EXHIBIT 2.0
AGREEMENT AND PLAN
OF MERGER
between
SOVEREIGN BANCORP, INC.
and
FIRST HOME BANCORP INC.
December 18, 1997
AGREEMENT
TABLE OF CONTENTS
Page
BACKGROUND............................................................ 1
AGREEMENT............................................................. 1
ARTICLE I
THE MERGERS
Section 1.01 Definitions......................................... 2
Section 1.02 The Merger.......................................... 7
Section 1.03 The Bank Merger..................................... 14
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST HOME
Section 2.01 Organization........................................ 14
Section 2.02 Capitalization...................................... 15
Section 2.03 Authority; No Violation............................. 16
Section 2.04 Consents ........................................... 18
Section 2.05 Financial Statements................................ 18
Section 2.06 Taxes .............................................. 19
Section 2.07 No Material Adverse Effect.......................... 19
Section 2.08 Contracts........................................... 19
Section 2.09 Ownership of Property; Insurance
Coverage................................... 21
Section 2.10 Legal Proceedings................................... 22
Section 2.11 Compliance With Applicable Law...................... 22
Section 2.12 ERISA .............................................. 23
Section 2.13 Brokers, Finders and Financial Advisors;
Fairness Opinion........................... 24
Section 2.14 Environmental Matters............................... 25
Section 2.15 Allowance for Losses................................ 25
Section 2.16 Information to be Supplied.......................... 25
Section 2.17 Securities Documents................................ 25
Section 2.18 Related Party Transactions.......................... 26
Section 2.19 Schedule of Termination Benefits.................... 26
Section 2.20 Loans .............................................. 27
Section 2.21 Antitakeover Provisions Inapplicable................ 27
Section 2.22 Quality of Representations.......................... 27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Section 3.01 Organization........................................ 27
Section 3.02 Capital Structure................................... 28
Section 3.03 Authority; No Violation............................. 29
Section 3.04 Consents ........................................... 30
Section 3.05 Financial Statements................................ 30
Section 3.06 Taxes .............................................. 31
Section 3.07 No Material Adverse Effect.......................... 31
Section 3.08 Ownership of Property; Insurance
Coverage................................... 32
Section 3.09 Legal Proceedings................................... 32
Section 3.10 Compliance With Applicable Law...................... 33
Section 3.11 Information to be Supplied.......................... 33
Section 3.12 ERISA ............................................. 34
Section 3.13 Securities Documents................................ 35
Section 3.14 Environmental Matters............................... 35
Section 3.15 Allowance for Loan Losses........................... 35
Section 3.16 Brokers and Finders................................. 36
Section 3.17 Loans .............................................. 36
Section 3.18 Accounting for the Merger;
Reorganization............................. 36
Section 3.19 NJBCA Antitakeover Provisions....................... 36
Section 3.20 Quality of Representations.......................... 36
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of First Home's Business.................... 36
Section 4.02 Access; Confidentiality............................. 40
Section 4.03 Regulatory Matters and Consents..................... 41
Section 4.04 Taking of Necessary Action.......................... 42
Section 4.05 Certain Agreements.................................. 43
Section 4.06 No Other Bids and Related Matters................... 44
Section 4.07 Duty to Advise; Duty to Update
Disclosure Schedule........................ 45
Section 4.08 Conduct of Sovereign's Business..................... 46
Section 4.09 Current Information................................. 46
Section 4.10 Undertakings by Sovereign and First
Home....................................... 46
Section 4.11 Employee Benefits and Termination
Benefits................................... 49
Section 4.12 Stock Exchange Listing.............................. 52
Section 4.13 Affiliate Letter.................................... 52
Section 4.14 Publication of Combined Financial
Results.................................... 52
Section 4.15 Sovereign Rights Agreement.......................... 52
Section 4.16 Advisory Board...................................... 52
ARTICLE V
CONDITIONS
Section 5.01 Conditions to First Home's Obligations
under this Agreement....................... 53
Section 5.02 Conditions to Sovereign's Obligations
under this Agreement....................... 54
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination......................................... 56
Section 6.02 Effect of Termination............................... 58
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses ........................................... 58
Section 7.02 Non-Survival of Representations and
Warranties................................. 58
Section 7.03 Amendment, Extension and Waiver..................... 58
Section 7.04 Entire Agreement.................................... 59
Section 7.05 No Assignment....................................... 59
Section 7.06 Notices ............................................ 59
Section 7.07 Captions ........................................... 60
Section 7.08 Counterparts........................................ 60
Section 7.09 Severability........................................ 60
Section 7.10 Governing Law....................................... 60
Exhibit 1 - First Home's Affiliate Agreement
Exhibit 2 - Stock Option Agreement
Exhibit 3 - Bank Plan of Merger
Exhibit 4 - Form of Agreement Re: Benefits
Exhibit 5 - Form of Opinion of Sovereign's Counsel
Exhibit 6 - Form of Tax Opinion of Sovereign's Counsel
Exhibit 7 - Form of Opinion of First Home's Counsel
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 18,
1997, is made by and between SOVEREIGN BANCORP, INC. ("Sovereign"), a
Pennsylvania corporation, having its principal place of business in
Wyomissing, Pennsylvania, and FIRST HOME BANCORP INC. ("First Home"), a New
Jersey corporation, having its principal place of business in Pennsville, New
Jersey.
BACKGROUND
1. Sovereign and First Home desire for First Home to merge
with and into Sovereign, with Sovereign surviving such merger, in accordance
with the applicable laws of the Commonwealth of Pennsylvania and the State of
New Jersey, and in accordance with the plan of merger set forth herein.
2. At or prior to the execution and delivery of this
Agreement, (a) certain directors and officers of First Home and affiliates of
First Home, each have executed in favor of Sovereign, a Letter Agreement dated
December 18, 1997, in the form attached hereto as Exhibit 1, and (b) First
Home is concurrently granting to Sovereign an option to acquire, under certain
circumstances, First Home's common stock (the "Sovereign Option") pursuant to
a Stock Option Agreement between Sovereign and First Home dated December 18,
1997, attached hereto as Exhibit 2.
3. Sovereign desires to merge First Home Savings Bank,
F.S.B., a federal savings bank and a wholly-owned subsidiary of First Home
("First Home Savings"), into and with Sovereign Bank, FSB, a federal savings
bank and a wholly-owned subsidiary of Sovereign ("Sovereign Bank"), with
Sovereign Bank surviving such merger in accordance with the Bank Plan of
Merger in the form attached hereto as Exhibit 3.
4. Sovereign and First Home desire to provide the terms and
conditions governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, agreements, representations and warranties herein contained,
the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person and, without limiting the generality of the
foregoing, includes any executive officer or director of such Person
and any Affiliate of such executive officer or director.
Agreement means this agreement, and any amendment
or supplement hereto, which constitutes a "plan of merger" between
Sovereign and First Home.
Applicable Exchange Ratio shall have the meaning
given to such term in Section 1.02(e)(ii).
Applications means the applications for regulatory
approval which are required by the transactions contemplated hereby.
Articles of Merger means the articles of merger to
be executed by Sovereign and First Home and to be filed in the PDS
and the NJSOS, in accordance with the applicable laws of the
Commonwealth of Pennsylvania and the State of New Jersey,
respectively.
Bank Merger means the merger of First Home Savings
with and into Sovereign Bank, with Sovereign Bank surviving such
merger, contemplated by Section 1.03 of this Agreement.
Bank Plan of Merger has the meaning given to that
term in Section 1.03 of this Agreement.
BCL means the Pennsylvania Business Corporation Law
of 1988, as amended.
Closing Date means the date determined by
Sovereign, in its sole discretion, upon five (5) days prior written
notice to First Home, but in no event later than thirty (30) days
after the last condition precedent pursuant to this Agreement has
been fulfilled or waived (including the expiration of any applicable
waiting period), or such other date as Sovereign and First Home shall
agree.
Determination Date means the date immediately
preceding the Closing Date.
Effective Date means the date upon which the
Articles of Merger shall be filed in the PDS and the NJSOS, and shall
be the same as the Closing Date.
Environmental Law means any federal, state or local
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any Regulatory Authority relating to (i) the
protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil,
plant and animal life or any other natural resource), and/or (ii) the
use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
any substance presently listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated,
whether by type or by quantity, including any material containing any
such substance as a component.
ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated from time
to time thereunder.
FDIA means the Federal Deposit Insurance Act, as
amended.
FDIC means the Federal Deposit Insurance Corporation.
First Home Common Stock means the common stock of
First Home described in Section 2.02(a).
First Home Disclosure Schedule means a disclosure
schedule delivered by First Home to Sovereign pursuant to this
Agreement.
First Home Financials means (i) the audited
consolidated financial statements of First Home as of December 31,
1996 and for the three years ended December 31, 1996, including the
notes thereto, (ii) the unaudited interim consolidated financial
statements of First Home as of each calendar quarter thereafter
included in Securities Documents filed by First Home, including the
notes thereto and (iii) the preliminary unaudited consolidated
statement of condition and income statement of First Home as of
November 30, 1997, and for the two-month period then ended.
First Home Stock Option Plans means the Employee
Compensation Program and the 1994 Stock Option Plan for Non-Employee
Directors.
First Home Regulatory Reports means the Annual
Reports of First Home or First Home Savings, as the case may be, on
Form H-(b)11, any Current Report of First Home or First Home Savings,
as the case may be, on Form H-(b)11 filed with the OTS from December
31, 1995 through the Closing Date and the Thrift Financial Reports of
First Home or First Home Savings, as the case may be, and
accompanying schedules for each calendar quarter, beginning with the
quarter ended December 31, 1995, through the Closing Date.
First Home Subsidiary means any corporation, 50% or
more of the capital stock of which is owned, either directly or
indirectly, by First Home, except any corporation the stock of which
is held in the ordinary course of the lending activities of First
Home Savings.
GAAP means generally accepted accounting principles
as in effect at the relevant date.
HOLA means the Home Owners' Loan Act of 1933, as
amended.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
Material Adverse Effect shall mean, with respect to
Sovereign or First Home, respectively, any effect that is material
and adverse to its assets, financial condition or results of
operations on a consolidated basis, provided, however, that Material
Adverse Effect shall not be deemed to include (a) any change in the
value of the respective investment and loan portfolios of Sovereign
or First Home resulting from a change in interest rates generally,
(b) any change occurring after the date hereof in any federal or
state law, rule or regulation or in GAAP, which change affects
banking institutions generally, including any changes affecting the
Bank Insurance Fund or the Savings Association Insurance Fund, (c)
reasonable expenses (plus reasonable legal fees, cost and expense
relating to any litigation arising as a result of the Merger and the
cost associated with Section 4.11(d) hereof) incurred in connection
with this Agreement and the transactions contemplated hereby, (d)
actions or omissions of a party (or any of its Subsidiaries) taken
with the prior informed written consent of the other party in
contemplation of the transactions contemplated hereby (including
without limitation any actions taken by First Home pursuant to
Section 4.10(a)(ix) of this Agreement), and (e) any effect with
respect to a party hereto caused, in whole or in substantial part, by
the other party.
Merger means the merger of First Home with and into
Sovereign, with Sovereign surviving such merger, contemplated by this
Agreement.
NASD means the National Association of Securities
Dealers, Inc.
NJBCA means the New Jersey Business Corporation
Act, as amended.
NJDB means the Department of Banking of the State
of New Jersey.
NJSOS means the Office of the Secretary of State of
the State of New Jersey.
OTS means the Office of Thrift Supervision.
PDS means the Department of State of the
Commonwealth of Pennsylvania.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group" (as that
term is defined in Section 13(d)(3) of the Exchange Act).
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any supplements thereto, to
be transmitted to holders of First Home Common Stock in connection
with the transactions contemplated by this Agreement.
Registration Statement means the registration
statement on Form S-4, including any pre-effective or post-effective
amendments or supplements thereto, as filed with the SEC under the
Securities Act with respect to the Sovereign Common Stock and
Sovereign Stock Purchase Rights to be issued in connection with the
transactions contemplated by this Agreement.
Regulatory Agreement has the meaning given to that
term in Section 2.11 and 3.10 of
this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including without
limitation the OTS, the FDIC, the NJDB, or the respective staffs
thereof.
Rights means warrants, options, rights, convertible
securities and other capital stock equivalents which obligate an
entity to issue its securities.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as
amended, and the rules and regulations promulgated from time to time
thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy material,
and other documents required to be filed under the Securities Laws.
Securities Laws means the Securities Act and the
Exchange Act and the rules and regulations promulgated from time to
time thereunder.
Sovereign Common Stock has the meaning given to
that term in Section 3.02(a) of this Agreement.
Sovereign Disclosure Schedule means a disclosure
schedule delivered by Sovereign to First Home pursuant to this
Agreement.
Sovereign Financials means (i) the audited
consolidated financial statements of Sovereign as of December 31,
1996 and for the three years ended December 31, 1996, including the
notes thereto, (ii) the unaudited interim consolidated financial
statements of Sovereign as of each calendar quarter thereafter
included in Securities Documents filed by Sovereign, including the
notes thereto, and (iii) the preliminary unaudited consolidated
financial statements of Sovereign as of November 30, 1997 and for the
two month period then ended, including the preliminary notes thereto.
Sovereign Market Price means, as of any date, the
average of the mean between the closing high bid and low asked prices
of a share of Sovereign Common Stock, as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq)
National Market System.
Sovereign Market Value means, as of any date, the
average of the Sovereign Market Prices for the fifteen consecutive
trading days ending on the trading day preceding the date as of which
the Sovereign Market Value is determined.
Sovereign Option means the option granted to
Sovereign by First Home to acquire such number of shares of First
Home Common Stock as shall equal 19.9% of the shares of First Home
Common Stock outstanding before giving effect to the exercise of such
option referenced in the recitals to this Agreement.
Sovereign Regulatory Reports means the Annual
Reports of Sovereign on Form H-(b)11 filed with the OTS since
December 31, 1995 through the Closing Date, any Current Report of
Sovereign on Form H-(b)11 filed with the OTS from December 31, 1995
through the Closing Date and the Thrift Financial Reports of
Sovereign Bank and accompanying schedules for each calendar quarter,
beginning with the quarter ended December 31, 1995, through the
Closing Date.
Sovereign Rights Agreement means the Rights
Agreement dated as of September 19, 1989, as amended September 27,
1995, between Sovereign and Chemical Bank, as rights agent, relating
to Sovereign's Series A Junior Participating Preferred Stock.
Sovereign Stock Purchase Rights means Rights to
purchase a unit of Sovereign's Series A Junior Participating
Preferred Stock in accordance with the terms of the Sovereign Rights
Agreement.
Sovereign Subsidiaries means (i) any corporation,
50% or more of the capital stock of which is owned, either directly
or indirectly, by Sovereign, except any corporation the stock of
which is held in the ordinary course of the lending activities of a
bank and (ii) Sovereign Capital Trust I and any similar entity
sponsored or created by Sovereign after the date hereof.
Subsidiary means any corporation, 50% or more of
the capital stock of which is owned, either directly or indirectly,
by another entity, except any corporation the stock of which is held
in the ordinary course of the lending activities of a bank.
Section 1.02 The Merger.
(a) Closing. The closing will take place at 10:00
a.m. on the Closing Date at such time and place as are agreed to by the
parties hereto; provided, in any case, that all conditions to closing set
forth in Article V (other than the delivery of certificates, opinions and
other instruments and documents to be delivered at the closing) have been
satisfied or waived at or prior to the Closing Date. On the Closing Date,
First Home and Sovereign shall cause the Articles of Merger to be duly
executed and to be filed in the PDS and the NJSOS.
(b) The Merger. Subject to the terms and conditions
of this Agreement, on the Effective Date: First Home shall merge with and into
Sovereign; the separate existence of First Home shall cease; Sovereign shall
be the surviving corporation in the Merger; and all of the property (real,
personal and mixed), rights, powers and duties and obligations of First Home
shall be taken and deemed to be transferred to and vested in Sovereign, as the
surviving corporation in the Merger, without further act or deed; all debts,
liabilities and duties of each of First Home and Sovereign shall thereafter be
the responsibility of Sovereign as the surviving corporation; all in
accordance with the applicable laws of the Commonwealth of Pennsylvania and
the State of New Jersey.
(c) Sovereign's Articles of Incorporation and
Bylaws. On and after the Effective Date, the articles of incorporation and the
bylaws of Sovereign, as in effect immediately prior to the Effective Date,
shall automatically be and remain the articles of incorporation and bylaws of
Sovereign, as the surviving corporation in the Merger, until thereafter
altered, amended or repealed.
(d) Board of Directors and Officers of Sovereign
and Sovereign Bank.
(i) On the Effective Date, the Board of
Directors of Sovereign, as the surviving corporation in the Merger, shall
consist of those persons holding such office immediately prior to the
Effective Date.
(ii) On the Effective Date, the officers
of Sovereign duly elected and holding office immediately prior to the
Effective Date shall be the officers of Sovereign, as the surviving
corporation in the Merger, existing on such Effective Date.
(iii) On the effective date of the Bank
Merger, the Board of Directors of Sovereign Bank, as the surviving institution
in the Bank Merger, shall consist of those persons holding such office
immediately prior to such effective date.
(iv) On the effective date of the Bank
Merger, the officers of Sovereign Bank duly elected and holding office
immediately prior to such effective date shall be the officers of Sovereign
Bank, as the surviving corporation in the Bank Merger.
(e) Conversion of Shares.
(i) Sovereign Common Stock.
(A) Each share of Sovereign Common
Stock issued and outstanding immediately prior to the Effective Date
shall, on and after the Effective Date, continue to be issued and
outstanding as an identical share of Sovereign Common Stock. Shares
of Sovereign Common Stock owned by First Home (other than shares held
in trust, managed, custodial or nominee accounts and the like or held
by mutual funds for which a subsidiary of First Home acts as
investment advisor, that in any such case are beneficially owned by
third parties (any such shares, "trust account shares") and shares
acquired in respect of debts previously contracted (any such shares,
"DPC shares")) shall become treasury stock of Sovereign.
(B) Each share of Sovereign Common
Stock issued and held in the treasury of Sovereign as of the
Effective Date, if any, shall, on and after the Effective Date,
continue to be issued and held in the treasury of Sovereign.
(ii) First Home Common Stock.
(A) Subject to the provisions of
subparagraphs (B), (C) and (D) of this Section 1.02(e)(ii), each
share of First Home Common Stock issued and outstanding immediately
prior to the Effective Date (other than shares of First Home Common
Stock, if any, then owned by Sovereign or First Home or any First
Home Subsidiary) shall, on the Effective Date, by reason of the
Merger and without any action on the part of the holder thereof, be
converted into and become a right to receive:
(i) if the Sovereign Market
Value determined as of the Effective Date is greater than or
equal to $18.00 and less than or equal to $22.00, then that
number of shares of fully paid and nonassessable shares of
Sovereign Common Stock, and the corresponding percentage of
Sovereign Stock Purchase Rights pursuant to the Sovereign
Rights Agreement, equal to $31.25 divided by the Sovereign
Market Value determined as of the Effective Date;
(ii) if the Sovereign Market
Value determined as of the Effective Date is less than
$18.00, then 1.736 shares of fully paid and nonassessable
shares of Sovereign Common Stock, and the corresponding
percentage of Sovereign Stock Purchase Rights pursuant to
the Sovereign Rights Agreement; or
(iii) if the Sovereign Market
Value determined as of the Effective Date is greater than
$22.00, then 1.420 shares of fully paid and nonassessable
shares of Sovereign Common Stock, and the corresponding
percentage of Sovereign Stock Purchase Rights pursuant to
the Sovereign Rights Agreement (as determined pursuant to
any of Sections 1.02(e)(ii)(A)(i), 1.02(e)(ii)(A)(ii) or
1.02(e)(ii)(A)(iii), the "Applicable Exchange Ratio").
(B) Each share of First Home Common
Stock (other than trust account shares or DPC shares) owned by
Sovereign or a Sovereign Subsidiary on the Effective Date, if any,
shall be cancelled.
(C) Each share of First Home Common
Stock issued and held in the treasury of First Home or owned by First
Home or any First Home Subsidiary (other than trust account shares or
DPC shares) as of the Effective Date, if any, shall be cancelled, and
no cash, stock or other property shall be delivered in exchange
therefor.
(D) No fraction of a whole share of
Sovereign Common Stock and no scrip or certificates therefor shall be
issued in connection with the Merger. Any former holder of First Home
Common Stock who would otherwise be entitled to receive a fraction of
a share of Sovereign Common Stock shall receive, in lieu thereof,
cash in an amount equal to such fraction of a share multiplied by the
Sovereign Market Price determined as of the Effective Date.
(f) Stock Options.
(i) On the Effective Date, each option to
acquire First Home Common Stock which is then outstanding ("First Home
Option"), whether or not exercisable, shall cease to represent a right to
acquire shares of First Home Common Stock and shall be converted automatically
into an option to purchase shares of Sovereign Common Stock and the
corresponding number of Sovereign Stock Purchase Rights, and Sovereign shall
assume each First Home Option, in accordance with the terms of the applicable
First Home Stock Option Plan and stock option agreement by which it is
evidenced, except that from and after the Effective Date, (i) Sovereign and
its Board of Directors or a duly authorized committee thereof shall be
substituted for First Home and First Home's Board of Directors or duly
authorized committee thereof administering such First Home Stock Option Plan,
(ii) each First Home Option assumed by Sovereign may be exercised solely for
shares of Sovereign Common Stock and Sovereign Stock Purchase Rights, (iii)
the number of shares of Sovereign Common Stock subject to such First Home
Option shall be equal to the number of shares of First Home Common Stock
subject to such First Home Option immediately prior to the Effective Date
multiplied by the Applicable Exchange Ratio, provided that any fractional
shares of Sovereign Common Stock resulting from such multiplication shall be
rounded down to the nearest share, and (iv) the per share exercise price under
each such First Home Option shall be adjusted by dividing the per share
exercise price under each such First Home Option by the Applicable Exchange
Ratio, provided that such exercise price shall be rounded up to the nearest
cent. Notwithstanding clauses (iii) and (iv) of the preceding sentence, each
First Home Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the IRC, and the regulations promulgated
thereunder, so as not to constitute a modification, extension or renewal of
the option within the meaning of Section 424(h) of the IRC. Sovereign and
First Home agree to take all necessary steps to effect the foregoing
provisions of this Section 1.02(f).
(ii) As soon as practicable after the
Effective Date, Sovereign shall deliver to each participant in each First Home
Stock Option Plan an appropriate notice setting forth such participant's
rights pursuant thereto and the grants subject to such First Home Stock Option
Plan shall continue in effect on the same terms and conditions, including
without limitation the duration thereof, subject to the adjustments required
by Section 1.02(f)(i) hereof after giving effect to the Merger. Within 60 days
after the Effective Date, Sovereign shall file a registration statement on
Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of Sovereign Common Stock and
Sovereign Stock Purchase Rights subject to such options and shall use its
reasonable best efforts to maintain the current status of the prospectus or
prospectuses contained therein for so long as such options remain outstanding.
(g) Surrender and Exchange of First Home Stock
Certificates.
(i) Exchange of Certificates. Each holder
of shares of First Home Common Stock who surrenders to Sovereign (or
its agent) the certificate or certificates representing such shares
will be entitled to receive, as soon as practicable after the
Effective Date, in exchange therefor a certificate or certificates
for the number of whole shares of Sovereign Common Stock into which
such holder's shares of First Home Common Stock have been converted
pursuant to the Merger, together with a check for cash in lieu of any
fractional share in accordance with Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates.
Each certificate for shares of Sovereign Common Stock issued in
exchange for certificates for First Home Common Stock pursuant to
Section 1.02(g)(i) hereof will be dated the Effective Date and be
entitled to dividends and all other rights and privileges pertaining
to such shares of stock from and after the Effective Date. Until
surrendered, each certificate theretofore evidencing shares of First
Home Common Stock will, from and after the Effective Date, evidence
solely the right to receive certificates for shares of Sovereign
Common Stock pursuant to Section 1.02(g)(i) hereof and a check for
cash in lieu of any fractional share in accordance with Section
1.02(e)(ii)(D) hereof. If certificates for shares of First Home
Common Stock are exchanged for Sovereign Common Stock at a date
following one or more record dates for the payment of dividends or of
any other distribution on the shares of Sovereign Common Stock,
Sovereign will pay cash in an amount equal to dividends theretofore
payable on such Sovereign Common Stock and pay or deliver any other
distribution to which holders of shares of Sovereign Common Stock
have theretofore become entitled. Upon surrender of certificates for
shares of First Home Common Stock in exchange for certificates for
Sovereign Common Stock, Sovereign also shall pay any dividends to
which such holder of First Home Common Stock may be entitled as a
result of the declaration of a dividend on the First Home Common
Stock by First Home in accordance with the terms of this Agreement
with a record date prior to the Effective Date and a payment date
after the Effective Date. No interest will accrue or be payable in
respect of dividends or cash otherwise payable under this Section
1.02(g) upon surrender of certificates for shares of First Home
Common Stock.
Notwithstanding the foregoing, no party
hereto will be liable to any holder of First Home Common Stock for
any amount paid in good faith to a public official or agency pursuant
to any applicable abandoned property, escheat or similar law. Until
such time as certificates for shares of First Home Common Stock are
surrendered by a First Home shareholder to Sovereign for exchange,
Sovereign shall have the right to withhold dividends or any other
distributions on the shares of Sovereign Common Stock issuable to
such shareholder.
(iii) Exchange Procedures. Each
certificate for shares of First Home Common Stock delivered for
exchange under this Section 1.02(g) must be endorsed in blank by the
registered holder thereof or be accompanied by a power of attorney to
transfer such shares endorsed in blank by such holder. If more than
one certificate is surrendered at one time and in one transmittal
package for the same shareholder account, the number of whole shares
of Sovereign Common Stock for which certificates will be issued
pursuant to this Section 1.02(g) will be computed on the basis of the
aggregate number of shares represented by the certificates so
surrendered. If shares of Sovereign Common Stock or payments of cash
are to be issued or made to a person other than the one in whose name
the surrendered certificate is registered, the certificate so
surrendered must be properly endorsed in blank, with signature(s)
guaranteed, or otherwise in proper form for transfer, and the person
to whom certificates for shares of Sovereign Common Stock is to be
issued or to whom cash is to be paid shall pay any transfer or other
taxes required by reason of such issuance or payment to a person
other than the registered holder of the certificate for shares of
First Home Common Stock which are surrendered. As promptly as
practicable after the Effective Date, Sovereign shall send or cause
to be sent to each shareholder of record of First Home Common Stock
transmittal materials for use in exchanging certificates representing
First Home Common Stock for certificates representing Sovereign
Common Stock into which the former have been converted in the Merger.
Certificates representing shares of Sovereign Common Stock and checks
for cash in lieu of fractional shares shall be mailed to former
shareholders of First Home as soon as reasonably possible but in no
event later than fifteen (15) business days following the receipt of
certificates representing former shares of First Home Common Stock
duly endorsed or accompanied by the materials referenced herein and
delivered by certified mail, return receipt requested (but in no
event earlier than the second business day following the Effective
Date).
(iv) Closing of Stock Transfer Books;
Cancellation of First Home Certificates. Upon the Effective Date, the
stock transfer books for First Home Common Stock will be closed and
no further transfers of shares of First Home Common Stock will
thereafter be made or recognized. All certificates for shares of
First Home Common Stock surrendered pursuant to this Section 1.02(g)
will be cancelled by Sovereign.
(h) Anti-Dilution Provisions. If, on the Effective
Date, (i) the Applicable Exchange Ratio is determined pursuant to either
Section 1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii), (ii) Sovereign has, at any
time after the date hereof and before the Effective Date, (A) issued a
dividend in shares of Sovereign Common Stock, (B) combined the outstanding
shares of Sovereign Common Stock into a smaller number of shares, (C)
subdivided the outstanding shares of Sovereign Common Stock, or (D)
reclassified the shares of Sovereign Common Stock, and (iii) the Applicable
Exchange Ratio would have been determined under the same section if such
dividend, combination, subdivision or reclassification had not occurred
(determined by appropriate mathematical adjustment of the actual Applicable
Exchange Ratio), then the number of shares of Sovereign Common Stock to be
delivered pursuant to Sections 1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii) to
First Home shareholders who are entitled to receive shares of Sovereign Common
Stock in exchange for shares of First Home Common Stock shall be adjusted so
that each First Home shareholder shall be entitled to receive such number of
shares of Sovereign Common Stock as such shareholder would have been entitled
to receive if the Effective Date had occurred prior to the happening of such
event. (By way of illustration, if Sovereign shall declare a stock dividend of
7% payable with respect to a record date on or prior to the Effective Date and
the conditions set forth above are satisfied, the Applicable Exchange Ratio
determined pursuant to Sections 1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii)
shall be adjusted upward by 7%). If, on the Effective Date, (i) the exchange
ratio preliminarily would be determined pursuant to Section 1.02(e)(ii)(A)(i),
1.02(e)(ii)(A)(ii), or 1.02(e)(ii)(A)(iii) (the "Tentative Exchange Ratio"),
(ii) Sovereign has, at any time after the date hereof and before the Effective
Date, (A) issued a dividend in shares of Sovereign Common Stock, (B) combined
the outstanding shares of Sovereign Common Stock into a smaller number of
shares, (C) subdivided the outstanding shares of Sovereign Common Stock, or
(D) reclassified the shares of Sovereign Common Stock, and (iii) the Tentative
Exchange Ratio would have been determined under a different section if such
dividend, combination, subdivision, or reclassification had not occurred
(determined by appropriate mathematical adjustment of the Sovereign Market
Value), then the actual Applicable Exchange Ratio shall be determined by
giving effect to such mathematical adjustment and by changing, if relevant,
the otherwise determined exchange ratio amount set forth in Section
1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii). (By way of illustration, if
Sovereign shall declare a two-for-one stock split payable with respect to a
record date on or prior to the Effective Date and the Sovereign Market Value
determined as of the Effective Date is $10.00, then the Applicable Exchange
Ratio shall be determined under Section 1.02(e)(ii)(A)(i) as though such
Sovereign Market Value were $20.00. In such event, each First Home shareholder
would receive 3.125 shares of Sovereign Common Stock in exchange for each
share of First Home Common Stock, so that the aggregate market value of the
Sovereign Common Stock received would be $31.25.)
Section 1.03 The Bank Merger. Sovereign and First Home shall
use their best efforts to cause First Home Savings to merge with and into
Sovereign Bank, with Sovereign Bank surviving such merger, as soon as
practicable after the Effective Date. Concurrently with, or as soon as
practicable after, the execution and delivery of this Agreement, Sovereign
shall cause Sovereign Bank, and First Home shall cause First Home Savings, to
execute and deliver the Bank Plan of Merger attached hereto as Exhibit 3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST HOME
First Home hereby represents and warrants to Sovereign that,
except as specifically set forth in the First Home Disclosure Schedule
delivered to Sovereign by First Home on the date hereof:
Section 2.01 Organization.
(a) First Home is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey. First Home is a savings and loan holding company duly registered under
the HOLA. First Home has the corporate power and authority to carry on its
business and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. First Home is not
qualified or licensed to do business as a foreign corporation in any other
jurisdiction and is not required to be so qualified or licensed as the result
of the ownership or leasing of property or the conduct of its business except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on First Home.
(b) First Home Savings is a federal savings bank
duly organized and validly existing under the laws of the United States. First
Home Savings has the corporate power and authority to carry on its business
and operations as now being conducted and to own and operate the properties
and assets now owned and being operated by it. Neither First Home Savings nor
any other First Home Subsidiary is qualified or licensed to do business as a
foreign corporation in any other jurisdiction and neither is required to be so
qualified or licensed as the result of the ownership or leasing of property or
the conduct of its business, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect on First Home.
(c) There are no First Home Subsidiaries other than
First Home Savings and those identified in the First Home Disclosure Schedule.
(d) The deposits of First Home Savings are insured
by the FDIC to the extent provided in the FDIA.
(e) The respective minute books of First Home and
First Home Savings and each other First Home Subsidiary accurately record, in
all material respects, all material corporate actions of their respective
shareholders and boards of directors (including committees).
(f) Prior to the date of this Agreement, First Home
has delivered to Sovereign true and correct copies of the articles of
incorporation and bylaws of First Home and the charter and bylaws of First
Home Savings as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of First Home
consists of (a) 10,000,000 shares of common stock, no par value ("First Home
Common Stock"), of which 2,708,426 shares are outstanding, validly issued,
fully paid and nonassessable and free of preemptive rights, and (b) 1,000,000
shares of preferred stock, none of which are issued or outstanding. Neither
First Home nor First Home Savings nor any other First Home Subsidiary has or
is bound by any subscription, option, warrant, call, commitment, agreement,
plan or other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other distributions on
any shares of First Home Common Stock, First Home preferred stock or any other
security of First Home or any securities representing the right to vote,
purchase or otherwise receive any shares of First Home Common Stock, First
Home preferred stock or any other security of First Home, other than (i)
shares issuable under the Sovereign Option and (ii) 121,961 shares issuable
under First Home Stock Option Plans and as set forth in reasonable detail in
the First Home Disclosure Schedule.
(b) The authorized capital stock of First Home
Savings consists of (i) 100 shares of common stock, no par value ("First Home
Savings Common Stock"), of which 100 shares are outstanding, validly issued,
fully paid, nonassessable, free of preemptive rights, all of which are owned
by First Home free and clear of any lien, security interests, pledges, charges
and restrictions of any kind or nature. Neither First Home nor any First Home
Subsidiary has or is bound by any subscription, option, warrant, call,
commitment, agreement or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or
other distributions on any shares of the capital stock of any First Home
Subsidiary or any other security of any First Home Subsidiary or any
securities representing the right to vote, purchase or otherwise receive any
shares of the capital stock or any other security of any First Home
Subsidiary. Either First Home or First Home Savings owns all of the
outstanding shares of capital stock of each First Home Subsidiary free and
clear of all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature.
(c) Except as set forth in the First Home
Disclosure Schedule, neither (i) First Home, (ii) First Home Savings, nor
(iii) any other First Home Subsidiary, owns any equity interest, directly or
indirectly, treasury stock, in any other company or controls any other
company, except for equity interests held in the investment portfolios of
First Home Subsidiaries, equity interests held by First Home Subsidiaries in a
fiduciary capacity, and equity interests held in connection with the
commercial loan activities of First Home Subsidiaries. There are no
subscriptions, options, warrants, calls, commitments, agreements or other
Rights outstanding and held by First Home or First Home Savings with respect
to any other company's capital stock or the equity of any other person.
(d) To the best of First Home's knowledge, except
as disclosed in First Home's proxy statement dated March 28, 1997, no person
or "group" (as that term is used in Section 13(d)(3) of the Exchange Act), is
the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5%
or more of the outstanding shares of First Home Common Stock.
Section 2.03 Authority; No Violation.
(a) First Home has full corporate power and
authority to execute and deliver this Agreement and to complete the
transactions contemplated hereby. First Home Savings has full corporate power
and authority to execute and deliver the Bank Plan of Merger and to consummate
the Bank Merger. The execution and delivery of this Agreement by First Home
and the completion by First Home of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of First Home and,
except for approval by the shareholders of First Home as required under the
NJBCA, First Home's certificate of incorporation and bylaws and Nasdaq
requirements applicable to it, no other corporate proceedings on the part of
First Home are necessary to complete the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by First Home
and, subject to approval of the shareholders of First Home as required under
the NJBCA, First Home's certificate of incorporation and bylaws and Nasdaq
requirements applicable to it and receipt of the required approvals from
Regulatory Authorities described in Section 3.04 hereof, constitutes the valid
and binding obligation of First Home, enforceable against First Home in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity. The Bank Plan of Merger, upon
its execution and delivery by First Home Savings concurrently with the
execution and delivery of this Agreement, will constitute the valid and
binding obligation of First Home Savings, enforceable against First Home
Savings in accordance with its terms, subject to applicable conservatorship or
receivership provisions of the FDIA, or insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) (A) The execution and delivery of this
Agreement by First Home, (B) the execution and delivery of the Bank Plan of
Merger by First Home Savings, (C) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 3.04 hereof and First Home's and
Sovereign's compliance with any conditions contained therein, the completion
of the transactions contemplated hereby, and (D) compliance by First Home or
First Home Savings with any of the terms or provisions hereof or of the Bank
Plan of Merger, will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or bylaws of First Home or any
First Home Subsidiary or the charter and bylaws of First Home Savings; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to First Home or any First Home Subsidiary or
any of their respective properties or assets; or (iii) except as set forth in
the First Home Disclosure Schedule, violate, conflict with, result in a breach
of any provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of First Home
or any First Home Subsidiary under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement, commitment or other instrument or obligation to which First Home or
any First Home Subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof
which, either individually or in the aggregate, will not have a Material
Adverse Effect on First Home.
Section 2.04 Consents. Except for the consents, approvals,
filings and registrations from or with the Regulatory Authorities referred to
in Section 3.04 hereof and compliance with any conditions contained therein,
and the approval of this Agreement by the shareholders of First Home under the
NJBCA, First Home's articles of incorporation and bylaws and Nasdaq
requirements applicable to it, and the approval of the Bank Plan of Merger by
First Home as sole shareholder of First Home Savings under the HOLA, and by
the First Home Savings Board of Directors, and except as disclosed in the
First Home Disclosure Schedule, no consents or approvals of, or filings or
registrations with, any public body or authority are necessary, and no
consents or approvals of any third parties are necessary, or will be, in
connection with (a) the execution and delivery of this Agreement by First Home
or the Bank Plan of Merger by First Home Savings, and (b) the completion by
First Home of the transactions contemplated hereby or by First Home Savings of
the Bank Merger. As of the date hereof, First Home has no reason to believe
that (i) any required consents or approvals will not be received or will be
received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact First Home's ability to complete the transactions
contemplated by this Agreement or that (ii) any public body or authority, the
consent or approval of which is not required or any filing with which is not
required, will object to the completion of the transactions contemplated by
this Agreement. Shareholders of First Home are not entitled to exercise
dissenters' rights in connection with the transactions contemplated by this
Agreement under federal or New Jersey law.
Section 2.05 Financial Statements.
(a) First Home has previously delivered, or will
deliver, to Sovereign the First Home Regulatory Reports. The First Home
Regulatory Reports have been, or will be, prepared in all material respects in
accordance with applicable regulatory accounting principles and practices
throughout the periods covered by such statements, and fairly present, or will
fairly present in all material respects, the financial position, results of
operations and changes in shareholders' equity of First Home as of and for the
periods ended on the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) First Home has previously delivered to
Sovereign the First Home Financials. The First Home Financials have been, or
will be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered by such statements, except as noted therein,
and fairly present, or will fairly present, the consolidated financial
position, results of operations and cash flows of First Home as of and for the
periods ended on the dates thereof, in accordance with GAAP applied on a
consistent basis, except as noted therein.
(c) At the date of each balance sheet included in
the First Home Financials or the First Home Regulatory Reports, neither First
Home nor First Home Savings (as the case may be) had, or will have any
liabilities, obligations or loss contingencies of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to be reflected
in such First Home Financials or First Home Regulatory Reports or in the
footnotes thereto which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which are not material in the aggregate and which are
incurred in the ordinary course of business, consistent with past practice and
except for liabilities, obligations and loss contingencies which are within
the subject matter of a specific representation and warranty herein and
subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
Section 2.06 Taxes.
(a) First Home and the First Home Subsidiaries are
members of the same affiliated group within the meaning of IRC Section
1504(a). First Home has duly filed, and will file, all federal, state and
local tax returns required to be filed by or with respect to First Home and
all First Home Subsidiaries on or prior to the Closing Date (all such returns
being accurate and correct in all material respects) and has duly paid or will
pay, or made or will make, provisions for the payment of all federal, state
and local taxes which have been incurred by or are due or claimed to be due
from First Home and any First Home Subsidiary by any taxing authority or
pursuant to any tax sharing agreement or arrangement (written or oral) on or
prior to the Closing Date other than taxes which (i) are not delinquent or
(ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or with respect to
First Home or any First Home Subsidiary.
Section 2.07 No Material Adverse Effect. First Home has not
suffered any Material Adverse Effect since September 30, 1997.
Section 2.08 Contracts.
(a) Except as described in First Home's proxy
statement for its April 25, 1997 annual meeting of shareholders and Annual
Report on Form 10-K for the year ended December 31, 1996, previously delivered
to Sovereign, in the footnotes to the audited consolidated financial
statements of First Home as of December 31, 1996 and for the three years ended
December 31, 1996, in the footnotes to the audited financial statements of
First Home Savings as of December 31, 1996 and for the three years ended
December 31, 1996, or in the First Home Disclosure Schedule, neither First
Home nor any First Home Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or arrangement with any past or
present officer, director or employee of First Home or any First Home
Subsidiary, except for "at will" arrangements; (ii) any plan, arrangement or
contract providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing or similar arrangements for or with any
past or present officers, directors or employees of First Home or any First
Home Subsidiary; (iii) any collective bargaining agreement with any labor
union relating to employees of First Home or any First Home Subsidiary; (iv)
any agreement which by its terms limits the payment of dividends by any First
Home Subsidiary; (v) any instrument evidencing or related to indebtedness for
borrowed money whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase, guaranty or otherwise, in
respect of which First Home or any First Home Subsidiary is an obligor to any
person, which instrument evidences or relates to indebtedness other than
deposits, repurchase agreements, Federal Home Loan Bank advances and
repurchases, bankers acceptances and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would
be applicable on or after the Closing Date to Sovereign or any Sovereign
Subsidiary; or (vi) any contract (other than this Agreement) limiting the
freedom of any First Home Subsidiary to engage in any type of banking or
bank-related business permissible under law.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) or described in
the First Home proxy statement for its April 25, 1997 annual meeting of
shareholders or in a footnote to such First Home Financials, have been
provided to Sovereign on or before the date hereof, are listed on the First
Home Disclosure Schedule and are in full force and effect on the date hereof
and neither First Home nor any First Home Subsidiary (nor, to the knowledge of
First Home, any other party to any such contract, plan, arrangement or
instrument) has breached any provision of, or is in default in any respect
under any term of, any such contract, plan, arrangement or instrument which
breach has resulted in or will result in a Material Adverse Effect with
respect to First Home. Except as set forth in the First Home Disclosure
Schedule, no party to any material contract, plan, arrangement or instrument
will have the right to terminate any or all of the provisions of any such
contract, plan, arrangement or instrument as a result of the transactions
contemplated by this Agreement. Except as set forth in the First Home
Disclosure Schedule, none of the employees (including officers) of First Home
or any First Home Subsidiary, possess the right to terminate their employment
as a result of the execution of this Agreement. Except as set forth in the
First Home Disclosure Schedule, no plan, employment agreement, termination
agreement, or similar agreement or arrangement to which First Home or any
First Home Subsidiary is a party or under which First Home or any First Home
Subsidiary may be liable contains provisions which permit an employee or
independent contractor to terminate it without cause and continue to accrue
future benefits thereunder. Except as set forth in the First Home Disclosure
Schedule, no such agreement, plan or arrangement (x) provides for acceleration
in the vesting of benefits or payments due thereunder upon the occurrence of a
change in ownership or control of First Home or any First Home Subsidiary
absent the occurrence of a subsequent event; (y) provides for benefits which
may cause the disallowance of a federal income tax deduction under IRC Section
280G; or (z) requires First Home or any First Home Subsidiary to provide a
benefit in the form of First Home Common Stock or determined by reference to
the value of First Home Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in the First Home
Disclosure Schedule, First Home and the First Home Subsidiaries have, or will
have as to property acquired after the date hereof, good and, as to real
property, marketable title to all assets and properties owned by First Home or
any First Home Subsidiary in the conduct of their businesses, whether such
assets and properties are real or personal, tangible or intangible, including
assets and property reflected in the balance sheets contained in the First
Home Regulatory Reports and in the First Home Financials or acquired
subsequent thereto (except to the extent that such assets and properties have
been disposed of for fair value, in the ordinary course of business, since the
date of such balance sheets), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items which secure repurchase
agreements and liabilities for borrowed money from a Federal Home Loan Bank,
(ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith and (iii) items permitted under Article IV. First Home
and the First Home Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by First Home and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Except as disclosed
in the First Home Disclosure Schedule, such existing leases and commitments to
lease constitute or will constitute operating leases for both tax and
financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in the Notes to the First Home Financials.
(b) With respect to all agreements pursuant to
which First Home or any First Home Subsidiary has purchased securities subject
to an agreement to resell, if any, First Home or such First Home Subsidiary,
as the case may be, has a valid, perfected first lien or security interest in
the securities or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby.
(c) First Home and the First Home Subsidiaries
currently maintain insurance considered by First Home to be reasonable for
their respective operations and similar in scope and coverage to that
maintained by other businesses similarly engaged. Neither First Home nor any
First Home Subsidiary has received notice from any insurance carrier that (i)
such insurance will be cancelled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. There are presently no material
claims pending under such policies of insurance and no notices have been given
by First Home or First Home Savings under such policies. All such insurance is
valid and enforceable and in full force and effect, and within the last three
years First Home and First Home Savings have received each type of insurance
coverage for which they have applied and during such periods have not been
denied indemnification for any material claims submitted under any of their
insurance policies.
Section 2.10 Legal Proceedings. Except as disclosed in the
First Home Disclosure Schedule, neither First Home nor any First Home
Subsidiary is a party to any, and there are no pending or, to the best of
First Home's knowledge, threatened legal, administrative, arbitration or other
proceedings, claims (whether asserted or unasserted), actions or governmental
investigations or inquiries of any nature (i) against First Home or any First
Home Subsidiary, (ii) to which First Home or any First Home Subsidiary's
assets are or may be subject, (iii) challenging the validity or propriety of
any of the transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of First Home to perform under this Agreement,
except for any proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on First Home.
Section 2.11 Compliance With Applicable Law.
(a) Except as disclosed in the First Home
Disclosure Schedule, First Home and First Home Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their businesses under, and have complied in all material respects with,
applicable laws, statutes, orders, rules or regulations of any federal, state
or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in
any material respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on First Home.
(b) Except as disclosed in the First Home
Disclosure Schedule, neither First Home nor any First Home Subsidiary has
received any notification or communication from any Regulatory Authority (i)
asserting that First Home or any First Home Subsidiary is not in compliance
with any of the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license, franchise, permit
or governmental authorization which is material to First Home or any First
Home Subsidiary; (iii) requiring or threatening to require First Home or any
First Home Subsidiary, or indicating that First Home or any First Home
Subsidiary may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting,
or purporting to restrict or limit, in any manner the operations of First Home
or any First Home Subsidiary, including without limitation any restriction on
the payment of dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner the operations of First
Home or any First Home Subsidiary, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither First Home nor any First
Home Subsidiary has consented to or entered into any Regulatory Agreement,
except as heretofore disclosed to Sovereign.
Section 2.12 ERISA. First Home has previously delivered to
Sovereign true and complete copies of all employee pension benefit plans
within the meaning of ERISA Section 3(2), including profit sharing plans,
employee stock ownership plan, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement plans, employment
agreements, annual executive and administrative incentive plan or long term
incentive plans, severance plans, policies and agreements, group insurance
plans, and all other employee welfare benefit plans within the meaning of
ERISA Section 3(1) (including vacation pay, sick leave, short-term disability,
long-term disability, and medical plans) and all other employee benefit plans,
policies, agreements and arrangements, all of which are set forth in the First
Home Disclosure Schedule, sponsored or contributed to for the benefit of the
employees or former employees (including retired employees) and any
beneficiaries thereof or directors or former directors of First Home or any
First Home Subsidiary, together with (i) the most recent actuarial (if any)
and financial reports relating to those plans which constitute "qualified
plans" under IRC Section 401(a), (ii) the most recent annual reports relating
to such plans filed by them, respectively, with any government agency, and
(iii) all rulings and determination letters which pertain to any such plans.
Neither First Home, any First Home Subsidiary, nor any pension plan maintained
by First Home or any First Home Subsidiary, has incurred, directly or
indirectly, within the past six (6) years any liability under Title IV of
ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS
with respect to any pension plan qualified under IRC Section 401(a) which
liability has resulted in or will result in a Material Adverse Effect with
respect to First Home, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043 occurred with respect to
any such pension plan which would result in a Material Adverse Effect. With
respect to each of such plans that is subject to Title IV of ERISA, the
present value of the accrued benefits under such plan, based upon the
actuarial assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed the then
current value of the assets of such plan allocable to such accrued benefits.
Neither First Home nor any First Home Subsidiary has incurred or is subject to
any liability under ERISA Section 4201 for a complete or partial withdrawal
from a multiemployer plan. All "employee benefit plans," as defined in ERISA
Section 3(3), comply and within the past six (6) years have complied in all
material respects with (i) relevant provisions of ERISA and (ii) in the case
of plans intended to qualify for favorable income tax treatment, provisions of
the IRC relevant to such treatment. No prohibited transaction (which shall
mean any transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408 or any transaction prohibited under IRC Section 4975) has
occurred within the past six (6) years with respect to any employee benefit
plan maintained by First Home or any First Home Subsidiary which would result
in the imposition, directly or indirectly, of an excise tax under IRC Section
4975 or other penalty under ERISA or the IRC, which, individually or in the
aggregate, has resulted in or will result in a Material Adverse Effect with
respect to First Home. First Home and the First Home Subsidiaries provide
continuation coverage under group health plans for separating employees and
"qualified beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in material compliance with Section
1862(b)(1) of the Social Security Act.
Section 2.13 Brokers, Finders and Financial Advisors;
Fairness Opinion. Except for First Home's engagement of RP Financial, LC ("RP
Financial") in connection with transactions contemplated by this Agreement,
neither First Home nor any First Home Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement or in connection with any transaction other than the Merger, or,
except for its commitments disclosed in First Home Disclosure Schedule,
incurred any liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this Agreement or
in connection with any transaction other than the Merger, which has not been
reflected in the First Home Financials. The First Home Disclosure Schedule
shall contain as an exhibit the engagement letter between First Home and RP
Financial. RP Financial has provided First Home with its written opinion to
the effect that the Exchange Ratio is fair to First Home shareholders from a
financial point of view.
Section 2.14 Environmental Matters. To the knowledge of
First Home, neither First Home nor any First Home Subsidiary, nor any
properties operated by First Home or any First Home Subsidiary during First
Home's use or ownership has been or is in violation of or liable under any
Environmental Law which violation or liability, individually or in the
aggregate, resulted in, or will result, in a Material Adverse Effect with
respect to First Home. There are no actions, suits or proceedings, or demands,
claims, notices or investigations (including without limitation notices,
demand letters or requests for information from any environmental agency)
instituted or pending, or to the knowledge of First Home, threatened, relating
to the liability of any property owned or operated by First Home or any First
Home Subsidiary under any Environmental Law.
Section 2.15 Allowance for Losses. The allowance for loan
losses reflected, and to be reflected, in the First Home Regulatory Reports,
and shown, and to be shown, on the balance sheets contained in the First Home
Financials have been, and will be, established in accordance with the
requirements of GAAP and all applicable regulatory criteria.
Section 2.16 Information to be Supplied. The information to
be supplied by First Home and First Home Savings for inclusion in the
Registration Statement (including the Prospectus/Proxy Statement) and/or any
information First Home filed with the SEC under the Exchange Act which is
incorporated by reference into the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the Registration Statement
is declared effective pursuant to the Securities Act and as of the date the
Prospectus/Proxy Statement is mailed to shareholders of First Home and up to
and including the date of the meeting of shareholders of First Home to which
such Prospectus/Proxy Statement relates, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein not misleading. The information supplied, or to be
supplied, by First Home for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority and up to and including
the date of the attainment of any required regulatory approvals or consents,
be accurate in all material respects.
Section 2.17 Securities Documents. First Home has delivered
to Sovereign copies of its (i) annual report on SEC Form 10-K for the year
ended December 31, 1996, (ii) quarterly reports on SEC Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and (iii)
proxy materials used or for use in connection with its meetings of
shareholders held in 1997 and 1996. Such reports and such proxy materials
complied, at the time filed with the SEC, in all material respects, with the
Exchange Act and all applicable rules and regulations of the SEC.
Section 2.18 Related Party Transactions. Except as disclosed
(i) in the First Home Disclosure Schedule, (ii) in the proxy statement for use
in connection with First Home's April 25, 1997 annual meeting of shareholders
or (iii) in the footnotes to the First Home Financials, First Home is not a
party to any transaction (including any loan or other credit accommodation,
but excluding deposits in the ordinary course of business) with any Affiliate
of First Home (except a First Home Subsidiary). Except as disclosed in the
First Home Disclosure Schedule or in First Home's proxy statement for its
April 25, 1997 annual meeting of shareholders, all such transactions (a) were
made in the ordinary course of business, (b) were made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other Persons, and (c) did not
involve more than the normal risk of collectability or present other risks or
unfavorable features. Except as set forth on the First Home Disclosure
Schedule, no loan or credit accommodation to any Affiliate of First Home is
presently in default or, during the three year period prior to the date of
this Agreement, has been in default or has been restructured, modified or
extended. Neither First Home nor First Home Savings has been notified that
principal and interest with respect to any such loan or other credit
accommodation will not be paid when due or that the loan grade classification
accorded such loan or credit accommodation by First Home Savings is
inappropriate.
Section 2.19 Schedule of Termination Benefits. The First
Home Disclosure Schedule includes a schedule of the present value as of
December 31, 1997 of termination benefits and related payments that would be
payable to the individuals identified thereon, excluding any options to
acquire First Home Common Stock granted to such individuals, under any and all
employment agreements, special termination agreements, supplemental executive
retirement plans, deferred bonus plans, deferred compensation plans, salary
continuation plans, or any other pension benefit or welfare benefit plan
maintained by First Home solely for the benefit of executive officers of First
Home or any First Home Subsidiary (the "Benefits Schedule"), assuming their
employment is terminated as of December 31, 1997 and the Closing Date occurs
prior to such termination. No other individuals are entitled to benefits under
any such plans. The present value of the termination benefits and related
payments specified, including required gross-up payments under Section 280G of
the IRC, on the Benefit Schedule with respect to each named individual (based
on a 6% per annum discount factor) is true and correct in all material
respects. As of November 30, 1997, no First Home director had deferred any
compensation accrued by First Home.
Section 2.20 Loans. Each loan reflected as an asset in the
First Home Financial Statements (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and correct (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (ii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy
the foregoing standards would not have a Material Adverse Effect on First
Home.
Section 2.21 Antitakeover Provisions Inapplicable. The
provisions of Sections 14A:10A-4 and 14A:10A-5 of the NJBCA do not and will
not apply to this Agreement or the transactions contemplated hereby.
Section 2.22 Quality of Representations. The representations
made by First Home in this Agreement are true, correct and complete in all
material respects, and do not omit statements necessary to make them not
misleading under all facts and circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Sovereign hereby represents and warrants to First Home that,
except as set forth in the Sovereign Disclosure Schedule delivered by
Sovereign to First Home on or prior to the date hereof:
Section 3.01 Organization.
(a) Sovereign is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Sovereign is a savings and loan holding company duly registered
under the HOLA. Sovereign has the corporate power and authority to carry on
its business and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each Sovereign
Subsidiary is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation and each possesses full
corporate power and authority to carry on its respective business and to own,
lease and operate its properties as presently conducted. Neither Sovereign nor
any Sovereign Subsidiary is required by the conduct of its business or the
ownership or leasing of its assets to qualify to do business as a foreign
corporation in any jurisdiction other than the Commonwealth of Pennsylvania
and the states of Delaware and New Jersey, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) Sovereign Bank is a federal savings bank, duly
organized and validly existing under the laws of the United States of America.
Sovereign Bank has the corporate power and authority to carry on its business
and operations as now being conducted and to own and operate the properties
and assets now owned and being operated by it.
(c) The deposits of Sovereign Bank are insured by
the FDIC to the extent provided in the FDIA.
(d) The respective minute books of Sovereign and
Sovereign Bank accurately record in all material respects all material
corporate action of their respective shareholders and boards of directors
(including committees) through the date of this Agreement.
(e) Prior to the execution of this Agreement,
Sovereign has delivered to First Home true and correct copies of the articles
of incorporation and the bylaws of Sovereign and Sovereign Bank, respectively,
as in effect on the date hereof.
Section 3.02 Capital Structure.
(a) The authorized capital stock of Sovereign
consists of (a) 200,000,000 shares of common stock, no par value ("Sovereign
Common Stock"), of which, at the date of this Agreement, 10,008 shares were
issued and held by Sovereign as treasury stock and 89,366,365 shares are
outstanding, validly issued, fully paid and nonassessable, and (b) 7,500,000
shares of preferred stock, no par value, of which, at the date of this
Agreement, 2,000,000 shares of 61/4% Cumulative, Convertible Preferred Stock,
Series B, are outstanding, validly issued, fully paid and nonassessable. No
shares of Sovereign Common Stock were issued in violation of any preemptive
rights. Sovereign has no Rights authorized, issued or outstanding, other than
(i) the Sovereign Stock Purchase Rights, (ii) options to acquire 2,342,047
shares of Sovereign Common Stock authorized under Sovereign's employee benefit
plans, stock option plans, non-employee directors compensation plan, employee
stock ownership plan, employee stock purchase plan, and dividend reinvestment
and stock purchase plan, and (iii) capital securities issued by Sovereign
Capital Trust I, and (iv) the deemed rights to acquire Sovereign Stock
possessed by holders of the common stock of ML Bancorp, Inc. under the
Agreement and Plan of Merger between Sovereign and ML Bancorp, Inc., dated
September 18, 1997, contingent upon completion of the transactions
contemplated thereby. As of September 30, 1997, Sovereign had approximately
10,500 shareholders of record.
(b) To the best of Sovereign's knowledge, except as
disclosed in Sovereign's proxy statement dated March 19, 1997, no person or
"group" (as that term is used in Section 13(d)(3) of the Exchange Act) is the
beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or
more of the outstanding shares of Sovereign Common Stock.
(c) Sovereign owns all of the capital stock of
Sovereign Bank, free and clear of any lien, security interests, pledges,
charges, encumbrances, agreements and restrictions of any kind or nature and
either Sovereign or Sovereign Bank owns all of its shares of capital stock of
each other Sovereign Subsidiary free and clear of all liens, security
interests, pledges, charges, encumbrances, agreements and restrictions of any
kind or nature. Except for the Sovereign Subsidiaries, Sovereign does not
possess, directly or indirectly, any material equity interest in any
corporation, except for equity interests held in the investment portfolios of
Sovereign Subsidiaries, equity interests held by Sovereign Subsidiaries in a
fiduciary capacity, and equity interests held in connection with the
commercial loan activities of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Sovereign has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Sovereign Bank has full corporate power and
authority to execute and deliver the Bank Plan of Merger and to consummate the
Bank Merger. The execution and delivery of this Agreement by Sovereign and the
completion by Sovereign of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Sovereign, and no other
corporate proceedings on the part of Sovereign are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sovereign and, subject to receipt of the required
approvals of Regulatory Authorities described in Section 3.04 hereof,
constitutes the valid and binding obligation of Sovereign, enforceable against
Sovereign in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity. The Bank Plan of
Merger, upon its execution and delivery by Sovereign Bank concurrently with
the execution and delivery of this Agreement, will constitute the valid and
binding obligation of Sovereign Bank, enforceable against Sovereign Bank in
accordance with its terms, subject to applicable conservatorship and
receivership provisions of the FDIA, or insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) (A) The execution and delivery of this
Agreement by Sovereign, (B) the execution and delivery of the Bank Plan of
Merger by Sovereign Bank, (C) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 3.04 hereof and First Home's and
Sovereign's compliance with any conditions contained therein, the consummation
of the transactions contemplated hereby, and (D) compliance by Sovereign or
Sovereign Bank with any of the terms or provisions hereof or of the Bank Plan
of Merger will not (i) conflict with or result in a breach of any provision of
the articles of incorporation or bylaws of Sovereign or any Sovereign
Subsidiary or the charter and bylaws of Sovereign Bank; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Sovereign or any Sovereign Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result
in the termination of, accelerate the performance required by, or result in a
right of termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Sovereign or Sovereign Bank under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other investment or obligation to which Sovereign or Sovereign
Bank is a party, or by which they or any of their respective properties or
assets may be bound or affected, except for such violations, conflicts,
breaches or defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material Adverse Effect on
Sovereign.
Section 3.04 Consents. Except for consents, approvals,
filings and registrations from or with the OTS, the NJDB, the SEC, and state
"blue sky" authorities, and compliance with any conditions contained therein,
and the approval of the Bank Plan of Merger by Sovereign as sole shareholder
of Sovereign Bank under the HOLA, and by the Sovereign Bank Board of Directors
no consents or approvals of, or filings or registrations with, any public body
or authority are necessary, and no consents or approvals of any third parties
are necessary, or will be, in connection with (a) the execution and delivery
of this Agreement by Sovereign or the Bank Plan of Merger by Sovereign Bank,
and (b) the completion by Sovereign of the transactions contemplated hereby or
by Sovereign Bank of the Bank Merger. Sovereign has no reason to believe that
(i) any required consents or approvals will not be received or will be
received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact Sovereign's or Sovereign Bank's ability to
complete the transactions contemplated by this Agreement or that (ii) any
public body or authority, the consent or approval of which is not required or
any filing with which is not required, will object to the completion of the
transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) Sovereign has made, or will make, the Sovereign
Regulatory Reports available to First Home for inspection. The Sovereign
Regulatory Reports have been, or will be, prepared in all material respects in
accordance with applicable regulatory accounting principles and practices
throughout the periods covered by such statements, and fairly present, or will
fairly present in all material respects, the financial position, results of
operations, and changes in shareholders' equity of Sovereign as of and for the
periods ended on the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) Sovereign has previously delivered, or will
deliver, to First Home the Sovereign Financials. The Sovereign Financials have
been, or will be, prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered by the Sovereign Financials, except as
noted therein and fairly present, or will fairly present, the consolidated
financial position, results of operations and cash flows of Sovereign as of
and for the periods ending on the dates thereof, in accordance with GAAP
applied on a consistent basis throughout the periods covered by the Sovereign
Financials, except as noted therein. Sovereign will make the Sovereign
Regulatory Reports available to First Home for inspection.
(c) At the date of each balance sheet included in
the Sovereign Financials or Sovereign Regulatory Reports, Sovereign did not
have any liabilities, obligations or loss contingencies of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to be reflected
in such Sovereign Financials or in the footnotes thereto which are not fully
reflected or reserved against therein or disclosed in a footnote thereto,
except for liabilities, obligations or loss contingencies which are not
material in the aggregate and which are incurred in the ordinary course of
business, consistent with past practice, and except for liabilities,
obligations or loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the case of any
unaudited statements, to normal recurring audit adjustments and the absence of
footnotes.
Section 3.06 Taxes. Sovereign and the Sovereign Subsidiaries
are members of the same affiliated group within the meaning of IRC Section
1504(a). Sovereign has duly filed, and will file, all federal, state and local
tax returns required to be filed by or with respect to Sovereign and all
Sovereign Subsidiaries on or prior to the Closing Date (all such returns being
accurate and correct in all material respects) and has duly paid or will pay,
or made or will make, provisions for the payment of all federal, state and
local taxes which have been incurred by or are due or claimed to be due from
Sovereign and any Sovereign Subsidiary by any taxing authority or pursuant to
any tax sharing agreement or arrangement (written or oral) on or prior to the
Closing Date other than taxes which (i) are not delinquent or (ii) are being
contested in good faith.
Section 3.07 No Material Adverse Effect. Sovereign has not
suffered any Material Adverse Effect since September 30, 1997.
Section 3.08 Ownership of Property; Insurance Coverage.
(a) Sovereign and the Sovereign Subsidiaries have
good and, as to real property, marketable title to all assets and properties
owned by Sovereign or any of its Subsidiaries in the conduct of their
businesses, whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the balance sheets
contained in the Sovereign Financials and in the Sovereign Regulatory Reports
or acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value, in the ordinary course of
business, since the date of such balance sheets), subject to no encumbrances,
liens, mortgages, security interests or pledges, except (i) those items that
secure liabilities for borrowed money and that are described in the Sovereign
Disclosure Schedule or permitted under Article IV hereof, and (ii) statutory
liens for amounts not yet delinquent or which are being contested in good
faith. Sovereign and the Sovereign Subsidiaries, as lessee, have the right
under valid and subsisting leases of real and personal properties used by
Sovereign and its Subsidiaries in the conduct of their businesses to occupy
and use all such properties as presently occupied and used by each of them.
(b) Sovereign and the Sovereign Subsidiaries
currently maintain insurance in amounts considered by Sovereign to be
reasonable for their respective operations, and such insurance is similar in
scope and coverage to that maintained by other businesses similarly engaged.
Neither Sovereign nor any Sovereign Subsidiary has received notice from any
insurance carrier that (i) such insurance will be cancelled or that coverage
thereunder will be reduced or eliminated or (ii) premium costs with respect to
such insurance will be substantially increased.
Section 3.09 Legal Proceedings. Neither Sovereign nor any
Sovereign Subsidiary is a party to any, and there are no pending or, to the
best of Sovereign's knowledge, threatened legal, administrative, arbitration
or other proceedings, claims, actions or governmental investigations or
inquiries of any nature (i) against Sovereign or any Sovereign Subsidiary,
(ii) to which Sovereign's or any Sovereign Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could adversely
affect the ability of Sovereign to perform under this Agreement, except for
any proceedings, claims, actions, investigations or inquiries referred to in
clauses (i) or (ii) which, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on Sovereign.
Section 3.10 Compliance With Applicable Law.
(a) Sovereign and the Sovereign Subsidiaries hold
all licenses, franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all material respects
with, applicable laws, statutes, orders, rules or regulations of any federal,
state or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in
any material respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on Sovereign.
(b) Neither Sovereign nor any Sovereign Subsidiary
has received any notification or communication from any Regulatory Authority
(i) asserting that Sovereign or any Sovereign Subsidiary is not in compliance
with any of the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license, franchise, permit
or governmental authorization which is material to Sovereign or any Sovereign
Subsidiary; (iii) requiring or threatening to require Sovereign or any
Sovereign Subsidiary, or indicating that Sovereign or any Sovereign Subsidiary
may be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or limiting, or
purporting to restrict or limit, in any manner the operations of Sovereign or
any Sovereign Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner the operations of
Sovereign or any Sovereign Subsidiary, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither Sovereign nor any Sovereign
Subsidiary has consented to or entered into any Regulatory Agreement, except
as heretofore disclosed to First Home.
Section 3.11 Information to be Supplied. The information to
be supplied by Sovereign for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) and/or any information Sovereign
filed with the SEC under the Exchange Act which is incorporated by reference
into the Registration Statement (including the Prospectus/Proxy Statement)
will not, at the time the Registration Statement is declared effective
pursuant to the Securities Act and as of the date the Prospectus/Proxy
Statement is mailed to shareholders of First Home and up to and including the
date of the meeting of shareholders of First Home to which such
Prospectus/Proxy Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be
supplied, by Sovereign for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority and up to and including
the date(s) of the obtainment of any required regulatory approvals or
consents, be accurate in all material aspects.
Section 3.12 ERISA. Sovereign has previously made available
to First Home true and complete copies of the employee pension benefit plans
within the meaning of ERISA Section 3(2), profit sharing plans, employee stock
ownership plans, stock purchase plans, deferred compensation and supplemental
income plans, supplemental executive retirement plans, annual incentive plans,
group insurance plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), and all other employee
benefit plans, policies, agreements and arrangements, all of which are set
forth on the Sovereign Disclosure Schedule, sponsored or contributed to for
the benefit of the employees or former employees (including retired employees)
and any beneficiaries thereof or directors or former directors of Sovereign or
any Sovereign Subsidiary, together with (i) the most recent actuarial (if any)
and financial reports relating to those plans which constitute "qualified
plans" under IRC Section 401(a), (ii) the most recent annual reports relating
to such plans filed by them, respectively, with any government agency, and
(iii) all rulings and determination letters which pertain to any such plans.
Neither Sovereign, any Sovereign Subsidiary, nor any pension plan maintained
by Sovereign or any Sovereign Subsidiary, has incurred, directly or
indirectly, within the past six (6) years any liability under Title IV of
ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS
with respect to any pension plan qualified under IRC Section 401(a) which
liability has resulted in or will result in a Material Adverse Effect with
respect to Sovereign, except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043 occurred with respect to
any such pension plan which would result in a Material Adverse Effect. With
respect to each of such plans that is subject to Title IV of ERISA, the
present value of the accrued benefits under such plan, based upon the
actuarial assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed the then
current value of the assets of such plan allocable to such accrued benefits.
Neither Sovereign nor any Sovereign Subsidiary has incurred or is subject to
any liability under ERISA Section 4201 for a complete or partial withdrawal
from a multiemployer plan. All "employee benefit plans," as defined in ERISA
Section 3(3), comply and within the past six (6) years have complied in all
material respects with (i) relevant provisions of ERISA, and (ii) in the case
of plans intended to qualify for favorable income tax treatment, provisions of
the IRC relevant to such treatment. No prohibited transaction (which shall
mean any transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408 or any transaction prohibited under IRC Section 4975) has
occurred within the past six (6) years with respect to any employee benefit
plan maintained by Sovereign or any Sovereign Subsidiary that would result in
the imposition, directly or indirectly, of an excise tax under IRC Section
4975 or other penalty under ERISA or the IRC, which individually or in the
aggregate, has resulted in or will result in a Material Adverse Effect with
respect to Sovereign. Sovereign and the Sovereign Subsidiaries provide
continuation coverage under group health plans for separating employees and
"qualified beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in compliance with Section 1862(b)(1) of
the Social Security Act.
Section 3.13 Securities Documents. Sovereign has delivered,
or will deliver, to First Home copies of its (i) annual reports on SEC Form
10-K for the years ended December 31, 1996, 1995, and 1994, (ii) quarterly
reports on SEC Form 10-Q for the quarters ended March 31, 1997, June 30, 1997
and September 30, 1997, (iii) current reports on SEC Form 8-K dated February
5, 1997, February 6, 1997, February 13, 1997, March 18, 1997 June 17, 1997,
September 12, 1997, as amended, September 18, 1997 and December 9, 1997, which
are all the Current Reports on Form 8-K which were or filed or required to be
filed, (iv) proxy statement dated March 19, 1997 used in connection with its
annual meeting of shareholders held in April 1997, (v) proxy material dated
July 22, 1997 relating to Sovereign's acquisition of Bankers Corp., and (vi)
preliminary proxy material filed by Sovereign with the SEC in November, 1997
and related Form S-4 Registration Statement relating to Sovereign's
acquisition of ML Bancorp, Inc. Such reports and such proxy materials
complied, at the time filed with the SEC, in all material respects, with the
Exchange Act and the applicable rules and regulations of the SEC.
Section 3.14 Environmental Matters. To the knowledge of
Sovereign, neither Sovereign nor any Sovereign Subsidiary, nor any properties
operated by Sovereign or any Sovereign Subsidiary during Sovereign's use or
ownership has been or is in violation of or liable under any Environmental Law
which violation or liability, individually or in the aggregate, resulted in or
will result in a Material Adverse Effect with respect to Sovereign. There are
no actions, suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand letters or
requests for information from any environmental agency) instituted or pending,
or to the knowledge of Sovereign, threatened, relating to the liability of any
property owned or operated by Sovereign or any Sovereign Subsidiary under any
Environmental Law.
Section 3.15 Allowance for Loan Losses. The allowance for
loan losses reflected, and to be reflected, in the Sovereign Regulatory
Reports, and shown, and to be shown, on the balance sheets contained in the
Sovereign Financials have been, and will be, established in accordance with
the requirements of GAAP and all applicable regulatory criteria.
Section 3.16 Brokers and Finders. In connection with the
transactions contemplated by the Agreement, neither Sovereign nor any
Sovereign Subsidiary, nor any of their respective officers, directors,
employees or agents, has employed any broker, finder or financial advisor, or
incurred any liability for any fees or commissions to any such person, in
connection with the transactions contemplated by this Agreement.
Section 3.17 Loans. Each loan reflected as an asset in the
Sovereign Financial Statements (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and correct (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy
the foregoing standards would not have a Material Adverse Effect on Sovereign.
Section 3.18 Accounting for the Merger; Reorganization. As
of the date hereof, Sovereign does not have any reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests treatment under GAAP,
or (ii) as a reorganization under Section 368(a) of the IRC.
Section 3.19 NJBCA Antitakeover Provisions. Neither
Sovereign nor any Sovereign Subsidiary is an "interested shareholder" of First
Home under Sections 14A:10A-4 and 14:10A-5 of the NJBCA.
Section 3.20 Quality of Representations. The representations
made by Sovereign in this Agreement are true, correct and complete in all
material respects and do not omit statements necessary to make the
representations not misleading under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of First Home's Business.
(a) From the date of this Agreement to the Closing
Date, First Home and each First Home Subsidiary will conduct its business and
engage in transactions, including extensions of credit, only in the ordinary
course and consistent with past practice and policies, except as otherwise
required by this Agreement or with the written consent of Sovereign. First
Home will use its reasonable good faith efforts, and will cause First Home
Savings to use its reasonable good faith efforts, to (i) preserve its business
organizations intact, (ii) maintain good relationships with employees, and
(iii) preserve for itself the good will of customers of First Home and First
Home Subsidiaries and others with whom business relationships exist. From the
date hereof to the Closing Date, except as otherwise consented to or approved
by Sovereign in writing or as permitted or required by this Agreement, First
Home will not, and First Home will not permit any First Home Subsidiary to:
(i) amend or change any provision of its
certificate of incorporation, charter, or bylaws;
(ii) change the number of authorized or
issued shares of its capital stock or issue or grant any option,
warrant, call, commitment, subscription, Right or agreement of any
character relating to its authorized or issued capital stock or any
securities convertible into shares of such stock, or split, combine
or reclassify any shares of capital stock, or declare, set aside or
pay any dividend or other distribution in respect of capital stock,
or redeem or otherwise acquire any shares of capital stock, except
that (A) First Home may issue shares of First Home Common Stock upon
the valid exercise, subject to the terms of the letter agreement
attached hereto as Exhibit 1, of presently outstanding options to
acquire First Home Common Stock under the First Home Stock Option
Plans, (B) First Home may pay a regular quarterly cash dividend, not
to exceed $.10 per share of First Home Common Stock outstanding, and
(C) First Home may issue shares of First Home Common Stock pursuant
to the Sovereign Option. As promptly as practicable following the
date of this Agreement, the Board of Directors of First Home shall
cause its regular quarterly dividend record dates and payment dates
to be the same as Sovereign's regular quarterly dividend record dates
and payment dates for Sovereign Common Stock, and except as provided
above, First Home shall not change its regular dividend payment dates
and record dates without prior written consent of Sovereign. Nothing
contained in this Section 4.01(ii) or in any other Section of this
Agreement shall be construed to permit First Home shareholders to
receive two dividends either from First Home or from First Home and
Sovereign in any quarter or to deny or prohibit them from receiving
one dividend from First Home or Sovereign in any quarter. Subject to
applicable regulatory restrictions, if any, First Home Savings may
pay a cash dividend, in the aggregate, sufficient to fund any
dividend by First Home permitted hereunder;
(iii) grant any severance or termination
pay (other than pursuant to written policies or written agreements of
First Home or First Home Subsidiaries in effect on the date hereof
and provided to Sovereign prior to the date hereof or as otherwise
agreed to in writing by Sovereign and First Home) to, or enter into
any new or amend any existing employment agreement with, or increase
the compensation of, any employee, officer or director of First Home
or any First Home Subsidiary, except for routine periodic increases
in salary (estimated to be not in excess of $125,000 through June 30,
1998) and bonus required by existing bonus plans (estimated to be not
in excess of $200,000 through June 30, 1998);
(iv) merge or consolidate First Home or
any First Home Subsidiary with any other corporation; sell or lease
all or any substantial portion of the assets or business of First
Home or any First Home Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other person,
firm, association, corporation or business organization other than in
connection with the collection of any loan or credit arrangement
between any First Home Subsidiary and any other person; enter into a
purchase and assumption transaction with respect to deposits and
liabilities; permit the revocation or surrender by any First Home
Subsidiary of its certificate of authority to maintain, or file an
application for the relocation of, any existing branch office, or
file an application for a certificate of authority to establish a new
branch office;
(v) sell or otherwise dispose of the
capital stock of First Home Savings or sell or otherwise dispose of
any asset of First Home or of any First Home Subsidiary other than in
the ordinary course of business consistent with past practice;
subject any asset of First Home or of any First Home Subsidiary to a
lien, pledge, security interest or other encumbrance (other than in
connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course
of business and transactions in "federal funds" and the satisfaction
of legal requirements in the exercise of trust powers) other than in
the ordinary course of business consistent with past practice; incur
any indebtedness for borrowed money (or guarantee any indebtedness
for borrowed money), except in the ordinary course of business
consistent with past practice;
(vi) take any action which would result in
any of the representations and warranties of First Home set forth in
this Agreement becoming untrue as of any date after the date hereof
or in any of the conditions set forth in Article V hereof not being
satisfied, except in each case as may be required by applicable law;
(vii) change any method, practice or
principle of accounting, except as may be required from time to time
by GAAP (without regard to any optional early adoption date) or any
Regulatory Authority responsible for regulating First Home or First
Home Savings;
(viii) waive, release, grant or transfer
any rights of value or modify or change in any material respect any
existing material agreement to which First Home or any First Home
Subsidiary is a party, other than in the ordinary course of business,
consistent with past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or arrangement
which was not in effect on the date of this Agreement, or materially
amend any existing plan or arrangement except to the extent such
amendments do not result in an increase in cost; provided, however,
that First Home may contribute to the First Home employee stock
ownership plan, to the extent accrued on the First Home Financial
Statements at and for periods prior to the date of this Agreement,
(i) up to $240,000 (consisting of both voluntary and matching
contributions) in January 1998 with respect to the year ending
December 31, 1997 and (ii) a pro rated amount up to $120,000
(consisting of both voluntary and matching contributions) prior to
the Closing Date with respect to the year ending December 31, 1998
(such amount to be pro rated based on the number of days elapsed from
January 1, 1998 to the Closing Date);
(x) purchase any security for its
investment portfolio not rated "A" or higher by either Standard &
Poor's Corporation or Xxxxx'x Investor Services, Inc. or otherwise
alter, in any material respect, the mix, maturity, credit or interest
rate risk profile of its portfolio of Investment Securities or its
portfolio of Mortgage-Backed Securities.
(xi) make any new loan or other credit
facility commitment (including without limitation, lines of credit
and letters of credit) to any borrower or group of affiliated
borrowers in excess of $1,000,000 in the aggregate, or increase,
compromise, extend, renew or modify any existing loan or commitment
outstanding in excess of $1,000,000, except for any commitment
disclosed on the First Home Disclosure Schedule; provided that
Sovereign will not unreasonably withhold its consent with respect to
any request by First Home for permission to increase, compromise,
extend, renew or modify any loan subject to this provision;
(xii) except as set forth on the First
Home Disclosure Schedule or except in the ordinary course of business
consistent with past practice, enter into, renew, extend or modify
any other transaction with any Affiliate other than deposit and loan
transactions in the ordinary course of business and which are in
compliance with applicable laws and regulations;
(xiii) enter into any interest rate swap
or similar commitment, agreement or arrangement;
(xiv) except for the execution of this
Agreement, or resulting therefrom, take any action that would give
rise to a right of payment to any individual under any employment
agreement;
(xv) intentionally and knowingly take any
action that would preclude satisfaction of the condition to closing
contained in Section 5.02(k) relating to financial accounting
treatment of the Merger; or
(xvi) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be
considered in the ordinary course of business for First Home or any First Home
Subsidiary to do any of the following: (i) make any capital expenditure of
$100,000 or more not disclosed on First Home Disclosure Schedule 4.01, without
the prior written consent of Sovereign; (ii) make any sale, assignment,
transfer, pledge, hypothecation or other disposition of any assets having a
book or market value, whichever is greater, in the aggregate in excess of
$1,000,000, other than pledges of assets to secure government deposits, to
exercise trust powers, sales of assets received in satisfaction of debts
previously contracted in the normal course of business, issuance of loans, or
transactions in the investment securities portfolio by First Home or a First
Home Subsidiary or repurchase agreements made, in each case, in the ordinary
course of business; or (iii) undertake or enter any lease, contract or other
commitment for its account, other than in the normal course of providing
credit to customers as part of its banking business, involving a payment by
First Home or any First Home Subsidiary of more than $100,000 annually, or
containing a material financial commitment and extending beyond 12 months from
the date hereof.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, First Home or Sovereign, as the case may be, shall afford to,
and shall cause each First Home Subsidiary or Sovereign Subsidiary to afford
to, the other party and its authorized agents and representatives, complete
access to their respective properties, assets, books and records and
personnel, at reasonable hours and after reasonable notice; and the officers
of First Home and Sovereign will furnish any person making such investigation
on behalf of the other party with such financial and operating data and other
information with respect to the businesses, properties, assets, books and
records and personnel as the person making such investigation shall from time
to time reasonably request.
(b) First Home and Sovereign each agree to conduct
such investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and employee
relationships of the other party.
(c) In addition to the access permitted by
subparagraph (a) above, from the date of this Agreement through the Closing
Date, First Home shall permit employees of Sovereign reasonable access to and
participation in matters relating to problem loans, loan restructurings and
loan work-outs of First Home and the First Home Subsidiaries, provided that
nothing contained in this subparagraph shall be construed to grant Sovereign
or any Sovereign employee any final decision-making authority with respect to
such matters. Sovereign shall have the right, however, at Sovereign's expense,
to cause First Home or any First Home Subsidiary to obtain an appraisal by an
independent third party experienced in such matters, and mutually satisfactory
to Sovereign and First Home, of the assets or property securing any loan made
by First Home or any First Home Subsidiary, with a principal balance of
$500,000 or more.
(d) If the transactions contemplated by this
Agreement shall not be consummated, First Home and Sovereign will each destroy
or return all documents and records obtained from the other party or its
representatives, during the course of its investigation and will cause all
information with respect to the other party obtained pursuant to this
Agreement or preliminarily thereto to be kept confidential, except to the
extent such information becomes public through no fault of the party to whom
the information was provided or any of its representatives or agents and
except to the extent disclosure of any such information is legally required.
First Home and Sovereign shall each give prompt notice to the other party of
any contemplated disclosure where such disclosure is so legally required.
Section 4.03 Regulatory Matters and Consents.
(a) First Home and Sovereign shall promptly prepare
a Prospectus/Proxy Statement to be mailed to shareholders of First Home in
connection with First Home's meeting of shareholders and the transactions
contemplated hereby, and to be filed by Sovereign with the SEC in the
Registration Statement, which Prospectus/Proxy statement shall conform to all
applicable legal requirements. Sovereign shall, as promptly as practicable
following the preparation thereof, file the Registration Statement with the
SEC and First Home and Sovereign shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Sovereign will advise First Home, promptly
after Sovereign receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
of the issuance of any stop order or the suspension of the qualification of
the shares of capital stock issuable pursuant to the Registration Statement,
or the initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration
Statement or for additional information. Sovereign shall use its best efforts
to obtain, prior to the effective date of the Registration Statement, all
necessary state securities laws or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement. Sovereign will
provide First Home with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as First Home may
reasonably request.
(b) Sovereign and First Home will prepare all
Applications to Regulatory Authorities and make all filings for, and use their
reasonable best efforts to obtain as promptly as practicable after the date
hereof, all necessary permits, consents, approvals, waivers and authorizations
of all Regulatory Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement.
(c) First Home will furnish Sovereign with all
information concerning First Home and First Home Subsidiaries as may be
reasonably necessary or advisable in connection with the Registration
Statement and any Application or filing made by or on behalf of Sovereign to
any Regulatory Authority in connection with the transactions contemplated by
this Agreement and the Bank Plan of Merger.
(d) Sovereign and First Home shall have the right
to review in advance, and to the extent practicable each will consult with the
other on, all information which appears in any filing made with or written
materials submitted to the SEC, any Regulatory Authority or any third party in
connection with the transactions contemplated by this Agreement and the Bank
Plan of Merger. In exercising the foregoing right, each of the parties hereto
shall act reasonably and as promptly as practicable. The parties hereto agree
that they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of the SEC, Regulatory
Authorities and third parties necessary or advisable to consummate the
transactions contemplated by this Agreement and the Bank Plan of Merger and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated hereby and thereby.
(e) Sovereign will promptly furnish First Home with
copies of all written communications to, or received by Sovereign or any
Sovereign Subsidiary from, any Regulatory Authority in respect of the
transactions contemplated hereby.
Section 4.04 Taking of Necessary Action.
(a) Sovereign and First Home shall each use its
best efforts in good faith, and each of them shall cause its Subsidiaries to
use their reasonable best efforts in good faith, to take or cause to be taken
all action necessary or desirable on its part using its best efforts so as to
permit completion of the Merger and the Bank Merger, as soon as practicable
after the date hereof, including, without limitation, (A) obtaining the
consent or approval of each individual, partnership, corporation, association
or other business or professional entity whose consent or approval is required
or desirable for consummation of the transactions contemplated hereby
(including assignment of leases without any change in terms), provided that
neither First Home nor any First Home Subsidiary shall agree to make any
payments or modifications to agreements in connection therewith without the
prior written consent of Sovereign, and (B) requesting the delivery of
appropriate opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take, or cause, or to the best of its ability
permit to be taken, any action that would substantially impair the prospects
of completing the Merger and the Bank Merger pursuant to this Agreement and
the Bank Plan of Merger; provided that nothing herein contained shall preclude
Sovereign or First Home or from exercising its rights under this Agreement or
the Stock Option Agreement.
Section 4.05 Certain Agreements.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, in which any person who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Date, a
director or officer or employee of First Home or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party to a suit
based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee
of First Home, any of the First Home's Subsidiaries or any of their respective
predecessors or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Date, the parties hereto agree to cooperate and use their best efforts to
defend against and respond thereto to the extent permitted by the NJBCA and
the Certificate of incorporation and bylaws of First Home. On or after the
Effective Date, Sovereign shall indemnify, defend and hold harmless all prior
and then-existing directors and officers of First Home and any First Home
Subsidiary, against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement (with the
approval of Sovereign which approval shall not be unreasonably withheld) of or
in connection with any claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director, officer or employee of First Home or any
First Home Subsidiary, whether pertaining to any matter existing or occurring
at or prior to the Effective Date and whether asserted or claimed prior to, or
at or after, the Effective Date ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, to the same extent as such officer, director or employee
may be indemnified by First Home or any First Home Subsidiary as of the date
hereof including the right to advancement of expenses, provided, however, that
any such officer, director or employee of First Home or any First Home
Subsidiary may not be indemnified by Sovereign and/or Sovereign Bank if such
indemnification is prohibited by applicable law.
(b) Sovereign shall maintain First Home's existing
directors' and officers' liability insurance policy (or a policy providing
comparable coverage amounts on terms generally no less favorable, including
Sovereign's existing policy if it meets the foregoing standard) covering
persons who are currently covered by such insurance for a period of five years
after the Effective Date; provided, however, that in no event shall Sovereign
be obligated to expend, in order to maintain or provide insurance coverage
pursuant to this Section 4.05(b), any amount per annum in excess of 150% of
the amount of the annual premiums paid as of the date hereof by First Home for
such insurance (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Sovereign shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount. In the event that Sovereign acts
as its own insurer for all of its directors and officers with respect to
matters typically covered by a directors' and officers' liability insurance
policy, Sovereign's obligations under this Section 4.05(b) may be satisfied by
such self insurance, so long as its senior debt ratings by Standard & Poor's
Corporation and Xxxxx'x Investors Services, Inc. are not lower than such
ratings as of the date hereof.
(c) Sovereign agrees to honor and Sovereign agrees
to cause Sovereign Bank to honor all terms and conditions of all existing
employment contracts and special termination agreements disclosed in the First
Home Disclosure Schedule and for purposes of this Agreement the terms of such
employment contracts shall be for a period of three (3) years from the Closing
Date. Under such employment contracts, each employee may elect to be paid out
under the terms of such contract or receive a lump-sum payment of the present
value (based on a 6% per annum discount factor) of the payments required to be
made thereunder.
(d) In the event that Sovereign or any of its
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each such case
the successors and assigns of such entity shall assume the obligations set
forth in this Section 4.05.
Section 4.06 No Other Bids and Related Matters.
(a) So long as this Agreement remains in effect,
First Home shall not and First Home shall not authorize or permit any of its
directors, officers, employees or agents, to directly or indirectly (i)
respond to, solicit, initiate or encourage any inquiries relating to, or the
making of any proposal which relates to, an Acquisition Transaction (as
defined below), (ii) recommend or endorse an Acquisition Transaction, (iii)
participate in any discussions or negotiations regarding an Acquisition
Transaction, (iv) provide any third party (other than Sovereign or an
affiliate of Sovereign) with any nonpublic information in connection with any
inquiry or proposal relating to an Acquisition Transaction or (v) enter into
an agreement with any other party with respect to an Acquisition Transaction.
First Home will immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than Sovereign with respect to any of the foregoing, and will take all
actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations
undertaken in this Section 4.06. First Home will notify Sovereign orally
(within one day) and in writing (as promptly as practicable) if any inquiries
or proposals relating to an Acquisition Transaction are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, First Home. As used in this
Agreement, "Acquisition Transaction" shall mean one of the following
transactions with a party other than Sovereign of an affiliate of Sovereign
(i) a merger or consolidation, or any similar transaction, involving First
Home or a First Home Subsidiary, (ii) a purchase, lease or other acquisition
of all or a substantial portion of the assets or liabilities of First Home or
a First Home Subsidiary or (iii) a purchase or other acquisition (including by
way of share exchange, tender offer, exchange offer or otherwise) of a
substantial interest in any class or series of equity securities of First Home
(other than as permitted by Section 4.01(a)(ii) hereof) or a First Home
Subsidiary.
(b) Notwithstanding the foregoing, First Home,
after written notice to Sovereign, may for a period of thirty (30) days after
the date of this Agreement respond to unsolicited inquiries from third parties
with respect to an Acquisition Transaction if the fiduciary duty of the
individuals set forth in the first sentence of Section 4.06(a) legally
requires them to do so and they are so advised in a written opinion of
counsel.
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedule. Each party shall promptly advise the other party of any change or
event having a Material Adverse Effect on it or which it believes would or
would be reasonably likely to cause or constitute a material breach of any of
its representations, warranties or covenants set forth herein. Each party
shall update its respective Disclosure Schedule as promptly as practicable
after the occurrence of an event or fact which, if such event or fact had
occurred prior to the date of this Agreement, would have been disclosed in
such Disclosure Schedule. The delivery of such updated Schedule shall not
relieve a party from any breach or violation of this Agreement and shall not
have any effect for the purposes of determining the satisfaction of the
condition set forth in Sections 5.01(c) and 5.02(c) hereof, as applicable.
Section 4.08 Conduct of Sovereign's Business. From the date
of this Agreement to the Closing Date, Sovereign will use its best efforts to
(x) preserve its business organizations intact, (y) maintain good
relationships with employees, and (z) preserve for itself the goodwill of
customers of Sovereign and Sovereign Subsidiaries and others with whom
business relationships exist.
Section 4.09 Current Information.
(a) During the period from the date of this
Agreement to the Effective Date, each party shall, upon the request of the
other party, cause one or more of its designated representatives to confer on
a monthly or more frequent basis with representatives of the other party
regarding its financial condition, operations and business and matters
relating to the completion of the transactions contemplated hereby. As soon as
reasonably available, but in no event more than 45 days after the end of each
calendar quarter ending after the date of this Agreement (other than the last
quarter of each fiscal year ending December 31), First Home and Sovereign will
deliver to the other party its quarterly report on Form 10-Q under the
Exchange Act, and, as soon as reasonably available, but in no event more than
90 days after the end of each fiscal year ended December 31, First Home and
Sovereign will deliver to the other party its Annual Report on Form 10-K.
Within 25 days after the end of each month, First Home and Sovereign will
deliver to the other party a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month.
(b) First Home shall provide to Sovereign a copy of
the minutes of any meeting of the Board of Directors of First Home or any
First Home Subsidiary, or any committee thereof, or any senior management
committee, promptly after such minutes are approved at a subsequent meeting of
the board or committee, but in any event within 40 days of the meeting of such
board or committee to which such minutes relate, except that with respect to
any meeting held within 30 days of the Closing Date, such minutes shall be
provided prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and First Home.
(a) From and after the date of this Agreement,
First Home shall:
(i) Voting by Directors. Recommend to all
members of First Home's Board of Directors to vote all shares of
First Home's Common Stock beneficially owned by each such director in
favor of this Agreement;
(ii) Phase I Environmental Audit. Permit
Sovereign, if Sovereign elects to do so, at its own expense, to cause
a "phase I environmental audit" to be performed at any physical
location owned or occupied by First Home or any First Home Subsidiary
on the date hereof;
(iii) Approval of Bank Plan of Merger.
Approve the Bank Plan of Merger as sole shareholder of First Home
Savings and obtain the approval of, and cause the execution and
delivery of, the Bank Plan of Merger by First Home Savings;
(iv) Proxy Solicitor. If Sovereign
requests and agrees to bear the expense thereof, retain a proxy
solicitor in connection with the solicitation of First Home
shareholder approval of this Agreement;
(v) Timely Review. If requested by
Sovereign at Sovereign's sole expense, cause its independent
certified public accountants to perform a review of its unaudited
consolidated financial statements as of the end of any calendar
quarter, in accordance with Statement of Auditing Standards No. 36,
and to issue its report on such financial statements as soon as is
practicable thereafter;
(vi) Outside Service Bureau Contracts. If
requested to do so by Sovereign, use its reasonable best efforts to
obtain an extension of any contract with an outside service bureau or
other vendor of services to First Home or any First Home Subsidiary,
on terms and conditions mutually acceptable to First Home and
Sovereign;
(vii) Committee Meetings. Permit a
representative of Sovereign, who is reasonably acceptable to First
Home, to attend all committee meetings of First Home and First Home
Savings management including, without limitation, any loan or
asset/liability committee;
(viii) List of Nonperforming Assets.
Provide Sovereign, within ten (10) days after the quarterly meeting
of its Asset Review Committee, a written list of nonperforming assets
as of the end of such month;
(ix) Reserves and Merger-Related Costs. On
or before the Effective Date, establish such additional accruals and
reserves as may be necessary to conform the accounting reserve
practices and methods (including credit loss practices and methods)
of First Home to those of Sovereign (as such practices and methods
are to be applied to First Home from and after the Closing Date) and
Sovereign's plans with respect to the conduct of the business of
First Home following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by First Home, provided,
however, that First Home shall not be required to take such action
(A) more than five (5) days prior to the Effective Date; and (B)
unless Sovereign agrees in writing that all conditions to closing set
forth in Section 5.02 have been satisfied or waived (except for the
expiration of any applicable waiting periods); prior to the delivery
by Sovereign of the writing referred to in the preceding clause,
First Home shall provide Sovereign a written statement, certified
without personal liability by the chief executive officer of First
Home and dated the date of such writing, that the representation made
in Section 2.15 hereof is true as of such date or, alternatively,
setting forth in detail the circumstances that prevent such
representation from being true as of such date; and no accrual or
reserve made by First Home or any First Home Subsidiary pursuant to
this subsection, or any litigation or regulatory proceeding arising
out of any such accrual or reserve, shall constitute or be deemed to
be a breach or violation of any representation, warranty, covenant,
condition or other provision of this Agreement or to constitute a
termination event within the meaning of Section 6.01(d) hereof; and
(x) Shareholders Meetings. First Home
shall take all action necessary to properly call and convene a
special meeting of its shareholders as soon as practicable after the
date hereof to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of First
Home shall recommend that the shareholders of First Home, approve
this Agreement and the transactions contemplated hereby; provided,
however, that no director of First Home shall be required to take any
action in accordance with this subsection in such person's capacity
as a director if the fiduciary duty of such person in such capacity
legally requires otherwise and such person is so advised in a written
opinion of counsel.
(b) From and after the date of this Agreement,
Sovereign and First Home shall each:
(i) Identification of First Home's
Affiliates. Cooperate with the other and use its best efforts to
identify those persons who may be deemed to be Affiliates of First
Home;
(ii) Public Announcements. Cooperate and
cause its respective officers, directors, employees and agents to
cooperate in good faith, consistent with their respective legal
obligations, in the preparation and distribution of, and agree upon
the form and substance of, any press release related to this
Agreement and the transactions contemplated hereby, and any other
public disclosures related thereto, including without limitation
communications to First Home shareholders, First Home's internal
announcements and customer disclosures, but nothing contained herein
shall prohibit either party from making any disclosure which its
counsel deems necessary under applicable law;
(iii) Maintenance of Insurance. Maintain,
and cause their respective Subsidiaries to maintain, insurance in
such amounts as are reasonable to cover such risks as are customary
in relation to the character and location of its properties and the
nature of its business;
(iv) Maintenance of Books and Records.
Maintain, and cause their respective Subsidiaries to maintain, books
of account and records in accordance with GAAP applied on a basis
consistent with those principles used in preparing the financial
statements heretofore delivered;
(v) Delivery of Securities Documents.
Deliver to the other, copies of all Securities Documents
simultaneously with the filing thereof; and
(vi) Taxes. File all federal, state, and
local tax returns required to be filed by them or their respective
Subsidiaries on or before the date such returns are due (including
any extensions) and pay all taxes shown to be due on such returns on
or before the date such payment is due.
Section 4.11 Employee Benefits and Termination Benefits.
(a) Employee Benefits. On and after the Effective
Date, the employee pension (including employee stock ownership plans) and
welfare benefit plans of Sovereign and First Home may, at Sovereign's election
and subject to the requirements of the IRC, continue to be maintained
separately, consolidated or terminated, provided, however, that First Home
employees shall receive benefits at least as favorable, in the aggregate, as
the benefits to which they were entitled on the date of this Agreement. First
Home and Sovereign agree that, subject to the conditions described herein, as
soon as practicable after the Effective Date and receipt of a favorable
determination letter from the IRS upon plan termination, participants in the
First Home ESOP shall be entitled at their election to have the amounts in
their First Home ESOP accounts either distributed to them in a lump sum or
rolled over to another tax-qualified plan (including Sovereign plans to the
extent permitted by Sovereign) or individual retirement account. In the event
of a consolidation of any or all of such pension benefit plans or in the event
of termination of the First Home pension benefit plans, First Home and First
Home Savings employees shall receive full credit for service with First Home
or First Home Savings under Sovereign's pension and 401(k) plans, but not
Sovereign's Employee Stock Ownership Plan, for purposes of eligibility and
vesting determination. In the event of any termination of or consolidation of
any First Home or First Home Savings health plan with any Sovereign health
plan, all employees of First Home or First Home Savings who were eligible for
coverage under the terminated plan shall have coverage under any successor
health plan with protection for any pre-existing condition. In the event of a
termination or consolidation of any First Home or First Home Savings health
plan, terminated First Home or First Home Savings employees will have the
right to continue coverage under group health plans of Sovereign and/or the
Sovereign Subsidiaries in accordance with the IRC Section 4980B(f).
(b) Termination Benefits. First Home shall cause to
be delivered to Sovereign concurrently with the execution of this Agreement
with respect to each executive officer named on the Benefits Schedule included
in the First Home Disclosure Schedule, the written acknowledgment of each such
individual in the form attached hereto as Exhibit 4 pursuant to which each
such individual agrees and acknowledges that the dollar amount set forth
opposite such individual's name on such Benefits Schedule is the entire amount
that would be due to such individual under any employment agreement, special
termination agreement, supplemental executive retirement plan, deferred bonus
plan, deferred compensation plan, salary continuation plan, or any other
pension benefit or welfare benefit plan maintained by First Home solely for
the benefit of officers of First Home or First Home Subsidiaries assuming a
termination of such individual's employment on December 31, 1997, subsequent
to the Closing Date. First Home and Sovereign acknowledge and agree that the
amounts shown on the Benefits Schedule and the letter of acknowledgement for
each officer named herein reflect a good faith estimate of the amounts that
will be payable to such individuals under the circumstances described and may
be subject to adjustment upon an actual termination of employment in order to
reflect increases in such individuals' compensation and benefit plans
consistent with past practices for routine periodic increases.
(c) Severance Policy. Sovereign agrees to cause
Sovereign Bank to provide employees of First Home Savings whose employment is
terminated in connection with the Merger within six (6) months of the
Effective Date, either because such employee's position is eliminated or such
employee is not offered comparable employment (i.e., not offered employment
for a position of generally similar job description or responsibilities in a
location within thirty (30) miles from an employee's work location), excluding
any employee who has an existing employment or consulting agreement or whose
employment is terminated for Cause (as defined below), as follows, provided
such employees execute such documentation as Sovereign may reasonably require,
including Sovereign's customary form of release: (i) the thirteen employees
identified on First Home's Disclosure Schedule shall be entitled to two weeks
of base salary as severance pay for each year of service with First Home or
First Home Savings, with a two-week minimum; and (ii) employees other than the
thirteen employees identified on First Home's Disclosure Schedule shall be
entitled to one week of base salary as severance pay for each year of service
with First Home or First Home Savings, with a one-week minimum. For purposes
of this Section 4.11(c), "Cause" shall mean termination because of the
employee's personal dishonesty, failure to meet established performance goals
(which shall be reasonably established), willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties or willful violation of any law, rule or regulation (other than
traffic violations or similar offenses). The benefits provided to terminated
First Home or First Home Savings employees under this subsection are the only
severance benefits payable by First Home or First Home Savings under any plan
or policy (excluding severance benefits provided under existing employment or
consulting agreements or as otherwise required by law), except for employees
who do not execute the documentation required by Sovereign, which employees
shall be entitled to the termination benefits provided under First Home
Savings' severance policies. The benefits payable to First Home employees
under this subsection or otherwise shall in any event be in lieu of any
termination benefits to which such employees would otherwise be entitled under
Sovereign's or Sovereign Bank's severance policies or programs then in effect.
(d) Retention Bonuses. Notwithstanding subparagraph
(c) above, each employee of First Home or of First Home Savings identified in
the First Home Disclosure Schedule shall be entitled to receive a "retention"
bonus from First Home or First Home Savings Bank as determined by the
executive officers of First Home (after consultation with Sovereign) and as
set forth on First Home's Disclosure Schedule in the event that such employee
remains an employee of First Home or First Home Savings, as applicable, until
the date the systems conversion occurs or is terminated prior to the date of
the systems conversion, but after the Effective Date, and satisfactorily
fulfills the duties and responsibilities of the position of such employee of
First Home or First Home Savings, as the case may be, through the Effective
Date; provided that retention bonuses, in the aggregate, shall not exceed
$250,000.
(e) Employee Loan Program. Prior to consummation of
the Merger, First Home may continue to originate loans pursuant to its
employee loan program in effect as of the date hereof, and upon consummation
of the Merger, Sovereign agrees to cause Sovereign Bank to honor the loans
originated by First Home pursuant to such employee loan program.
(f) Intention Regarding Future Employment. Within
ninety (90) days of the date hereof, Sovereign and Sovereign Bank intends to
use their reasonable best efforts to inform the employees of First Home and
First Home Savings of the likelihood of such employees having continued
employment with Sovereign Bank following the Effective Date and, where
appropriate, intends to use their reasonable best efforts to interview the
First Home and First Home Savings employees to determine if there are mutually
beneficial employment opportunities available at Sovereign Bank. It is the
intent of Sovereign Bank in connection with reviewing applicants for
employment positions to give any First Home employee who is terminated in
connection with the Merger within three months of the Effective Date the same
consideration as is afforded Sovereign Bank employees for such positions in
accordance with existing formal or informal policies for a period of three
months from such date of termination.
Section 4.12 Stock Exchange Listing. Sovereign shall use all
reasonable best efforts to cause the shares of Sovereign Common Stock to be
issued in connection with the Merger to be approved for quotation on the
Nasdaq Stock Market's National Market System, subject to official notice of
issuance, as of or prior to the Effective Date.
Section 4.13 Affiliate Letter. Concurrently with the
execution and delivery of this Agreement, First Home shall cause to be
delivered to Sovereign the Letter Agreement attached hereto as Exhibit 1,
executed by each director, officer and any shareholder required to file
reports on SEC Schedule 13D under the Exchange Act set forth thereon.
Section 4.14 Publication of Combined Financial Results.
Sovereign shall use its reasonable best efforts to publish as soon as
possible, but no later than the required date of filing its Quarterly Report
on Form 10-Q for the first fiscal quarter following the Effective Date in
which there are at least 30 days of post-Merger combined operations, combined
revenues and net income figures as contemplated by and in accordance with the
terms of SEC Accounting Series Release No. 135.
Section 4.15 Sovereign Rights Agreement. Sovereign agrees
that any Sovereign Rights issued pursuant to the Sovereign Rights Agreement
shall be issued with respect to each share of Sovereign Common Stock issued
pursuant to the terms hereof regardless whether there has occurred a
"Distribution Date" under the terms of such Sovereign Rights Agreement prior
to the Effective Date, as well as to take all action necessary or advisable to
enable the holder of each such share of Sovereign Common Stock to obtain the
benefit of such Sovereign Stock Purchase Rights notwithstanding their prior
distribution, including without limitation, amendment of the Sovereign Rights
Agreement.
Section 4.16 Advisory Board. On the Effective Date,
Sovereign Bank shall establish for a period of at least two years the First
Home Advisory Board (the "Advisory Board"), which shall consist of all the
members of the First Home Board of Directors immediately prior to the
Effective Date. The members of the Advisory Board shall be paid an annual
retainer of $9,000, exclusive of any First Home Board Members who do not wish
to join the Advisory Board.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to First Home's Obligations under
this Agreement. The obligations of First Home hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by First Home pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to
be taken by, or on the part of, Sovereign and Sovereign Bank to authorize the
execution, delivery and performance of this Agreement and the Bank Plan of
Merger, respectively, and the consummation of the transactions contemplated by
this Agreement and the Bank Plan of Merger, shall have been duly and validly
taken by Sovereign and Sovereign Bank; and First Home shall have received
certified copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of
Sovereign required by this Agreement to be performed by Sovereign at or prior
to the Closing Date shall have been duly performed and complied with in all
respects, except where the failure to perform or comply with any obligation or
covenant would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Sovereign;
(c) Representations and Warranties. The
representations and warranties of Sovereign set forth in this Agreement shall
be true and correct, as of the date of this Agreement, and as of the Closing
Date as though made on and as of the Closing Date, except as to any
representation or warranty (i) which specifically relates to an earlier date
or (ii) where the breach of the representation or warranty would not, either
individually or in the aggregate, constitute a Material Adverse Effect with
respect to Sovereign;
(d) Approvals of Regulatory Authorities. Sovereign
shall have received all required approvals of Regulatory Authorities of the
Merger, and delivered copies thereof to First Home; and all notice and waiting
periods required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions contemplated
hereby;
(f) No Material Adverse Effect. Since September 30,
1997, there shall not have occurred any Material Adverse Effect with respect
to Sovereign;
(g) Officer's Certificate. Sovereign shall have
delivered to First Home a certificate and such other documents, dated the
Closing Date and signed, without personal liability, by its chairman or
president, to the effect that the conditions set forth in subsections (a)
through (e) of this Section 5.01 have been satisfied, to the best knowledge of
the officer executing the same;
(h) Opinion of Sovereign's Counsel. First Home
shall have received an opinion of Xxxxxxx & Xxx, counsel to Sovereign, dated
the Closing Date, in form and substance reasonably satisfactory to First Home
and its counsel to the effect set forth on Exhibit 5 attached hereto;
(i) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no proceedings shall
be pending or threatened by the SEC to suspend the effectiveness of the
Registration Statement; and all required approvals by state securities or
"blue sky" authorities with respect to the transactions contemplated by this
Agreement, shall have been obtained and neither the Registration Statement nor
any such approval by state securities or "blue sky" authorities shall be
subject to a stop order or threatened stop order by the SEC or any such
authority;
(j) Tax Opinion. First Home shall have received an
opinion of Xxxxxxx & Xxx, substantially to the effect set forth on Exhibit 6
attached hereto;
(k) Approval of First Home's Shareholders. This
Agreement shall have been approved by the shareholders of First Home by such
vote as is required under First Home's articles of incorporation and bylaws,
NJBCC or under Nasdaq requirements applicable to it; and
(l) Investment Banking Opinion. First Home shall
have received a written opinion, dated within five (5) days of mailing the
Prospectus/Proxy Statement, from RP Financial, updating its prior written
opinion, to the effect that the Applicable Exchange Ratio is fair, from a
financial point of view, to such shareholders.
Section 5.02 Conditions to Sovereign's Obligations under
this Agreement. The obligations of Sovereign hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Sovereign pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to
be taken by, or on the part of, First Home and First Home Savings to authorize
the execution, delivery and performance of this Agreement and the Bank Plan of
Merger, respectively, and the consummation of the transactions contemplated by
this Agreement and the Bank Plan of Merger, shall have been duly and validly
taken by First Home and First Home Savings; and Sovereign shall have received
certified copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of
First Home, required by this Agreement to be performed by it at or prior to
the Closing Date shall have been duly performed and complied with in all
respects, except where the failure to perform or comply with any obligation or
covenant would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to First Home;
(c) Representations and Warranties. The
representations and warranties of First Home set forth in this Agreement shall
be true and correct as of the date of this Agreement, and as of the Closing
Date as though made on and as of the Closing Date, except as to any
representation or warranty (i) which specifically relates to an earlier date
or (ii) where the breach of the representation or warranty would not, either
individually or in the aggregate, result in a Material Adverse Effect with
respect to First Home;
(d) Approvals of Regulatory Authorities. Sovereign
shall have received all required approvals of Regulatory Authorities for the
Merger, without the imposition of any term or condition that would have a
Material Adverse Effect on Sovereign upon completion of the Merger; and all
notice and waiting periods required thereunder shall have expired or been
terminated;
(e) No Injunction. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions contemplated
hereby;
(f) No Material Adverse Effect. Since September 30,
1997, there shall not have occurred any Material Adverse Effect with respect
to First Home.
(g) Officer's Certificate. First Home shall have
delivered to Sovereign a certificate and such other documents, dated the
Closing Date and signed, without personal liability, by its chairman of the
board or president, to the effect that the conditions set forth in subsections
(a) through (e) of this Section 5.02 have been satisfied, to the best
knowledge of the officer executing the same;
(h) Opinions of First Home's Counsel. Sovereign
shall have received an opinion of Blank Rome Xxxxxxxx & XxXxxxxx LLP, counsel
to First Home, dated the Closing Date, in form and substance reasonably
satisfactory to Sovereign and its counsel to the effect set forth on Exhibit 7
attached hereto;
(i) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no proceedings shall
be pending or threatened by the SEC to suspend the effectiveness of the
Registration Statement; and all required approvals by state securities or
"blue sky" authorities with respect to the transactions contemplated by this
Agreement, shall have been obtained and neither the Registration Statement nor
any such approval by state securities or "blue sky" authorities shall be
subject to a stop order or threatened stop order by the SEC or any such
authority;
(j) Tax Opinion. Sovereign shall have received an
opinion of Xxxxxxx & Xxx, its counsel, substantially to the effect set forth
on Exhibit 6 attached hereto;
(k) Pooling Letter. Sovereign shall have received a
letter from Ernst & Young L.L.P. to the effect that the Merger will be treated
as a "pooling of interests" for financial accounting purposes;
(l) Phase I Environmental Audit Results. The
results of any "phase I environmental audit" conducted pursuant to Section
4.10(a)(ii) with respect to owned or occupied bank premises shall be
reasonably satisfactory to Sovereign; provided, however, that (i) any such
environmental audit must be initiated within 45 days of the date of this
Agreement, (ii) Sovereign must elect to terminate this Agreement or waive its
right to terminate the Agreement under this Section 5.02(l) within 15 days of
receiving the results of such environmental audit and (iii) Sovereign may not
terminate this Agreement under this Section 5.02(l) unless the results of such
audits result in a Material Adverse Effect on Sovereign; and
(m) Liquidation Account. Neither the Merger or
consummation of the Bank Plan of Merger shall require Sovereign, First Home or
any Subsidiary of either to distribute to depositors the liquidation account
established by First Home Savings in connection with its conversion from
mutual to stock form.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be terminated
on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By Sovereign or First Home:
(i) if the Closing Date shall not have
occurred on or before July 31, 1998, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe, in any material
respect, its agreements set forth in this Agreement required to be
performed or observed by such party on or before the Closing Date; or
(ii) if either party has received a final
unappealable administrative order from a Regulatory Authority whose
approval or consent has been requested that such approval or consent
will not be granted, or in the case of a termination by Sovereign,
will not be granted absent the imposition of terms and conditions
which would permit satisfaction of the condition set forth at Section
5.02(d) hereof, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to
perform or observe in any material respect its agreements set forth
herein required to be performed or observed by such party on or
before the Closing Date; or
(c) By First Home, if on the Closing Date the
Sovereign Market Value shall be less than $13.50 (as adjusted for stock splits
and dividends) subject, however, to the following: If First Home shall elect
to terminate this Agreement pursuant to this Section 6.01(c), it shall give
written notice thereof to Sovereign (provided that such notice of election to
terminate may be withdrawn at any time within the five-day period commencing
with receipt of such notice). During the five-day period commencing with its
receipt of such notice, Sovereign shall have the option to elect to increase
the Applicable Exchange Ratio to an amount which when multiplied by the
Sovereign Market Value determined as of the Closing Date, equal to $23.44 and
the Closing Date shall be postponed by the minimum amount of time necessary,
if any, to accommodate Sovereign's election of such option (i.e. up to a
five-day period). If Sovereign so elects within such five-day period, it shall
give prompt written notice to First Home of such election and the Applicable
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 6.01(c) and this Agreement shall remain in effect in accordance with
its terms (except as the Applicable Exchange Ratio shall have been so
modified), and any references in this Agreement to "Exchange Ratio" or
"Applicable Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 6.01(c).
(d) At any time on or prior to the Effective Date,
by First Home in writing if Sovereign has, or by Sovereign in writing if First
Home has, in any material respect, breached (i) any material covenant or
undertaking contained herein or (ii) any representation or warranty contained
herein, which in the case of a breach referred to in subclause (i) or (ii)
above by Sovereign would have a Material Adverse Effect on Sovereign and in
case of a breach referred to in subclause (i) or (ii) above by First Home
would have a Material Adverse Effect on First Home, in any case if such breach
has not been substantially cured by the earlier of 30 days after the date on
which written notice of such breach is given to the party committing such
breach or the Effective Date or if on such date such breach no longer causes a
Material Adverse Effect.
Section 6.02 Effect of Termination. If this Agreement is
terminated pursuant to Section 6.01 hereof, this Agreement shall forthwith
become void (other than Section 4.02(d), Section 4.10(b)(iii) and Section 7.01
hereof, which shall remain in full force and effect), and there shall be no
further liability on the part of Sovereign or First Home to the other, except
for any liability arising out of any uncured willful breach of any covenant or
other agreement contained in this Agreement or any fraudulent breach of a
representation or warranty.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of printing and
mailing the Proxy Statement/Prospectus which shall be shared equally, each
party hereto shall bear and pay all costs and expenses incurred by it in
connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and Warranties.
All representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants, other than those
covenants that by their terms are to be performed after the Effective Date,
including without limitation the covenants set forth in Sections 1.02(f),
1.02(g), 4.05, and 4.11(a) and (c) which will survive the Merger, shall
terminate on the Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject to
applicable law, at any time prior to the consummation of the transactions
contemplated by this Agreement, the parties may (a) amend this Agreement, (b)
extend the time for the performance of any of the obligations or other acts of
either party hereto, (c) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions contained in
Articles IV and V hereof or otherwise provided that any amendment, extension
or waiver granted or executed after shareholders of First Home have approved
this Agreement shall not modify either the amount or the form of the
consideration to be provided hereby to holders of First Home Common Stock upon
consummation of the Merger or otherwise materially adversely affect the
shareholders of First Home without the approval of the shareholders who would
be so affected. This Agreement may not be amended except by an instrument in
writing authorized by the respective Boards of Directors and signed, by duly
authorized officers, on behalf of the parties hereto. Any agreement on the
part of a party hereto to any extension or waiver shall be valid only if set
forth in an instrument in writing signed by a duly authorized officer on
behalf of such party, but such waiver or failure to insist on strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
Section 7.04 Entire Agreement. This Agreement, including the
documents and other writings referred to herein or delivered pursuant hereto,
contains the entire agreement and understanding of the parties with respect to
its subject matter. This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with respect to its
subject matter. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors; provided, however,
that nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto and their respective successors,
any rights, remedies, obligations or liabilities other than pursuant to
Sections 1.02(f), 1.02(g), 4.05, and 4.11(a) and (c).
Section 7.05 No Assignment. Neither party hereto may assign
any of its rights or obligations hereunder to any other person, without the
prior written consent of the other party hereto.
Section 7.06 Notices. All notices or other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by prepaid registered or certified mail (return receipt
requested), or sent by telecopy, addressed as follows:
(a) If to Sovereign, to:
Sovereign Bancorp, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxx,
President and Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
and
Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) If to First Home, to:
First Home Bancorp Inc.
000 Xxxxx Xxxxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx,
Chairman, President and Chief
Executive Officer
Telecopy No.: (000) 000-0000
with copies to:
Blank Rome Xxxxxxx & XxXxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Section 7.08 Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
Section 7.09 Severability. If any provision of this
Agreement or the application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this Agreement and
the application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.
Section 7.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the domestic internal law (including the
law of conflicts of law) of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
SOVEREIGN BANCORP, INC.
By /s/ Xxx X. Xxxxx
------------------------------------------
Xxx X. Xxxxx
President and Chief Executive Officer
FIRST HOME BANCORP INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxx,
Chairman, President and
Chief Executive Officer
