EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
XXXXXX CITY BANCORP, INC.
AND
SOUND FEDERAL BANCORP, INC.
DATED AS OF FEBRUARY 8, 2006
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TABLE OF CONTENTS
Page
ARTICLE I. CERTAIN DEFINITIONS................................................1
Section 1.01 Certain Definitions.................................1
ARTICLE II. THE MERGER........................................................8
Section 2.01 Structure of the Merger.............................8
Section 2.02 Bank Merger.........................................8
Section 2.03 Effect on Outstanding Shares........................8
Section 2.04 Exchange Procedures.................................9
Section 2.05 Dissenters' Rights.................................10
Section 2.06 Stock Options......................................11
Section 2.07 Closing; Effective Time............................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER........................11
Section 3.01 Disclosure Letter..................................11
Section 3.02 Organization.......................................12
Section 3.03 Capitalization.....................................12
Section 3.04 Authority; No Violation............................13
Section 3.05 Consents...........................................14
Section 3.06 Fairness Opinion; Required Vote....................14
Section 3.07 Financial Statements...............................14
Section 3.08 Absence of Certain Changes or Events...............15
Section 3.09 Taxes..............................................15
Section 3.10 Material Contracts; Leases; Defaults...............18
Section 3.11 Ownership of Property; Insurance Coverage..........18
Section 3.12 Intellectual Property..............................19
Section 3.13 Labor Matters......................................20
Section 3.14 Legal Proceedings..................................20
Section 3.15 Compliance With Applicable Law.....................21
Section 3.16 Employee Benefit Plans.............................21
Section 3.17 Brokers, Finders and Financial Advisors............24
Section 3.18 Environmental Matters..............................24
Section 3.19 Loan Portfolio.....................................25
Section 3.20 Related Party Transactions.........................27
Section 3.21 Deposits...........................................27
Section 3.22 Antitakeover Provisions Inapplicable...............27
Section 3.23 Registration Obligations...........................28
Section 3.24 Risk Management Instruments........................28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................28
Section 4.01 Organization.......................................28
Section 4.02 Authority; No Violation............................29
Section 4.03 Consents...........................................29
Section 4.04 Access to Funds....................................29
Section 4.05 Financial Statements...............................29
Section 4.06 Legal Proceedings..................................30
ARTICLE V. CONDUCT PENDING ACQUISITION.......................................30
Section 5.01 Conduct of Business Prior to the Effective Time....30
Section 5.02 Forbearances of Seller.............................30
Section 5.03 Maintenance of Insurance...........................34
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Section 5.04 All Reasonable Efforts.............................34
ARTICLE VI. COVENANTS........................................................34
Section 6.01 Current Information................................34
Section 6.02 Access to Properties and Records...................35
Section 6.03 Financial and Other Statements.....................35
Section 6.04 Disclosure Letter Supplements......................36
Section 6.05 Consents and Approvals of Third Parties............36
Section 6.06 Failure to Fulfill Conditions......................36
Section 6.07 No Solicitation....................................36
Section 6.08 Employee Benefits..................................38
Section 6.09 Advisory Board.....................................40
Section 6.10 Directors and Officers Indemnification and
Insurance.........................................40
Section 6.11 Certain Policies of Seller.........................42
Section 6.12 Antitakeover Provisions............................42
Section 6.13 Voting Agreements..................................42
ARTICLE VII. REGULATORY AND OTHER MATTERS....................................42
Section 7.01 Meeting of Stockholders............................42
Section 7.02 Proxy Statement....................................42
Section 7.03 Regulatory Approvals...............................43
ARTICLE VIII. CLOSING CONDITIONS.............................................43
Section 8.01 Conditions to Each Party's Obligations under this
Agreement.........................................43
Section 8.02 Conditions to the Obligations of Purchaser under
this Agreement....................................44
Section 8.03 Conditions to the Obligations of Seller under
this Agreement....................................45
ARTICLE IX. THE CLOSING......................................................46
Section 9.01 Time and Place.....................................46
Section 9.02 Deliveries at the Pre-Closing and the Closing......46
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER.................................46
Section 10.01 Termination........................................46
Section 10.02 Effect of Termination..............................47
Section 10.03 Amendment, Extension and Waiver....................48
ARTICLE XI. MISCELLANEOUS....................................................48
Section 11.01 Confidentiality....................................48
Section 11.02 Public Announcements...............................49
Section 11.03 Survival...........................................49
Section 11.04 Notices............................................49
Section 11.05 Parties in Interest................................50
Section 11.06 Complete Agreement.................................50
Section 11.07 Counterparts.......................................50
Section 11.08 Severability.......................................50
Section 11.09 Governing Law......................................50
Section 11.10 Interpretation.....................................50
Section 11.11 Specific Performance...............................51
Exhibit A Form of Voting Agreement
Exhibit B Form of Plan of Interim Merger
Exhibit C Form of Plan of Bank Merger
Exhibit D Form of Settlement Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
February 8, 2006, by and between Xxxxxx City Bancorp, Inc., a Delaware
corporation (the "Purchaser"), and Sound Federal Bancorp, Inc., a Delaware
corporation (the "Seller").
WHEREAS, the Board of Directors of each of Purchaser and Seller has (i)
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of their respective
companies and stockholders, and (ii) has approved this Agreement at meetings of
each of such Boards of Directors;
WHEREAS, in accordance with the terms of this Agreement, Merger Sub will
merge with and into Seller and immediately thereafter Seller Bank will be merged
with and into the Bank, a wholly owned subsidiary of Purchaser;
WHEREAS, as a condition to the willingness of Purchaser to enter into this
Agreement, each of the directors and executive officers of Seller has entered
into a Voting Agreement, substantially in the form of Exhibit A hereto, dated as
of the date hereof, with Purchaser (the "Voting Agreement"), pursuant to which
each such director or executive officer has agreed, among other things, to vote
all shares of common stock of Seller owned by such person in favor of the
approval of this Agreement and the transactions contemplated hereby, upon the
terms and subject to the conditions set forth in such Voting Agreement; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE in consideration of the mutual covenants, representations,
warranties and agreements herein contained and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.01 Certain Definitions.
As used in this Agreement the following terms have the following meanings
(unless the context otherwise requires, references to Articles and Sections
refer to Articles and Sections of this Agreement).
"Acquisition Agreement" shall have the meaning set forth in Section
6.07(b).
"Acquisition Proposal" shall mean any inquiry, proposal or offer from any
person relating to, or that could reasonably be expected to lead to, any direct
or indirect acquisition or purchase, in one transaction or a series of
transactions, of assets (including equity securities of any Seller Subsidiary)
or businesses that constitute 25% or more of the revenues, net income or assets
of Seller and the Seller Subsidiaries, taken as a whole, or 25% or more of any
class of equity securities of Seller, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 25% or more of any
class of equity securities of Seller, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution, joint venture, binding
share exchange or similar transaction involving Seller or any Seller Subsidiary
pursuant to which any person or the stockholders of any person would own 25% or
more of any class of equity securities of Seller or of any resulting parent
company of Seller, in each case other than the transactions contemplated by this
Agreement.
"Advisory Board" shall have the meaning set forth in Section 6.09.
"Affiliate" means any Person who directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person and any Affiliate of
such executive officer or director.
"Agreement" means this agreement, and any amendment hereto.
"Bank" shall mean Xxxxxx City Savings Bank, a federally chartered savings
bank, with its principal offices located at West 00 Xxxxxxx Xxxx, Xxxxxxx, Xxx
Xxxxxx 00000, which is a wholly owned subsidiary of Purchaser.
"Bank Merger" shall have the meaning set forth in Section 2.02.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the OTS and the FDIC, which regulates the Bank or
Seller Bank, or any of their respective holding companies or subsidiaries.
"BOLI" shall mean bank owned life insurance.
"Certificate" shall mean a certificate evidencing shares of Seller Common
Stock.
"Claim" shall have the meaning set forth in Section 6.10(b).
"Closing" shall have the meaning set forth in Section 2.07.
"Closing Date" shall have the meaning set forth in Section 2.07.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" shall have the meaning set forth in
Section 3.16(a).
"Confidentiality Agreements" shall mean the confidentiality agreements
referred to in Section 11.01 of this Agreement.
"Continuing Employees" shall have the meaning set forth in Section 6.08(c).
"CRA" shall mean the Community Reinvestment Act of 1977.
"Derivatives Contract" shall have the meaning set forth in Section 3.24.
"DGCL" shall mean the Delaware General Corporation Law.
"Disclosure Letter" shall have the meaning set forth Section 3.01.
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"Dissenting Shares" shall mean shares of Seller Common Stock the holder of
which pursuant to any applicable law providing for dissenters' or appraisal
rights is entitled to receive payment in accordance with the provisions of any
such law.
"Dissenting Stockholder" shall mean the holder of Dissenting Shares.
"Effective Time" shall mean the date and time specified pursuant to Section
2.07 hereof as the effective time of the Merger.
"Environmental Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the exposure to, or
the use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Materials of
Environmental Concern. The term Environmental Law includes without limitation
(a) the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. ss.9601, et seq; the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
ss.7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss.1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.2601, et seq; the Emergency Planning and Community Right to Know Act, 42
U.S.C. ss.11001, et seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq;
and all comparable state and local laws, and (b) any common law (including
without limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to the presence of or
exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 3.16(c).
"ERISA Affiliate Plan" shall have the meaning set forth in Section 3.16(c).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Shares" shall have the meaning set forth in Section 2.03(a).
"FDIA" shall mean the Federal Deposit Insurance Act, as amended, and
applicable regulations thereunder.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of New York.
"GAAP" shall mean accounting principles generally accepted in the United
States of America.
"Governmental Entity" shall mean any federal, state, local or other
government, governmental, regulatory or administrative authority, agency or
commission (including, but not limited to, the SEC, NASDAQ, OTS and FDIC) or any
court, tribunal or judicial or arbitral body.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
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"HIPAA" shall mean the Health Insurance Portability and Accountability Act
of 1996, as amended.
"Indemnified Liabilities" shall have the meaning set forth in Section
6.10(b).
"Intellectual Property" shall mean all (i) trademarks, service marks, brand
names, d/b/a/'s, Internet domain names, logos, symbols, trade dress, trade
names, and other indicia of origin, all applications and registrations for the
foregoing, and all goodwill associated therewith and symbolized thereby,
including all renewals of same, (ii) inventions and discoveries, whether
patentable or not, and all patents, registrations, invention disclosures and
applications therefor, including divisions, continuations, continuations-in-part
and renewal applications, and including renewals, extensions and reissues, (iii)
Trade Secrets, (iv) published and unpublished works of authorship, whether
copyrightable or not (including without limitation databases and other
compilations of information), copyrights therein and thereto, and registrations
and applications therefor, and all renewals, extensions, restorations and
reversions thereof, and (v) all other intellectual property or proprietary
rights.
"IRS" shall mean the United States Internal Revenue Service.
"IT Assets" shall mean Seller's and each Seller Subsidiaries' computers,
computer software, firmware, middleware, servers, workstations, routers, hubs,
switches, data communications lines, and all other information technology
equipment, and all associated documentation.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) means those facts that are known by
any officer with the title ranking not less than vice president or a director of
such Person, and includes any facts, matters or circumstances set forth in any
written notice from any Bank Regulator or any other material written notice
received by an officer with the title ranking not less than vice president or a
director of that Person. For purposes of this definition, an officer or director
will be deemed to have "Knowledge" of a particular fact or other matter if a
prudent individual could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter.
"Lending Policy" shall have the meaning set forth in Section 5.02(p).
"Licensed Intellectual Property" means Intellectual Property that Seller
and the Seller Subsidiaries are licensed or otherwise permitted by other Persons
to use.
"Listed Intellectual Property" shall have the meaning set forth in Section
3.12(a).
"Loan Property" shall have the meaning set forth in Section 3.18.
"Material Adverse Effect" shall mean an effect which (A) is material and
adverse to the assets, business, financial condition, results of operations or
prospects of Seller or Purchaser, as the context may dictate, and its
subsidiaries taken as a whole, other than any such effect attributable to or
resulting from (x) any change in banking or similar laws, rules or regulations
of general applicability or interpretations thereof by courts or governmental
authorities, (y) any change in GAAP or regulatory accounting principles, in each
case which affects banks, thrifts or their holding companies generally or (z)
any change in interest rates, provided, that any such change in interest rates
shall not affect the referenced party to a materially greater extent than banks,
thrifts or their holding companies generally, or (B) adversely affects the
ability of Seller or Purchaser, as the context may dictate, to perform its
material obligations hereunder or (C) materially and adversely affects the
timely consummation of the transactions contemplated hereby.
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"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws, including, but not limited to,
radon, radioactive material, asbestos, asbestos-containing material, urea
formaldehyde foam insulation, lead, polychlorinated biphenyl, flammables and
explosives.
"Maximum Amount" shall have the meaning set forth in Section 6.10(a).
"Merger" shall mean the merger of Seller with and into Merger Sub pursuant
to the terms hereof.
"Merger Consideration" shall mean the cash in an aggregate per share amount
to be paid by Purchaser for each share of Seller Common Stock, as set forth in
Section 2.03(a).
"Merger Sub" shall have the meaning set forth in Section 2.01.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq National Market, Inc.
"Notice of Superior Proposal" shall have the meaning set forth in Section
6.07(b).
"OTS" shall mean the Office of Thrift Supervision or any successor thereto.
"Participation Facility" shall have the meaning set forth in Section 3.18.
"Paying Agent" shall mean Mellon Bank, NA, or such other bank or trust
company or other agent designated by Purchaser, which shall act as agent for
Purchaser in connection with the exchange procedures for exchanging Certificates
for the Merger Consideration.
"Paying Agent Agreement" shall have the meaning set forth in Section
2.04(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Plan of Bank Merger" shall have the meaning set forth in Section 2.02.
"Plan of Interim Merger" shall have the meaning set forth in Section 2.01.
"Pre-Effective Time Tax Period" means any taxable period (or the allocable
portion of a Straddle Period) ending on or before the close of business on the
date the Effective Time occurs.
"Proxy Statement" shall have the meaning set forth in Section 7.02.
"Purchaser" shall mean Xxxxxx City Bancorp, Inc., a Delaware corporation,
with its principal executive offices located at West 00 Xxxxxxx Xxxx, Xxxxxxx,
Xxx Xxxxxx 00000.
"Purchaser Subsidiary" means any substantial corporation or limited
liability company, 50% or more of the capital stock of which is owned, either
directly or indirectly, by Purchaser or the Bank, except any corporation the
stock of which is held in the ordinary course of the lending activities of the
Bank.
"Regulatory Agreement" shall have the meaning set forth in Section 3.15(c).
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"Regulatory Approvals" means the approval of the OTS to the Merger, the
Bank Merger and the related transactions contemplated by this Agreement.
"Representatives" shall have the meaning set forth in Section 6.07(a).
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall have the meaning set forth in the preamble.
"Seller Adverse Recommendation Change" shall have the meaning set forth in
Section 6.07(b).
"Seller Bank" shall mean Sound Federal Savings, a federally chartered
savings association, with its principal offices located at 0000 Xxxxxxxxxx
Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000, which is a wholly owned subsidiary of
Seller.
"Seller Bank Common Stock" shall have the meaning set forth in Section
3.03(b).
"Seller Bank Preferred Stock" shall have the meaning set forth in Section
3.03(b).
"Seller Common Stock" shall mean the common stock, par value $0.01 per
share, of Seller.
"Seller Defined Benefit Plan" shall have the meaning set froth in Section
3.16(c).
"Seller ESOP" shall mean the Seller Employee Stock Ownership Plan.
"Seller Fee" shall have the meaning in Section 10.02(b)(iii).
"Seller Group" means any combined, unitary, consolidated or other
affiliated group within the meaning of Section 1504 of the Code or otherwise, of
which Seller or any Seller Subsidiary is or has been a member for Tax purposes.
"Seller Loan" shall have the meaning set forth in Section 3.19(d).
"Seller Option" shall mean an option to purchase shares of Seller Common
Stock granted pursuant to the Seller Stock Benefit Plans and outstanding as of
the date hereof, as set forth in the Disclosure Letter.
"Seller Preferred Stock" shall have the meaning set forth in Section
3.03(a).
"Seller Reports" shall have the meaning set forth in Section 3.07(a).
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"Seller Stock Benefit Plans" shall mean the Seller 1999 Stock Option Plan,
Seller 2004 Incentive Stock Benefit Plan, and any and all amendments thereto.
"Seller Stockholders Meeting" shall have the meaning set forth in Section
7.01.
"Seller Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by Seller or Seller Bank,
except any corporation the stock of which is held in the ordinary course of the
lending activities of Seller Bank.
"Seller REIT Subsidiary" means any corporation, trust or association, 50%
or more of the beneficial ownership of which is owned, either directly or
indirectly, by Seller or Seller Bank, except any corporation, trust or
association, the beneficial ownership of which is held in the ordinary course of
the lending activities of Seller Bank.
"Settlement Agreement" shall have the meaning set forth in Section 6.08(e).
"Stockholder Approval" shall have the meaning set forth in Section 8.01(a).
"Straddle Period" means any taxable period that includes (but does not end
on) the Closing Date.
"Superior Proposal" shall mean an Acquisition Proposal, which the Board of
Directors of Seller reasonably determines (after consultation with a financial
advisor of nationally recognized reputation) to be (i) more favorable to the
stockholders of Seller from a financial point of view than the Merger (taking
into account all the terms and conditions of such proposal and this Agreement
(including any changes to the financial terms of this Agreement proposed by
Purchaser in response to such offer or otherwise)) and (ii) reasonably capable
of being completed, taking into account all financial, legal, regulatory and
other aspects of such proposal.
"Surviving Corporation" shall have the meaning set forth in Section 2.01.
"Tax" means any and all (a) federal, state, local or foreign tax, fee or
other like assessment or charge of any kind, including, without limitation, any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value-added, transfer, franchise, profits, license,
payroll, employment, social security (or similar), unemployment, disability,
registration, estimated, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall tax, premium, customs duty or other tax,
together with any interest, penalty or additions thereto, whether disputed or
not; (b) liability for the payment of Tax as the result of membership in the
Seller Group; and (c) transferee or secondary liability in respect of any Tax
(whether imposed by law or contractual arrangement).
"Tax Return" means any return (including estimated returns), declaration,
report, claim for refund, or information return or statement or any amendment
thereto relating to Taxes, including any such document prepared on an
affiliated, consolidated, combined or unitary group basis and any schedule or
attachment thereto.
"Taxing Authority" means any governmental or regulatory authority, body or
instrumentality exercising any authority to impose, regulate or administer the
imposition of Taxes.
"Termination Date" shall mean March 31, 2007.
"Trade Secrets" means confidential information, trade secrets and know-how,
including confidential processes, schematics, business methods, formulae,
drawings, prototypes, models, designs, customer lists and supplier lists.
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"Treasury Stock" means all shares of Seller Common Stock held in the
treasury of Seller (other than shares held in a fiduciary capacity or in
connection with debts previously contracted).
"Voting Agreement" shall have the meaning set forth in the recitals to this
Agreement.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II.
THE MERGER
Section 2.01 Structure of the Merger.
Subject to the terms and conditions of this Agreement, Purchaser will cause
a Delaware corporation to be organized as a wholly owned special purpose
subsidiary of Purchaser or the Bank ("Merger Sub"). At the Effective Time,
Merger Sub will merge (the "Merger") with and into Seller, with Seller being the
surviving entity (the "Surviving Corporation"), pursuant to the provisions of,
and with the effect provided in, the DGCL and pursuant to the terms and
conditions of an agreement and plan of merger ("Plan of Interim Merger") to be
entered into between Merger Sub and Seller in the form attached hereto as
Exhibit B. The separate corporate existence of Merger Sub shall thereupon cease.
The Surviving Corporation shall continue to be governed by the laws of the State
of Delaware and its separate corporate existence with all of its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. At the Effective Time, the certificate of incorporation and bylaws of
Seller shall be amended in their entirety to conform to the certificate of
incorporation and bylaws of Merger Sub in effect immediately prior to the
Effective Time and shall become the certificate of incorporation and bylaws of
the Surviving Corporation. At the Effective Time, the directors and officers of
Merger Sub shall become the directors and officers of the Surviving Corporation.
As part of the Merger, each share of Seller Common Stock will be converted into
the right to receive the Merger Consideration pursuant to the terms of Section
2.03.
Section 2.02 Bank Merger.
Immediately after the Merger, the board of directors of the Surviving
Corporation shall adopt a plan of dissolution (which shall be a plan of complete
liquidation and dissolution of the Surviving Corporation for purposes of Section
332(a) and 337(a) of the Code) and shall cause articles of dissolution
authorized in accordance with the DGCL to be filed with the Secretary of State
of the State of Delaware. Upon the certificate of dissolution becoming
effective, the Bank and Seller Bank shall enter into a plan of merger (the "Plan
of Bank Merger") in the form attached hereto as Exhibit C (which shall be a plan
of complete liquidation and dissolution of Seller for purposes of Sections
332(a) and 337(a) of the Code) pursuant to which Seller Bank will be merged with
and into the Bank (the "Bank Merger") pursuant to and with the effect set forth
in the regulations of the OTS and the FDIC. The documentation relating to the
Bank Merger shall provide that the directors and officers of Bank as the
surviving entity of the Bank Merger shall be all of the respective directors and
officers of Bank immediately prior to such merger.
Section 2.03 Effect on Outstanding Shares.
(a) By virtue of the Merger, automatically and without any action on the
part of the holder thereof, each share of Seller Common Stock, issued and
outstanding at the Effective Time (other than (i) Dissenting Shares (the holder
of which shall only have the rights provided under applicable law), (ii) shares
held directly or indirectly by Purchaser (other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted), (iii) unissued
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Seller Common Stock reserved for issuance pursuant to the Seller Stock Benefit
Plans and (iv) Treasury Stock (the shares referred to in clauses (i), (ii),
(iii) and (iv) are hereinafter collectively referred to as the "Excluded
Shares")) shall become and be converted into the right to receive $20.75 in cash
without interest (the "Merger Consideration").
As of the Effective Time, each Excluded Share, other than Dissenters'
Shares, shall be cancelled and retired and cease to exist, and no exchange or
payment shall be made with respect thereto.
(c) As of the Effective Time, all shares of Seller Common Stock other than
Excluded Shares shall no longer be outstanding and shall be automatically
cancelled and retired and shall cease to exist, and each holder of a Certificate
formerly representing any such share of Seller Common Stock shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration. After the Effective Time, there shall be no transfers on the
stock transfer books of Seller.
Section 2.04 Exchange Procedures.
(a) Immediately prior to the Effective Time, each Certificate previously
representing shares of Seller Common Stock (except as specifically set forth in
Section 2.03) shall represent only the right to receive the Merger
Consideration.
(b) As of the Effective Time, Purchaser shall deposit, or shall cause to be
deposited with the Paying Agent pursuant to the terms of an agreement (the
"Paying Agent Agreement") in form and substance reasonably satisfactory to
Purchaser and Seller, for the benefit of the holders of shares of Seller Common
Stock, for exchange in accordance with this Section 2.04, an amount of cash
sufficient to pay the aggregate Merger Consideration to be paid pursuant to
Section 2.03(a).
(c) As promptly as practicable after the Effective Time, but no later than
ten (10) business days after the Effective Time, Purchaser shall cause the
Paying Agent to mail to each holder of record of a Certificate or Certificates
the following: (i) a letter of transmittal specifying that delivery shall be
effected, only upon the delivery and surrender of the Certificates to the Paying
Agent, which shall be in a form and contain any other provisions as Purchaser
may reasonably determine; and (ii) instructions in effecting the delivery and
surrender of the Certificates in exchange for the Merger Consideration. At the
Effective Time, each stockholder of Seller that upon proper delivery and
surrender of a Certificate or Certificates to the Paying Agent, together with a
properly completed and duly executed letter of transmittal, shall be entitled to
receive in exchange therefor a check in an amount equal to the product of the
Merger Consideration and the number of shares of Seller Common Stock represented
by the Certificate or Certificates delivered and surrendered pursuant to the
provisions hereof, and the Certificate or Certificates so surrendered shall be
canceled forthwith. No interest will be paid or accrued on the Merger
Consideration. If a transfer of ownership of any shares of Seller Common Stock
has been made but not registered in the transfer records of Seller prior to the
Effective Time, a check for the Merger Consideration may be issued to the
transferee if the Certificate representing such Seller Common Stock is presented
to the Paying Agent, accompanied by documents sufficient, in the reasonable
discretion of Purchaser and the Paying Agent, (i) to evidence and effect such
transfer and (ii) to evidence that all applicable stock transfer taxes have been
paid.
(d) From and after the Effective Time, there shall be no transfers on the
stock transfer records of Seller of any shares of Seller Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective Time
Certificates are presented to Purchaser or the Surviving Corporation, they shall
be canceled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 2.04.
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(e) Any portion of the aggregate Merger Consideration or the proceeds of
any investments thereof that remains unclaimed by the stockholders of Seller for
twelve (12) months after the Effective Time shall be repaid by the Paying Agent
to Purchaser. Any stockholders of Seller who have not theretofore complied with
this Section 2.04 shall thereafter look only to Purchaser for payment of the
Merger Consideration deliverable in respect of each share of Seller Common Stock
such stockholder holds as determined pursuant to this Agreement, without any
interest thereon. If outstanding Certificates for shares of Seller Common Stock
are not delivered and surrendered or the payment for them is not claimed prior
to the date on which such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to the
extent permitted by abandoned property and any other applicable law, become the
property of Purchaser (and to the extent not in its possession shall be paid
over to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of Purchaser, the
Surviving Corporation, the Paying Agent or any other person shall be liable to
any former holder of Seller Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) If any Certificate has been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Paying Agent, the posting by such
person of a bond in such amount as the Paying Agent may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(g) Purchaser or the Paying Agent will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement or the
transactions contemplated hereby to any holder of Seller Common Stock, such
amounts as Purchaser (or any Affiliate thereof) or the Paying Agent are required
to deduct and withhold with respect to the making of such payment under the
Code, or any applicable provision of U.S. federal, state, local or non-U.S. Tax
law. To the extent that such amounts are properly withheld by Purchaser or the
Paying Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the Seller Common Stock in
respect of whom such deduction and withholding were made by Purchaser or the
Paying Agent.
Section 2.05 Dissenters' Rights.
Notwithstanding anything in this Agreement to the contrary, any shares of
Seller Common Stock that are issued and outstanding as of the Effective Time and
that are held by a stockholder who has properly exercised his or her appraisal
rights under the DGCL shall not be converted into the right to receive the
Merger Consideration unless and until such holder shall have failed to perfect,
or shall have effectively withdrawn or lost, his or her right to dissent from
the Merger or seek appraisal for his or her shares under the DGCL and to receive
such consideration as may be determined to be due with respect to such
Dissenters' Shares pursuant to and subject to the requirements of the DGCL. If
any such Dissenting Stockholder shall have failed to perfect or shall have
effectively withdrawn or lost the right to dissent or seek appraisal, the
Dissenters' Shares held by the holder shall thereupon be treated as though such
Dissenters' Shares had been converted into the right to receive the Merger
Consideration pursuant to Section 2.03. Seller shall give Purchaser (i) prompt
notice of any notice or demands for appraisal or payment for shares of Seller
Common Stock, attempted withdrawals of any such demands and any other
instruments served pursuant to the DGCL and received by Seller relating to
stockholders' rights of appraisal and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands or
notices. Seller shall not, without the prior written consent of Purchaser, make
any payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
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Section 2.06 Stock Options.
At the Effective Time, each Seller Option which is outstanding and
unexercised immediately prior thereto, whether or not then vested or
exercisable, shall be cancelled and all rights thereunder shall be extinguished.
As consideration for such cancellation, Seller shall make payment to such holder
of an amount determined by multiplying (x) the number of shares of Seller Common
Stock subject to such holder's Seller Option by (y) an amount equal to the
excess (if any) of (i) the Merger Consideration, over (ii) the exercise price
per share of such Seller Option; provided, however, that no such payment shall
be made to such holder unless, and such payment shall be deferred without
interest until, such holder has agreed to such payment and has executed and
delivered to Seller an instrument in such form prescribed by Purchaser and
reasonably satisfactory to Seller accepting such payment in full settlement of
his or her rights relative to the Seller Option. Prior to the date hereof (in
the case of Messrs. XxXxxxxxxx and Xxxxxxx and each non-employee director of
Seller) and within thirty (30) days thereafter (in the case of all others),
Seller shall use its reasonable best efforts to obtain the written consent to
the provisions of this Section 2.06 on the form prescribed by the Purchaser of
each person who is the holder of Seller Options that will not, by their terms,
expire prior to the Effective Time. Prior to date hereof, Seller shall have
taken or shall have caused to have been taken, all requisite action under the
terms of Stock Benefit Plans or otherwise to cause cancellation of all Seller
Options in the manner set forth herein.
Section 2.07 Closing; Effective Time.
Subject to the satisfaction or waiver of all conditions to closing
contained in Article VIII hereof, the Closing shall occur (i) no later than five
business days following the latest to occur of (a) the receipt of all required
Regulatory Approvals and the expiration of any applicable waiting periods, or
(b) the approval of the Merger by the stockholders of Seller, or (ii) at such
other date or time upon which Purchaser and Seller mutually agree (the
"Closing"). The Merger shall be effected by the filing of a certificate of
merger with the Delaware Office of the Secretary of State on the day of the
Closing (the "Closing Date"), in accordance with the DGCL. The "Effective Time"
means the date and time upon which the certificate of merger is filed with the
Delaware Office of the Secretary of State, or as otherwise stated in the
certificate of merger, in accordance with the DGCL.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that the statements contained
in this Article III are true and correct as of the date of this Agreement and
will be true and correct as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the Disclosure Letter (as
defined below) delivered by Seller to Purchaser prior to the execution of this
Agreement. References to the Knowledge of Seller shall include the Knowledge of
any Seller Subsidiary.
Section 3.01 Disclosure Letter.
On or prior to the date hereof, Seller has delivered to Purchaser a letter
(the "Disclosure Letter") setting forth, among other things, facts,
circumstances and events the disclosure of which are required or appropriate in
relation to any or all of its covenants, representations and warranties (and
making specific reference to the section of this Agreement to which such section
of the Disclosure Letter relates), other than Section 3.08; provided, that the
mere inclusion of a fact, circumstance or event in the Disclosure Letter shall
11
not be deemed an admission by a party that such item represents a material
exception or that such item is reasonably likely to result in a Material Adverse
Effect. The Disclosure Letter is true, correct and complete in all material
respects.
Section 3.02 Organization.
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly registered as a
savings and loan holding company under the HOLA. Seller has all requisite
corporate power and authority to own, lease and operate its properties and carry
on its business as now conducted. Seller is duly licensed or qualified to do
business in each jurisdiction where its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to
obtain such license or qualification would not reasonably be expected to have a
Material Adverse Effect.
(b) Seller Bank is a stock savings association duly organized, validly
existing and in good standing under the laws of the United States of America.
The deposits of Seller Bank are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid by Seller Bank when due. Seller Bank is a
member of the FHLB and owns the requisite amount of stock therein.
(c) The Disclosure Letter sets forth each Seller Subsidiary. Each Seller
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
The Disclosure Letter sets forth all entities (whether corporations,
partnerships, or similar organizations), including the corresponding percentage
ownership in which Seller owns, directly or indirectly, 5% or more of the
ownership interests as of the date of this Agreement and indicates for each
Seller Subsidiary, as of such date, its jurisdiction of organization and the
jurisdiction wherein it is qualified to do business. All of the Seller
Subsidiaries are in compliance with all applicable laws, rules and regulations
relating to direct investments in equity ownership interests. Seller owns,
either directly or indirectly, all of the outstanding capital stock of each
Seller Subsidiary. No Seller Subsidiary (other than Seller Bank) is an "insured
depositary institution" as defined in the FDIA. All of the shares of capital
stock of each Seller Subsidiary (including Seller Bank) held by Seller or by
another Seller Subsidiary are validly issued, fully paid, nonassessable and not
subject to any preemptive rights and are owned by Seller or a Seller Subsidiary
free and clear of any pledges, security interests, claims, liens, encumbrances
or restrictions (other than those imposed by applicable federal and state
securities laws) and there are no agreements or understandings with respect to
the voting or disposition of any such shares.
(d) The respective minute books of Seller, Seller Bank and each other
Seller Subsidiary accurately record, in all material respects, all corporate
actions of their respective stockholders and boards of directors (including
committees).
(e) Prior to the date of this Agreement, Seller has made available to
Purchaser true and correct copies of the certificate of incorporation or charter
and bylaws of Seller, Seller Bank and each other Seller Subsidiary.
Section 3.03 Capitalization.
(a) The authorized capital stock of Seller consists of 24,000,000 shares of
Seller Common Stock and 1,000 shares of preferred stock of Seller, par value
$0.01 per share ("Seller Preferred Stock"). As of the date of this Agreement:
(A) 12,322,206 shares of Seller Common Stock were issued and outstanding, (B) no
shares of Seller Preferred Stock were issued and outstanding, (C) no shares of
Seller Preferred Stock were reserved for issuance, (D) 1,004,582 shares of
Seller Common Stock were reserved for issuance pursuant to the Seller Stock
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Benefit Plans, and (E) 1,313,964 shares of Seller Common Stock were held by
Seller in its treasury or by its Subsidiaries. All outstanding shares of Seller
Common Stock are validly issued, fully paid and nonassessable and not subject to
any preemptive rights and, with respect to shares held by Seller in its treasury
or by its Subsidiaries, are free and clear of all liens, claims, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws) and there are no agreements or understandings with respect to
the voting or disposition of any such shares. The Disclosure Letter sets forth a
complete and accurate list of all options to purchase Seller Common Stock that
have been granted and are outstanding pursuant to the Seller Stock Benefit Plans
including the dates of grant, exercise prices, dates of vesting, dates of
termination and shares subject to each grant. Seller has not, since March 31,
2005 adopted or modified the terms of any stock option plan or restricted stock
or phantom stock plan or made any grants under the Seller Stock Benefit Plans.
(b) The authorized capital stock of Seller Bank consists of 20,000,000
shares of common stock, par value $0.10 per share (the "Seller Bank Common
Stock"), and 10,000,000 shares of preferred stock, par value $0.10 per share
(the "Seller Bank Preferred Stock"). As of the date of this Agreement, 1,000
shares of the Seller Bank Common Stock were outstanding, no shares of the Seller
Bank Preferred Stock were outstanding, no shares of Seller Bank Common Stock or
Seller Bank Preferred Stock were reserved for issuance and all outstanding
shares of the Seller Bank Common Stock were, and as of the Effective Time will
be, owned by Seller. All of the outstanding shares of the Seller Bank Common
Stock are validly issued, fully paid and nonassessable.
(c) No bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which stockholders of Seller may vote are issued or
outstanding.
(d) As of the date of this Agreement and, except for this Agreement,
neither Seller nor any Seller Subsidiary has or is bound by any Rights
obligating Seller or any Seller Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any additional shares of capital stock of
Seller or any Seller Subsidiary or obligating Seller or any Seller Subsidiary to
grant, extend or enter into any such Right other than pursuant to the Seller
Stock Benefit Plans. As of the date hereof, there are no outstanding contractual
obligations of Seller or any Seller Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock of Seller or any Seller
Subsidiary.
Section 3.04 Authority; No Violation.
(a) Seller has full corporate power and authority to execute and deliver
this Agreement, the Plan of Interim Merger and, subject to the receipt of the
Regulatory Approvals and the approval of this Agreement by Seller's
stockholders, to consummate the transactions contemplated hereby (it being
understood that Seller Bank shall amend Section 8 of its Federal Stock Charter
prior to the Closing Date to eliminate any restrictions on ownership or voting
of Seller Bank Common Stock). The execution and delivery of this Agreement by
Seller and the completion by Seller of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Seller. This
Agreement has been duly and validly executed and delivered by Seller, and
subject to approval by the stockholders of Seller and receipt of the Regulatory
Approvals, constitutes the valid and binding obligation of Seller, enforceable
against Seller 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, whether applied in a
court of law or a court of equity.
(b) Subject to receipt of Regulatory Approvals and receipt of the approval
of the stockholders of Seller, the consummation of the transactions contemplated
hereby and compliance by Seller with any of the terms or provisions hereof will
not: (i) conflict with or result in a breach or violation of or a default under
any provision of the Certificate of Incorporation or Bylaws of Seller or any
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Seller Subsidiary or the Federal Stock Charter and Bylaws of Seller Bank (other
than Section 8 of the Federal Stock Charter of Seller Bank, which Seller Bank
shall amend prior to the Closing Date to eliminate any restrictions on ownership
or voting of Seller Bank Common Stock); (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree, governmental permit
or license or injunction applicable to Seller or any Seller Subsidiary or any of
their respective properties or assets or enable any person to enjoin the Merger
or the other transactions contemplated hereby; 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
Seller or Seller Subsidiary under any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Seller or Seller Subsidiary
is a party, or by which they or any of their respective properties or assets may
be bound or affected.
Section 3.05 Consents.
Except for the Regulatory Approvals and compliance with any conditions
contained therein, the filing of the Proxy Statement with the SEC contemplated
by Section 7.02 hereof and the approval of this Agreement by the requisite vote
of the stockholders of Seller, no consents, waivers or approvals of, or filings
or registrations with, any Governmental Entity or Bank Regulator are necessary,
and no consents, waivers or approvals of, or filings or registrations with, any
other third parties are necessary, in connection with (a) the execution and
delivery of this Agreement by Seller, and the completion by Seller of the Merger
or (b) the execution and delivery of the Plan of Bank Merger by Seller Bank and
the completion by Seller Bank of the Bank Merger. Seller has no reason to
believe that (i) any required Regulatory Approvals or other required consents or
approvals will not be received, or that (ii) any public body or authority, the
consent or approval of which is not required or to which a filing is not
required, will object to the completion of the transactions contemplated by this
Agreement.
Section 3.06 Fairness Opinion; Required Vote.
Seller has received an opinion from Xxxxx, Xxxxxxxx & Xxxxx to the effect
that, subject to the terms, conditions and qualifications set forth therein, as
of the date hereof, the Merger Consideration to be received by the stockholders
of Seller pursuant to this Agreement is fair to such stockholders from a
financial point of view. Such opinion has not been amended or rescinded as of
the date of this Agreement and Seller has no reason to believe that such opinion
may be amended or rescinded after the date hereof. The affirmative vote of a
majority of the issued and outstanding shares of Seller Common Stock is the only
vote of Stockholders required to approve this Agreement and the Merger under
Seller's certificate of incorporation, bylaws and the DGCL.
Section 3.07 Financial Statements.
(a) As of their respective dates, neither Seller's Annual Report on Form
10-K for the fiscal year ended March 31, 2005 nor any other document filed
subsequent to March 31, 2005 under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, each in the form (including exhibits and any documents
specifically incorporated by reference therein) filed with the SEC
(collectively, the "Seller Reports"), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Each
of the financial statements of Seller included in the Seller Reports complied as
14
to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto and have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited financial statements, as permitted by SEC Form 10-Q). Each of the
balance sheets contained or incorporated by reference in Seller's Reports
(including in each case any related notes and schedules) fairly presented the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and of changes in stockholders' equity and
of cash flows, contained or incorporated by reference in the Seller Reports
(including in each case any related notes and schedules), fairly presented the
results of operations, stockholders' equity and cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein. No event has occurred that would cause a normal year-end
adjustment to the unaudited interim financial statements prepared prior to the
date hereof (including such statements as are included in the Seller's Quarterly
Reports on Form 10-Q for the periods ended June 30, 2005, September 30, 2005 and
December 31, 2005) that would be material in amount or effect and no such
adjustment is reasonably likely to occur. Seller has made available to Purchaser
a true and complete copy of all Seller Reports filed with the SEC since March
31, 2005.
(b) Seller and each Seller Subsidiary have each timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 2002
with (i) the OTS, (ii) the FDIC, (iii) any state banking commission, (iv) and
other state or federal regulatory authority having jurisdiction over insured
depository institutions or their holding companies, (v) the SEC, (vi) the NASDAQ
and (vii) any other self regulatory organization, and have paid all fees and
assessments due and payable in connection therewith, except to the extent the
failure of a report, registration or statement to have been filed in a "timely"
fashion has not and will not result in a failure to comply with applicable laws,
rules or regulations or materially prejudice the Seller or any Seller Subsidiary
with respect to the applicable Governmental Entity.
Section 3.08 Absence of Certain Changes or Events.
Except as disclosed in the Seller Reports filed since March 31, 2005 and
prior to the date of this Agreement and except for the reasonable out-of-pocket
fees and disbursements of Seller incurred in connection with the completion of
the transactions contemplated hereby, including reasonable attorney's fees of
Seller and the fees of Seller's financial advisor, good faith estimates of which
have been provided to Purchaser, since March 31, 2005 (i) neither Seller nor any
Seller Subsidiary has incurred any liability, except in the ordinary course of
its business consistent with past practice, (ii) Seller and each Seller
Subsidiary has conducted its respective businesses only in the ordinary and
usual course of such businesses and (iii) there has not been any condition,
event, change or occurrence that, individually or in the aggregate, has had, or
is reasonably likely to have, a Material Adverse Effect.
Section 3.09 Taxes.
(a) (i) Seller, each Seller Subsidiary and the Seller Group has filed or
caused to be filed, and with respect to Tax Returns due between the date of this
Agreement and the date the Effective Time occurs, will timely file (including
any applicable extensions) all Tax Returns required to be filed, (ii) all such
Tax Returns are, or in the case of such Tax Returns not yet filed, will be,
true, complete and correct in all material respects and such Tax Returns
correctly reflected (or in the case of such Tax Returns not yet filed, will
correctly reflect) the facts regarding the income, business, assets, operations,
activities, status and other matters of Seller, each Seller Subsidiary and the
Seller Group and any other information required to be shown thereon, and (iii)
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all Taxes of Seller, the Seller Subsidiaries and the Seller Group (whether or
not reflected on any such Tax Returns) attributable to a Pre-Effective Time Tax
Period have been, or in the case of Taxes the due date for payment of which is
between the date of this Agreement and the date the Effective Time occurs,
timely paid in full, including, without limitation, all Taxes which Seller, each
Seller Subsidiary and the Seller Group is obligated to withhold for amounts paid
or owing to employees, independent contractors, stockholders creditors and other
third parties other than Taxes that have been reserved or accrued on the balance
sheet contained in the most recent Seller Report, which the Seller is contesting
in good faith.
(b) The most recent audited financial statements for Seller reflect an
adequate reserve for all Taxes payable by Seller and the Seller Subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements, and, in the case of Taxes owed as of the date hereof, an adequate
reserve is (and until the date the Effective Time occurs will continue to be)
reflected in the accruals for Taxes payable on the balance sheet contained in
the most recent Seller Report, other than accruals established to reflect timing
differences and accruals reflected only in the notes thereto.
(c) There are no liens for Taxes, except for statutory liens not yet due
with respect to any of the assets or properties of Seller or any Seller
Subsidiary.
(d) (i) No Tax Return of Seller, any Seller Subsidiary or the Seller Group
has within the past six (6) years been examined by the Internal Revenue Service,
(ii) except as set forth in the Disclosure Letter, no Tax Return of Seller, any
Seller Subsidiary or the Seller Group is under audit or examination by any other
Taxing Authority, and (iii) except as set forth in the Disclosure Letter, no
notice of such an audit or examination has been received by Seller or any Seller
Subsidiary.
(e) Each deficiency, if any, resulting from any audit or examination
relating to Taxes by any Taxing Authority has been timely paid. No issues
relating to Taxes were raised by the relevant Taxing Authority in any completed
audit or examination that can reasonably be expected to recur in a later taxable
period. The relevant statute of limitations is closed with respect to the Tax
Returns of Seller, each Seller Subsidiary and the Seller Group for all years
through 2001. Seller has made available to Purchaser documents setting forth the
dates of the most recent audits or examinations of the Seller, each Seller
Subsidiary and the Seller Group by any Taxing Authority in respect of Taxes for
all taxable periods for which the statute of limitations has not yet expired.
(f) Except as set forth in the Disclosure Letter, none of Seller, any
Seller Subsidiary or the Seller Group is a party to or is bound by any Tax
sharing agreement, Tax indemnity obligation or similar agreement, arrangement or
practice with respect to Taxes (including, without limitation, any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any Taxing Authority).
(g) Neither Seller nor any Seller Subsidiary will be required to include in
a taxable period ending after the date of the Effective Time any taxable income
attributable to income that accrued, but was not recognized, in a Pre-Effective
Time Tax Period (or the portion of a Straddle Period allocable to the
Pre-Effective Time Tax Period) as a result of an adjustment under Section 481 of
the Code, the installment method of accounting, the long-term contract method of
accounting, the cash method of accounting, any comparable provision of state,
local, or foreign Tax law, or for any other reason.
(h) Except as set forth in the Disclosure Letter, there are no outstanding
agreements or waivers extending, or having the effect of extending, the
statutory period of limitation applicable to any Tax Returns required to be
filed with respect to Seller or any Seller Subsidiary, and none of Seller, any
Seller Subsidiary or the Seller Group has requested any extension of time within
which to file any Tax Return, which return has not yet been filed. No power of
16
attorney with respect to any Taxes has been executed or filed with any Taxing
Authority by or on behalf of Seller, any Seller Subsidiary or the Seller Group.
(i) Seller and each of the Seller Subsidiaries have complied in all
respects with all applicable laws relating to the payment and withholding of
Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code or any comparable provision of any state, local or foreign
laws) and have, within the time and in the manner prescribed by applicable law,
withheld from and paid over to the proper Taxing Authorities all amounts
required to be so withheld and paid over under such laws.
(j) Neither Seller nor any Seller Subsidiary has been a party to any
distribution occurring during the last five years in which the parties to such
distribution treated the distribution as one to which Section 355 of the Code
applied.
(k) Neither Seller nor any Seller Subsidiary is a party to any "listed
transaction" as defined in Treasury Regulation Section 1.6011-4(b)(2).
(l) None of the Tax Returns filed by Seller, any Seller Subsidiary or the
Seller Group contains a disclosure statement under former Section 6661 of the
Code or Section 6662 of the Code (or any similar provision of state, local or
foreign Tax law).
(m) Seller has not been, at any time during the applicable time period set
forth in Section 897(c)(1) of the Code, a United States real property holding
company within the meaning of Section 897(c)(2) of the Code.
(n) Seller has made available to Purchaser for inspection (i) complete and
correct copies of all material Tax Returns of Seller, each Seller Subsidiary and
the Seller Group relating to Taxes for all taxable periods for which the
applicable statute of limitations has not yet expired, and (ii) complete and
correct copies of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending ruling
requests, and any similar documents, submitted by, received by or agreed to by
or on behalf of Seller or any Seller Subsidiary, or, to the extent related to
the income, business, assets, operations, activities or status of Seller or any
Seller Subsidiary, submitted by, received by or agreed to by or on behalf of any
Seller Group, and relating to Taxes for all taxable periods for which the
statute of limitations has not yet expired.
(o) The Disclosure Letter sets forth each state, county, local, municipal
or foreign jurisdiction in which Seller or any Seller Subsidiary files, or is or
has been required to file, a Tax Return relating to state and local income,
franchise, license, excise, net worth, property or sales and use taxes or is or
has been liable for any Taxes on a "nexus" basis at any time for a taxable
period for which the relevant statutes of limitation have not expired. Neither
Seller nor any Seller Subsidiary has received notice of any claim by a Taxing
Authority in a jurisdiction where Seller or such Seller Subsidiary does not file
Tax Returns that Seller or such Seller Subsidiary is or may be subject to
taxation by such jurisdiction.
(p) Neither Seller nor any Seller Subsidiary has ever (i) made an election
under Section 1362 of the Code to be treated as an S corporation for federal
income tax purposes, or (ii) made any similar election under any comparable
provision of any state, local or foreign Tax law.
(q) From April 19, 1999 through the Effective Time, Sound REIT, Inc. has
been and will continue to be a real estate investment trust within the meaning
of Section 856 of the Code.
17
(r) From May 12, 1999 through the Effective Time, First Federal REIT, Inc.
has been and will continue to be a real estate investment trust within the
meaning of Section 856 of the Code.
Section 3.10 Material Contracts; Leases; Defaults.
(a) Except as set forth in the Disclosure Letter, neither Seller nor any
Seller Subsidiary is a party to or subject to: (i) any employment, consulting or
severance contract with any past or present officer, director or employee of
Seller or any Seller Subsidiary, except for "at will" arrangements; (ii) any
plan or contract providing for bonuses, pensions, options, or other equity
deferred compensation, retirement payments, profit sharing, insurance benefits,
death benefits, health, medical or disability benefits or similar material
arrangements for or with any past or present officers, directors or employees of
Seller or any Seller Subsidiary; (iii) any collective bargaining agreement with
any labor union relating to employees of Seller or any Seller Subsidiary; (iv)
any agreement which by its terms limits the payment of dividends by Seller or
any Seller 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 Seller or any Seller Subsidiary is an obligor to any person, which
instrument evidences or relates to indebtedness other than deposits, FHLB
advances, repurchase agreements, bankers' acceptances, and "treasury tax and
loan" accounts established in the ordinary course of business and transactions
in "federal funds" or which contains financial covenants or other restrictions
(other than those relating to the payment of principal and interest when due)
which would be applicable on or after the Closing Date to Purchaser or any
Purchaser Subsidiary; (vi) any other agreement, written or oral, not terminable
on 60 days' notice, that obligates Seller or any Seller Subsidiary for the
payment of more than $25,000 annually; or (vii) any agreement (other than this
Agreement), contract, arrangement, commitment or understanding (whether written
or oral) that restricts or limits in any material way the conduct of business by
Seller or any Seller Subsidiary (it being understood that any non-compete or
similar provision shall be deemed material).
(b) Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, neither Seller nor any Seller
Subsidiary is in default under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party,
by which its assets, business, or operations may be bound or affected, or under
which it or its assets, business, or operations receive benefits, and there has
not occurred any event that, with the lapse of time or the giving of notice or
both, would constitute such a default.
(c) True and correct copies of agreements, contracts, arrangements and
instruments referred to in Sections 3.10(a) and (b) have been made available to
Purchaser on or before the date hereof, are listed on the Disclosure Letter and
are in full force and effect on the date hereof and enforceable against the
counterparty to which it relates.
Section 3.11 Ownership of Property; Insurance Coverage.
(a) Except as set forth in the Disclosure Letter, Seller and each Seller
Subsidiary has good and, as to real property, marketable title to all assets and
properties owned by Seller or each Seller Subsidiary in the conduct of its
businesses, whether such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance sheet
contained in the most recent Seller Financial Statements or acquired subsequent
thereto (except to the extent that such assets and properties have been disposed
of in the ordinary course of business, since the date of such balance sheet and
except to the extent that the failure to have good title to any personal
property would not reasonably be expected to have a Material Adverse Effect),
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) those items which secure liabilities for public or statutory
obligations or any discount with, borrowing from or other obligations to FHLB,
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inter-bank credit facilities, reverse repurchase agreements or any transaction
by a Seller Subsidiary acting in a fiduciary capacity, (ii) statutory liens for
amounts not yet delinquent or which are being contested in good faith. Seller
and the Seller Subsidiaries, as lessee, have the right under valid and existing
leases of real and personal properties used by Seller and the Seller
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them and (iii) encumbrances
that do not materially affect the marketability of any title to real property.
Such existing leases and commitments to lease constitute or will constitute
operating leases for both tax and financial accounting purposes and the lease
expense and minimum rental commitments with respect to such leases and lease
commitments are as disclosed in all respects in the notes to the Seller
Financial Statements. Each real estate lease that will require the consent of
the lessor or its agent to consummate the effects intended by the Merger or
otherwise as a result of the Merger or the Bank Merger by virtue of the terms of
any such lease is listed in the Disclosure Letter identifying the section of the
lease that contains such prohibition or restriction.
(b) With respect to all agreements pursuant to which Seller or any Seller
Subsidiary has purchased securities subject to an agreement to resell, if any,
Seller or such Seller Subsidiary, as the case may be, has a lien or security
interest (which to Seller's Knowledge is a valid, perfected first lien) in the
securities or other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
(c) Seller and each Seller Subsidiary currently maintain insurance for
reasonable amounts with financially sound and reputable insurance companies,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. Neither Seller
nor any Seller Subsidiary has received notice from any insurance carrier that
(i) such insurance will be canceled 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 Seller or any
Seller Subsidiary under such policies. All such insurance is valid and
enforceable and in full force and effect, and within the last three years Seller
and each Seller Subsidiary has received each type of insurance coverage for
which it has applied and during such periods has not been denied indemnification
for any claims submitted under any of its insurance policies. The Seller
Disclosure Letter identifies all policies of insurance maintained by Seller and
each Seller Subsidiary as well as the other matters required to be disclosed
under this Section.
Section 3.12 Intellectual Property.
(a) The Disclosure Letter sets forth a true and complete list of all (i)
Registered and/or material Intellectual Property owned by Seller and Seller
Subsidiaries indicating for each Registered item the registration or application
number and the applicable filing jurisdiction (collectively, the "Listed
Intellectual Property"). Seller or the relevant Seller Subsidiary exclusively
owns (beneficially, and of record where applicable) all Listed Intellectual
Property, free and clear of all encumbrances, exclusive licenses and
non-exclusive licenses not granted in the ordinary course of business. The
Listed Intellectual Property is valid, subsisting and enforceable, and is not
subject to any outstanding order, judgment, decree or agreement adversely
affecting the Seller's use thereof or its rights thereto. Seller and the Seller
Subsidiaries have sufficient rights to use all Intellectual Property used in its
business as currently conducted. To Seller's Knowledge, Seller and the Seller
Subsidiaries do not and have not in the past five years infringed or otherwise
violated the Intellectual Property rights of any third party. There is no
material litigation, opposition, cancellation, proceeding, objection or claim
pending, asserted or threatened against the Seller or any Seller Subsidiary
concerning the ownership, validity, registerability, enforceability,
infringement or use of, or licensed right to use, any Intellectual Property. To
the Seller's Knowledge, (x) no valid basis for any such litigation, opposition,
cancellation, proceeding, objection or claim exists, (y) no Person is violating
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any Listed Intellectual Property or other Intellectual Property right owned or
held exclusively by Seller or any Seller Subsidiary, and (z) the Licensed
Intellectual Property is valid, subsisting and enforceable and is not subject to
any outstanding order, judgment, decree or agreement adversely affecting the
Seller's use thereof or its rights thereto. Consummation of the transactions
contemplated by this Agreement will not terminate or alter the terms pursuant to
which the Seller or any Seller Subsidiary is permitted to use any Licensed
Intellectual Property and will not create any rights by third parties to use any
Intellectual Property owned by the Purchaser (other than any termination,
alteration or creation of any rights that results from action of the Purchaser
and its Affiliates).
(b) The Seller and the Seller Subsidiaries have taken commercially
reasonable measures to protect the confidentiality of all Trade Secrets that are
owned, used or held by Seller and the Seller Subsidiaries, and to the Seller's
Knowledge, such Trade Secrets have not been used, disclosed to or discovered by
any Person except pursuant to valid and appropriate non-disclosure and/or
license agreements which have not been breached. Seller has exercised
commercially reasonable efforts to ensure that Seller's and the Seller
Subsidiaries' current and prior employees who have access to confidential
information have executed valid intellectual property and confidentiality
agreements or are obligated, pursuant to Seller policies, to maintain the
confidentiality of such information for the benefit of Seller or the relevant
Seller Subsidiary on terms and conditions consistent with industry standards.
All Intellectual Property developed under contract to Seller or the Seller
Subsidiaries has been assigned to Seller or the Seller Subsidiaries.
(c) To Seller's Knowledge, the IT Assets operate and perform in all
respects in accordance with their documentation and functional specifications
and otherwise as required by Seller in connection with its business, and have
not malfunctioned or failed within the past three years. To Seller's Knowledge,
the IT Assets do not contain any "time bombs," "Trojan horses," "back doors,"
"trap doors," "worms," viruses, bugs, faults or other devices or effects that
(1) enable or assist any person to access without authorization the IT Assets,
or (ii) otherwise significantly adversely affect the functionality of the IT
Assets, in either case except as disclosed in its documentation. To Seller's
Knowledge, no person has gained unauthorized access to the IT Assets. Seller has
implemented commercially reasonable backup and disaster recovery technology
consistent with industry practices.
(d) To Seller's Knowledge, none of the software owned by it contains any
shareware, open source code, or other software whose use requires disclosure or
licensing of Intellectual Property.
Section 3.13 Labor Matters.
Neither Seller nor any Seller Subsidiary is or has ever been a party to, or
is or has ever been bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization with
respect to its employees and no such agreement or contract is currently being
negotiated by Seller or any Seller Subsidiary, nor is Seller or any Seller
Subsidiary the subject of any proceeding asserting that it has committed an
unfair labor practice or otherwise relating to labor matters involving any
current or former employees of Seller or any Seller Subsidiary or seeking to
compel it or any Seller Subsidiary to bargain with any labor organization as to
wages and conditions of employment, nor is any strike, other labor dispute or
organizational effort involving Seller or any Seller Subsidiary pending or, to
the Knowledge of Seller, threatened. Seller and each Seller Subsidiary is in
compliance with applicable laws regarding employment of employees and retention
of independent contractors, and are in compliance with applicable employment tax
laws.
Section 3.14 Legal Proceedings.
Neither Seller nor any Seller Subsidiary is a party to any, and there are
no pending or, to Seller's Knowledge, threatened legal, administrative,
20
arbitration or other proceedings, claims (whether asserted or unasserted),
actions or governmental investigations or inquiries of any nature, (i) against
Seller or any Seller Subsidiary, (ii) to which Seller or any Seller 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 Seller to perform under this Agreement.
Section 3.15 Compliance With Applicable Law.
(a) Seller and each Seller Subsidiary is in compliance in all material
respects with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to it,
its properties, assets and deposits, its business, and its conduct of business
and its relationship with its employees, including, without limitation, the
Xxxxxxxx-Xxxxx Act of 2002, the USA Patriot Act, the Bank Secrecy Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the CRA, the Home Mortgage
Disclosure Act, and all other applicable fair lending laws and other laws
relating to discriminatory business practices. (b) Seller and each Seller
Subsidiary has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all Bank
Regulators that are required in order to permit it to own or lease its
properties and to conduct its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to the Knowledge of Seller, no suspension or cancellation of any
such permit, license, certificate, order or approval is threatened or will
result from the consummation of the transactions contemplated by this Agreement,
subject to obtaining the approvals set forth in Section 7.03.
(c) From the period beginning January 1, 2003, neither Seller nor any
Seller Subsidiary has received any written notification or any other
communication from any Bank Regulator (i) asserting that Seller or any Seller
Subsidiary is not in material compliance with any of the statutes, regulations
or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any
license, franchise, permit or governmental authorization; (iii) requiring or
threatening to require Seller or any Seller Subsidiary, or indicating that
Seller or any Seller Subsidiary may be required, to enter into a cease and
desist order, agreement or memorandum of understanding or any other agreement
with any federal or state governmental agency or authority which is charged with
the supervision or regulation of banks or engages in the insurance of bank
deposits restricting or limiting, or purporting to restrict or limit, in any
material respect the operations of Seller or any Seller Subsidiary, including
without limitation any restriction on the payment of dividends; or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of Seller or any Seller Subsidiary (any such
notice, communication, memorandum, agreement or order described in this sentence
is hereinafter referred to as a "Regulatory Agreement"). Neither Seller nor any
Seller Subsidiary has consented to or entered into any Regulatory Agreement that
is currently in effect. The most recent regulatory rating given to Seller Bank
as to compliance with the CRA is "satisfactory" or better.
Section 3.16 Employee Benefit Plans.
(a) The Disclosure Letter includes a descriptive list of all plans,
programs, policies, payroll practices, contracts, agreements and other
arrangements providing for bonus, incentive compensation, deferred compensation,
pension, retirement benefits or payments, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock, stock
option, stock appreciation, phantom stock, and other stock and stock related
awards, severance, welfare benefits, fringe benefits, employment, severance and
change in control benefits or payments and all other types of compensation and
types of compensation and compensation and benefit practices, policies and
arrangements, in each case, sponsored or contributed to, required to be
contributed to or maintained by Seller or any Seller Subsidiary in which any
21
employee or former employee, consultant or former consultant or director or
former director of Seller or any Seller Subsidiary participates or to which any
such employee, consultant or director is a party or is otherwise entitled to
receive benefits (the "Compensation and Benefit Plans"). Other than as set forth
in the Disclosure Letter, neither Seller nor any of its Subsidiaries has any
commitment to create any additional Compensation and Benefit Plan or to modify,
change or renew any existing Compensation and Benefit Plan (any modification or
change that increases the cost of such plans would be deemed material), except
as required by law or regulation to maintain the qualified status thereof.
Seller has made available to Purchaser true and correct copies of the
Compensation and Benefit Plans and amendments thereto.
(b) Each Compensation and Benefit Plan has been operated and administered
in all material respects in accordance with its terms and with applicable law,
including, but not limited to, ERISA, the Code, the Securities Act, the Exchange
Act, the Age Discrimination in Employment Act, COBRA, HIPAA and any regulations
or rules promulgated thereunder, and all filings, disclosures and notices
required by ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other applicable law have been timely
made or any interest, fines, penalties or other impositions for late filings
have been paid in full. Each Compensation and Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and which is
intended to be qualified under Section 401(a) of the Code is, and since its
inception has been, so qualified, and has received a favorable determination
letter from the IRS, and Seller is not aware of any circumstances which are
reasonably likely to result in revocation of any such favorable determination
letter. There is no pending or, to the Knowledge of Seller threatened, action,
suit or claim relating to any of the Compensation and Benefit Plans (other than
routine claims for benefits). Neither Seller nor any Seller Subsidiary has
engaged in a transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably be expected to subject
Seller or any Seller Subsidiary to an unpaid tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA.
(c) The Disclosure Letter sets forth the funding status of each Seller
Defined Benefit Plan (as hereinafter defined) at December 31, 2004. No
liability, other than PBGC premiums arising in the ordinary course of business,
has been or could reasonably be expected by Seller, any Seller Subsidiary or any
ERISA Affiliate (as hereinafter defined) to be incurred with respect to any
Compensation and Benefit Plan which is a defined benefit plan subject to Title
IV of ERISA ("Seller Defined Benefit Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by Seller or any entity which is considered one employer
with Seller under Sections 4001(a)(14) and (b)(1) of ERISA or Section 414 of the
Code (an "ERISA Affiliate") (such plan hereinafter referred to as an "ERISA
Affiliate Plan"). No proceeding has been initiated by the PBGC to terminate any
Seller Defined Benefit Plan or to appoint a trustee to administer any Seller
Defined Benefit Plan. No Seller Defined Benefit Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of
the last day of the end of the most recent plan year ending prior to the date
hereof and each Seller Defined Benefit Plan has been maintained in compliance
with the minimum funding standards of ERISA and the Code. The fair market value
of the assets of each Seller Defined Benefit Plan exceeds the present value of
the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under
such Seller Defined Benefit Plan as of the end of the most recent plan year with
respect to the respective Seller Defined Benefit Plan ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such Seller Defined Benefit Plan as of the date
hereof; and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) has been required to be filed for any Seller Defined Benefit Plan within
the 12-month period ending on the date hereof. Neither Seller nor any of its
Subsidiaries has provided, or is required to provide, security to any Seller
Defined Benefit Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code or has taken any action, or omitted
to take any action, that has resulted, or would reasonably be expected to result
in the imposition of a lien under Section 412(n) of the Code or pursuant to
22
ERISA. To the Knowledge of Seller, there is no pending investigation, audit or
enforcement action by any Bank Regulator, the IRS, the U.S. Department of Labor
or the PBGC with respect to any Compensation and Benefit Plan or any ERISA
Affiliate Plan.
(d) The Seller and the ERISA Affiliates have never had an obligation to
contribute to a "multi-employer plan" as such term is defined in section 3(37)
of ERISA or had any direct or indirect liability or potential liability with
respect to such a plan.
(e) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements to which Seller or any Seller Subsidiary is a party or a sponsor
have been timely made, and all anticipated contributions and funding obligations
are accrued on Seller's consolidated financial statements to the extent required
by GAAP. Seller and the Seller Subsidiaries have expensed and accrued as a
liability the present value of future benefits under each applicable
Compensation and Benefit Plan for financial reporting purposes as required by
GAAP.
(f) Except as set forth in the Disclosure Letter, neither Seller nor any
Seller Subsidiary has any obligations to provide retiree health, life insurance,
disability insurance, or death benefits under any Compensation and Benefit Plan,
other than benefits mandated by Section 4980B of the Code and there has been no
communication to employees by Seller or any Seller Subsidiary that would
reasonably be expected to promise or guarantee such benefits.
(g) With respect to each Compensation and Benefit Plan, if applicable,
Seller has provided or made available to Purchaser copies of the: (A) trust
instruments and insurance contracts; (B) two most recent Forms 5500 filed with
the IRS; (C) two most recent actuarial reports and financial statements; (D)
most recent summary plan description; (E) most recent determination letter
issued by the IRS; and (F) any Form 5310 or Form 5330 filed with the IRS within
the last two years.
(h) Except as set forth in the Disclosure Letter, the consummation of the
Merger will not, directly or indirectly (including, without limitation, as a
result of any termination of employment or service at any time prior to or
following the Effective Time): (A) entitle any current or former employee,
consultant, independent contractor or director to any payment or benefit
(including severance pay, change in control benefit, or similar compensation) or
any increase in compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan, (C) result in any material
increase in benefits payable under or the obligation to fund benefits under any
Compensation and Benefit Plan or (D) result in the triggering or imposition of
any restrictions or limitations on the rights of Seller, any of the Seller
Subsidiaries, the Purchaser or any of the Purchaser Subsidiaries to amend or
terminate any Compensation and Benefit Plan. Except as set forth in the
Disclosure Letter, the consummation of the Merger and/or the Bank Merger will
not, directly or indirectly (including without limitation, as a result of any
termination of employment or service at any time prior to or following the
Effective Time), entitle any current or former employee, director, consultant or
independent contractor of Seller or any Seller Subsidiary to any actual or
deemed payment (or benefit) which could constitute an "excess parachute payment"
(as such term is defined in Section 280G of the Code). The Disclosure Letter
includes a schedule of all termination benefits and related payments that would
be employees who are participants in the Seller Bank Amended and Restated
Severance Plan for Key Employees, under the Compensation and Benefit Plans,
assuming their employment or service is terminated as of the Closing Date and
based on the other assumptions specified in such schedule. Except for such
individuals described in the previous sentence and those individuals who have
delivered Settlement Agreements pursuant to Section 6.08(e), no other
individuals are entitled to any termination benefits or any related payments
under any of the Compensation and Benefit Plans (other than a tax qualified
Pension Plan).
23
(i) Except as set forth in the Disclosure Letter, neither Seller nor any
Seller Subsidiary maintains any compensation plans, programs or arrangements
under which (i) payment is reasonably likely to become non-deductible, in whole
or in part, for tax reporting purposes as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder, or (ii) any
payment is reasonably likely to become subject to an excise tax under section
409A or 4999 of the Code.
(j) Except as set forth in the Disclosure Letter, there are no stock
option, stock appreciation or similar rights, earned dividends or dividend
equivalents, or shares of restricted stock, outstanding under any of the
Compensation and Benefit Plans or otherwise as of the date hereof and none will
be granted, awarded, or credited after the date hereof.
(k) Except as set forth in the Disclosure Letter, each BOLI contract of the
Seller Bank (i) constitutes a "life insurance contract" as defined in Section
7702 of the Code, (ii) does not constitute a "modified endowment contract" as
defined in Section 7702A of the Code and (iii) has not resulted in the loss or
denial of an interest deduction under Section 264(f) of the Code.
(l) Except as set forth in the Disclosure Letter, each Compensation and
Benefit Plan can be amended, terminated or otherwise discontinued without
liability to the Seller, any Seller Subsidiary, Purchaser, any Purchaser
Subsidiary or any ERISA Affiliate.
Section 3.17 Brokers, Finders and Financial Advisors.
Neither Seller nor any Seller Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person in connection with the transactions contemplated by this
Agreement except for the retention of Keffe, Xxxxxxxx and Xxxxx by Seller and
the fee payable pursuant thereto, which Seller has separately disclosed to
Purchaser.
Section 3.18 Environmental Matters.
(a) Except as may be set forth in any Phase I Environmental Report
identified in the Disclosure Letter (a true copy of which has been provided to
Purchaser), with respect to Seller and each Seller Subsidiary:
(i) Each of Seller and the Seller Subsidiaries, each Participation
Facility, and, to Seller's Knowledge, each Loan Property is, and has been,
in compliance in all material respects with, and is not liable under, any
Environmental Laws;
(ii) Seller has received no written notice and does not otherwise have
Knowledge that there is any suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending and,
to Seller's Knowledge, no such action is threatened, before any court,
governmental agency or other forum against it or any of the Seller
Subsidiaries or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental
Law or (y) relating to the presence of or release into the environment of
any Materials of Environmental Concern (as defined herein), whether or not
occurring at or on a site owned, leased or operated by it or any of the
Seller Subsidiaries or any Participation Facility;
(iii) Seller has received no written notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
24
investigation or proceeding pending and, to Seller's Knowledge no such
action is threatened, before any court, governmental agency or other forum
relating to or against any Loan Property (or Seller or any of the Seller
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Materials of Environmental Concern, whether or not
occurring at or on a site owned, leased or operated by a Loan Property;
(iv) The properties currently owned or operated by Seller or any
Seller Subsidiary and, to the Seller's Knowledge, the Loan Properties
(including, without limitation, soil, groundwater or surface water on, or
under the properties, and buildings thereon) are not contaminated with and
do not otherwise contain any Materials of Environmental Concern;
(v) There is no suit from any federal, state, local or foreign
governmental entity or any third party indicating that it may be in
violation of, or liable under, any Environmental Law;
(vi) Except as set forth in the Disclosure Letter, there are no
underground storage tanks on, in or under any properties owned or operated
by Seller or any of the Seller Subsidiaries or any Participation Facility,
and, to Seller's Knowledge, the Loan Properties; and to Seller's Knowledge,
no underground storage tanks have been closed or removed from any
properties owned or operated by Seller or any Seller Subsidiaries or any
Participation Facility or Loan Properties; and
(vii) To Seller's Knowledge, during the period of (s) Seller's or any
of the Seller Subsidiaries' ownership or operation of any of their
respective current properties or (t) Seller's or any of the Seller
Subsidiaries' participation in the management of any Participation
Facility, there has been no contamination by or release of Materials of
Environmental Concern in, on, under or affecting such properties that could
reasonably be expected to result in material liability under the
Environmental Laws. To Seller's Knowledge, prior to the period of (x)
Seller's or any of the Seller Subsidiaries' ownership or operation of any
of their respective current properties or (y) Seller's or any of the Seller
Subsidiaries' participation in the management of any Participation
Facility, there was no contamination by or release of Materials of
Environmental Concern in, on, under or affecting such properties that could
reasonably be expected to result in material liability under the
Environmental Laws.
(viii) To Seller's knowledge, there is no reasonable basis for any
suit, claim, action, demand, executive or administrative order, directive
or proceeding of a type described in Section 3.18(a)(ii) or (iii).
"Loan Property" means any property in which Seller or any Seller Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Participation Facility" means any facility in which Seller or any Seller
Subsidiary participates in the management (including all property held as
trustee or in any other fiduciary capacity) and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
Section 3.19 Loan Portfolio.
(a) The allowance for loan losses reflected in the notes to Seller's
audited consolidated statement of financial condition at March 31, 2005 was, and
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the allowance for loan losses shown in the notes to the unaudited consolidated
financial statements in the Seller Reports for periods ending after March 31,
2005 were, or will be, adequate, as of the dates thereof, under GAAP.
(b) The Disclosure Letter sets forth a listing, as of the most recently
available date, by account, of: (A) each borrower, customer or other party which
has notified Seller Bank or any other Seller Subsidiary during the past twelve
months of, or has asserted against Seller Bank or any other Seller Subsidiary,
in each case in writing, any "lender liability" or similar claim, and, to the
knowledge of Seller Bank each borrower, customer or other party which has given
Seller Bank or any other Seller Subsidiary any oral notification of, or orally
asserted to or against Seller Bank or any other Seller Subsidiary, any such
claim; and (B) all loans, (1) that are contractually past due 90 days or more in
the payment of principal and/or interest, (2) that are on non-accrual status,
(3) that as of the date of this Agreement are classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Watch list" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such loan
and the identity of the obligor thereunder, (4) where a reasonable doubt exists
as to the timely future collectability of principal and/or interest, whether or
not interest is still accruing or the loans are less than 90 days past due, (5)
where the interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in accordance
with such initial terms, or (6) where a specific reserve allocation exists in
connection therewith; and (C) all other assets classified by Seller Bank or any
other Seller Subsidiary as real estate acquired through foreclosure or in lieu
of foreclosure, including in-substance foreclosures, and all other assets
currently held that were acquired through foreclosure or in lieu of foreclosure.
(c) All loans receivable (including discounts) and accrued interest entered
on the books of Seller and the Seller Subsidiaries arose out of bona fide
arm's-length transactions, were made for good and valuable consideration in the
ordinary course of Seller's or the appropriate Seller Subsidiary's respective
business, and each note or other evidences of indebtedness with respect to such
loans (including discounts) is a legal, valid and binding obligation of the
maker or obligor thereof, enforceable against such maker or obligor in
accordance with its terms. To the Knowledge of Seller, the loans, discounts and
the accrued interest reflected on the books of Seller and the Seller
Subsidiaries are subject to no defenses, set-offs or counterclaims (including,
without limitation, those afforded by usury or truth-in-lending laws), except as
may be provided by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or by general principles of equity. All such loans are owned by
Seller or the appropriate Seller Subsidiary free and clear of any liens.
(d) With respect to each loan owned by Seller or any Seller Subsidiary, in
whole or in part (each, a "Seller Loan"):
(i) neither Seller nor any Seller Subsidiary nor any prior holder of a
Seller Loan has modified the note or any of the related security documents
in any material respect or satisfied (other than the ordinary amortization
of principal or prepayment of principal as permitted by the applicable loan
documents), canceled or subordinated the note or any of the related
security documents except as otherwise disclosed by documents in the
applicable Seller Loan file;
(ii) Seller or a Seller Subsidiary is the sole holder of legal and
beneficial title to each Seller Loan (or Seller or Seller Subsidiary's
applicable participation interest, as applicable);
(iii) the note and the related security documents, copies of which are
included in the Seller Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed except as otherwise disclosed by
documents in the applicable Seller Loan file;
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(iv) there is no pending or, to Seller's Knowledge, threatened
condemnation proceeding or similar proceeding affecting the property which
serves as security for a Seller Loan;
(v) there is no litigation or proceeding pending or, to Seller's
Knowledge, threatened, relating to the property which serves as security
for a Seller Loan that would have a material adverse effect upon the
related Seller Loan;
(vi) with respect to a Seller Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable and the interest in such Seller Loan of Seller or a Seller
Subsidiary created by such participation would not be a part of the
insolvency estate of the Seller Loan originator or other third party upon
the insolvency thereof; and
(vii) each Seller Loan secured by a mortgage on residential property
(except for construction loans) was originated by a bank, thrift, other
HUD-approved lender, licensed mortgage broker or insurance company.
Section 3.20 Related Party Transactions.
Except as described in Seller's Proxy Statement distributed in connection
with the annual meeting of stockholders in 2005 (which has previously been
provided to Purchaser), neither Seller nor any Seller Subsidiary is a party to
any transaction (including any loan or other credit accommodation) with any
Affiliate of Seller or any Seller Subsidiary. Except as described in Seller's
Proxy Statement, all such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. No loan or credit
accommodation to any Affiliate of Seller or any Seller Subsidiary is presently
in default or, during the three-year period prior to the date of this Agreement,
has been in default or has been restructured, modified or extended except for
rate modifications pursuant to Seller Bank's loan modification policy that is
applicable to all Persons. Neither Seller nor any Seller Subsidiary has been
notified that principal and interest with respect to any such loan or other
credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by Seller is
inappropriate.
Section 3.21 Deposits.
None of the deposits of Seller or any Seller Subsidiary is a "brokered"
deposit or subject to any encumbrance, legal restraint or other legal process
except to the extent any such deposits serve as collateral for any Loan or are
subject to legal restraint in the ordinary course of the banking business due to
the action of the depositor or a third party.
Section 3.22 Antitakeover Provisions Inapplicable.
Other than Section 8 of the Federal Stock Charter of Seller Bank (which
Seller Bank shall amend prior to the Closing Date to eliminate any restrictions
on ownership or voting of Seller Bank Common Stock), the transactions
contemplated by this Agreement are not subject to the requirements of any
"moratorium," "control share," "fair price," "affiliate transactions," "business
combination" or other antitakeover laws and regulations of any state, including
the provisions of Section 203 of the DGCL applicable to Seller or any Seller
Subsidiary.
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Section 3.23 Registration Obligations.
Neither Seller nor any Seller Subsidiary is under any obligation,
contingent or otherwise, which will survive the Effective Time by reason of any
agreement to register any transaction involving any of its securities under the
Securities Act.
Section 3.24 Risk Management Instruments.
Neither Seller nor any Subsidiary is a party to or has agreed to enter into
an exchange-traded or over-the-counter equity, interest rate, foreign exchange
or other swap, forward, future, option, cap, floor or collar or any other
contract that is not included in the consolidated statements of condition and is
a derivative contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that (A) are referred to generically
as "structured notes," "high risk mortgage derivatives (other than "high risk
mortgage derivatives" set forth in the Disclosure Letter)," "capped floating
rate notes" or "capped floating rate mortgage derivatives" or (B) are likely to
have changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in the Disclosure Letter or
disclosed in Seller Reports filed on or prior to the date hereof.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the statements contained
in this Article IV are true and correct as of the date of this Agreement and
will be true and correct as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article IV).
Section 4.01 Organization.
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly registered as a
savings and loan holding company under the HOLA. Purchaser has all requisite
corporate power and authority to own, lease and operate its properties and carry
on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification.
(b) The Bank is a stock savings bank duly organized, validly existing and
in good standing under the laws of the United States of America. The deposits of
the Bank are insured by the FDIC to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due.
(c) Merger Sub will, at the Effective Time, be a corporation duly
incorporated and validly existing under the laws of the State of Delaware. At
the Effective Time, the Bank will have received all requisite approvals of
government authorities to own, and the Bank will own, all of the outstanding
capital stock of Merger Sub.
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Section 4.02 Authority; No Violation.
(a) Purchaser has full corporate power and authority to execute and deliver
this Agreement and, subject to receipt of the required Regulatory Approvals, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser and the completion by Purchaser of the transactions
contemplated hereby, have been duly and validly approved by the Board of
Directors of Purchaser, and no other corporate proceedings on the part of
Purchaser are necessary to complete the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Purchaser, and
subject to the receipt of the Regulatory Approvals, constitutes the valid and
binding obligation of Purchaser, enforceable against Purchaser 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.
(b) The execution and delivery of this Agreement by Purchaser, subject to
receipt of the Regulatory Approvals and compliance by Seller and Purchaser with
any conditions contained therein, the consummation of the transactions
contemplated hereby and compliance by Purchaser with any of the terms or
provisions hereof will not (i) conflict with or result in a breach or violation
of, or default under and provision of the certificate of incorporation or bylaws
of Purchaser or (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree, governmental permit or license or injunction
applicable to Purchaser.
(c) Merger Sub will, at the Effective Time, have full corporate power and
authority to execute and deliver the Plan of Interim Merger and, subject to
receipt of the required Regulatory Approvals, to consummate the transactions
contemplated hereby.
Section 4.03 Consents.
Except for the Regulatory Approvals and compliance with any conditions
contained therein, the filing of the Proxy Statement with the SEC contemplated
by Section 7.02 hereof and the approval of this Agreement by the requisite vote
of the stockholders of Seller, no consents, waivers or approvals of, or filings
or registrations with, any Governmental Entity or Bank Regulator are necessary,
and, to the Knowledge of Purchaser, no consents, waivers or approvals of, or
filings or registrations with, any other third parties are necessary, in
connection with (a) the execution and delivery of this Agreement by Purchaser
and the completion by Purchaser of the Merger or (b) the execution and delivery
of the Plan of Interim Merger by the Purchaser and the completion by the Bank of
the Bank Merger. Purchaser has no reason to believe that (i) any Regulatory
Approvals or other required consents or approvals will not be received, or that
(ii) any public body or authority, the consent or approval of which is not
required or to which a filing is not required, will object to the completion of
the transactions contemplated by this Agreement.
Section 4.04 Access to Funds.
Purchaser has, or on the Closing Date will have, access to all funds
necessary to consummate the Merger and pay the aggregate Merger Consideration
and shall have entered into the Paying Agent Agreement with Paying Agent.
Section 4.05 Financial Statements.
The financial statements of the Purchaser included in the Purchaser's
Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed
with the SEC have been prepared in accordance with GAAP applied on a consistent
29
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited financial statements, as permitted by SEC
Form 10-K or the Securities Laws).
Section 4.06 Legal Proceedings.
Purchaser is not a party to any action, suit or proceeding that would
materially adversely affect the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
ARTICLE V.
CONDUCT PENDING ACQUISITION
Section 5.01 Conduct of Business Prior to the Effective Time.
Except as expressly provided in this Agreement or with the prior written
consent of Purchaser, during the period from the date of this Agreement to the
Effective Time, Seller shall, and shall cause each Seller Subsidiary to: (i)
conduct its business in the ordinary and usual course consistent with past
practices and prudent banking practice; (ii) maintain and preserve intact its
business organization, properties, leases and advantageous business
relationships and retain the services of its officers and key employees; (iii)
take no action which would adversely affect or delay the ability of each of
Seller or any Seller Subsidiary to perform its covenants and agreements on a
timely basis under this Agreement; (iv) take no action which would adversely
affect or delay the ability of parties to obtain any necessary approvals,
consents or waivers of any Governmental Authority required for the transactions
contemplated hereby or which would reasonably be expected to result in any such
approvals, consents or waivers containing any material condition or restriction;
and (v) take no action that results in or is reasonably likely to have a
Material Adverse Effect on Seller or the Seller Subsidiaries taken as a whole.
Section 5.02 Forbearances of Seller.
Without limiting the covenants set forth in Section 5.01 hereof, from the
date hereof until the Effective Time, except as expressly contemplated or
permitted by this Agreement, without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld, Seller will not, and it will
cause each of the Seller Subsidiaries not to:
(a) change or waive any provision of its certificate of incorporation,
charter or bylaws or any similar governing documents of any Seller Subsidiary
except as required by law, except as necessary to eliminate Section 8A from the
Federal Stock Charter of Seller Bank;
(b) change the number of authorized or issued shares of its capital stock,
issue any shares of Seller Common Stock that are held as Treasury Stock as of
the date of this Agreement, or issue or grant any Right or agreement of any
character relating to its authorized or issued capital stock or any securities
convertible into shares of such stock, make any grant or award under the Seller
Stock Benefit Plans, or split, combine or reclassify any shares of its capital
stock, or declare, set aside or pay any dividend or other distribution in
respect of its capital stock, or purchase or redeem or otherwise acquire any
shares of its capital stock, except that (A) Seller may issue shares of Seller
Common Stock upon the valid exercise, in accordance with the information set
forth in the Disclosure Letter, of presently outstanding Seller Options issued
under the Seller Stock Benefit Plans, (B) Seller may continue to pay its regular
quarterly cash dividend of $0.075 per share with payment and record dates
consistent with past practice, and (C) any Seller Subsidiary may pay dividends
to its parent company (as permitted under applicable law or regulations);
30
(c) except as provided in clause (p) below, enter into, amend in any
material respect or terminate any contract or agreement (including without
limitation any settlement agreement with respect to litigation) involving a
payment by Seller or any Seller Subsidiary of $25,000 or more;
(d) make any commitment relating to an application for the opening or
closing of any, or open or close any, branch, automated banking or other office
facility;
(e) enter into any new line of business or introduce any new products;
(f) grant or agree to pay any bonus, severance or termination payment
(including, but not limited to discretionary severance pay) to, or enter into,
renew or amend any employment agreement, severance agreement and/or supplemental
executive agreement with, or increase in any manner the compensation or fringe
benefits of, any of its directors, officers or employees, except (i) as may be
required by applicable law or pursuant to binding, written commitments existing
on the date hereof and set forth in the Disclosure Letter, (ii) the payment of
bonuses for the year ending March 31, 2006, to the extent such bonuses have been
accrued in accordance with GAAP through March 31, 2006 and provided that such
bonuses are consistent, as to amount and persons covered, with past practice,
and (iii) Seller Bank may hire at-will, non-officer employees to fill vacancies
that may from time to time arise in the ordinary course of business. In
addition, Seller may agree to pay employees of Seller or Seller Bank, who are
identified by Seller and agreed to by Purchaser, a retention bonus in an
individual amount, and in an aggregate amount as to all retention bonuses, to be
agreed to by Purchaser;
(g) enter into or, except as may be required by law, materially modify any
pension, retirement, stock option, stock purchase, stock appreciation right,
stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice;
(h) merge or consolidate Seller or any Seller Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of Seller or any Seller Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other Person other than in
connection with foreclosures, settlements in lieu of foreclosure, troubled loan
or debt restructuring, or the collection of any loan or credit arrangement
between Seller, or any Seller Subsidiary, and any other Person; enter into a
purchase and assumption transaction with respect to deposits and liabilities;
permit the revocation or surrender by any Seller 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;
(i) sell or otherwise dispose of the capital stock of Seller or sell or
otherwise dispose of any asset of Seller or of any Seller Subsidiary other than
in the ordinary course of business consistent with past practice;
(j) incur any indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money) or subject any asset of Seller or of any Seller
Subsidiary to any 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), except as set forth in the Disclosure Letter
or in the ordinary course of business consistent with past practice;
31
(k) take any action which would result in any of the representations and
warranties of Seller 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 VIII
hereof not being satisfied, except in each case as may be required by applicable
law;
(l) change any method, practice or principle of accounting, except as may
be required from time to time by GAAP (without regard to any optional early
adoption date) or any Bank Regulator responsible for regulating Seller or Seller
Bank;
(m) waive, release, grant or transfer any material rights of value or
modify or change in any material respect any existing agreement or indebtedness
to which Seller or any Seller Subsidiary is a party, other than in the ordinary
course of business, consistent with past practice;
(n) make any investment in any debt security, including mortgage-backed and
mortgage related securities, other than U.S. government and U.S. government
agency securities with final maturities not greater than five years, that are
purchased in the ordinary course of business consistent with past practice, in
either case, with a purchase price no greater than 101.5% of par value;
(o) other than investments for Seller's portfolio made in accordance with
Section 5.02(m), make any investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity other than the
purchase of FHLB common stock necessary to maintain Seller's membership status
with the FHLB of New York and other than pursuant to existing commitments set
forth in the Disclosure Letter;
(p) except pursuant to commitments existing at the date hereof which are
set forth in the Disclosure Letter, make, renegotiate, renew, increase, extend
or purchase any loan, lease (credit equivalent), advance, credit enhancement or
other extension of credit, or make any commitment in respect of any of the
foregoing, except in conformity with existing lending practices set forth in the
Sound Federal Savings Loan Department Procedures Manual, last revised on January
20, 2005, and attached to the Disclosure Letter (the "Lending Policy") and in
amounts not to exceed the limits set forth in such Lending Policy;
(q) enter into, renew, extend or modify any other transaction (other than a
deposit transaction) with any Affiliate other than pursuant to Seller's existing
Insider Loan Policy;
(r) enter into any futures contract, option, interest rate caps, interest
rate floors, interest rate exchange agreement or other agreement, or take any
other action for purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of interest;
(s) except for the execution of this Agreement, and actions taken or which
will be taken in accordance with this Agreement and performance thereunder, take
any action that would give rise to a right of payment to any individual under
any employment agreement;
(t) make any change in policies in existence on the date of this Agreement
with regard to: the extension of credit, or the establishment of reserves with
respect to the possible loss thereon or the charge off of losses incurred
thereon; investments; asset/liability management; or other material banking
policies in any material respect except as may be required by changes in
applicable law or regulations or by a Bank Regulator or changes in GAAP, as
advised by Seller's independent public accountants;
32
(u) except for the execution of this Agreement, and the transactions
contemplated therein, take any action that would give rise to an acceleration of
the right to payment to any individual under any Seller Compensation and Benefit
Plan;
(v) make any capital expenditures in excess of $50,000 individually or
$100,000 in the aggregate, other than pursuant to binding commitments existing
on the date hereof which are set forth in the Disclosure Letter and other than
expenditures necessary to maintain existing assets in good repair;
(w) purchase or otherwise acquire, or sell or otherwise dispose of, any
assets or incur any liabilities other than in the ordinary course of business
consistent with past practices and policies;
(x) sell any participation interest in any loan (other than sales of loans
secured by one- to four-family real estate that are consistent with past
practice) unless the Bank has been given the first opportunity and a reasonable
time to purchase any loan participation being sold;
(y) undertake or, enter into any lease, contract or other commitment for
its account, other than in the normal course of providing credit to customers as
part of its banking business, involving a payment by Seller or any Seller
Subsidiary of more than $25,000 annually, or containing any financial commitment
extending beyond 12 months from the date hereof;
(z) pay, discharge, settle or compromise any claim, action, litigation,
arbitration or proceeding; other than any such payment, discharge, settlement or
compromise in the ordinary course of business consistent with past practice that
involves solely money damages in the amount not in excess of $25,000
individually or $50,000 in the aggregate;
(aa) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect (which includes sales of
residential loans and mortgages, mortgage related and other securities as part
of balance sheet management), sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties, leases or assets to any individual,
corporation or other entity other than a direct or indirect wholly owned
subsidiary of Seller or cancel, release or assign any indebtedness of any such
person, except pursuant to contracts or agreements in force at the date of this
Agreement and which are set forth in the Disclosure Letter; provided, however,
that no sales may be made with recourse;
(bb) purchase or sell servicing rights (other than loan sales with
servicing released) with respect to loans the principal balance of which, either
individually or in the aggregate, exceeds $1,000,000;
(cc) fail to maintain all its properties in repair, order and condition no
worse than on the date of this Agreement other than as a result of ordinary wear
and tear;
(dd) make any investment or commitment to invest in real estate or in any
real estate development project, other than real estate acquired in satisfaction
of defaulted mortgage loans and investments or commitments approved by the Board
of Directors of Seller prior to the date of this Agreement and disclosed in
writing to Purchaser; (ee) elect to the Board of Directors of Seller or Seller
Bank any person who is not a member of the Board of Directors of Seller or
Seller Bank as of the date of this Agreement;
(ff) make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes or otherwise, enter into any closing
33
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes, except as required by law, rule, regulation or
GAAP; or
(gg) agree to do any of the foregoing.
Section 5.03 Maintenance of Insurance.
Seller shall maintain, and cause the Seller 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.
Section 5.04 All Reasonable Efforts.
Subject to the terms and conditions herein provided, Seller agrees to use,
and agrees to cause each Seller Subsidiary to use, all commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
ARTICLE VI.
COVENANTS
Section 6.01 Current Information.
(a) During the period from the date of this Agreement to the Effective
Time, Seller will cause one or more of its representatives to confer with
representatives of Purchaser and report the general status of its ongoing
operations at such times as Purchaser may reasonably request. Seller will
promptly notify Purchaser of any material change in the normal course of its
business or in the operation of its properties and, to the extent permitted by
applicable law, of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the known threat of material litigation involving Seller or any Seller
Subsidiary.
(b) Seller Bank and the Bank shall meet on a regular basis to discuss and
plan for the conversion of Seller Bank's data processing and related electronic
informational systems to those used by the Bank which planning shall include,
but not be limited to, discussion of the possible termination by Seller Bank of
third-party service provider arrangements effective at the Effective Time or at
a date thereafter, non-renewal of personal property leases and software licenses
used by Seller Bank in connection with its systems operations, retention of
outside consultants and additional employees to assist with the conversion, and
outsourcing, as appropriate, of proprietary or self-provided system services, it
being understood that, unless Seller Bank otherwise agrees, no conversion shall
take place prior to the Effective Time. In the event that Seller Bank takes, at
the request of the Bank, any action relative to third parties to facilitate the
conversion that results in the imposition of any termination fees or charges,
Purchaser shall indemnify Seller Bank for any such fees and charges, and the
costs of reversing the conversion process, if for any reason the Merger is not
consummated for any reason other than a breach of this Agreement by Seller.
Seller shall reasonably cooperate with Purchaser to effect any conversion of the
operating systems of Seller and the Seller Subsidiaries to those of Purchaser or
its Affiliates on the Closing Date or as soon thereafter as is reasonably
practicable. In connection therewith, Seller shall, from and after the date
hereof through the Closing, reasonably assist Purchaser in making and sending
notices, information and materials to the customers and service providers of
Seller and the Seller Subsidiaries.
34
(c) Seller shall provide Purchaser, within 10 business days of the end of
each calendar month, a written list of nonperforming assets (the term
"nonperforming assets," for purposes of this subsection, means (i) loans that
are "troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate owned, (iv) all
loans ninety (90) days or more past due as of the end of such month and (iv)
impaired loans). On a monthly basis, Seller shall provide Purchaser with a
schedule of all loan approvals, which schedule shall indicate the loan amount,
loan type and other material features of the loan.
(d) Seller shall promptly inform Purchaser 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 Seller or any Seller Subsidiary
under any labor or employment law.
Section 6.02 Access to Properties and Records.
Seller shall permit Purchaser reasonable access upon reasonable notice to
its properties and those of the Seller Subsidiaries, and shall disclose and make
available to Purchaser during normal business hours all of its books, papers and
records relating to the assets, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' (other than minutes
that discuss any of the transactions contemplated by this Agreement or any other
subject matter Seller reasonably determines should be treated as confidential)
and stockholders' meetings, organizational documents, Bylaws, material contracts
and agreements, filings with any regulatory authority, litigation files, plans
affecting employees, and any other business activities or prospects in which
Purchaser may have a reasonable interest; provided, however, that Seller shall
not be required to take any action that would provide access to or disclose
information where such access or disclosure, in Seller's reasonable judgment,
would interfere with the normal conduct of Seller's business or would violate or
prejudice the rights or business interests or confidences of any customer or
other person, or would result in the waiver by it of the privilege protecting
communications between it and any of its counsel, or would be contrary to any
law or regulation applicable to Seller Bank. Seller shall provide and shall
request its auditors to provide Purchaser with such historical financial
information regarding it (and related audit reports, consents and work papers)
as Purchaser may reasonably request. Purchaser shall use commercially reasonable
efforts to minimize any interference with Seller's regular business operations
during any such access to Seller's property, books and records. Seller and each
Seller Subsidiary shall permit Purchaser, at Purchaser's expense, to cause a
"phase I environmental audit" and a "phase II environmental audit" to be
performed at any physical location owned or occupied by Seller or any Seller
Subsidiary.
Section 6.03 Financial and Other Statements.
(a) Promptly upon receipt thereof, Seller will furnish to Purchaser copies
of each annual, interim or special audit of the books of Seller and the Seller
Subsidiaries made by its independent accountants and copies of all internal
control reports submitted to Seller by such accountants in connection with each
annual, interim or special audit of the books of Seller and the Seller
Subsidiaries made by such accountants.
(b) As soon as reasonably available, but in no event later than two
business days after such documents are filed with the SEC, Seller will deliver
to Purchaser the Seller Reports filed by it with the SEC. Within 10 business
days after the end of each month Seller will deliver to Purchaser a consolidated
balance sheet and a consolidated statement of operations, without related notes,
for such month prepared in accordance with current financial reporting
practices.
35
(c) Seller will advise Purchaser promptly of the receipt of any examination
report of any Bank Regulator with respect to the condition or activities of
Seller or any of the Seller Subsidiaries.
(d) With reasonable promptness Seller will furnish to Purchaser such
additional financial data that Seller possesses and as Purchaser may reasonably
request, including without limitation, detailed monthly financial statements and
loan reports.
Section 6.04 Disclosure Letter Supplements.
From time to time prior to the Effective Time, Seller will promptly
supplement or amend the Disclosure Letter delivered in connection herewith with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Disclosure Letter or which is necessary to correct any
information in such Disclosure Letter which has been rendered materially
inaccurate thereby. No supplement or amendment to such Disclosure Letter shall
have any effect for the purpose of determining satisfaction of the conditions
set forth in Article VII or shall relieve Seller of any liability hereunder.
Section 6.05 Consents and Approvals of Third Parties.
In addition to the Obligations of Article VI hereunder, Seller shall use
all commercially reasonable efforts, and shall cause each Seller Subsidiary, to
obtain as soon as practicable all consents and approvals of any other persons
necessary or desirable for the consummation of the transactions contemplated by
this Agreement.
Section 6.06 Failure to Fulfill Conditions.
In the event that Seller determines that a condition to its obligation to
complete the Merger or Bank Merger cannot be fulfilled and that it will not
waive that condition, it will promptly notify Purchaser.
Section 6.07 No Solicitation.
(a) Seller shall not, nor shall it authorize or permit any Seller
Subsidiary or any of their respective directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other advisor,
agent or representative (collectively, "Representatives") retained by it or any
Seller Subsidiary to, directly or indirectly, (i) solicit, initiate or knowingly
encourage, or take any other action designed to, or which could reasonably be
expected to, facilitate, any Acquisition Proposal or (ii) enter into, continue
or otherwise participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or otherwise cooperate in
any way with, any Acquisition Proposal. Seller shall, and shall cause each
Seller Subsidiary and any Representative engaged thereby, to immediately cease
and cause to be terminated all existing discussions or negotiations with any
Person conducted heretofore with respect to any Acquisition Proposal and request
the prompt return or destruction of all confidential information previously
furnished. Notwithstanding the foregoing, at any time prior to obtaining the
Stockholder Approval, in response to a bona fide written Acquisition Proposal
that the Board of Directors of Seller in good faith reasonably determines (after
consultation with its outside legal counsel and a financial advisor of
nationally recognized reputation) (i) it is legally necessary for the proper
discharge of its fiduciary duties to respond to such Acquisition Proposal and
(ii) such Acquisition Proposal constitutes or is reasonably likely to lead to a
Superior Proposal, and which Acquisition Proposal was not solicited after the
date hereof and was made after the date hereof and did not otherwise result from
a breach of this Section 6.07(a), Seller may, subject to compliance with Section
6.07(c), (x) furnish information with respect to Seller and each Seller
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Subsidiary to the person making such Acquisition Proposal (and its
Representatives) pursuant to a customary confidentiality agreement not less
restrictive to such person than the confidentiality provisions of the
Confidentiality Agreement, provided that all such information has previously
been provided to Purchaser or is provided to Purchaser prior to or substantially
concurrent with the time it is provided to such person, and (y) participate in
discussions or negotiations with the person making such Acquisition Proposal
(and its Representatives) regarding such Acquisition Proposal.
(b) Neither the Board of Directors of Seller nor any committee thereof
shall (i) (A) withdraw (or modify in a manner adverse to Purchaser), or publicly
propose to withdraw (or modify in a manner adverse to Seller), the adoption or
recommendation by such Board of Directors or any such committee thereof of this
Agreement, the Merger or the other transactions contemplated by this Agreement
or (B) adopt or recommend, or propose publicly to adopt or recommend, any
Acquisition Proposal (any action described in this clause (i) being referred to
as a "Seller Adverse Recommendation Change") or (ii) adopt or recommend, or
publicly propose to adopt or recommend, or allow the Seller or any Seller
Subsidiary to execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement or other
similar contract constituting or related to, or that is intended to or could
reasonably be expected to lead to, any Acquisition Proposal (other than a
confidentiality agreement referred to in Section 6.07(a)) (an "Acquisition
Agreement"). Notwithstanding the foregoing, at any time prior to obtaining the
Stockholder Approval, the Board of Directors of Seller may in response to an
Acquisition Proposal that the Board of Directors of Seller in good faith
reasonably determines (after consultation with outside legal counsel and a
financial advisor of nationally recognized reputation) constitutes a Superior
Proposal and that was unsolicited and made after the date hereof and that did
not otherwise result from a breach of this Section 6.07, (1) make a Seller
Adverse Recommendation Change or (2) cause Seller to terminate this Agreement
and concurrently with or after such termination enter into an Acquisition
Agreement as provided by and with the effect set forth in Article X; provided,
however, that Seller shall not be entitled to exercise its right to make a
Seller Adverse Recommendation Change or terminate this Agreement pursuant to
this clause until after the fifth business day following Purchaser's receipt of
written notice (a "Notice of Superior Proposal") from Seller advising Purchaser
that the Board of Directors of Seller intends to take such action and specifying
the reasons therefor, including the terms and conditions of any Superior
Proposal that is the basis of the proposed action by the Board of Directors. In
determining whether to make a Seller Adverse Recommendation Change or to cause
Seller to so terminate this Agreement, the Board of Directors of Seller shall
take into account any changes to the financial terms of this Agreement proposed
by Purchaser in response to a Notice of Superior Proposal or otherwise.
(c) In addition to the obligations of Seller forth in Sections 6.07(a) and
6.07(b), Seller shall promptly advise Purchaser orally and in writing of any
Acquisition Proposal, the material terms and conditions of any such Acquisition
Proposal (including any changes thereto) and the identity of the person making
any such Acquisition Proposal. Seller shall (i) keep Purchaser fully informed in
all material respects of the status and details (including any change to the
terms thereof) of any Acquisition Proposal, (ii) provide to Purchaser as soon as
practicable after receipt or delivery thereof copies of all correspondence and
other written material sent or provided to Seller or any Seller Subsidiary from
any person that describes any of the terms or conditions of any Acquisition
Proposal (including any draft acquisition agreement) and (iii) keep Purchaser
fully informed in all material respects of the status and details of any
determination by Seller's Board of Directors with respect to any such
Acquisition Proposal.
(d) Nothing contained in this Section 6.07 shall prohibit Seller from
complying with its disclosure obligations under federal securities laws or state
law; provided, however, that in no event shall the Seller or its Board of
Directors or any committee thereof take, or agree or resolve to take, any action
prohibited by Section 6.07(b) (it being understood that any accurate disclosure
37
of factual information to the stockholders of Seller that is required to be made
to such stockholders under applicable federal securities Laws shall not be
considered a modification prohibited by clause (i)(A) of Section 6.07(b)).
Section 6.08 Employee Benefits
(a) Purchaser intends to approach suitably qualified employees of Seller
whose positions do not continue after the Effective Time to fill vacancies
within the Purchaser wherever possible. Purchaser will review all Compensation
and Benefit Plans to determine whether to maintain, terminate or continue such
plans. In the event employee compensation and/or benefits as currently provided
by Seller or Seller Bank are changed or terminated by Purchaser, in whole or in
part, Purchaser shall provide Continuing Employees (as defined below in Section
6.08(c)) with compensation and benefits that are, in the aggregate,
substantially similar to the compensation and benefits provided to similarly
situated Purchaser employees (as of the date any such compensation or benefit is
provided). All Continuing Employees who become participants in a compensation or
benefit plan sponsored, maintained or contributed to by Purchaser or any
Purchaser Subsidiary shall, for purposes of determining eligibility for and for
any applicable vesting periods of such employee benefits only (and not for
benefit accrual purposes) be given credit for meeting eligibility and vesting
requirements in such plans for service as an employee of Seller or Seller Bank
or any predecessor thereto prior to the Effective Time; provided, however, that
such service shall not be recognized for any purpose under Purchaser's tax
qualified defined benefit plan or retiree insurance plan.
(b) The Seller ESOP shall be terminated as of, or prior to, the Effective
Time. All shares held by the Seller ESOP shall be converted into the right to
receive the Merger Consideration, all outstanding Seller ESOP indebtedness shall
be repaid as soon as practicable following the Effective Time, and the balance
of the shares and any other assets remaining in the loan suspense account shall
be allocated and distributed to Seller ESOP participants (subject to the receipt
of a favorable determination letter from the IRS), as provided for in the Seller
ESOP and unless otherwise required by applicable law. Prior to the Effective
Time, Seller, and following the Effective Time, Purchaser, shall use their
respective best efforts in good faith to obtain such favorable determination
letter (including, but not limited to, making such changes to the ESOP and the
proposed allocations as may be requested by the IRS as a condition to its
issuance of a favorable determination letter). Prior to the Effective Time,
Seller, and following the Effective Time, Purchaser, will adopt such amendments
to the Seller ESOP as may be reasonably required by the IRS as a condition to
granting such favorable determination letter on termination. Neither Seller,
prior to the Effective Time, nor Purchaser, following the Effective Time, shall
make any distribution from the Seller ESOP except as may be required by
applicable law until receipt of such favorable determination letter. In the case
of a conflict between the terms of this Section and the terms of the Seller
ESOP, the terms of the Seller ESOP shall control; however, in the event of any
such conflict, Seller before the Effective Time, and Purchaser, after the
Effective Time, shall use their best efforts to cause the Seller ESOP to be
amended to conform to the requirements of this Section.
(c) In the event of any termination of any Seller or Seller Bank health
plan or consolidation of any such plan with any Purchaser or Bank health plan,
Purchaser shall make available to employees of Seller or Seller Bank who
continue employment with Purchaser or a Purchaser Subsidiary ("Continuing
Employees") and their dependents, employer-provided health coverage on the same
basis as it provides such coverage to Purchaser employees. Unless a Continuing
Employee affirmatively terminates coverage under a Seller or Seller Bank health
plan prior to the time that such Continuing Employee becomes eligible to
participate in the Purchaser or Bank health plan, no coverage of any of the
Continuing Employees or their dependents shall terminate under any of the Seller
or Seller Bank health plans prior to the time such Continuing Employees and
their dependents become eligible to participate in the health plans, programs
and benefits common to all employees of Purchaser or Bank and their dependents.
38
In the event of a termination or consolidation of any Seller or Seller Bank
health plan, terminated Seller or Seller Bank employees and qualified
beneficiaries will have the right to continued coverage under group health plans
of Purchaser or Bank in accordance with Code Section 4980B(f), consistent with
the provisions below. In the event of any termination of any Seller or Seller
Bank health plan, or consolidation of any Seller or Seller Bank health plan with
any Purchaser or Bank health plan, individuals covered by the Seller or Seller
Bank health plan shall be entitled to immediate coverage under the Purchaser or
Bank health plan in accordance with HIPAA and the regulations issued thereunder,
including limitations on pre-existing condition exclusions, nondiscrimination
and special enrollment rights. All Seller or Seller Bank employees who cease
participating in a Seller or Seller Bank health plan and become participants in
a comparable Purchaser or Bank health plan shall receive credit for any
co-payment and deductibles paid under Seller's or Seller Bank's health plan, to
the extent such credit would be provided under Seller's or Seller Bank's health
plan, for purposes of satisfying any applicable deductible or out-of-pocket
requirements under the Purchaser or Bank health plan, upon substantiation, in a
form satisfactory to Purchaser or Bank that such co-payment and/or deductible
has been satisfied.
(d) Prior to the Effective Time, Seller shall take or cause to be taken all
requisite action to (i) freeze, as of the Effective Time, future benefit
accruals under Seller's defined benefit plans (whether or not tax-qualified) and
(ii) if requested by Purchaser, to amend any or all of Seller's Compensation and
Benefit Plans to prohibit the enrollment of new participants after the Effective
Time.
(e) Purchaser shall assume and honor Seller and Seller Bank's obligations
under the Compensation and Benefit Plans; provided, however, concurrently with
the execution and delivery of this Agreement, Xxxxxxx X. XxXxxxxxxx, Xxxxxxx X.
Xxxxxxx and each of the members of the Board of Directors of Seller will execute
and deliver to the Purchaser an agreement in the form attached hereto as Exhibit
D (a "Settlement Agreement") setting forth the manner in which his or her rights
under the Compensation and Benefit Plans will be settled by the Seller or the
Purchaser or assumed and honored by the Purchaser, as applicable.
(f) Immediately prior to the Effective Time, Seller and/or the Seller
Subsidiaries shall terminate each of the Seller Bank Amended and Restated
Director Deferred Fee Plan, the Seller Bank 2005 Director Deferred Fee Plan and
the Seller Bank Amended and Restated Director Retirement Plan, and shall pay the
amounts due thereunder in a lump sum to the participants therein, on or prior to
the Effective Time in accordance with Code Section 409A. Each person receiving a
payment thereunder shall concurrently execute and deliver an acknowledgment
acknowledging the payment of the amounts due and releasing Purchaser, Seller and
Seller Bank from any further obligations thereunder.
(g) Immediately prior to the Effective Time, a lump sum payment of the
present value due to each executive in connection with a change in control under
the Seller Bank Amended and Restated Non-Qualified Supplemental Executive
Retirement Agreement shall be made to each executive who is a party to the
Seller Bank Amended and Restated Non-Qualified Supplemental Executive Retirement
Agreement. Each executive receiving a payment thereunder shall concurrently
execute and deliver an acknowledgment acknowledging the payment of the amounts
due and releasing Purchaser, Seller and Seller Bank from any further obligations
thereunder. Following the distribution of all amounts due thereunder, but in any
event, prior to the Effective Time, the Amended and Restated Non-Qualified
Supplement Executive Agreements shall be terminated. The Supplemental Retirement
Agreement for Xxxxxxx X. XxXxxxxxxx shall not terminate at the Effective Time
but benefits due thereunder shall be paid in accordance with the agreement.
(h) After the execution of this Agreement, neither Seller nor Seller Bank
shall reassign any person who is a "key employee" (within the meaning of the
Amended and Restated Severance Plan for Key Employees) to a principal place of
employment that is 30 or more miles from Purchaser's executive offices at West
00 Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx. Purchaser will offer a service-based
39
severance pay plan and an outplacement assistance program for employees of
Seller or Seller Bank who are discharged without cause within one year after the
Effective Time and who are not otherwise eligible for termination benefits under
an employment agreement or the Amended and Restated Severance Plan for Key
Employees. Prior to the execution and delivery of this Agreement, the Seller or
Seller Bank shall cause the Committee (as such term is defined in the Seller
Bank Amended and Restated Severance Plan for Key Employees) to appoint the
individuals designated by Purchaser or Bank as the successors to the members of
such Committee.
(i) Prior to the execution and delivery of this Agreement, Seller and
Seller Bank shall amend the Sound Federal Savings Amended and Restated
Supplemental Executive Retirement Agreement, the Sound Federal Savings Amended
and Restated Director Retirement Plan and the Sound Federal Savings Amended and
Restated Director Deferred Fee Plan to eliminate therefrom any restriction
(other than any restriction specifically required to be set forth therein to
avoid the imposition of an excise tax under section 409A of the Code) on the
right of Purchaser to terminate or cause to terminate any of them, to the extent
not terminated prior to the Effective Time. A certified copy of resolutions
adopted by the Board of Directors of Seller or Seller Bank, as applicable,
effecting such amendments shall be included in Section 6.08(i) of the Disclosure
Letter.
Section 6.09 Advisory Board.
Effective as of the Closing Date, Purchaser shall establish an Advisory
Board (the "Advisory Board"). Each person who serves on the Board of Directors
of Seller or Seller Bank both on the date of this Agreement and immediately
prior to the Effective Time, shall be appointed to the Advisory Board effective
immediately following the Effective Time. The Advisory Board shall meet
quarterly, and shall be continued for a period of three years. Each advisory
board member shall receive an annual retainer of $20,000 payable at the first
quarterly meeting of each year.
Section 6.10 Directors and Officers Indemnification and Insurance.
(a) Purchaser shall maintain, or shall cause the Bank to maintain, in
effect for six years following the Effective Time, the current directors' and
officers' liability insurance policies maintained by Seller and Seller Bank
(provided, that Purchaser may, at its option, substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall Purchaser be required to expend
annually pursuant to this Section 6.10(a) more than 175% of the annual cost
currently expended by Seller and Seller Bank with respect to such insurance (the
"Maximum Amount"); provided, further, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceed the Maximum
Amount, Purchaser shall maintain the most advantageous policies of directors'
and officers' insurance obtainable for an annual premium equal to the Maximum
Amount. In connection with the foregoing, Seller agrees in order for Purchaser
to fulfill its agreement to provide directors and officers liability insurance
policies for six years to provide such insurer or substitute insurer with such
representations as such insurer may request with respect to the reporting of any
prior claims.
(b) In addition to Section 6.10(a), for a period of six years after the
Effective Time, Purchaser shall indemnify, defend and hold harmless each person
who is now, or who has been at any time before the date hereof or who becomes
before the Effective Time, an officer or director of Seller or an Seller
Subsidiary (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior written
consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed) of or in connection with any claim, action, suit,
40
proceeding or investigation, whether civil, criminal, or administrative (each a
"Claim"), in which an Indemnified Party is, or is threatened to be made, a party
or witness in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director, officer or employee of Seller or a Seller
Subsidiary if such Claim pertains to any matter of fact arising, existing or
occurring before the Effective Time (including, without limitation, the Merger
and the other transactions contemplated hereby), regardless of whether such
Claim is asserted or claimed before, or after, the Effective Time (the
"Indemnified Liabilities"), to the fullest extent permitted under Delaware law
(to the extent not prohibited by federal law), Purchaser's Certificate of
Incorporation and Bylaws, and under Seller's Certificate of Incorporation and
Bylaws. Purchaser shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the fullest extent
permitted by Delaware law (to the extent not prohibited by federal law) upon
receipt of an undertaking to repay such advance payments if the Indemnified
Party shall be adjudicated or determined to be not entitled to indemnification
in the manner set forth below. Any Indemnified Party wishing to claim
indemnification under this Section 6.10(b) upon learning of any Claim, shall
notify Purchaser (but the failure so to notify Purchaser shall not relieve it
from any liability which it may have under this Section 6.10(b), except to the
extent such failure materially prejudices Purchaser) and shall deliver to
Purchaser the undertaking referred to in the previous sentence. In the event of
any such Claim (whether arising before or after the Effective Time) (1)
Purchaser shall have the right to assume the defense thereof (in which event the
Indemnified Parties will cooperate in the defense of any such matter) and upon
such assumption Purchaser shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
Purchaser elects not to assume such defense, or counsel for the Indemnified
Parties reasonably advises the Indemnified Parties that there are or may be
(whether or not any have yet actually arisen) issues which raise conflicts of
interest between Purchaser and the Indemnified Parties, the Indemnified Parties
may retain counsel reasonably satisfactory to them, and Purchaser shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties, (2)
except to the extent otherwise required due to conflicts of interest, Purchaser
shall be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties whose reasonable fees and expenses shall be
paid promptly as statements are received unless there is a conflict of interest
that necessitates more than one law firm, (3) Purchaser shall not be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld, conditioned or delayed), and (4) no Indemnified
Party shall be entitled to indemnification hereunder with respect to a matter as
to which (x) he shall have been adjudicated in any proceeding not to have acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of Seller or any Seller Subsidiary, or (y) in the event
that a proceeding is compromised or settled so as to impose any liability or
obligation upon an Indemnified Party, if there is a determination that with
respect to said matter said Indemnified Party did not act in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
Seller or any Seller Subsidiary. Such determination shall be made in accordance
with the DGCL.
(c) In the event that either Purchaser or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving bank or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Purchaser shall assume the obligations set forth in
this Section 6.10.
(d) The obligations of Purchaser provided under this Section 6.10 are
intended to be enforceable against Purchaser directly by the Indemnified Parties
and shall be binding on all respective successors and permitted assigns of
Purchaser. Purchaser shall pay all reasonable costs, including attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 6.10 to the fullest
extent permitted under applicable law.
41
Section 6.11 Certain Policies of Seller.
At the written request of Purchaser, each of Seller or any Seller
Subsidiary shall modify and change its loan, litigation, real estate valuation
policies and practices (including loan classifications and levels of reserves),
investment and asset/liability management policies and practices and operating
and internal control procedures after the date on which all required regulatory
and shareholder approvals are received and immediately prior to the Effective
Time so as to be consistent on a mutually satisfactory basis with those of
Purchaser or the Bank; provided, that such policies and procedures are
consistent with GAAP and all applicable laws and regulations. Seller's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue or breached in any respect for any purpose as a
consequence of any modifications or changes undertaken solely on account of this
Section 6.11.
Section 6.12 Antitakeover Provisions.
Seller shall take all steps (i) to exempt or continue to exempt Purchaser
and Merger Sub, this Agreement, the Merger and the Bank Merger from any
provisions of an anti-takeover nature in the Seller Certificate of Incorporation
or Bylaws (or equivalent documents), and the provisions of any federal or state
anti-takeover laws, and (ii) upon the request of Purchaser, to assist in any
challenge by Purchaser or Merger Sub to the applicability to this Agreement, the
Merger and the Bank Merger of any federal or state anti-takeover law.
Section 6.13 Voting Agreements.
Each director and executive officer of Seller and Seller Bank shall execute
a voting agreement substantially in the form attached as Exhibit A as of the
date hereof.
ARTICLE VII.
REGULATORY AND OTHER MATTERS
Section 7.01 Meeting of Stockholders.
Seller shall take all steps necessary to duly call, give notice of, convene
and hold a meeting of its stockholders for the purpose of considering and voting
on approval of this Agreement and the Merger, and for such other, purposes as
may be, in Seller's reasonable judgment, necessary or desirable (the "Seller
Stockholders Meeting"). In connection with the solicitation of proxies with
respect to the Seller Stockholders Meeting, the Board of Directors of Seller
shall recommend approval of this Agreement to the Seller stockholders (subject
to Section 6.07) and cooperate and consult with Purchaser with respect to each
of the foregoing matters. Seller shall use its best efforts to solicit approval
of the Merger. Without limiting the generality of the foregoing, Seller shall
utilize the services of a professional proxy soliciting firm to provide
assistance in obtaining the stockholder vote required to be obtained by it
hereunder.
Section 7.02 Proxy Statement.
As soon as practicable after the date hereof, Seller shall prepare a Proxy
Statement, which shall be reasonably acceptable to counsel to Purchaser, for the
purpose of taking stockholder action on the Merger and this Agreement and file
the Proxy Statement with the SEC not later than 45 days from the date hereof and
respond to comments of the staff of the SEC and promptly mail the Proxy
Statement to the holders of record (as of the applicable record date) of shares
of voting stock of Seller. Seller represents and covenants that the Proxy
Statement and any amendment or supplement thereto, with respect to the
42
information pertaining to it or its Subsidiaries at the date of mailing to its
stockholders and the date of the Stockholder Meetings to be held in connection
with the Merger, will be in compliance with the Exchange Act and all relevant
rules and regulations of the SEC and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (except as to information regarding
Purchaser as to which no representation or covenant is being made). Purchaser
represents and covenants that information regarding Purchaser, that Purchaser
provides to Seller for inclusion in the Proxy Statement, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading at the date of
mailing of the Proxy Statement to stockholders of Purchaser.
Section 7.03 Regulatory Approvals.
Each of Seller and Purchaser will cooperate with the other and use all
reasonable efforts to promptly prepare and file all necessary documentation to
obtain the Regulatory Approvals. Seller and Purchaser will furnish each other
and each other's counsel with all information concerning themselves, their
respective Subsidiaries, directors, officers and stockholders and such other
matters as may be necessary or advisable in connection with any application,
petition or other statement made by or on behalf of Seller or Purchaser to any
Bank Regulator or governmental body in connection with the Merger and the other
transactions contemplated by this Agreement. Each party acknowledges that time
is of the essence in connection with the preparation and filing of the
documentation referred to above. Seller shall have the right to review and
approve in advance all characterizations of the information relating to Seller
and any of the Seller Subsidiaries which appear in any filing made in connection
with the transactions contemplated by this Agreement with any governmental body.
In addition, Seller and Purchaser shall each furnish to the other a copy of each
publicly available portion of such filing made in connection with the
transactions contemplated by this Agreement with any governmental body promptly
after its filing.
ARTICLE VIII.
CLOSING CONDITIONS
Section 8.01 Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, none of which may be waived:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the stockholders of
Seller in accordance with applicable law and regulations.
(b) Injunctions. None of the parties hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction, and no
statute, rule or regulation shall have been enacted, entered, promulgated,
interpreted, applied or enforced by any Governmental Entity or Bank Regulator,
that enjoins or prohibits the consummation of the transactions contemplated by
this Agreement.
(c) Regulatory Approvals. All required Regulatory Approvals shall have been
obtained and shall remain in full force and effect and all waiting periods
relating thereto shall have expired; and no such Regulatory Approval shall
include any condition or requirement, that would, in the judgment of the Board
of Directors of Purchaser, have a Material Adverse Effect on (x) Seller and the
Seller Subsidiaries taken as a whole or (y) Purchaser and the Purchaser
Subsidiaries taken as a whole.
43
Section 8.02 Conditions to the Obligations of Purchaser under this Agreement.
The obligations of Purchaser under this Agreement shall be further subject
to the satisfaction of the conditions set forth in this Section 8.02 at or prior
to the Closing Date:
(a) Representations and Warranties. Each of the representations and
warranties of Seller set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects and each representation or
warranty that is not so qualified shall be true and correct in all material
respects, in each case, as of the date of this Agreement and upon the Effective
Time with the same effect as though all such representations and warranties had
been made at the Effective Time (except to the extent such representations and
warranties speak as of an earlier date), and Seller shall have delivered to
Purchaser a certificate to such effect signed by the Chief Executive Officer and
the Chief Financial Officer of Seller as of the Effective Time.
(b) Agreements and Covenants. Seller shall have performed in all material
respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and Purchaser shall have received a certificate signed on
behalf of Seller by the Chief Executive Officer and Chief Financial Officer of
Seller to such effect dated as of the Effective Time.
(c) Good Standing. Purchaser shall have received certificates (such
certificates to be dated as of a day as close as practicable to the Closing
Date) from appropriate authorities as to the good standing or corporate
existence, as applicable, of Seller and each Seller Subsidiary.
(d) Third Party Consents. Seller shall have obtained the consent or
approval of each person (other than the governmental approvals or consents
referred to in Section 7.03) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which Seller or any Seller Subsidiary is a party or is otherwise
bound, except those for which failure to obtain such consents and approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
Seller (after giving effect to the transactions contemplated hereby) or upon the
consummation of the transactions contemplated hereby.
(e) Legal Opinion. Seller shall have caused to be delivered to Purchaser an
opinion, dated the Closing Date, from the law firm of Xxxx Xxxxxx Xxxxxxxx &
Xxxxxx, P.C., counsel to Seller, concerning the following matters:
(i) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Seller Bank is a
federally chartered stock savings and loan association duly organized and
in existence under the laws of the United States of America;
(ii) Seller and Seller Bank have the power and authority to carry on
the business as described in the Proxy Statement and to consummate the
transactions contemplated by this Agreement;
(iii) this Agreement has been duly authorized and approved by Seller
and this Agreement and the transactions contemplated hereby have been
approved by the requisite vote of Seller's stockholders and duly
authorized, executed and delivered by Seller;
44
(iv) all corporate acts, other proceedings required to be taken by or
on the part of Seller, including the adoption of this Agreement by the
stockholders of Seller, and the necessary approvals, consents,
authorizations or notifications required to be taken to consummate the
transactions contemplated by this Agreement, have been properly taken or
obtained; neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, with or without the
giving of notice or the lapse of time, or both, will (i) violate any
provision of the certificate of incorporation, charter or bylaws of Seller
or Seller Bank, as the case may be; or (ii) violate, conflict with, result
in the material breach or termination of, constitute a material default
under, or accelerate the performance required by any indenture, mortgage,
deed of trust, or other agreement or instrument to which Seller or Seller
Bank are a party or by which it or any of their properties or assets may be
bound and of which such counsel is aware, or violate any statute, rule or
regulation applicable to Seller or Seller Bank, which would have a Material
Adverse Effect on the financial condition, assets, liabilities, or business
of Seller or Seller Bank; no consent, approval, authorization, order,
registration or qualification of or with any court, regulatory authority or
other governmental body, other than as specifically contemplated by this
Agreement is required for the consummation by Seller or Seller Bank of the
transactions contemplated by this Agreement;
(f) Other Documents. Seller will furnish Purchaser with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in this Section 8.02 or as are customary for
transaction of the type provided for herein as Purchaser may reasonably request.
Section 8.03 Conditions to the Obligations of Seller under this Agreement.
The obligations of Seller under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 8.03 at or prior to the
Closing Date:
(a) Representations and Warranties. Each of the representations and
warranties of Purchaser set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects and each representation or
warranty that is not so qualified shall be true and correct in all material
respects, in each case, as of the date of this Agreement and upon the Effective
Time with the same effect as though all such representations and warranties had
been made at the Effective Time (except to the extent such representations and
warranties speak as of an earlier date), and Purchaser shall have delivered to
Seller a certificate to such effect signed by the Chief Executive Officer and
the Chief Financial Officer of Purchaser as of the Effective Time.
(b) Agreements and Covenants. Purchaser shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and Seller shall have received a certificate signed on
behalf of Purchaser by the Chief Executive Officer and Chief Financial Officer
of Purchaser to such effect dated as of the Effective Time.
(c) Payment of Merger Consideration. Purchaser shall have delivered the
Merger Consideration to the Paying Agent on or before the Closing Date and the
Paying Agent shall provide Seller with a certificate evidencing such delivery.
(d) Good Standing. Seller shall have received a certificate (such
certificate to be dated as of a day as close as practicable to the Closing Date)
from the appropriate authority as to the good standing or corporate existence,
as applicable of each of Purchaser and Merger Sub.
45
(e) Other Documents. Purchaser will furnish Seller with such certificates
of their officers or others and such other documents to evidence fulfillment of
the conditions set forth in this Section 8.03 or as are customary for
transaction of the type provided for herein as Seller may reasonably request.
ARTICLE IX.
THE CLOSING
Section 9.01 Time and Place.
Subject to the provisions of Articles VIII and X hereof, the Closing of the
transactions contemplated hereby shall take place at the offices of Xxxxxxx
Xxxxxxxx & Xxxx LLP, Two World Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at
10:00 a.m., or at such other place or time upon which Purchaser and Seller
mutually agree. A pre-closing of the transactions contemplated hereby (the
"Pre-Closing") shall take place at the offices of Xxxxxxx Xxxxxxxx & Wood LLP,
Two World Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on the day
prior to the Closing Date. Section 9.02 Deliveries at the Pre-Closing and the
Closing.
At the Pre-Closing there shall be delivered to Purchaser and Seller the
opinions, certificates, and other documents and instruments required to be
delivered at the Closing under Article IX hereof. At or prior to the Closing,
Purchaser shall deliver the Merger Consideration as set forth under Section
8.03(c) hereof.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
Section 10.01 Termination.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval of the Merger by the stockholders of Seller:
(a) At any time by the mutual written agreement of Purchaser and Seller;
(b) By either party (provided, that the terminating party is not then in
breach of any representation, warranty, covenant or other agreement contained
herein) if there shall have been a breach of any of the representations or
warranties set forth in this Agreement (subject to the standard set forth in
Section 8.02(a) or 8.03(a), as applicable) on the part of the other party, which
breach by its nature cannot be cured prior to the Termination Date or shall not
have been cured within 30 days after written notice of such breach by the
terminating party to the other party;
(c) By either party (provided, that the terminating party is not then in
breach of any representation or warranty or breach of any covenant or other
agreement contained herein) if there shall have been a failure to perform or
comply in any material respect with any of the covenants or agreements set forth
in this Agreement on the part of the other party, which failure by its nature
cannot be cured prior to the Termination Date or shall not have been cured
within 30 days after written notice of such failure by the terminating party to
the other party;
(d) At the election of either party, if the Closing shall not have occurred
by the Termination Date, or such later date as shall have been agreed to in
46
writing by Purchaser and Seller; provided, that no party may terminate this
Agreement pursuant to this Section 10.01(d) if the failure of the Closing to
have occurred on or before said date was due to such party's willful breach of
any representation or warranty or material breach of any covenant or other
agreement contained in this Agreement;
(e) By either party if (i) final action has been taken by a Bank Regulator
whose approval is required in connection with this Agreement and the
transactions contemplated hereby, which final action (x) has become unappealable
and (y) does not approve this Agreement or the transactions contemplated hereby,
(ii) any Bank Regulator whose approval or nonobjection is required in connection
with this Agreement and the transactions contemplated hereby has stated that it
will not issue the required approval or nonobjection, or (iii) any court of
competent jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger or Bank Merger and such order, decree, ruling
or other action shall have become final and unappealable;
(f) By either party, if Stockholder Approval shall have not been obtained
at the Seller Stockholders Meeting duly convened therefor or at any adjournment
or postponement thereof;
(g) By Seller in accordance with the terms and subject to the conditions of
Section 6.07(b); or
(h) By Purchaser if prior to obtaining Stockholder Approval (i) a Seller
Adverse Recommendation Change shall have occurred or (ii) the Board of Directors
of Seller fails to publicly reaffirm its adoption and recommendation of this
Agreement, the Merger or the other transactions contemplated by this Agreement
within ten business days of receipt of a written request by Purchaser to provide
such reaffirmation following an Acquisition Proposal.
Section 10.02 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to any provision
of Section 10.01, this Agreement shall forthwith become void and have no further
force, except that (i) the provisions of Sections 10.02, 11.01, 11.06, 11.09,
11.10, and any other Section which, by its terms, relates to post-termination
rights or obligations, shall survive such termination of this Agreement and
remain in full force and effect.
(b) If this Agreement is terminated, expenses and damages of the parties
hereto shall be determined as follows:
(i) Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(ii) In the event of a termination of this Agreement because of a
willful breach of any representation, warranty, covenant or agreement
contained in this Agreement, the breaching party shall be liable for
any and all damages, costs and expenses, including all reasonable
attorneys' fees, sustained or incurred by the non-breaching party as a
result thereof or in connection therewith or with respect to the
enforcement of its rights hereunder.
(iii) As a condition of Purchaser's willingness, and in order to
induce Purchaser to enter into this Agreement, and to reimburse
Purchaser for incurring the costs and expenses related to entering
into this Agreement and consummating the transactions contemplated by
this Agreement, Seller hereby agrees to pay Purchaser, and Purchaser
shall be entitled to payment of, a fee of $13,265,000 (the "Seller
Fee"), within three business days after written demand for payment is
made by Purchaser, following the occurrence of any of the events set
forth below:
47
(A) This Agreement is terminated pursuant to Sections 10.01(g) or
10.01(h); or
(B) The entering into a definitive agreement by Seller relating to an
Acquisition Proposal or the consummation of an Acquisition Proposal
involving Seller within twelve months after the occurrence of any of
the following: (i) the termination of the Agreement by Purchaser
pursuant to Section 10.01(b) or 10.01(c) because of a willful breach
by Seller or any Seller Subsidiary; or (ii) the failure of the
stockholders of Seller to approve this Agreement after the occurrence
of an Acquisition Proposal.
(iv) If demand for payment of the Seller Fee is made pursuant to
Section 10.02(b)(iii) and payment is timely made, then Purchaser will
not have any other rights or claims against Seller or the Seller
Subsidiaries, or their respective officers and directors, under this
Agreement, it being agreed that the acceptance of the Seller Fee under
Section 10.02(b)(iii) will constitute the sole and exclusive remedy of
Purchaser against Seller and the Seller Subsidiaries and their
respective officers and directors.
Section 10.03 Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time (whether
before or after approval thereof by the stockholders of Seller), the parties
hereto by action of their respective Boards of Directors, may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of this
Agreement and the transactions contemplated hereby by the stockholders of
Seller, there may not be, without further approval of such stockholders, any
amendment of this Agreement which reduces the amount or value, or changes the
form of, the Merger Consideration to be delivered to Seller's stockholders
pursuant to this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Any termination of
this Agreement pursuant to Article X may only be effected upon a vote of a
majority of the entire Board of Directors of the terminating party.
ARTICLE XI.
MISCELLANEOUS
Section 11.01 Confidentiality.
Except as specifically set forth herein, Purchaser and Seller mutually
agree to be bound by the terms of the confidentiality agreements dated November
28, 2005 (the "Confidentiality Agreements") previously executed by the parties
hereto, which Confidentiality Agreements are hereby incorporated herein by
reference. The parties hereto agree that such Confidentiality Agreements shall
continue in accordance with their respective terms, notwithstanding the
48
termination of this Agreement. Seller acknowledges that Purchaser is a third
party beneficiary of any and all confidentiality agreements entered into by
Seller in the past six (6) months similar to the confidentiality agreement
between the parties hereto.
Section 11.02 Public Announcements.
Seller and Purchaser shall cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement, and except as may be otherwise required by law, neither Seller
nor Purchaser shall issue any news release, or other public announcement or
communication with respect to this Agreement unless such news release or other
public announcement or communication has been mutually agreed upon by the
parties hereto.
Section 11.03 Survival.
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto shall expire and be terminated and
extinguished at the Effective Time, except for those covenants and agreements
contained herein which by their terms apply in whole or in part after the
Effective Time.
Section 11.04 Notices.
All notices or other communications hereunder shall be in writing and shall
be deemed given if delivered by receipted hand delivery or mailed by prepaid
registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to Seller, to: Xxxxxxx X. XxXxxxxxxx
President and Chief Executive Officer
Sound Federal Bancorp, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
With required copies to: Xxxx Xxxx, Esq.
and Xxxx Xxxxxx, Esq.
Xxxx Xxxxxx Pomerenck & Xxxxxx, P.C.
0000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
If to Purchaser, to: Xxxxxx X. Xxxxxxxx, Xx.
Chairman, President and
Chief Executive Officer
Xxxxxx City Bancorp, Inc.
West 00 Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
With required copies to: Omer X. X. Xxxxxxxx, Esq.
and Xxxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxxxxx & Xxxx LLP
Two World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
49
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three business days after being delivered to the
U.S. mail, postage prepaid; or (c) one business day after being delivered to the
overnight courier.
Section 11.05 Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party, and that (except as specifically provided in this
Agreement) nothing in this Agreement is intended to confer upon any other person
any rights or remedies under or by reason of this Agreement. Nothing in this
Agreement is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 11.06 Complete Agreement.
This Agreement, including the Exhibits hereto and the documents and other
writings referred to herein or therein or delivered pursuant hereto, together
with the Confidentiality Agreements referred to in Section 11.01, contains the
entire agreement and understanding of the parties with respect to its subject
matter. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties other than those expressly set forth herein
or therein. This Agreement supersedes all prior agreements and understandings
(other, than the Confidentiality Agreements referred to in Section 11.01 hereof)
between the parties, both written and oral, with respect to its subject matter.
Section 11.07 Counterparts.
This Agreement may be executed in two or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original.
Section 11.08 Severability.
In the event that any one or more provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
Section 11.09 Governing Law.
This Agreement shall be governed by the laws of the State of New York,
without giving effect to its principles of conflicts of laws, other than Section
5-1401 of the New York General Obligations Law.
Section 11.10 Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
50
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which are part of the related
Section (e.g., a section numbered "Section 5.01(a)" would be part of "Section
5.01" and references to "Section 5.01" would also refer to material contained in
the subsection described as "Section 5.01(a)"). The table of contents, index and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrases
"the date of this Agreement", "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date set
forth in the Recitals to this Agreement.
Section 11.11 Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
51
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first set
forth above.
XXXXXX CITY BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxxxxx, Xx.
Chairman, President and Chief Executive Officer
SOUND FEDERAL BANCORP, INC.
By: /s/ Xxxxxxx X. XxXxxxxxxx
-----------------------------------------
Xxxxxxx X. XxXxxxxxxx
President and Chief Executive Officer
52
EXHIBIT A
VOTING AGREEMENT
February ___, 2006
Xxxxxx City Bancorp, Inc.
West 00 Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
Xxxxxx City Bancorp, Inc. (the "Purchaser") and Sound Federal Bancorp, Inc.
(the "Seller") have entered into an Agreement and Plan of Merger dated as of
February 8, 2006 (the "Merger Agreement"), pursuant to which, subject to the
terms and conditions set forth therein, (a) Seller will merge with and into a
corporation to be formed as a wholly owned subsidiary of the Xxxxxx City Savings
Bank (the "Merger") and (b) stockholders of Seller will receive the Merger
Consideration stated in the Merger Agreement. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Merger Agreement.
Purchaser has requested, as a condition to its execution and delivery of
the Merger Agreement, that the undersigned, being a director or officer of
Seller and/or Seller Bank, execute and deliver to Purchaser this Letter
Agreement (the "Agreement").
The undersigned (the "Stockholder"), in order to induce Purchaser to
execute and deliver the Merger Agreement, and intending to be legally bound,
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
stockholders of Seller called to vote for approval of the Merger so that all
shares of common stock of Seller over which the undersigned or a member of the
undersigned's immediate family now has sole or shared voting power (including
any shares acquired by the Stockholder prior to the record date for such
meetings) will be counted for the purpose of determining the presence of a
quorum at such meetings and to vote, or cause to be voted, all such shares (i)
in favor of approval and adoption of the Merger Agreement and the transactions
contemplated thereby (including any amendments or modifications of the terms
thereof approved by the Board of Directors of Seller), and (ii) against approval
or adoption of any other merger, business combination, recapitalization, partial
liquidation or similar transaction involving Seller, it being understood that as
to immediate family members, the undersigned will use his/her reasonable efforts
to cause the shares to be present and voted in accordance with (i) and (ii)
above;
(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 stockholder of Seller, to
approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any Seller Common
Stock on or prior to the date of any meeting of Seller Stockholders to vote on
the Merger Agreement, except for (i) transfers to charities, charitable trusts,
or other charitable organizations under Section 501(c)(3) of the Internal
Revenue Code, lineal descendants or the spouse of the undersigned, or to a trust
or other entity for the benefit of one or more of the foregoing persons,
provided that the transferee agrees in writing to be bound by the terms of this
letter agreement, and (ii) dispositions pursuant to cashless exercises of
outstanding options to purchase common stock of Seller;
A-1
(d) Represents that Stockholder (i) has full power, corporate or otherwise,
to enter into this 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, (ii) is the beneficial owner of all shares of Seller
Common Stock as indicated on the final page of this Agreement (the "Shares"),
which at the date hereof are, and at all times up until the Termination Date
will be, free and clear of any liens, claims, options, charges, proxies or
voting restrictions or other encumbrances, and (iii) does not beneficially own
any shares of capital stock of Seller other than the Shares;
(e) Agrees that Stockholder will not, and will cause his or her
representatives and agents not to, directly or indirectly (i) initiate, solicit
or knowingly encourage (including by way of furnishing non-public information or
assistance) the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, or (ii) enter into or maintain or
continue discussions or negotiate with any Person in furtherance of or to obtain
an Acquisition Proposal or agree to or endorse any Acquisition Proposal, or
authorize any of its representatives or agents to take any such action;
provided, however, that nothing in this clause (e) shall prohibit Stockholder
from taking actions in such Stockholder's capacity as director or executive
officer of the Seller in accordance with Section 6.07 of the Merger Agreement;
(f) Agrees to execute and deliver any additional documents necessary, in
the reasonable opinion of Purchaser, to carry out the intent of this Agreement;
(g) Agrees not to assert, demand or exercise any rights of appraisal or
dissenters in connection with the Merger;
(h) Agrees that if any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to the Purchaser. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
Stockholder and Purchaser shall negotiate in good faith to modify this Agreement
so as to effect the original intent of this Agreement as closely as possible to
the fullest extent permitted by applicable law in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to the extent
possible;
(i) Agrees that this Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of Stockholder and Purchaser and their
respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of Stockholder and Purchaser may be assigned by either
Stockholder or Purchaser without the prior written consent of the other;
(j) Agrees that irreparable damage would occur in the event any provision
of this Agreement was not performed in accordance with the terms hereof or was
otherwise breached. It is accordingly agreed that Purchaser shall be entitled to
specific relief hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, in any state or
federal court in the State of New York, in addition to any other remedy to which
Purchaser may be entitled at law or in equity. Any requirements for the securing
or posting of any bond with respect to any such remedy are hereby waived;
(k) Agrees that this Agreement shall be governed by, and interpreted in
accordance with the laws of the State of New York, without regarding to
conflicts of laws principles thereof other than Section 5-1401 of the New York
A-2
General Obligations Law. Stockholder agrees that all actions and proceedings
arising in connection with this Agreement or any agreement, document or
instrument executed in connection herewith shall be tried and litigated in the
state and Federal courts located in New York, New York (other than appeals from
those courts that may have to be heard outside of New York, New York); and
(l) The obligations set forth herein shall terminate concurrently with any
termination of the Merger Agreement.
A-3
-------------------------------------------
The undersigned intends to be legally bound hereby.
Sincerely,
Name:
Title:
Address for Notice:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Shares beneficially owned:
---------------------------------------------------
shares of Common Stock of ____________
A-4
EXHIBIT B
PLAN OF INTERIM MERGER
This PLAN OF INTERIM MERGER dated as of _____________________, 2006 (the
"Plan of Interim Merger") is entered into by and between Xxxxxx City Merger Sub,
Inc. (the "Merger Sub"), a Delaware corporation, and Sound Federal Bancorp,
Inc., a Delaware corporation registered as a savings and loan holding company
(the "Seller"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Merger Agreement (as defined below).
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of February
8, 2006 (the "Merger Agreement"), by and between Xxxxxx City Bancorp, Inc. (the
"Purchaser") and Seller, each a Delaware corporation, Seller will merge with and
into Merger Sub, a wholly owned subsidiary of the Bank (the "Merger"); and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Merger Agreement and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. The Interim Merger. On the effective date, Merger Sub shall be
merged with and into Seller, with Seller being the surviving entity (the
"Interim Merger"). The Interim Merger shall be subject to the terms and
conditions of the Merger Agreement, and shall be prior in time to the proposed
merger of Sound Federal Savings, a wholly-owned subsidiary of Seller, (the
"Seller Bank") with and into Xxxxxx City Savings Bank (the "Bank"). Upon
completion of the Interim Merger, the separate corporate existence of Merger Sub
shall thereupon cease. Seller shall continue to be governed by the laws of the
State of Delaware and its separate corporate existence with all of its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Interim Merger.
Section 2. Name of Surviving Corporation. The name of the surviving
corporation in the Interim Merger (the "Surviving Corporation") shall be
"____________________".
Section 3. Location of Offices. The business of the Surviving Corporation
shall be conducted at its administrative office at West 00 Xxxxxxx Xxxx,
Xxxxxxx, Xxx Xxxxxx 00000, and at all other locations where Seller was legally
authorized to carry out its business immediately prior to the Interim Merger.
Section 4. Effect on Outstanding Shares.
(a) By virtue of the Interim Merger, automatically and without any action
on the part of the holder thereof, each share of Seller Common Stock issued and
outstanding at the effective time of the Interim Merger (the "Effective Time")
(other than (i) shares the holder of which (the "Dissenting Stockholder")
pursuant to any applicable law providing for dissenters' or appraisal rights is
entitled to receive payment in accordance with the provisions of any such law,
such holder to have only the rights provided in any such law (the "Dissenters'
Shares"), (ii) shares held directly or indirectly by Purchaser (other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted), (iii) unissued Seller Common Stock reserved for issuance pursuant
to the Seller Stock Benefit Plan and (iv) Treasury Stock ) shall become and be
converted into the right to receive $20.75 in cash without interest.
B-1
(b) At the Effective Time, each share of Seller Common Stock held directly
or indirectly by Purchaser (other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) and Treasury Stock shall be
cancelled and retired and cease to exist, and no exchange or payment shall be
made with respect thereto.
(c) The shares of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall become shares of the Surviving
Corporation at the Effective Time by virtue of the Interim Merger, automatically
and without any action on the part of the holder thereof, and shall thereafter
constitute all of the issued and outstanding shares of the capital stock of the
Surviving Corporation.
Section 5. Assets and Liabilities. At the Effective Time, all assets and
property (real, personal, and mixed, tangible and intangible, choses in action,
rights, and credits) then owned by Seller shall pass to and vest in the
Surviving Corporation without any conveyance or other transfer. The Surviving
Corporation shall be deemed to be a continuation of Seller. The rights and
obligations, including liabilities, of Seller shall become the rights and
obligations of the Surviving Corporation.
Section 6. Directors and Officers. At the Effective Time, the directors and
officers of Merger Sub shall become the directors and officers of the Surviving
Corporation.
Section 7. Certificate of Incorporation and Bylaws. At the Effective Time,
the certificate of incorporation and bylaws of Seller shall be amended in their
entirety to conform to the certificate of incorporation and bylaws of Merger Sub
in effect immediately prior to the Effective Time and shall become the
certificate of incorporation and bylaws of the Surviving Corporation.
Section 8. Termination. This Plan of Interim Merger shall be terminated
automatically without further act or deed of either of the parties hereto in the
event of the termination of the Merger Agreement in accordance with Article X
thereof.
Section 9. Stockholder Approval. The transactions contemplated by this Plan
of Interim Merger have been approved by the affirmative vote of a majority of
the outstanding shares of Seller and by the Bank as sole shareholder of Merger
Sub.
Section 10. Amendments. This Plan of Interim Merger may be amended by a
subsequent writing signed by the parties hereto upon the approval of the board
of directors of each of the parties hereto.
Section 11. Counterparts. This Plan of Interim Merger may be executed in
two or more counterparts, each of which shall be deemed to be an original and
all of which taken together shall constitute one instrument.
Section 12. Successors. This Plan of Merger shall be binding upon the
successors of Seller Bank and the Bank.
Section 13. Governing Law. This Plan of Interim Merger shall be governed
by, and interpreted in accordance with the laws of the State of New York,
without regarding to conflicts of laws principles thereof other than Section
5-1401 of the New York General Obligations Law.
Section 14. Severability. In the event that any one or more provisions of
this Plan of Interim Merger shall for any reason be held invalid, illegal or
unenforceable in any respect, by any court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provisions
B-2
of this Plan of Interim Merger and the parties shall use their reasonable
efforts to substitute a valid, legal and enforceable provision which, insofar as
practical, implements the purposes and intents of this Plan of Interim Merger.
Section 15. Captions and References. The captions contained in this Plan of
Interim Merger are for convenience of reference only and do not form a part of
this Plan of Interim Merger.
[Signature page follows]
B-3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Interim Merger to be duly executed as of the date first above written.
XXXXXX CITY MERGER SUB, INC.
By: ___________________________
Name
Title
I, Xxxxxxxx X. Xxxxxxxxx, the duly elected, qualified and acting Secretary
of Xxxxxx City Merger Sub, Inc., hereby certify that this Agreement and Plan of
Interim Merger has been approved and adopted by Xxxxxx City Savings Bank, the
sole stockholder of Xxxxxx City Merger Sub, Inc., as of ____________________,
2006.
-----------------------
Xxxxxxxx X. Xxxxxxxxx
Secretary
SOUND FEDERAL BANCORP, INC.
By: ___________________________
[Name]
[Title]
I, _________________________, the duly elected, qualified and acting
Secretary of Sound Federal Bancorp, Inc. hereby certify that this Agreement and
Plan of Interim Merger has been approved and adopted by Sound Federal Bancorp,
Inc., as of ___________________, 2006.
-------------------------
[Name]
Secretary
B-4
EXHIBIT C
PLAN OF BANK MERGER
This PLAN OF BANK MERGER (the "Plan of Merger") is dated as of _________,
2006, by and between Xxxxxx City Savings Bank, a federally chartered savings
bank (the "Bank"), and Sound Federal Savings, a federally chartered savings bank
(the "Seller Bank"). Capitalized terms not otherwise defined herein shall have
the meanings set forth in the Merger Agreement (as defined below).
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of February
8, 2006 (the "Merger Agreement"), by and between Xxxxxx City Bancorp, Inc. (the
"Purchaser") and Sound Federal Bancorp, Inc. (the "Seller"), each a Delaware
corporation, Seller will merge with and into Merger Sub, a wholly owned
subsidiary of the Bank (the "Merger"); and
WHEREAS, the Merger Agreement provides that subsequent to consummation of
the Merger, Seller Bank shall be merged with and into the Bank, with the Bank as
the Surviving Bank;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Merger Agreement and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. The Bank Merger.
(a) Subject to the terms and conditions set forth in the Merger Agreement,
at the Effective Time, Seller Bank shall be merged with and into the Bank
pursuant to the Bank Merger Act, as amended, and the relevant regulations of the
Office of Thrift Supervision. The Bank shall be the "Surviving Bank" of the Bank
Merger and shall continue to be governed by the Office of Thrift Supervision.
(b) At the Effective Time, the Surviving Bank shall be considered the same
business and corporate entity as each of the Seller Bank and the Bank (together,
the "Merging Banks") and thereupon and thereafter all the property, rights,
privileges, powers and franchises of each of the Merging Banks shall vest in the
Surviving Bank and the Surviving Bank shall be subject to and be deemed to have
assumed all of the debts, liabilities, obligations and duties of each of the
Merging Banks and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, liabilities, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Surviving Bank.
(c) The Bank Merger shall become effective as of the date of the
certificate of merger prepared by the Office of Thrift Supervision (the
"Effective Time").
Section 2. Name of Surviving Bank. The name of the Surviving Bank shall be
"Xxxxxx City Savings Bank."
Section 3. Principal Office and Location of Other Offices. The principal
office of the Bank shall continue to be West 00 Xxxxxxx Xxxx, Xxxxxxx, Xxx
Xxxxxx 00000 after the Effective Time. The branch offices of Seller Bank and the
Bank will be operated as branch offices of the Surviving Bank immediately
following the Effective Time. Schedule 3 to this Plan of Merger contains a list
of the principal offices and branch offices of both Seller Bank and the Bank.
C-1
Section 4. Effect on Outstanding Shares. Upon the effectiveness of the Bank
Merger, (i) each share of common stock, par value $0.10 per share, of Seller
Bank issued and outstanding immediately prior to the Effective Time shall be
cancelled and (ii) each share of common stock, par value $2.00 per share, of the
Bank issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and shall constitute the only shares of capital stock of
the Surviving Bank issued and outstanding immediately after the Effective Time.
Section 5. Assets and Liabilities. At the Effective Time, all assets and
property (real, personal, and mixed, tangible and intangible, choses in action,
rights and credits) then owned by the Seller Bank shall become the property of
the Surviving Bank. The Surviving Bank shall be deemed to be a continuation of
the Seller Bank, the rights and obligations of which shall succeed to such
rights and obligations and the duties and liabilities connected therewith.
Section 6. Savings Accounts. At the Effective Time, all savings accounts
and certificates of deposit in Seller Bank, shall, without issue reissue, be and
become savings and certificates of deposit of the Surviving Bank, the rights and
obligations of which shall succeed to such rights and obligations and the duties
and liabilities connected therewith.
Section 7. Directors and Officers. On and after the Effective Time, until
changed in accordance with the certificate of incorporation and bylaws of the
Surviving Bank, (i) the directors of the Surviving Bank shall be the directors
of the Bank immediately prior to the Effective Time and (ii) the officers of the
Surviving Bank shall be the officers of the Bank immediately prior to the
Effective Time. Schedule 7 to this Plan of Merger sets forth the names of the
directors and officers of the Surviving Bank. The directors and officers of the
Surviving Bank shall hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Bank.
Section 8. Certificate of Incorporation. On and after the Effective Time,
the Certificate of Incorporation of the Bank shall be the Certificate of
Incorporation of the Surviving Bank until amended in accordance with applicable
law.
Section 9. Bylaws. On and after the Effective Time, the Bylaws of the Bank
shall be the Bylaws of the Surviving Bank until amended in accordance with
applicable law.
Section 10. Capital of Surviving Bank. The amount of capital stock of the
Surviving Bank immediately following the Effective Time shall be ____________
shares of common stock, par value $0.01 per share, and immediately following the
Effective Time, the Surviving Bank shall maintain a surplus of at least
[__________] ($[-----------]).
Section 11. Liquidation Account. At the Effective Time, the liquidation
account of the Seller Bank shall be assumed and become the liquidation account
of the Surviving Bank.
Section 12. Conditions Precedent. The respective obligations of each party
under this Plan of Merger shall be subject to (i) the consummation of the Merger
pursuant to the Merger Agreement and (ii) the approval of this Plan of Merger by
the respective sole stockholder of each of the Bank and Seller Bank.
Section 13. Termination. This Plan of Merger shall be terminated
automatically without further act or deed of either of the parties hereto in the
event of the termination of the Merger Agreement in accordance with Article X
thereof.
C-2
Section 14. Amendments. To the extent permitted by the Office of Thrift
Supervision, this Plan of Merger may be amended by a subsequent writing signed
by the parties hereto upon the approval of the board of directors of each of the
parties hereto.
Section 15. Counterparts. This Plan of Merger may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which taken together shall constitute one instrument.
Section 16. Successors. This Plan of Merger shall be binding upon the
successors of Seller Bank and the Bank.
Section 17. Governing Law. This Plan of Merger shall be governed by, and
interpreted in accordance with the laws of the State of New York, without
regarding to conflicts of laws principles thereof other than Section 5-1401 of
the New York General Obligations Law.
Section 18. Severability. In the event that any one or more provisions of this
Plan of Merger shall for any reason be held invalid, illegal or unenforceable in
any respect, by any court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Plan of Merger
and the parties shall use their reasonable efforts to substitute a valid, legal
and enforceable provision which, insofar as practical, implements the purposes
and intents of this Plan of Merger
Section 19. Captions and References. The captions contained in this Plan of
Interim Merger are for convenience of reference only and do not form a part of
this Plan of Interim Merger..
[Signature page follows]
C-3
IN WITNESS WHEREOF, Seller Bank and the Bank have caused this Plan of
Merger to be executed by their duly authorized officers as of the date first set
forth above.
XXXXXX CITY SAVINGS BANK
ATTEST:
------------------------------- By:
------------------------------
Name: Name:
Title: Title:
SOUND FEDERAL SAVINGS
ATTEST:
------------------------------ By:
------------------------------
Name: Name:
Title: Title:
C-4
Schedule 3
List of Principal and Branch Offices
C-5
Schedule 7
List of Directors and Officers of Surviving Bank
C-6
