersigned and Sovereign by signing and
returning to Sovereign a counterpart hereof.
Very truly yours,
Name:____________________________
Accepted as of this ____ day of July 2001:
Sovereign Bancorp, Inc.
By: ____________________________
78
EXHIBIT 2
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement"), dated July 16,
2001, is by and between SOVEREIGN BANCORP, INC., a Pennsylvania corporation
("Sovereign") and MAIN STREET BANCORP, INC., a Pennsylvania corporation ("Main
Street").
BACKGROUND
----------
1. Sovereign and Main Street desire to enter into an Agreement and Plan of
Merger, dated July 16, 2001 (the "Agreement"), providing, among other things,
for the acquisition by Sovereign of Main Street through the merger of Main
Street with and into Sovereign, with Sovereign surviving the merger (the
"Merger").
2. As a condition to Sovereign executing the Agreement, Main Street is
granting to Sovereign an option to purchase up to that number of shares of
common stock, 1.00 par value of Main Street (the "Common Stock"), as shall equal
19.9% of shares of Common Stock of Main Street issued and outstanding
immediately prior to such purchase, on the terms and conditions hereinafter set
forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and agreements
set forth herein, Sovereign and Main Street, intending to be legally bound
hereby, agree:
1. Grant of Option.
---------------
(a) Main Street hereby grants to Sovereign, on the terms and
conditions set forth herein, an unconditional irrevocable option to purchase
(the "Option") up to 2,083,600 shares (as adjusted as set forth herein, the
"Option Shares") of Common Stock at a price per share (the "Option Price") equal
to $10.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock of Main Street without giving effect to any shares
subject to or issued pursuant to the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Stock Option Agreement), the number of shares of Common
Stock subject to the Option shall be increased so that, after such issuance,
such number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant
79
to the Option. Nothing contained in this Section 1(b) or elsewhere in this Stock
Option Agreement shall be deemed to authorize Issuer to issue shares in breach
of any provision of the Agreement.
2. Exercise of Option. Provided that (i) Sovereign shall not on the date of
------------------
exercise be in breach of the agreements or covenants contained in the Agreement
or herein, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, upon or after
the occurrence of a Triggering Event (as such term is hereinafter defined) and
until termination of this Stock Option Agreement in accordance with the
provisions of Section 23, Sovereign may exercise the Option, in whole or in
part, at any time or one or more times, from time to time. As used herein, the
term "Triggering Event" means the occurrence of any of the following events:
(a) a person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder), other than Sovereign or an affiliate of Sovereign,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 15% or more of the then outstanding shares of Common Stock
(excluding any shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission);
(b) a person or group, other than Sovereign or an affiliate of
Sovereign, enters into an agreement, letter of intent, or similar document
with Main Street pursuant to which such person or group or any affiliate of
such person or group would (i) merge or consolidate, or enter into any
similar transaction, with Main Street, (ii) acquire all or substantially
all of the assets or liabilities of Main Street or all or substantially all
of the assets or liabilities of Main Street Bank, the wholly-owned
subsidiary of Main Street ("Main Street Bank"), or (iii) acquire beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 15% or more of the then
outstanding shares of Common Stock (excluding any shares eligible to be
reported on Schedule 13G of the Securities and Exchange Commission) or the
then outstanding shares of common stock of Main Street Bank; or
(c) a person or group, other than Sovereign or an affiliate of
Sovereign, publicly announces a bona fide proposal (including a written
communication that is or becomes the subject of public disclosure) for (i)
any merger, consolidation or acquisition of all or substantially all the
assets or liabilities of Main Street or all or substantially all the assets
or liabilities of Main Street Bank, or any other business combination
involving Main Street or Main Street Bank, or (ii) a transaction involving
the transfer of beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities representing,
15% or more of the then outstanding shares of Common Stock or the then
outstanding shares of common stock of Main Street Bank (collectively, a
"Proposal"), and thereafter, if such Proposal has not been Publicly
Withdrawn (as such
80
term is hereinafter defined) at least 30 days prior to the meeting of
shareholders of Main Street called to vote on the Merger, Main Street's
shareholders fail to approve the Merger by the vote required by applicable
law at the meeting of shareholders called for such purpose or such meeting
has been cancelled; or
(d) a person or group, other than Sovereign or an affiliate of
Sovereign, makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, Main Street willfully takes any
action in a manner which would likely result in the failure of either party
to satisfy a material condition to the closing of the Merger or materially
reduce the value of the transaction to Sovereign; or
(e) the Board of Directors of Main Street shall (i) fail to recommend
and endorse the Agreement and the transactions contemplated thereby or (ii)
withdraw, modify, or change in a manner adverse to Sovereign its approval
or recommendation of the Agreement and the transactions contemplated
thereby, or (iii) recommend or endorse an Acquisition Transaction (as
defined in Section 4.06 of the Agreement); or
(f) Main Street breaches, in any material respect, any binding term
of the Agreement with respect to the Merger which would permit Sovereign to
terminate the Agreement or this Stock Option Agreement after a Proposal is
made and before it is Publicly Withdrawn or publicly announces an intention
to authorize, recommend or accept any such Proposal; provided, however,
that any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law.
If more than one of the transactions giving rise to a Triggering Event
under this Section 2 is undertaken or effected, then all such transactions shall
give rise only to one Triggering Event, which Triggering Event shall be deemed
continuing for all purposes hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Main Street or in soliciting or inducing any
other person (other than Sovereign or an affiliate of Sovereign) to do so.
Notwithstanding the foregoing, the obligation of Main Street to issue
Option Shares upon exercise of the Option shall be deferred (but shall not
terminate) (i) until the receipt of all required governmental or regulatory
approvals or consents necessary for Main Street to issue the Option Shares, or
Sovereign to exercise the Option, or until the expiration or termination of any
waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares, and, in each case, notwithstanding any provision to the contrary set
forth herein, the Option shall not expire or otherwise terminate.
00
Xxxx Xxxxxx shall notify Sovereign promptly in writing of the occurrence of
any Triggering Event known to it, it being understood that the giving of such
notice by Main Street shall not be a condition to the right of Sovereign to
exercise the Option. Subject to compliance with the applicable banking and
securities laws or regulations, Main Street will not take any action which would
have the effect of preventing or disabling Main Street from delivering the
Option Shares to Sovereign upon exercise of the Option or otherwise performing
its obligations under this Stock Option Agreement. In the event Sovereign
wishes to exercise the Option, Sovereign shall send a written notice to Main
Street (the date of which is hereinafter referred to as the "Notice Date")
specifying the total number of Option Shares it wishes to purchase and a place
and date between two and ten business days inclusive from the Notice Date for
the closing of such a purchase (a "Closing"); provided, however, that a Closing
shall not occur prior to two days after the later of receipt of any necessary
regulatory approvals or the expiration of any legally required notice or waiting
period, if any.
3. Repurchase of Option by Main Street.
-----------------------------------
(a) At the request of Sovereign at any time and from time to time
commencing upon the first occurrence of a Repurchase Event (as hereinafter
defined) and ending upon termination of this Stock Option Agreement in
accordance with the provisions of Section 00, Xxxx Xxxxxx shall repurchase from
Sovereign upon Sovereign's request (x) all or any portion of the Option Shares
not yet purchased by Sovereign pursuant hereto and (y) all or any portion shares
of Common Stock purchased by Sovereign pursuant hereto with respect to which
Sovereign then has beneficial ownership. The date on which Sovereign exercises
its rights under this Section 3 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 3 Repurchase
Consideration") equal to the sum of: (i) the aggregate Purchase Price paid by
Sovereign for any shares of Common Stock being repurchased which were acquired
pursuant to the Option and with respect to which Sovereign then has beneficial
ownership; (ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Section 6), multiplied by the number of shares of Common
Stock being repurchased with respect to which the Option has not been exercised;
and (iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment pursuant to Section 6) paid (or, in the case of Option
Shares with respect to which the Option has been exercised, but the Closing has
not occurred, payable) by Sovereign for each share of Common Stock being
repurchased with respect to which the Option has been exercised and with respect
to which Sovereign then has beneficial ownership, multiplied by the number of
such shares.
(b) If Sovereign exercises its rights under this Section 0, Xxxx
Xxxxxx shall, within ten (10) business days after the Request Date, pay the
Section 3 Repurchase Consideration to Sovereign in immediately available funds,
and contemporaneously with such payment, Sovereign shall surrender to Main
Street the Option and the certificate evidencing the shares of Common Stock
being repurchased with respect to which Sovereign then has beneficial
82
ownership, and Sovereign shall warrant that it has sole record and beneficial
ownership of such shares, and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever. In the event of
the repurchase of less than all of the Option Shares with respect to which the
Option has not been exercised, Main Street shall issue a new Stock Option
Agreement to Sovereign reflecting the remaining balance, if any, of Option
Shares after giving effect to such repurchase. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any banking agency or
department of any federal or state government, including without limitation the
Board of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Pennsylvania Department of Banking, or the respective staffs
thereof (the "Regulatory Authority"), is required in connection with the payment
of all or any portion of the Section 3 Repurchase Consideration, Sovereign shall
have the ongoing option to revoke its request for repurchase pursuant to Section
3, in whole or in part, or to require that Main Street deliver from time to time
that portion of the Section 3 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval), in which case the ten (10) business day period of time that
would otherwise run pursuant to the preceding sentence for the payment of the
portion of the Section 3 Repurchase Consideration shall run instead from the
date on which, as the case may be, any required notification period has expired
or been terminated or such approval has been obtained and, in either event, any
requisite waiting period shall have passed. If any Regulatory Authority
disapproves of any part of Main Street's proposed repurchase pursuant to this
Section 0, Xxxx Xxxxxx shall promptly give notice of such fact to Sovereign. If
any Regulatory Authority prohibits repurchase pursuant to this Section 0, Xxxx
Xxxxxx shall promptly give notice of such fact to Sovereign. If any Regulatory
Authority prohibits the repurchase in part but not in whole, then Sovereign
shall have the right (i) to revoke the repurchase request or (ii) to the extent
permitted by such Regulatory Authority, determine whether the repurchase should
apply to the Option and/or Option Shares subject to the repurchase request and
to what extent to each, and Sovereign shall thereupon have the right to exercise
the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
3(a)(ii) and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Sovereign shall notify Main Street of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 3(d)(i), (ii) the price per
share of Common Stock received by a holder of Common Stock in connection with
any merger or other business combination transaction described in Section
3(d)(ii), (iii) or (iv), or (iii) the highest closing sales price per share of
Common Stock quoted on the Nasdaq Stock Market during the sixty (60) business
days preceding the Request Date; provided, however, that in the event of a sale
of less than all of Main Street's assets, the Applicable Price shall be the sum
of the price paid in such sale for such
83
assets and the current market value of the remaining assets of Main Street's as
determined by a nationally-recognized investment banking firm selected by
Sovereign, divided by the number of shares of Common Stock outstanding at the
time of such sale. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally-recognized investment banking firm selected by Sovereign and
reasonably acceptable to Main Street, which determination shall be conclusive
for all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any person or
group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than Sovereign or an affiliate of Sovereign,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership of, 15% or more
of the then-outstanding shares of Common Stock, (ii) Main Street shall have
merged or consolidated with any person, other than Sovereign or an affiliate of
Sovereign, and shall not be the surviving or continuing corporation of such
merger or consolidation, (iii) any person, other than Sovereign or an affiliate
of Sovereign, shall have merged into Main Street and Main Street shall be the
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Common Stock have been changed into or exchanged for stock or other
securities of Main Street or any other person or cash or any other property or
the outstanding shares of Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the surviving corporation or (iv) Main Street shall have sold or
otherwise transferred more than 15% of its consolidated assets to any person,
other than Sovereign or an affiliate of Sovereign.
4. Payment and Delivery of Certificates. At any Closing hereunder, (a)
------------------------------------
Sovereign will make payment to Main Street of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Main Street, (b) Main Street will deliver to Sovereign a
stock certificate or certificates representing the number of Option Shares so
purchased, registered in the name of Sovereign or its designee, in such
denominations as were specified by Sovereign in its notice of exercise, and (c)
Sovereign will pay any transfer or other taxes required by reason of the
issuance of the Option Shares so purchased.
A legend will be placed on each stock certificate evidencing Option Shares
issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not been the
subject of a registration statement filed under the Securities Act of
1933, as amended (the "Act"), and declared effective by the Securities and
Exchange Commission. These shares may not be sold, transferred or
otherwise disposed of prior to such time unless Main Street Bancorp, Inc.
receives an opinion of counsel reasonably acceptable to it stating that an
exemption from the registration provisions of the Act is available for
such transfer."
84
5. Registration Rights. On or after the date of first exercise of the
-------------------
Option and upon receipt of a written request from Sovereign, Main Street shall
prepare and file as soon as practicable a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission covering the Option and such number of Option Shares as
Sovereign shall specify in its request, and Main Street shall use its best
efforts to cause such registration statement to be declared effective in order
to permit the sale or other disposition of the Option and the Option Shares,
provided that Sovereign shall in no event have the right to have more than one
such registration statement become effective, and provided further that Main
Street shall not be required to prepare and file any such registration statement
in connection with any proposed sale with respect to which counsel to Main
Street delivers to Main Street and to Sovereign its opinion to the effect that
no such filing is required under applicable laws and regulations with respect to
such sale or disposition; provided, however, that Main Street may delay any
registration of Option Shares above for a period not exceeding sixty (60) days
in the event that Main Street shall in good faith determine that any such
registration would adversely affect an offering or contemplated offering of
other securities by Main Street. Sovereign shall provide all information
reasonably requested by Main Street for inclusion in any registration statement
to be filed hereunder. In connection with such filing, Main Street shall use
its commercially reasonable efforts to cause to be delivered to Sovereign such
certificates, opinions, accountant's letters and other documents as Sovereign
shall reasonably request and as are customarily provided in connection with
registration of securities under the Securities Act. Main Street shall provide
to Sovereign such number of copies of the preliminary prospectus and final
prospectus and any amendments and supplements thereto as Sovereign may
reasonably request.
All expenses incurred by Main Street in complying with the provisions of
this Section 5, including, without limitation, all registration and filing fees,
reasonable printing expenses, reasonable fees and disbursements of counsel for
Main Street and blue sky fees and expenses, shall be paid by Main Street.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Sovereign and any other
expenses incurred by Sovereign in connection with such filing shall be borne by
Sovereign. In connection with such filing, Main Street shall indemnify and hold
harmless Sovereign against any losses, claims, damages or liabilities, joint or
several, to which Sovereign may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary or final registration statement or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and Main Street will
reimburse Sovereign for any legal or other expense reasonably incurred by
Sovereign in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that Main Street will not be
liable in any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such preliminary
85
or final registration statement or such amendment or supplement thereto in
reliance upon and in conformity with written information furnished by or on
behalf of Sovereign specifically for use in the preparation thereof. Sovereign
will indemnify and hold harmless Main Street to the same extent as set forth in
the immediately preceding sentence but only with reference to written
information furnished by or on behalf of Sovereign for use in the preparation of
such preliminary or final registration statement or such amendment or supplement
thereto; and Sovereign will reimburse Main Street for any legal or other expense
reasonably incurred by Main Street in connection with investigating or defending
any such loss, claim, damage, liability or action. Notwithstanding anything to
the contrary contained herein, no indemnifying party shall be liable for any
settlement effected without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any change
-----------------------------------------
in the Common Stock by reason of stock dividends, split-ups, recapitalizations,
combinations, conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be appropriately
adjusted.
7. Filings and Consents. Each of Sovereign and Main Street will use its
--------------------
commercially reasonable efforts to make all filings with, and to obtain consents
of, all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Stock Option Agreement.
8. Representations and Warranties of Main Street. Main Street hereby
---------------------------------------------
represents and warrants to Sovereign as follows:
(a) Due Authorization. Main Street has the requisite corporate power
-----------------
and authority to execute, deliver and perform this Stock Option Agreement and
all corporate action necessary for execution, delivery and performance of this
Stock Option Agreement has been duly taken by Main Street. This Stock Option
Agreement constitutes a legal, valid and binding obligation of Main Street,
enforceable against Main Street in accordance with its terms (except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(b) Authorized Shares. Main Street has taken all necessary corporate
-----------------
action to authorize and reserve for issuance all shares of Common Stock that may
be issued pursuant to any exercise of the Option.
9. Representations and Warranties of Sovereign. Sovereign hereby
-------------------------------------------
represents and warrants to Main Street that Sovereign has the requisite
corporate power and authority to execute, deliver and perform this Stock Option
Agreement and all corporate action necessary for execution, delivery and
performance of this Stock Option Agreement has been duly taken by Sovereign.
This Stock Option Agreement constitutes a legal, valid and binding obligation
of Sovereign, enforceable against Sovereign in accordance with its terms (except
as may be
86
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). Sovereign or its
assignee agrees to execute a standard investment representation letter with
respect to its acquisition of any Main Street securities acquired in connection
with this transaction.
10. Specific Performance. The parties hereto acknowledge that damages
--------------------
would be an inadequate remedy for a breach of this Stock Option Agreement and
that the obligations of the parties hereto shall be specifically enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. Sovereign may not sell, assign or otherwise
----------------------
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to a subsidiary of Sovereign subject to
compliance with applicable securities laws. Sovereign represents that it is
acquiring the Option for Sovereign's own account and not with a view to, or for
sale in connection with, any distribution of the Option or the Option Shares.
Sovereign is aware that neither the Option nor the Option Shares is the subject
of a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to Section 5 of the Securities Act,
but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by Sovereign in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
-----------------------------------
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation of any governmental authority or any applicable order
of any court or for any other purpose.
14. Validity. The invalidity or unenforceability of any provision of this
--------
this Stock Option Agreement shall not affect the validity or enforceability of
any other provisions of this Stock Option Agreement, which shall remain in full
force and effect.
15. Notices. All notices, requests, consents and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by telegram or telecopy, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
(i) If to Sovereign, to:
Sovereign Bancorp, Inc.
87
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx Xxxxxxxxxxxx 00000
Attention: Xxxx X. XxXxxxxx,
Senior Vice President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxx, P.C.
000 Xxxxx Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esquire
Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
(ii) If to Main Street, to:
Main Street Bancorp, Inc.
000 Xxxx Xxxxxx
Xxxxxxx Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxx & Xxxxx LLP
One South Market Square
12th Floor
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopy No.: (000) 000-0000
88
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by and
-------------
construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are inserted
--------
for convenience and reference purposes, and shall not limit or otherwise affect
any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual consent,
----------------------
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive (i) compliance with any of the covenants of
the other party contained in this Stock Option Agreement and/or (ii) the other
party's performance of any of its obligations set forth in this Stock Option
Agreement.
19. Parties in Interest. This Stock Option Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and, nothing in this
Stock Option Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two or
-----------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred by the parties hereto in connection with the transactions
contemplated by this Stock Option Agreement or the Option shall be paid by the
party incurring such cost or expense.
22. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Agreement.
23. Termination. This Stock Option Agreement shall terminate and be of
-----------
no further force or effect upon the earliest to occur of: (A) the Effective Time
(as defined in the Agreement); or (B) termination of the Agreement in accordance
with the terms thereof, except that if (i) the Agreement is terminated by
Sovereign pursuant to any of Sections 6.01(b)(i), 6.01(e), or 6.01(f) of the
Agreement (provided the failure of the occurrence of the event specified in
Section 6.01(b)(i) of the Agreement shall be due to the failure of Main Street
to perform or observe its agreements set forth in the Agreement required to be
performed or observed by Main Street prior to the Closing Date (as defined in
the Agreement) and further provided that the breach specified in Section 6.01(e)
of the Agreement shall result from a
89
willful action taken by Main Street), this Stock Option Agreement shall not
terminate until eighteen (18) months after the date of termination of the
Agreement or (ii) the Agreement is terminated as a result of the failure of Main
Street shareholders to approve the Agreement following (x) a withdrawal or
modification by the Board of Directors of Main Street of a prior recommendation
to approve the Agreement, (y) a failure of the Board of Directors of Main Street
to recommend approval of the Agreement, or (z) the making of a Proposal (as
defined in Section 2(c) of this Stock Option Agreement) by a person or group,
other than Sovereign or an affiliate of Sovereign, which is not Publicly
Withdrawn (as defined in Section 2 of this Stock Option Agreement) at least
thirty (30) days prior to the meeting of shareholders of Main Street called to
vote on the Merger, this Stock Option Agreement shall not terminate until
eighteen (18) months after the date of termination of the Agreement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Stock Option Agreement to be
executed by its duly authorized officer and has caused its corporate seal to be
affixed hereunto and to be duly attested, all as of the day and year first above
written.
SOVEREIGN BANCORP, INC.
By /s/ Xxxx X. XxXxxxxx
------------------------------------------
Xxxx X. XxXxxxxx
MAIN STREET BANCORP, INC.
By /s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
90
EXHIBIT 3
FORM OF AGREEMENT RE: BENEFITS
-------------------------------
July 16, 2001
Sovereign Bancorp, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Gentlemen:
I, the undersigned, hereby acknowledge and agree that an amount equal to
$__________ is a good faith estimate of the maximum amount that I would be
entitled to receive from Main Street, any Main Street 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, incentive or bonus plan, or any
other benefit or welfare plan, assuming that the Merger were to occur on March
31, 2002 and further assuming that my employment with Main Street or any Main
Street subsidiary (or any of their respective successors or assigns) were
terminated for any reason, whether voluntarily or involuntarily, immediately
thereafter. 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 acknowledgment and agreement of Sovereign
Bancorp, Inc., as evidenced below, that the amount shown above reflects a good
faith estimate of the amounts that will be payable to me as hereinbefore
specified, and may be subject to adjustment upon an actual termination of my
employment to reflect increases in my compensation and benefits due to the
passage of time or in accordance with the terms of Main Street's employee
benefit plans and past practices for routine increases.
Sincerely,
Acknowledged and Agreed to:
SOVEREIGN BANCORP, INC.
By________________________
Title_____________________
91
EXHIBIT 4
FORM OF TAX OPINION OF XXXXXXX & XXX, P.C.
------------------------------------------
Sovereign and Main Street shall have received an opinion of Xxxxxxx & Xxx,
P.C. substantially to the effect that, under the provisions of the IRC:
1. The Merger will be treated as a reorganization within the meaning
of Section 368(a) of the IRC;
2. Sovereign and Main Street will each be a party to the
reorganization within the meaning of Section 368(b) of the IRC;
3. No gain or loss will be recognized by Sovereign or Main Street as a
result of the Merger (except for amounts resulting from any
required change in accounting methods or any income or deferred
gain recognized under the relevant consolidated return
regulations);
4. Main Street shareholders who receive only Sovereign common stock
for all of their shares of Main Street stock will not recognize any
gain or loss with respect to shares of Sovereign stock received
(except with respect to cash received in lieu of a fractional share
interest in Sovereign common stock);
5. Each Main Street shareholder who receives Sovereign common stock
and cash (other than cash in lieu of a fractional share interest in
Sovereign common stock) in exchange for the shareholder's shares of
Main Street common stock will recognize the gain, if any, realized
by the shareholder, in an amount not in excess of the amount of
cash received, but will not recognize any loss on the exchange;
6. Each Main Street shareholder's aggregate tax basis in any shares of
Sovereign common stock received in the transaction (including
fractional shares deemed received and redeemed) will be the same as
the aggregate tax basis of the shares of Main Street common stock
the Main Street shareholder surrendered in exchange therefor,
decreased by the amount of any cash received by the shareholder and
increased by the amount of income or gain recognized by the
shareholder in the exchange; and
7. Each Main Street shareholder's holding period in any shares of
Sovereign common stock received in the transaction (including any
fractional shares deemed received and redeemed) will ,in each
instance, include the period during which the shares of Main Street
common stock surrendered in exchange therefor were held.
92
8. The Rights transferred with the shares of Sovereign common stock
will not constitute "other property" with the meaning of Section
356(a)(1)(B) of the IRC.
In rendering such opinion, Xxxxxxx & Xxx, P.C. will be entitled to receive
and rely upon customary certificates and representation of officers of Sovereign
and Main Street.
93
