AGREEMENT AND PLAN OF MERGER
BETWEEN
U.S.B. HOLDING CO., INC.
AND
TAPPAN ZEE FINANCIAL, INC.
DATED AS OF MARCH 6, 1998
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.............................................. 2
ARTICLE II THE MERGER............................................... 7
2.1 The Merger............................................... 7
2.2 Effective Time; Closing.................................. 7
2.3 Treatment of Capital Stock............................... 8
2.4 Shareholder Rights; Stock Transfers...................... 8
2.5 Dissenting Shares........................................ 9
2.6 Fractional Shares........................................ 9
2.7 Exchange Procedures...................................... 9
2.8 Anti-Dilution Provisions.................................11
2.9 Company Options..........................................12
...........................................................
2.10 Additional Actions.......................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY........................................ 13
3.1 Capital Structure...................................... 13
3.2 Organization, Standing and Authority of the Company.... 14
3.3 Ownership of the Company Subsidiaries.................. 14
3.4 Organization, Standing and Authority of
the Company Subsidiaries............................. 14
3.5 Authorized and Effective Agreement..................... 15
3.6 Securities Documents and Regulatory Reports............ 16
3.7 Financial Statements................................... 16
3.8 Material Adverse Change................................ 17
3.9 Environmental Matters.................................. 17
3.10 Tax Matters............................................ 18
3.11 Legal Proceedings...................................... 19
3.12 Compliance with Laws................................... 19
3.13 Certain Information.................................... 20
3.14 Employee Benefit Plans................................. 20
i
3.15 Certain Contracts...................................... 22
3.16 Brokers and Finders.................................... 23
3.17 Insurance.............................................. 23
3.18 Properties............................................. 23
3.19 Allowance for Loan Losses.............................. 24
3.20 Related Party Transactions............................. 24
3.21 Loans.................................................. 24
3.22 Accounting for the Merger; Reorganization.............. 25
3.23 Fairness Opinion....................................... 25
3.24 Labor.................................................. 25
3.25 Required Vote; Inapplicability of Antitakover States... 25
3.26 Ownership of Acquiror Common Stock..................... 26
3.27 Disclosures............................................ 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR...................................... 26
4.1 Capital Structure...................................... 26
4.2 Organization, Standing and Authority of the Acquiror... 27
4.3 Ownership of the Acquiror Subsidiaries................. 27
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries................................ 27
4.5 Authorized and Effective Agreement..................... 28
4.6 Securities Documents and Regulatory Reports............ 29
4.7 Financial Statements................................... 29
4.8 Material Adverse Change................................ 30
4.9 Environmental Matters.................................. 30
4.10 Tax Matters............................................ 31
4.11 Legal Proceedings...................................... 32
4.12 Compliance with Laws................................... 32
4.13 Certain Information.................................... 33
4.14 Employee Benefit Plans................................. 33
4.15 Certain Contracts...................................... 34
4.16 Brokers and Finders.................................... 34
4.17 Insurance.............................................. 35
4.18 Allowance for Loan Losses.............................. 35
4.19 Loans.................................................. 35
4.20 Accounting for the Merger; Reorganization.............. 35
4.21 Fairness Opinion....................................... 35
4.22 Labor.................................................. 35
4.23 Ownership of Company Common Stock...................... 36
4.24 Disclosures............................................ 36
ii
ARTICLE V COVENANTS.............................................. 36
5.1 Reasonable Best Efforts................................ 36
5.2 Shareholder Meeting.................................... 36
5.3 Regulatory Matters..................................... 37
5.4 Investigation and Confidentiality...................... 38
5.5 Press Releases......................................... 39
5.6 Business of the Parties................................ 39
5.7 Certain Actions........................................ 43
5.8 Current Information.................................... 43
5.9 Indemnification; Insurance............................. 44
5.10 Directors.............................................. 46
5.11 Benefit Plans and Arrangements......................... 46
5.12 Reserves and Merger - Related Costs.................... 47
5.13 Disclosure Supplements................................. 47
5.14 Failure to Fulfill Conditions.......................... 48
5.15 Affiliates............................................. 48
ARTICLE VI CONDITIONS PRECEDENT................................... 48
6.1 Conditions Precedent - The Acquiror
and the Company....................................... 48
6.2 Conditions Precedent - The Company..................... 50
6.3 Conditions Precedent - The Acquiror.................... 51
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT...................... 52
7.1 Termination............................................ 52
7.2 Effect of Termination.................................. 53
7.3 Survival of Representations, Warranties
and Covenants........................................ 53
7.4 Waiver................................................. 54
7.5 Amendment or Supplement................................ 54
ARTICLE VIII MISCELLANEOUS.................................................. 54
8.1 Expenses; Termination Fee.............................. 54
8.2 Entire Agreement....................................... 55
8.3 No Assignment.......................................... 55
8.4 Notices................................................ 55
8.5 Alternative Structure.................................. 56
8.6 Interpretation......................................... 57
8.7 Counterparts........................................... 57
iii
8.8 Governing Law.......................................... 57
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Letter Agreement with Xx. Xxxxxxx
Exhibit D Form of Letter Agreement with Xx. Xxxxxx
Exhibit E Form of Acquiror Affiliate Agreement
Exhibit F Form of Agreement with Xx. Xxxxxxx
Exhibit G Form of Agreement with Xx. Xxxxxx
Exhibit H Form of Opinion of the Acquiror's Counsel
Exhibit I Form of Opinion of the Company's Counsel
iv
DISCLOSURE SCHEDULES
Tappan Zee Financial, Inc.
--------------------------
Section 3.1 Capital Structure
Section 3.3 Ownership of the Company Subsidiaries
Section 3.5(b) Authorized and Effective Agreement - Governing Documents
of Company Subsidiaries
Section 3.5(c) Authorized and Effective Agreement - Third Party Consents
Section 3.9(d) Environmental Matters - Environmental Studies
Section 3.10(b) Tax Matters - Delinquencies and Deficiencies
Section 3.10(c) Tax Matters - Agreements, Adjustments and Consents
Section 3.11 Legal Proceedings
Section 3.14(a) Employee Benefit Plans
Section 3.14(c) Employee Benefit Plans - Section 4201 of ERISA
Section 3.15(a) Certain Contracts
Section 3.16 Brokers and Finders
Section 3.20 Related Party Transactions
Section 5.6(a)(iv) Business of the Parties - Change in Benefits or
Compensation to Directors, Officers or Employees
Section 5.6(a)(v) Business of the Parties - Employee Benefit Plans to be
Entered Into or Modified
Section 5.9(a) Indemnification; Insurance
Section 5.11(b) Benefit Plans and Arrangements - Severance Policy
Section 5.11(c) Benefit Plans and Arrangements - Employment Agreements and
Severance Agreements
U.S.B. Holding Co., Inc.
------------------------
Section 4.1 Capital Structure
Section 4.3 Ownership of the Acquiror Subsidiaries
Section 4.5(c) Authorized and Effective Agreement - Third Party Consents
Section 4.9 Environmental Matters - Environmental Studies
Section 4.10(b) Tax Matters - Delinquencies and Deficiencies
Section 4.10(c) Tax Matters - Agreements, Adjustments and Consents
Section 4.14(a) Employee Benefit Plans
Section 4.15 Certain Contracts
Section 4.16 Brokers and Finders
v
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of March 6,
1998, by and between U.S.B. Holding Co., Inc. (the "Acquiror"), a Delaware
corporation, and Tappan Zee Financial, Inc. (the "Company"), a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of the Acquiror and the Company
have determined that it is in the best interests of their respective companies
and their shareholders to consummate the business combination transaction
provided for herein, including the merger of the Company with and into the
Acquiror, subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances, (ii) the directors
and certain officers of the Company are concurrently entering into an agreement
with the Acquiror (the "Company Affiliate Agreement"), in substantially the form
attached hereto as Exhibit B, pursuant to which, among other things, each such
stockholder agrees to vote his or her shares of Company Common Stock in favor of
this Agreement and the transactions contemplated hereby and (iii) Messrs.
Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxx are concurrently entering into letter
agreements, in substantially the forms attached hereto as Exhibits C and D,
respectively; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, the directors and certain officers of the Acquiror
are concurrently entering into an agreement with the Company (the "Acquiror
Affiliate Agreement"), in substantially the form attached hereto as Exhibit E;
and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $5.00
per share, of the Acquiror.
"Acquiror Employee Stock Benefit Plans" shall mean the following
employee benefit plans of the Acquiror, as amended and in effect from time to
time: 1984 Incentive Stock Option Plan, 1993 Incentive Stock Option Plan, 1997
Employee Stock Option Plan, U.S.B. Holding Co., Inc. Employee Stock Ownership
Plan (with 401(k) Provision), Dividend Reinvestment and Stock Purchase Plan,
Director Stock Option Plan and Key Employees' Supplemental Investment Plan for
Salaried Employees.
"Acquiror Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of the
Acquiror as of December 31, 1996, 1995 and 1994 and the consolidated statements
of income, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror for each of the three years ended December
31, 1996, 1995 and 1994 as filed by the Acquiror in its Securities Documents,
and (ii) the consolidated statements of condition of the Acquiror (including
related notes and schedules, if any) and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of the Acquiror included in the Securities Documents filed by the Acquiror
with respect to the quarterly and annual periods ended subsequent to December
31, 1996.
"Acquiror Bank" shall mean Union State Bank, a New York chartered bank
and a wholly-owned subsidiary of the Acquiror.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, no
par value per share, of the Acquiror.
"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.
"Average Closing Price" shall mean the average of the last reported
sale prices for the Acquiror Common Stock for the 20 consecutive AMEX Trading
Days ending with (and including) the date on which the last of the regulatory
approvals discussed in Section 6.1(b) required for consummation of the Merger is
obtained. "AMEX Trading Day" shall mean a full trading day for the American
Stock Exchange.
2
"Bank" shall mean Tarrytowns Bank, FSB, a federally-chartered savings
bank and a wholly-owned subsidiary of the Company.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof and shall include the Company ESOP.
"Company ESOP" shall mean the Employee Stock Ownership Plan of Tappan
Zee Financial, Inc. and Affiliates.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of March 31, 1997, 1996 and 1995 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Company for each of the three years ended
March 31, 1997, 1996 and 1995 as filed by the Company in its Securities
Documents, and (ii) the consolidated statements of financial condition of the
Company (including related notes and schedules, if any) and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Company included in the Securities Documents
filed by the Company with respect to the quarterly and annual periods ended
subsequent to March 31, 1997.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Stock Option Plans.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of the Company.
3
"Company Stock Option Plans" shall mean the Company's 1996 Stock Option
Plan for Officers and Employees, as amended, and the Company's 1996 Stock Option
Plan for Outside Directors, as amended, each as in effect as of the date hereof.
"DGCL" shall mean the General Corporation Law of the State of Delaware,
as amended.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" 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 governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, ET SEQ; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, ET SEQ; the Clean Air Act, as amended, 42 U.S.C. ss.7401, ET
SEQ; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, ET
SEQ; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, ET SEQ;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, ET
SEQ; the SafE Drinking Water Act, 42 U.S.C. ss.300f, ET SEQ; and all comparable
state and local laws, and (2) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3(b)
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
4
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"GAAP" means generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or
the Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of the Company, on
the one hand, or the Acquiror, on the other hand, to consummate the transactions
contemplated by this Agreement, provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof that are generally applicable to the banking or
savings industries, (b) changes in GAAP that are generally applicable to the
banking or savings industries, (c) expenses incurred in connection with the
transactions contemplated hereby or (d) actions or omissions of a party (or any
of its Subsidiaries) taken with the prior informed written consent of the other
party or parties in contemplation of the transactions contemplated hereby.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the
Acquiror pursuant to the terms hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSBD" shall mean the New York State Banking Department.
5
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"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).
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.13 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to shareholders
of the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Severance Plan" shall mean the Severance Plan of Tarrytowns Bank, FSB.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the Commission.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
6
ARTICLE II
THE MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 251 of the DGCL. The Acquiror shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of the Merger, and
shall continue its corporate existence under the laws of the State of Delaware.
The name of the Surviving Corporation shall continue to be "U.S.B. Holding Co.,
Inc." Upon consummation of the Merger, the separate corporate existence of the
Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL.
(c) The Certificate of Incorporation and Bylaws of the Acquiror, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be
as stated in the Certificate of Incorporation of the Acquiror immediately prior
to the Effective Time.
(e) The directors and officers of the Acquiror immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
subject to the provisions of Section 5.10 hereof, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of
a Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, unless a later date and time is specified as the effective
time in such Certificate of Merger (the "Effective Time"). A closing (the
"Closing") shall take place immediately prior to the Effective Time at 10:00
a.m., Eastern Time, on the fifth business day following the satisfaction or
waiver, to the extent permitted hereunder, of the conditions to the consummation
of the Merger specified in Article VI of this Agreement (other than the delivery
of certificates, opinions and other instruments and documents to be delivered at
the Closing) (the "Closing Date"), at the principal executive offices of the
Acquiror in Orangeburg, New York, or at such other place, at such other time, or
on such other date as the parties may mutually agree upon. At the Closing, there
shall be delivered to the Acquiror and the
7
Company the opinions, certificates and other documents required to be delivered
under Article VI hereof. Subject to the fulfillment or waiver at or prior to the
Closing of the conditions to its obligations set forth in Article VI, at the
Closing each party shall execute and deliver a Certificate of Merger for filing
with the Secretary of State of the State of Delaware.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(b) subject to Section 2.6 hereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
held, otherwise than in a fiduciary capacity for the benefit of third parties or
as a result of debts previously contracted, by the Acquiror or any of its
Subsidiaries, which shares shall be cancelled and retired) shall become and be
converted into the right to receive that number of shares of Acquiror Common
Stock equal to (i) if the Average Closing Price is greater than or equal to
$17.75 and less than or equal to $25.00, the quotient (rounded to the nearest
hundredth) determined by dividing (A) $22.00 by (B) the Average Closing Price,
(ii) if the Average Closing Price is less than $17.75, 1.24 shares or (iii) if
the Average Closing Price is greater than $25.00, 0.88 shares (subject to
possible adjustment as set forth in Sections 2.8 and 7.1(f) hereof, the
"Exchange Ratio").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
At the Effective Time, holders of Company Common Stock shall cease to
be and shall have no rights as shareholders of the Company, other than to
receive the consideration provided under this Article II. After the Effective
Time, there shall be no transfers on the stock transfer books of the Company or
the Surviving Corporation of shares of Company Common Stock and if certificates
evidencing such shares are presented for transfer after the Effective Time, they
shall be cancelled against delivery of certificates for whole shares of Acquiror
Common Stock (plus cash in lieu of any fractional share interest) as herein
provided.
2.5 DISSENTING SHARES
Holders of shares of Company Common Stock will not have the right to
dissent under the DGCL and demand payment of the fair market value of such
shares of Company Common Stock.
2.6 FRACTIONAL SHARES
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of
8
Company Common Stock entitled to a fraction of a share of Acquiror Common Stock
shall, at the time of surrender of the certificate or certificates representing
such holder's shares, receive an amount of cash (without interest) equal to the
product arrived at by multiplying such fraction of a share of Acquiror Common
Stock by $22.00. No such holder shall be entitled to dividends, voting rights or
any other rights in respect of any fractional share interest.
2.7 EXCHANGE PROCEDURES
(a) On the Closing Date, the Acquiror shall issue to an agent, duly
appointed by the Acquiror and reasonably acceptable to the Company (the
"Exchange Agent"), the number of shares of Acquiror Common Stock issuable and
the amount of cash payable to holders of Company Common Stock pursuant to
Section 2.6 hereof (which shall be held by the Exchange Agent in trust for such
holders of Company Common Stock). Promptly after the Effective Time, the
Exchange Agent shall distribute Acquiror Common Stock and cash as provided
herein. The Exchange Agent shall not be entitled to vote or exercise any rights
of ownership with respect to the shares of Acquiror Common Stock held by it from
time to time hereunder.
(b) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock (except as provided in Section 2.3(b) hereof), upon surrender of
the same to the Exchange Agent, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of Acquiror Common Stock into which the shares of Company Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted (plus cash in lieu of any fractional share interest), as
provided in Section 2.3 hereof. As promptly as practicable after the Effective
Time, and in no event later than ten days thereafter, the Exchange Agent shall
mail to each holder of record of an outstanding certificate which immediately
prior to the Effective Time evidenced shares of Company Common Stock, and which
is to be exchanged for Acquiror Common Stock (plus cash in lieu of any
fractional share interest), as provided in Section 2.3 hereof, a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Acquiror Common Stock (plus cash in lieu of any fractional share
interest). The Exchange Agent shall accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with customary exchange
practices.
(c) Each outstanding certificate which prior to the Effective Time
represented Company Common Stock and which is not surrendered to the Exchange
Agent in accordance with the procedures provided for herein shall, except as
otherwise herein provided, until duly surrendered to the Exchange Agent be
deemed to evidence ownership of the number of whole shares of Acquiror Common
Stock (plus cash in lieu of any fractional share interest) into which such
Company Common Stock shall have been converted by virtue of the Merger.
9
(d) No holder of a certificate theretofore representing shares of
Company Common Stock shall be entitled to receive any dividends in respect of
the Acquiror Common Stock into which such shares shall have been converted by
virtue of the Merger until the certificate representing such shares is
surrendered in exchange for a certificate or certificates representing whole
shares of Acquiror Common Stock (plus cash in lieu of any fractional share
interest). In the event that dividends are declared and paid by the Acquiror in
respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of whole shares of Acquiror Common
Stock not then issued shall accrue (without interest). Any such dividends shall
be paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock.
(e) The Acquiror shall not be obligated to deliver a certificate or
certificates representing whole shares of Acquiror Common Stock (plus cash in
lieu of any fractional share interest) to which a holder of Company Common Stock
would otherwise be entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing the shares of Company
Common Stock for exchange as provided in this Section 2.7, or, in default
thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond
in an amount as may be reasonably required in each case by the Acquiror. If any
certificate evidencing shares of Acquiror Common Stock is to be issued in a name
other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(f) Any portion of the shares of Acquiror Common Stock and cash
delivered to the Exchange Agent by the Acquiror pursuant to Section 2.7(a)
hereof that remains unclaimed by the shareholders of the Company by the second
anniversary of the Effective Time shall be delivered by the Exchange Agent to
the Acquiror. Any shareholders of the Company who have not theretofore complied
with Section 2.7(b) hereof shall thereafter look only to the Acquiror for the
consideration deliverable in respect of each share of Company Common Stock such
shareholder holds as determined pursuant to this Agreement without any interest
thereon. If outstanding certificates for shares of Company Common Stock are not
surrendered or the payment for them is not claimed prior to the second
anniversary of the Effective Time (the "Old Certificates"), the Acquiror may at
any time thereafter, with or without notice to the holders of record of the Old
Certificates which were converted into whole shares of Acquiror Common Stock
(plus cash in lieu of any fractional share interest) pursuant to the terms of
this Agreement, sell for the accounts of such holders any or all of the shares
of Acquiror Common Stock which such holders are entitled to receive under
Section 2.3(b) hereof (the "Unclaimed Shares"), provided, however, that the
Acquiror shall not be obligated to make any sale of Unclaimed Shares (even if
notice of sale of the Unclaimed Shares has been given) and instead may issue to
the holder of any Old Certificates properly delivered to the Acquiror in
accordance with the terms thereof a certificate evidencing the number of whole
shares of Acquiror
10
Common Stock (plus cash in lieu of any fractional share interest) to which such
holder is entitled by virtue of Section 2.3(b) hereof. In the event that the
Acquiror elects to sell Unclaimed Shares, it may do so in a registered public
offering under the Securities Act and applicable state securities laws, by
private sale or by sale at any broker's board or in any securities exchange, in
each case in such manner and at such times as the Acquiror shall determine. The
net proceeds of any such sale of Unclaimed Shares shall be held for the holders
of the unsurrendered Old Certificates whose Unclaimed Shares have been sold, to
be paid to them upon surrender of their Old Certificates. From and after any
such sale, the sole right of the holders of the unsurrendered Old Certificates
whose Unclaimed Shares have been sold shall be the right to collect the net sale
proceeds held by the Acquiror for their respective accounts, and such holders
shall not be entitled to receive any interest on such net sale proceeds held by
the Acquiror.
(g) The Acquiror and the Exchange Agent shall be entitled to rely upon
the stock transfer books of the Company to establish the identity of those
persons entitled to receive the consideration specified in this Agreement, which
books shall be conclusive with respect thereto. In the event of a dispute with
respect to ownership of stock represented by any certificate, the Acquiror and
the Exchange Agent shall be entitled to deposit any consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
2.8 ANTI-DILUTION PROVISIONS
If after the date of this Agreement and prior to the Effective Time the
number of outstanding shares of Acquiror Common Stock or Company Common Stock
shall have been increased or decreased by reason of a dividend payable in shares
of common stock or a split or combination of outstanding shares, then (a) in the
case of any such event involving the Acquiror Common Stock the number of shares
of Acquiror Common Stock to be delivered to Company shareholders who are
entitled to receive shares of Acquiror Common Stock in exchange for shares of
Company Common Stock shall be adjusted so that each Company shareholder shall be
entitled to receive such number of shares of Acquiror Common Stock as such
shareholder would have been entitled to receive if the Effective Time had
occurred prior to the happening of such event and (b) in the case of any such
event involving the Company Common Stock the Exchange Ratio shall be adjusted by
multiplying the Exchange Ratio by a fraction the numerator of which shall be the
number of shares of Company Common Stock issued and outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Company Common Stock issued and outstanding immediately after such event. The
Exchange Ratio also shall be appropriately adjusted to reflect any capital
reorganization involving the reclassification of the Acquiror Common Stock or
the Company Common Stock subsequent to the date of this Agreement and prior to
the Effective Time. Similar adjustments shall be made to the amount payable in
lieu of fractional share interests.
11
2.9 COMPANY OPTIONS
(a) At the Effective Time, and except as may be contemplated by Section
5.11 hereof, each Company Option which is then outstanding, whether or not
exercisable, shall cease to represent a right to acquire shares of Company
Common Stock and shall be converted automatically into an option to purchase
shares of Acquiror Common Stock, and the Acquiror shall assume each Company
Option, in accordance with the terms of the Company Stock Option Plans and stock
option agreement by which it is evidenced, except that from and after the
Effective Time, (i) the Acquiror and its Board of Directors or a duly authorized
committee thereof shall be substituted for the Company and the Company's Board
of Directors or duly authorized committee thereof administering the Company
Stock Option Plan, (ii) each Company Option assumed by the Acquiror may be
exercised solely for shares of Acquiror Common Stock, (iii) the number of shares
of Acquiror Common Stock subject to such Company Options shall be equal to the
number of shares of Company Common Stock subject to such Company Options
immediately prior to the Effective Time multiplied by the Exchange Ratio,
provided that any fractional shares of Acquiror Common Stock resulting from such
multiplication shall be rounded down to the nearest share, and (iv) the per
share exercise price under each such Company Option shall be adjusted by
dividing the per share exercise price under each such Company Option by the
Exchange Ratio, provided that such exercise price shall be rounded up to the
nearest cent. Notwithstanding the preceding sentence, each Company Option which
is an "incentive stock option" shall be adjusted as required by Section 424 of
the Code, 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 Code, and all Company Options shall be adjusted, if necessary, so
as not to impair the eligibility of the Merger for pooling of interests
accounting treatment. The Acquiror and the Company agree to take all necessary
steps to effect the foregoing provisions of this Section 2.9(a).
(b) As soon as practicable after the Effective Time, the Acquiror shall
deliver to each participant in the Company Stock Option Plans an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to the Company Stock Option Plans shall continue in effect on the same
terms and conditions, including without limitation the duration thereof, subject
to the adjustments required by Section 2.9(a)(iii) hereof after giving effect to
the Merger. Within 30 days after the Effective Time, the Acquiror 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 Acquiror
Common Stock 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.
2.10 ADDITIONAL ACTIONS
If, at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the
12
Surviving Corporation as a result of, or in connection with, the Merger, or (ii)
otherwise carry out the purposes of this Agreement, the Company and its proper
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 5,000,000
shares of Company Common Stock and 1,000,000 shares of Company Preferred Stock.
As of the date hereof, 1,478,062 shares of Company Common Stock are issued and
outstanding, 142,000 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for the
Company Stock Option Agreement and for Company Options to acquire not more than
121,500 shares of Company Common Stock as of the date hereof, a schedule of
which has been Previously Disclosed, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company is
duly registered as a unitary savings and loan holding company under the HOLA and
the regulations of the OTS thereunder. The Company has heretofore delivered to
the Acquiror true and complete copies of the Certificate of Incorporation and
Bylaws of the Company as in effect as of the date hereof.
13
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (x) capital stock of the Company Subsidiaries, (y) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted and (z) securities and
other interests which are Previously Disclosed, the Company does not own or have
the right to acquire, directly or indirectly, any outstanding capital stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of capital stock or other ownership interests of each Company Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable,
and are directly owned by the Company free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect to
the capital stock or other ownership interests of the Company Subsidiaries and
there are no agreements, understandings or commitments relating to the right of
the Company to vote or to dispose of such capital stock or other ownership
interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the United
States or the jurisdiction in which it is organized. Each of the Company
Subsidiaries (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on the Company. The deposit accounts of the Bank are insured by the SAIF to the
maximum extent permitted by the FDIA. The Bank has paid all deposit insurance
premiums and assessments required by the FDIA and the regulations thereunder.
The Company has heretofore delivered or made available to the Acquiror true and
complete copies of the Articles of Incorporation, Charter, Bylaws and other
governing documents of each Company Subsidiary as in effect as of the date
hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Acquiror, constitutes a
14
legal, valid and binding obligation of the Company which is enforceable against
the Company in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger), nor
compliance by the Company with any of the provisions hereof (i) does or will
conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of the Company or, except as Previously Disclosed, the
equivalent documents of any Company Subsidiary, (ii) violate, conflict with or
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or a
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or a Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or a Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB and the OTS, (ii) the filing
and effectiveness of the Form S-4 with the Commission, (iii) the approval of
this Agreement by the requisite vote of the shareholders of the Company, (iv)
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the DGCL in connection with the Merger and (v) review of
the Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no consents
or approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Company or the Bank in
connection with the execution and delivery by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby.
(d) As of the date hereof, the Company is not aware of any facts or
circumstances relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since June 30, 1995, the Company has timely filed with the
Commission (and the NASD to the extent specifically required by the rules and
regulations thereof) all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit
15
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Since June 30, 1995, each of the Company and the Bank has duly
filed with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete, accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent examinations
of the Company or the Bank by the OTS or the FDIC, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof and which could have a Material Adverse Effect on the
Company.
3.7 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements which,
in the case of the consolidated statements of financial condition of the Company
as of March 31, 1997, 1996 and 1995 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended March 31, 1997, 1996 and 1995, are accompanied by the audit reports of
KPMG Peat Marwick LLP, independent public accountants with respect to the
Company. The Company Financial Statements referred to herein, as well as the
Company Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of the Company as of the respective dates set forth therein,
and the consolidated results of operations, shareholders' equity and cash flows
of the Company for the respective periods or as of the respective dates set
forth therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of the Company and the Company Subsidiaries have been conducted in all
material respects in accordance with generally accepted auditing standards. The
books and records of the Company and the Company Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Company and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of
December 31, 1997 (including related notes) and (ii) of liabilities incurred
since December 31, 1997 in the ordinary course of business (including without
limitation liabilities assumed or incurred in connection with actions by the
Company consistent with the terms of Section 5.6(a) hereof), neither the Company
nor any Company Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise, material to the financial condition, results of
operations or business of the Company on a consolidated basis.
16
3.8 MATERIAL ADVERSE CHANGE
Since December 31, 1997, (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on the Company.
3.9 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws except to the extent
any non-compliance would not have a Material Adverse Effect on the Company.
Neither the Company nor a Company Subsidiary has received any communication
alleging that the Company or a Company Subsidiary is not in such compliance and,
to the best knowledge of the Company, there are no present circumstances that
would prevent or interfere with the continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or a Company Subsidiary or properties
which secure or otherwise act as collateral for loans or other extensions of
credit made by the Company or any Company Subsidiary has been or is in violation
of or liable under any Environmental Law except to the extent any violation or
liability would not have a Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
material liability arising under any Environmental Law against the Company or a
Company Subsidiary or against any person or entity whose liability for any
Environmental Claim the Company or a Company Subsidiary has or may have retained
or assumed either contractually or by operation of law or with respect to any of
the properties owned, leased or operated by the Company or a Company Subsidiary
or properties which secure or otherwise act as collateral for loans or other
extensions of credit made by the Company or any Company Subsidiary.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned or leased by it or a Company Subsidiary or which secures or otherwise acts
as collateral for a loan or other extension of credit held by the Company or a
Company Subsidiary as of the date hereof.
17
3.10 TAX MATTERS
(a) The Company and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all material taxes
required to be paid in respect of the periods covered by such returns and, as of
the Effective Time, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment of,
all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Company nor a Company Subsidiary will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of the Company and its Subsidiaries have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Company or a Company Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to the Company or a
Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
3.11 LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Company, threatened against the Company or a Company Subsidiary
or against any asset, interest or right of the Company or a Company Subsidiary,
or against any officer, director or employee of any of them
18
that individually or in the aggregate, if decided adversely, would have a
Material Adverse Effect on the Company. Except as Previously Disclosed, neither
the Company nor a Company Subsidiary is a party to any order, judgment or decree
which has or could reasonably be expected to have a Material Adverse Effect on
the Company.
3.12 COMPLIANCE WITH LAWS
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Certificate of Incorporation, Charter or other organizational
document or Bylaws, or of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any federal, state, local or other
governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on the Company; and neither the Company nor a Company
Subsidiary has received any notice or communication from any federal, state or
local governmental authority asserting that the Company or a Company Subsidiary
is in violation of any of the foregoing which could reasonably be expected to
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to all savings associations or
savings and loan holding companies issued by governmental authorities), and none
of them has received any written communication requesting that it enter into any
of the foregoing.
3.13 CERTAIN INFORMATION
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied in writing by the Company or representatives or
agents thereof for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date such Proxy
19
Statement is mailed to shareholders of the Company and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement mailed by the Company to its shareholders in connection with the
meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
3.14 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, stock grant,
employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any deferred compensation, consultant, bonus or group
insurance contract or any other incentive, health and welfare or employee
benefit plan or agreement maintained for the benefit of employees or former
employees of the Company or any Company Subsidiary (the "Company Employee
Plans"), whether written or oral, and the Company has previously furnished or
made available to the Acquiror accurate and complete copies of the same together
with (i) the most recent actuarial and financial reports prepared with respect
to any plans, (ii) the most recent annual reports filed with any governmental
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any Company Employee
Plan constituting an "employee benefit plan" within the meaning of Section 3(2)
of ERISA ("Company Pension Plan") or, to the best of the Company's knowledge,
any fiduciary of such Company Pension Plan, has incurred any direct or indirect
material liability to the PBGC, the Internal Revenue Service or any present or
former employees of the Company or a Company Subsidiary with respect to any such
Company Pension Plan. To the best of the Company's knowledge, no reportable
event under Section 4043(b) of ERISA has occurred with respect to any such
Company Pension Plan.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary participates in or has incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multi-employer plan (as such
term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Pension Plan which is intended to
qualify under Section 401 of the Code to the effect that such plan is qualified
under Section 401 of the Code and the trust associated with such Company Pension
Plan is tax exempt under Section 501 of the Code. No such letter has been
revoked or, to the best of the Company's knowledge, is threatened to be revoked
and the Company does not know of any ground on which such revocation may be
based. Neither the Company nor any Company Subsidiary has any liability under
any such Company Pension Plan that is not reflected on the consolidated
statement of financial condition of the Company at December 31, 1997
20
included in the Company Financial Statements, other than liabilities incurred in
the ordinary course of business in connection therewith subsequent to the date
thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the terms of the
operative plan documents and the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than in the
case of the Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by the Company or a Company Subsidiary of any obligation, other than
by the Bank in the ordinary course of its banking business, (ii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or former director,
officer or employee of the Company or a Company Subsidiary, (iii) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of the Company or a Company Subsidiary upon execution of this Agreement or upon
or following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional
21
acts or events); (iv) any agreement, arrangement or understanding pursuant to
which the Company or a Company Subsidiary is obligated to indemnify any
director, officer, employee or agent of the Company or a Company Subsidiary; (v)
any agreement, arrangement or understanding to which the Company or a Company
Subsidiary is a party or by which any of the same is bound which limits the
freedom of the Company or a Company Subsidiary to compete in any line of
business or with any person, (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the FDIC or any
other regulatory agency, (vii) any other agreement, arrangement or understanding
which would be required to be filed as an exhibit to the Company's Annual Report
on Form 10-K under the Exchange Act and which has not been so filed or (viii)
any other agreement, arrangement or understanding which, if entered into after
the date hereof, would require the consent of the Acquiror under Section 5.6(a)
hereof.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 INSURANCE
Each of the Company and its Subsidiaries is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with
commercially reasonable business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
3.18 PROPERTIES
All real and personal property owned by the Company or its Subsidiaries
or presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties, real and
22
personal, reflected on the consolidated statement of financial condition of the
Company as of December 31, 1997 included in the Company Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable (ii) pledges to secure deposits and other liens incurred in the ordinary
course of its banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) as reflected on the consolidated statement of financial condition of the
Company as of December 31, 1997 included in the Company Financial Statements.
All real and personal property which is material to the Company's business on a
consolidated basis and leased or licensed by the Company or a Company Subsidiary
is held pursuant to leases or licenses which are valid and enforceable in
accordance with their respective terms and such leases will not terminate or
lapse prior to the Effective Time.
3.19 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected, and to be reflected, in the
Company's reports referred to in Section 3.6(b) hereof, and shown, and to be
shown, on the balance sheets contained in the Company Financial Statements have
been, and will be, established in accordance with the requirements of, and was
and will be adequate under, GAAP and all applicable regulatory criteria.
3.20 RELATED PARTY TRANSACTIONS
Except as (i) Previously Disclosed, (ii) disclosed in the Company's
proxy statement dated June 30, 1997 or (iii) disclosed in the footnotes to the
Company Financial Statements, the Company 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 the Company (except a Company
Subsidiary); and all such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as
Previously Disclosed, no loan or credit accommodation to any Affiliate of the
Company 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 the Company nor the Bank has been notified that principal
and interest with respect to any such loan or other credit accommodation will
not be paid when due or that the loan grade classification accorded such loan or
credit accommodation by the Bank is inappropriate.
3.21 LOANS
Each loan reflected as an asset in the Company 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
23
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 the Company.
3.22 ACCOUNTING FOR THE MERGER; REORGANIZATION
As of the date hereof, the Company, after consultation with KPMG Peat
Marwick LLP, does not have any reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests accounting treatment under GAAP, or (ii) as
a reorganization under Section 368(a) of the Code.
3.23 FAIRNESS OPINION
The Company has received a written opinion from Sandler X'Xxxxx &
Partners L.P. to the effect that, as of the date hereof, the consideration to be
received by shareholders of the Company pursuant to this Agreement is fair, from
a financial point of view, to such shareholders.
3.24 LABOR
No work stoppage involving the Company or a Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor a Company Subsidiary is involved in, or threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding
involving the employees of the Company or a Company Subsidiary which could have
a Material Adverse Effect on the Company. Employees of the Company and the
Company Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Company's knowledge, there have been no
efforts to unionize or organize any employees of the Company or any of the
Company Subsidiaries during the past five years.
3.25 REQUIRED VOTE; INAPPLICABILITY OF ANTITAKOVER STATUTES
(a) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.18 hereof, the affirmative vote of the holders
of a majority of the issued and outstanding shares of Company Common Stock is
necessary to approve this Agreement and the transactions contemplated hereby on
behalf of the Company.
(b) A majority of the Disinterested Directors of the Company (as
defined in Section 3(g) of Article VIII of the Certificate of Incorporation of
the Company) have approved the Merger and this Agreement such that the
provisions of Section 1 of Article VIII of the Certificate of Incorporation of
the Company are inapplicable to this Agreement and the transactions contemplated
hereby.
(c) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.18 hereof, the Acquiror is not an "interested
stockholder," as defined
24
in Section 203(c)(5) of the DGCL and, as a result, the provisions of Section 203
of the DGCL do not apply to the Merger and the other transactions contemplated
hereby.
3.26 OWNERSHIP OF ACQUIROR COMMON STOCK
As of the date hereof, neither the Company nor, to its best knowledge,
any of its Affiliates or associates, (i) beneficially own, directly or
indirectly, or (ii) are parties to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of Acquiror Common Stock which in the aggregate represent 5% or more of
the outstanding shares of Acquiror Common Stock (other than shares held in a
fiduciary capacity and beneficially owned by third parties and shares taken in
consideration of debts previously contracted).
3.27 DISCLOSURES
The representations and warranties of the Company made pursuant to 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 IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 CAPITAL STRUCTURE
The authorized capital stock of the Acquiror consists of 20,000,000
shares of Acquiror Common Stock and 100,000 shares of Acquiror Preferred Stock.
As of the date hereof, there were 12,441,000 shares of Acquiror Common Stock
issued and outstanding, 128,122 shares of Acquiror Common Stock were held as
treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Acquiror Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
As of the date hereof, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Acquiror, except for (i) shares of
Acquiror Common Stock issuable pursuant to the Acquiror Employee Stock Benefit
Plans, a schedule of which has been Previously Disclosed, and (ii) by virtue of
this Agreement.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of
25
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a bank holding company under the BHCA and the regulations
of the FRB thereunder. The Acquiror has heretofore delivered to the Company true
and complete copies of the Certificate of Incorporation and Bylaws of the
Acquiror as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUIROR SUBSIDIARIES
The Acquiror has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Acquiror
Subsidiary and identified the Acquiror Bank as its only Significant Subsidiary.
The outstanding shares of capital stock or other ownership interest of each of
the Acquiror Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and, except as Previously Disclosed, are directly
or indirectly owned by the Acquiror free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect to
the capital stock or other ownership interests of any Acquiror Subsidiary and
there are no agreements, understandings or commitments relating to the right of
the Acquiror to vote or to dispose of such capital stock or other ownership
interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR SUBSIDIARIES
Each Acquiror Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Each of the Acquiror Subsidiaries (i) has full power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted, and (ii) is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such qualification, except where the
failure to be so licensed, qualified or in good standing would not have a
Material Adverse Effect on the Acquiror. The deposit accounts of the Acquiror
Bank are insured by the BIF to the maximum extent permitted by the FDIA, and the
Acquiror Bank has paid all premiums and assessments required by the FDIA and the
regulations thereunder. The Acquiror has heretofore delivered or made available
to the Company true and complete copies of the Articles of Incorporation,
Charter, Bylaws and other governing documents of each Acquiror Subsidiary as in
effect as of the date hereof.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Acquiror has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals) to perform all of its obligations under this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Acquiror. This Agreement
has been duly and validly executed and delivered by the Acquiror and, assuming
due authorization,
26
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of the Acquiror which is enforceable against the Acquiror in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger) nor
compliance by the Acquiror with any of the provisions hereof (i) does or will
conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of the Acquiror or the equivalent documents of any
Acquiror Subsidiary, (ii) violate, conflict with or result in a breach of any
term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon any
property or asset of the Acquiror or any Acquiror Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Acquiror or any
Acquiror Subsidiary is a party, or by which any of their respective properties
or assets may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Acquiror or any Acquiror
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB and the OTS (ii) the filing
and effectiveness of the Form S-4 with the Commission, (iii) compliance with
applicable state securities or "blue sky" laws in connection with the issuance
of Acquiror Common Stock pursuant to this Agreement, (iv) the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL in connection with the Merger and (v) review of the Merger
by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Acquiror or Acquiror Bank in
connection with the execution and delivery by the Acquiror of this Agreement and
the consummation by the Acquiror of the transactions contemplated hereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated by this Agreement.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1995, the Acquiror has timely filed with the
Commission (and since April 1997 the AMEX to the extent specifically required by
the rules and regulations thereof) all Securities Documents required by the
Securities Laws and such Securities Documents complied in
27
all material respect with the Securities Laws and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) Since January 1, 1995, the Acquiror and the Acquiror Bank has duly
filed with the FRB, the FDIC, the NYSBD and any other applicable federal or
state banking authority, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and such reports were
in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of the Acquiror or the Acquiror Bank by the FRB, the FDIC or
the NYSBD, as the case may be, neither the Acquiror nor the Acquiror Bank was
required to correct or change any action, procedure or proceeding which the
Acquiror or the Acquiror Bank believes has not been corrected or changed as
required as of the date hereof and which could have a Material Adverse Effect on
the Acquiror.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the
Company accurate and complete copies of the Acquiror Financial Statements which,
in the case of the consolidated statements of condition of the Acquiror as of
December 31, 1996, 1995 and 1994 and the consolidated statements of income,
shareholders' equity and cash flows for each of the three years ended December
31, 1996, 1995 and 1994, are accompanied by the audit reports of Deloitte &
Touche, LLP, independent public accountants with respect to the Acquiror. The
Acquiror Financial Statements referred to herein, as well as the Acquiror
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated condition
of the Acquiror as of the respective dates set forth therein, and the
consolidated income, shareholders' equity and cash flows of the Acquiror for the
respective periods or as of the respective dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of the Acquiror and the Acquiror Subsidiaries have been conducted in all
material respects in accordance with generally accepted auditing standards. The
books and records of the Acquiror and the Acquiror Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements, and all such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Acquiror and the Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Acquiror as of
September 30, 1997 (including related notes) and (ii) of liabilities incurred
since September 30, 1997 in the ordinary course of business (including without
limitation liabilities assumed or incurred in connection with actions by the
Acquiror consistent with the terms of Section 5.6(b) hereof), neither the
Acquiror nor any Acquiror Subsidiary
28
has any liabilities, whether absolute, accrued, contingent or otherwise,
material to the financial condition, results of operations or business of the
Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
Since September 30, 1997, (i) the Acquiror and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on the Acquiror.
4.9 ENVIRONMENTAL MATTERS
(a) To the best of the Acquiror's knowledge, the Acquiror and its
Subsidiaries are in compliance with all Environmental Laws except to the extent
any non-compliance would not have a Material Adverse Effect on the Acquiror.
Neither the Acquiror nor an Acquiror Subsidiary has received any communication
alleging that the Acquiror or an Acquiror Subsidiary is not in such compliance
and, to the best knowledge of the Acquiror, there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties
owned, leased or operated by the Acquiror or an Acquiror Subsidiary or
properties which secure or otherwise act as collateral for loans or other
extensions of credit made by the Acquiror or any Acquiror Subsidiary has been or
is in violation of or liable under any Environmental Law except to the extent
any violation or liability would not have a Material Adverse Effect on the
Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
material liability arising under any Environmental Law against the Acquiror or
an Acquiror Subsidiary or against any person or entity whose liability for any
Environmental Claim the Acquiror or an Acquiror Subsidiary has or may have
retained or assumed either contractually or by operation of law or with respect
to any of the properties owned, leased or operated by the Acquiror or an
Acquiror Subsidiary or properties which secure or otherwise act as collateral
for loans or other extensions of credit made by the Acquiror or any Acquiror
Subsidiary.
(d) Except as Previously Disclosed, the Acquiror has not conducted any
environmental studies during the past five years with respect to any properties
owned or leased by it or an Acquiror Subsidiary or which secures or otherwise
acts as collateral for a loan or other extension of credit held by the Acquiror
or an Acquiror Subsidiary as of the date hereof.
4.10 TAX MATTERS
29
(a) The Acquiror and the Acquiror Subsidiaries have timely filed all
federal, state and local (and, if applicable, foreign) income, franchise, bank,
excise, real property, personal property and other tax returns required by
applicable law to be filed by them (including, without limitation, estimated tax
returns, income tax returns, information returns and withholding and employment
tax returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all material
taxes required to be paid in respect of the periods covered by such returns and,
as of the Effective Time, will have paid, or where payment is not required to
have been made, will have set up an adequate reserve or accrual for the payment
of, all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Acquiror nor any of the Acquiror Subsidiaries will
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and its Subsidiaries are complete and accurate in all
material respects. Neither the Acquiror nor an Acquiror Subsidiary is delinquent
in the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of the Acquiror and its Subsidiaries have been examined by
the applicable tax authorities (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Acquiror or any Acquiror Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
Except as Previously Disclosed, there are currently no agreements in effect with
respect to the Acquiror or an Acquiror Subsidiary to extend the period of
limitations for the assessment or collection of any tax. Except as Previously
Disclosed, as of the date hereof, no audit, examination or deficiency or refund
litigation with respect to such return is pending or, to the best of the
Acquiror's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Acquiror nor any
Acquiror Subsidiary (i) is a party to any agreement providing for the allocation
or sharing of taxes, (ii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by the Acquiror or an Acquiror Subsidiary (nor does
the Acquiror have any knowledge that the Internal Revenue Service has proposed
any such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
4.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or against any
officer, director or employee of any of them that individually or in the
aggregate, if
30
decided adversely, would have a Material Adverse Effect on the Acquiror. Neither
the Acquiror nor any of the Acquiror Subsidiaries is a party to any order,
judgment or decree which has or could reasonably be expected to have a Material
Adverse Effect on the Acquiror.
4.12 COMPLIANCE WITH LAWS
(a) The Acquiror and each of the Acquiror Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Certificate of Incorporation, Charter or other
organizational document or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on the Acquiror; and neither the Acquiror nor any
Acquiror Subsidiary has received any notice or communication from any federal,
state or local governmental authority asserting that the Acquiror or any
Acquiror Subsidiary is in violation of any of the foregoing which could
reasonably be expected to have a Material Adverse Effect on the Acquiror.
Neither the Acquiror nor any Acquiror Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all banks or holding companies thereof, as applicable, issued by governmental
authorities), and none of them has received any written communication requesting
that it enter into any of the foregoing.
4.13 CERTAIN INFORMATION
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date such Proxy Statement is mailed to shareholders of the
Company and up to and including the date of the meeting of shareholders to which
such Proxy Statement relates, will contain any untrue statement of a
31
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date. The Proxy Statement mailed by the
Company to its shareholders in connection with the meeting of shareholders at
which this Agreement will be considered by such shareholders will comply as to
form in all material respects with the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder.
4.14 EMPLOYEE BENEFIT PLANS
(a) The Acquiror has Previously Disclosed all stock option, stock
grant, employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any deferred compensation, consultant, bonus or group
insurance contract or any other incentive, health and welfare or employee
benefit plan or agreement maintained for the benefit of employees or former
employees of the Acquiror or any Acquiror Subsidiary (the "Acquiror Employee
Plans"), whether written or oral, and the Acquiror has previously furnished or
made available to the Company accurate and complete copies of the same together
with (i) the most recent actuarial and financial reports prepared with respect
to any plans, (ii) the most recent annual reports filed with any governmental
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any qualified plan.
(b) To the best of the Acquiror's knowledge, the Acquiror Employee
Plans have been operated in compliance in all material respects with the terms
of the operative plan documents and the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or issued
thereunder and all other applicable governmental laws and regulations.
4.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Acquiror nor an
Acquiror Subsidiary is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under (i) any agreement, arrangement or understanding
pursuant to which any payment (whether of severance pay or otherwise) became or
may become due to any director, officer or employee of the Acquiror or an
Acquiror Subsidiary upon execution of this Agreement or upon or following
consummation of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events); (ii) any
agreement, arrangement or understanding pursuant to which the Acquiror or an
Acquiror Subsidiary is obligated to indemnify any director, officer, employee or
agent of the Acquiror or an Acquiror Subsidiary, (iii) any agreement,
arrangement or understanding to which the Acquiror or an Acquiror Subsidiary is
a party or by which any of the same is bound which limits the freedom of the
Acquiror or an Acquiror Subsidiary to compete in any line of business or with
any person, (iv) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the FRB, the FDIC, the NYSBD or any other
regulatory agency, (v) any other agreement, arrangement or understanding which
would be required to be filed as an exhibit to the Acquiror's Annual Report on
Form 10-K under the Exchange Act and which has not been so filed or (vi) any
32
other agreement, arrangement or understanding which, if entered into after the
date hereof, would require the consent of the Company under Section 5.6(b)
hereof.
(b) Neither the Acquiror nor any Acquiror Subsidiary is in default or
in non-compliance, which default or non-compliance could reasonably be expected
to have a Material Adverse Effect on the Acquiror, under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party or by which its assets, business or operations may be
bound or affected, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event that
with the lapse of time or the giving of notice, or both, would constitute such a
default or non-compliance.
4.16 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
4.17 INSURANCE
The Acquiror and each Acquiror Subsidiary is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with
commercially reasonable business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
4.18 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected, and to be reflected, in the
Acquiror's reports referred to in Section 4.6(b) hereof, and shown, and to be
shown, on the balance sheets contained in the Acquiror Financial Statements have
been, and will be, established in accordance with the requirements of, and was
and will be adequate under, GAAP and all applicable regulatory criteria.
4.19 LOANS
Each loan reflected as an asset in the Acquiror 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 the Acquiror.
4.20 ACCOUNTING FOR THE MERGER; REORGANIZATION
33
As of the date hereof, the Acquiror, after consultation with Deloitte &
Touche LLP, 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 Code.
4.21 FAIRNESS OPINION
The Acquiror has received a written opinion from Xxxxx, Xxxxxxxx &
Xxxxx, Inc. to the effect that, as of the date hereof, the consideration to be
paid pursaunt to Article II hereof is fair, from a financial point of view, to
the shareholders of the Acquiror.
4.22 LABOR
No work stoppage involving the Acquiror or an Acquiror Subsidiary is
pending or, to the best knowledge of the Acquiror, threatened. Neither the
Acquiror nor an Acquiror Subsidiary is involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving the employees of the Acquiror or an Acquiror Subsidiary
which could have a Material Adverse Effect on the Acquiror. Employees of the
Acquiror and the Acquiror Subsidiaries are not represented by any labor union
nor are any collective bargaining agreements otherwise in effect with respect to
such employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror or any of the
Acquiror Subsidiaries during the past five years.
4.23 OWNERSHIP OF COMPANY COMMON STOCK
As of the date hereof, neither the Acquiror nor, to its best knowledge,
any of its Affiliates or associates, (i) beneficially own, directly or
indirectly, or (ii) are parties to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of Company Common Stock which in the aggregate represent 5% or more of
the outstanding shares of Company Common Stock (other than shares held in a
fiduciary capacity and beneficially owned by third parties, shares taken in
consideration of debts previously contracted or in the case of the Acquiror
shares which may be acquired pursuant to the Company Stock Option Agreement).
4.24 DISCLOSURES
The representations and warranties of the Acquiror made pursuant to
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.
34
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the
Company and the Acquiror shall use its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary or advisable under applicable laws and regulations so as to
permit consummation of the Merger as promptly as reasonably practicable, and to
otherwise enable consummation of the transactions contemplated hereby, and shall
cooperate fully with the other party hereto to that end.
5.2 SHAREHOLDER MEETING
The Company shall take all action necessary to properly call and
convene a 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 the Company will recommend that
the shareholders of the Company approve this Agreement and the transactions
contemplated hereby, provided that the Board of Directors of the Company may
fail to make such recommendation, or withdraw, modify or change any such
recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall cooperate with each other in the
preparation of, and the prompt filing of the Form S-4, including the Proxy
Statement. Each of the Acquiror and the Company shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing, and the Company shall thereafter
promptly mail the Proxy Statement to its shareholders. The Acquiror also shall
use its reasonable best efforts to obtain all necessary state securities law or
"blue sky" permits and approvals required to carry out the issuance of Acquiror
Common Stock pursuant to the Merger and all other transactions contemplated by
this Agreement, and the Company shall furnish all information concerning the
Company and the holders of the Company Common Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and, within 60 days of the date hereof, file
all necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all Governmental Entities and third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement (including
35
without limitation the Merger). The Acquiror and the Company shall have the
right to review in advance, and to the extent practicable each will consult with
the other on, in each case subject to applicable laws relating to the exchange
of information, all the information which appears in any filing made with or
written materials submitted to any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. 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 all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each
other with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such access
shall be reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations. Each party and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
36
(b) The Acquiror may request, within 45 days from the date hereof, the
Company to conduct at the Acquiror's expense environmental audits by an
independent qualified environmental engineer or consultant (the "Environmental
Consultant") of any parcel or parcels of real property owned by the Company. The
Environmental Consultant shall conduct any audits or other investigations
pursuant to this Section 5.4(b) with reasonable care and subject to customary
practices among environmental consultants and engineers, including without
limitation, following completion thereof the restoration of any site to the
extent practicable to its condition prior to such audit or investigation and the
removal of all monitoring xxxxx.
(c) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish was already in its possession prior to the disclosure thereof by
the party furnishing the information; (y) was then generally known to the
public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof and shall cooperate with the other party so that the other party
may seek an appropriate protective order.
5.5 PRESS RELEASES
The Acquiror and the Company shall agree with each other as to the form
and substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use all
commercially reasonable efforts to (x) preserve its business organization and
that of the Bank
37
intact, (y) keep available to itself and the Acquiror the present services of
the employees of the Company and the Bank and (z) preserve for itself and the
Acquiror the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $0.07 per share, which shall be declared and paid at
approximately the same time as dividends on the Acquiror Common Stock,
it being the intention of the parties that the shareholders of the
Company receive dividends for any particular calendar quarter on either
the Company Common Stock or the Acquiror Common Stock acquired in
exchange therefor pursuant to the terms of this Agreement but not both,
provided, however, that nothing contained herein shall be deemed to
affect the ability of a Company Subsidiary to pay dividends on its
capital stock to the Company;
(ii) issue any shares of its capital stock, other than in the
case of the Company pursuant to the Company Stock Option Agreement and
upon exercise of the Company Options referred to in Section 3.1 hereof,
or issue, grant, modify or authorize any Rights, other than the Company
Stock Option Agreement; purchase any shares of Company Common Stock; or
effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
(iii) amend its Certificate of Incorporation, Charter, Bylaws
or similar organizational documents; impose, or knowingly suffer the
imposition, on any share of stock or other ownership interest held by
the Company in a Company Subsidiary of any lien, charge or encumbrance
or permit any such lien, charge or encumbrance to exist; or waive or
release any material right or cancel or compromise any material debt or
claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except (i) as
Previously Disclosed, (ii) as may be required pursuant to binding
commitments existing on the date hereof, (iii) as may be required by
law and (iv) merit increases in accordance with past practices, normal
cost-of-living increases and normal increases related to promotions or
increased job responsibilities;
(v) except as Previously Disclosed, enter into or, except as
may be required by law, modify any pension, retirement, stock option,
restricted stock, stock purchase, stock appreciation right, savings,
profit sharing, deferred compensation, supplemental retirement,
consulting, bonus, group insurance or other employee benefit, incentive
or welfare contract,
38
plan or arrangement, or any trust agreement related thereto, in respect
of any of its directors, officers or employees; make any contributions
to the Company Pension Plan, except as required by the presently
existing terms of the Company Pension Plan or the policies under which
it is operated as of the date hereof; or make any contributions to the
Company ESOP, other than necessary to enable the Company ESOP to make
required payments on its indebtedness as of the date hereof;
(vi) enter into (w) any transaction, agreement, arrangement or
commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by the Company or a Company Subsidiary or guarantee by the
Company or any Company Subsidiary of any such obligation, except in the
case of the Bank for deposits, FHLB advances, federal funds purchased
and securities sold under agreements to repurchase in the ordinary
course of business consistent with past practice, (y) any agreement,
arrangement or commitment relating to the employment of an employee or
consultant, or amend any such existing agreement, arrangement or
commitment, provided that the Company and the Bank may employ an
employee or consultant in the ordinary course of business if the
employment of such employee or consultant is terminable by the Company
or the Bank at will without liability, other than as required by law;
or (z) any contract, agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the fiscal
year ended March 31, 1997, except as required by changes in laws or
regulations or GAAP, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for the fiscal year
ended March 31, 1997, except as required by changes in laws or
regulations;
(viii) make any capital expenditures in excess of $10,000
individually or $50,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair; or
enter into as lessee any new lease of real property or any new lease of
personal property providing for annual payments in excess of $5,000;
(ix) file any applications or make any contract with respect
to branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) control over or any equity
interest in any business or entity, except for investments in
marketable equity securities in the ordinary course of business and not
exceeding 2% of the outstanding shares of any class;
(xi) enter into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market
39
rates of interest (other than forward commitments to sell loans in the
ordinary course of business);
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xiii) change or modify in any material respect any of its
lending or investment policies, except to the extent required by law or
an applicable regulatory authority;
(xiv) take any action that would prevent or impede the Merger
from qualifying (A) for pooling-of-interests accounting treatment under
GAAP or (B) as a reorganization within the meaning of Section 368 of
the Code, provided, however, that nothing contained herein shall limit
the ability of the Company to comply with its obligations under the
Company Stock Option Agreement;
(xv) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time;
(xvi) terminate the employment of Xx. Xxxxxxx or Xx. Xxxxxx
without cause; or
(xvii) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, the Acquiror shall continue to conduct its business
and the business of the Acquiror Subsidiaries in the ordinary course consistent
with past practice. During such period, the Acquiror also will use all
commercially reasonable efforts to (x) preserve its business organization and
that of the Acquiror Bank intact, (y) keep available to itself the present
services of the employees of the Acquiror and the Acquiror Bank and (z) preserve
for itself the goodwill of the customers of the Acquiror and the Acquiror Bank
and others with whom business relationships exist. Without limiting the
generality of the foregoing, except with the prior written consent of the
Company or as expressly contemplated hereby, between the date hereof and the
Effective Time, the Acquiror shall not, and shall cause each Acquiror Subsidiary
not to:
(i) amend its Certificate of Incorporation or Bylaws in a
manner which would adversely affect in any manner the terms of the
Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby; or impose, or knowingly suffer the
imposition, on any share of stock or other ownership interest held by
the Acquiror in an Acquiror Subsidiary of any lien, charge or
encumbrance or permit any such lien, charge or encumbrance to exist;
40
(ii) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the
ability of the Acquiror to consummate the transactions contemplated
hereby, or enter into any agreement providing for, or otherwise
participate in, any merger, consolidation or other transaction in which
the Acquiror or any surviving corporation may be required not to
consummate the Merger or any of the other transactions contemplated
hereby in accordance with the terms of this Agreement;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of
Directors in the ordinary course of business and consistent with past
practice, provided, however, that nothing contained herein shall be
deemed to affect the ability of (x) an Acquiror Subsidiary to pay
dividends on its capital stock to the Acquiror or (y) the Acquiror to
repurchase shares of Acquiror Common Stock, unless otherwise prohibited
by clause (iv) below;
(iv) take any action that would prevent or impede the Merger
from qualifying (A) for pooling-of-interests accounting treatment under
GAAP or (B) as a reorganization within the meaning of Section 368 of
the Code; provided, however, that nothing contained herein shall limit
the ability of the Acquiror to exercise its rights under the Company
Stock Option Agreement;
(v) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(vi) enter into an agreement with respect to an Acquisition
Transaction with a third party which is conditioned (explicitly or
implicitly) on the Acquiror not completing the Merger; provided, that
the foregoing shall not prevent the Acquiror or any Acquiror Subsidiary
from acquiring any other assets or businesses or from discontinuing or
disposing of any of its assets or business if such action is, in the
reasonable judgment of the Acquiror, desirable in the conduct of the
business of the Acquiror and the Acquiror Subsidiaries and would not,
in the reasonable judgment of the Acquiror, likely delay the Effective
Time to a date subsequent to the date set forth in Section 7.1(e) of
this Agreement. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Acquiror, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of the Acquiror
or (z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
20% or more of the voting power of the Acquiror.
(vii) agree to do any of the foregoing.
41
5.7 CERTAIN ACTIONS
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an Affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror orally and in writing of any such request for
information or of any such negotiations or discussions, as well as instruct its
and its Subsidiaries' directors, officers, representatives and
42
agents to refrain from taking any action prohibited by this Section 5.7. The
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than the Acquiror with respect to any of the foregoing.
5.8 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective
Time, 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 in the case of the Acquiror and March 31 in the case of the
Company), the Company and the Acquiror 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
ending December 31 in the case of the Acquiror and March 31 in the case of the
Company, the Company and the Acquiror will deliver to the other party its Annual
Report on Form 10-K. Within 35 days after the end of each month, the Company and
the Acquiror will deliver to the other party a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with GAAP.
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, the Acquiror, in the case of an indemnification obligation
of the Company, or the applicable Company Subsidiary or its successor by merger,
in the case of an indemnification obligation of a Company Subsidiary (the
Acquiror or such Company Subsidiary, as applicable, being referred to herein as
the "Indemnifying Party") shall provide indemnification (including advancement
of expenses, if applicable) to each present and former director, officer or
employee of the Company or a Company Subsidiary and each officer or employee of
the Company or its Subsidiaries that is serving or has served as a director or
trustee of another entity expressly at the Company's request or direction, in
each case determined as of the Effective Time (the "Indemnified Parties"), with
respect to any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether, civil,
criminal, administrative or investigative, arising out of matters existing or
occurring at or prior to the Effective Time, (including the transactions
contemplated by this Agreement, including the entering into of the Company Stock
Option Agreement), if first asserted or claimed prior to the date hereof and
Previously Disclosed, if first asserted or claimed between the date hereof and
the Effective Time and disclosed pursuant to Section 5.13 hereof or if first
asserted or claimed after the Effective Time, to
43
the fullest extent, if any, that such Indemnified Party, would have been
entitled to indemnification or the advancement of expenses by the Company under
Article X of its Certificate of Incorporation on the one hand or by the Bank
under Article XII of its Bylaws on the other hand ("the Indemnification
Rights"), as in effect on the date hereof and Previously Disclosed, provided,
however, that all rights to indemnification in respect of any claim asserted or
made within such period shall continue until the final disposition of such
claim, and provided, further, that nothing contained herein shall enlarge the
rights to indemnification contained in the Indemnification Rights or extend or
be deemed a waiver of any applicable statute of limitations in respect of any
claim or claim for indemnification. Without limiting the foregoing, the Acquiror
also agrees that all limitations of liability existing in favor of the
Indemnified Parties in Article IX of the Certificate of Incorporation of the
Company, as in effect on the date hereof and Previously Disclosed, arising out
of matters existing or occurring at or prior to the Effective Time shall survive
the Merger and shall continue in full force and effect.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest) in accordance with the obligations set forth in
Section 5.9(a) hereof, (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Acquiror shall maintain the Company's existing directors' and
officers' liability insurance policy (or purchase an insurance policy providing
coverage on substantially the same terms and conditions) for acts or omissions
occurring prior to the Effective Time by persons who are currently covered by
such insurance policy maintained by the Company
44
for a period of six years following the Effective Time, provided, however, that
in no event shall the Acquiror be required to expend on an annual basis more
than 125% of the amount paid by the Company as of the date hereof for such
insurance coverage (the "Insurance Amount") to maintain or procure such
insurance coverage, and further provided that if the Acquiror is unable to
maintain or obtain the insurance called for hereby, the Acquiror shall use all
reasonable efforts to obtain as much comparable insurance as is available for
the Insurance Amount. At the request of the Acquiror, the Company shall use
reasonable efforts to procure the insurance coverage referred to in the
preceding sentence prior to the Effective Time on the terms set forth in such
sentence.
(d) In the event that the Acquiror 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 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 DIRECTORS
The Acquiror agrees to take all action necessary to appoint or elect,
effective as of the Effective Time, one director of the Company as of the date
hereof selected by the Acquiror as a director of the Acquiror, to serve as a
Class II director (as described in the Acquiror's most recent proxy statement)
and until his successor is elected and qualified. Further, the Acquiror agrees
to take all action necessary to appoint or elect, effective as of the Effective
Time, those directors of the Company as of the date hereof who so desire, other
than the director who becomes a member of the Acquiror's Board of Directors, to
serve on the Acquiror's Chairman's Council. Each such person shall serve at the
discretion of the Chairman of the Board of the Acquiror.
5.11 BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time,
and at the discretion of the Acquiror, the Acquiror will take all reasonable
action so that employees of the Company and its Subsidiaries will be entitled to
participate in the Acquiror Employee Plans of general applicability, and until
such time the Company Employee Plans shall remain in effect, provided that no
employee of the Company or a Company Subsidiary who becomes an employee of the
Acquiror and subject to the Acquiror's medical insurance plans shall be excluded
from coverage thereunder on the basis of a preexisting condition that was not
also excluded under the Company's medical insurance plans, except to the extent
such preexisting condition was excluded from coverage under the Company's
medical insurance plans, in which case this Section 5.11(a) shall not require
coverage for such preexisting condition. For purposes of determining eligibility
to participate in and the vesting of benefits (but not for purposes of benefit
accrual) under the Acquiror Employee Plans, the
45
Acquiror shall recognize years of service with the Company and a Company
Subsidiary prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the employment
of any employee of the Company or any Company Subsidiary (other than any
employee who is party to an employment agreement, employee retention agreement
as Previously Disclosed) is involuntarily terminated within one year of the
Effective Time, such employee will be entitled to receive severance and other
benefits, in accordance with, and to the extent provided by the Company's
Severance Plan, which has been Previously Disclosed. For purposes of determining
benefits under the Company's Severance Plan, the Acquiror shall recognize years
of service and unused vacation with the Company and a Company Subsidiary prior
to the Effective Time.
(c) Following the Merger, the Surviving Corporation and the Bank shall
honor in accordance with their terms the agreements to be entered into, as of
the Effective Time, by Xx. Xxxxxxx and Xx. Xxxxxx and the Bank, in the forms as
attached hereto as Exhibits F and G, respectively. These agreements will replace
and supersede the employment agreements entered into by Xx. Xxxxxxx and the
Company and the Bank and Xx. Xxxxxx and the Company and the Bank, all as
Previously Disclosed. Following the Merger, the Surviving Corporation shall, or
shall cause the Bank to, honor in accordance with their terms the Company or
Bank employee retention agreements which have been Previously Disclosed. The
provisions of this Section 5.11(c) are intended to be for the benefit of, and
shall be enforceable by, each party to, or beneficiary of, the foregoing
agreements or arrangements, and his or her representatives.
5.12 RESERVES AND MERGER-RELATED COSTS
On or before the Closing Date, and at the written request of the
Acquiror, the Company shall 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 the Company to those of the
Acquiror (as such practices and methods are to be applied to the Company from
and after the Effective Time) and Acquiror's plans with respect to the conduct
of the business of the Company following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by the Company, provided, however,
that the Company shall not be required to take such action (A) more than five
business days prior to the Closing Date; and (B) unless the Acquiror agrees in
advance in writing that all conditions to closing set forth in Sections 6.1 and
6.3 have been satisfied or waived (except for the expiration of any applicable
waiting periods). No accrual or reserve made by the Company or any Company
Subsidiary pursuant to this subsection, or any litigation or
46
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 7.1(b) hereof.
5.13 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.14 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each party will promptly
inform the other party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity or
third party or which would otherwise prevent or materially delay completion of
the Merger.
5.15 AFFILIATES
Promptly, but in any event within two weeks, after the execution and
delivery of this Agreement, the Company shall deliver to the Acquiror (a) a
letter identifying all persons who, to the knowledge of the Company, may be
deemed to be affiliates of the Company under Rule 145 of the Securities Act and
the pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of the Company and (b) copies of letter
agreements, each substantially in the form of Exhibit B, executed by each such
person so identified as an affiliate of the Company agreeing to comply with Rule
145 and to refrain from transferring shares of either Company Common Stock or
Acquiror Common Stock, as the case may be, as required by the
pooling-of-interests accounting rules. The Acquiror agrees to publish as soon as
possible, but in no event later than 60 days following the consummation of the
Merger, combined revenues and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
47
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - THE ACQUIROR AND THE COMPANY
The respective obligations of the Acquiror and the Company to effect
the Merger shall be subject to satisfaction of the following conditions at or
prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger shall have been duly
and validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the consummation of the Merger
shall have been received, without the imposition of any term or condition that
could have a Material Adverse Effect on the Acquiror upon completion of the
Merger, and all statutory waiting periods in respect thereof shall have expired;
and the Acquiror and the Company shall have procured all other approvals,
consents and waivers of each person (other than the Governmental Entities
referred to above) whose approval, consent or waiver is necessary to the
consummation of the Merger.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger.
(d) The Form S-4 shall have become effective under the Securities Act,
and the Acquiror shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for listing on the American Stock Exchange.
(f) The Acquiror and the Company shall have received the written
opinion of either the Acquiror's independent public accountants or counsel to
the Acquiror which is reasonably satisfactory to the Company, which opinion
shall be addressed to each of the Acquiror and the Company and reasonably
satisfactory to it, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and that (i) except
for cash received in lieu of fractional share interests, holders of Company
Common Stock who exchange such stock for Acquiror Common Stock in the Merger
will not recognize income, gain or loss for federal income tax purposes, (ii)
the basis of such Acquiror Common Stock will equal the basis of the Company
Common Stock for which it is exchanged and (iii) the holding period of such
Acquiror
48
Common Stock will include the holding period of the Company Common Stock for
which it is exchanged, assuming that such stock is a capital asset in the hands
of the holder thereof at the Effective Time. Such opinion shall be based on such
written representations from the Acquiror, the Company and others as such
independent public accountants or counsel shall reasonably request as to factual
matters.
(g) KPMG Peat Marwick LLP shall have issued a letter dated as of the
Effective Time to the Company and Deloitte & Touche LLP shall have issued a
letter dated as of the Effective Time to the Acquiror, to the effect that, based
on a review of this Agreement and related agreements and the facts and
circumstances then known to it, the Merger shall be accounted for as a
pooling-of-interests under GAAP, and the Acquiror and the Company shall have
received from the Affiliates of the Company and the Acquiror the agreements
attached hereto as Exhibits B and E, respectively, to the extent necessary to
ensure in the reasonable judgment of the Acquiror and the Company that the
Merger shall be accounted for in such manner.
6.2 CONDITIONS PRECEDENT - THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror set forth in
Article IV hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate,
dated the date of the Closing and signed by its President and Chief Executive
Officer and by its Chief Financial Officer, to the effect that the conditions
set forth in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) No order, injunction or decree shall have been issued by any court
or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(e) The Company shall have received an opinion of Elias, Matz, Xxxxxxx
& Xxxxxxx LLP, counsel to the Acquiror, dated the Closing Date, in form and
substance reasonably satisfactory to the Company and its counsel to the effect
set forth in Exhibit H attached hereto.
(f) The Acquiror shall have furnished the Company with such
certificates of its respective officers or others and such other documents to
evidence fulfillment of the conditions set
49
forth in Sections 6.1 and 6.2 as such conditions relate to the Acquiror as the
Company may reasonably request.
6.3 CONDITIONS PRECEDENT - THE ACQUIROR
The obligations of the Acquiror to effect the Merger shall be subject
to satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a certificate,
dated the date of the Closing and signed by its President and Chief Executive
Officer and by its Chief Financial Officer, to the effect that the conditions
set forth in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No order, injunction or decree shall have been issued by any court
or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(e) The Acquiror shall have received an opinion of Xxxxxxx Xxxxxxxx &
Wood, counsel to the Company, dated the Closing Date, in form and substance
reasonably satisfactory to the Acquiror and its counsel to the effect set forth
on Exhibit I attached hereto.
(f) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto, if the Board of Directors of each so
determines by vote of a majority thereof;
50
(b) at any time on or prior to the Effective Time, by the Acquiror or
the Company in writing, if its Board of Directors so determine by vote of a
majority thereof, if the other party has, in any material respect, breached (i)
any material covenant or undertaking contained herein or (ii) any representation
or warranty contained herein, in any case if such breach would have a Material
Adverse Effect on the party and has not been 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 Time;
(c) at any time, by either party hereto in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Merger is denied or withdrawn at the request or recommendation of
the Governmental Entity which must grant such approval, unless within the
twenty-day period following such denial or withdrawal a petition for rehearing
or an amended application has been filed with the applicable Governmental
Entity, provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 7(c)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein, or (ii) if any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by this Agreement;
(d) at any time, by either party hereto in writing, if the shareholders
of the Company do not approve this Agreement after a vote taken thereon at a
meeting duly called for such purpose (or at any adjournment thereof), unless the
failure of such occurrence shall be due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
herein to be performed or observed by such party at or before the Effective
Time;
(e) by either the Company or the Acquiror in writing if the Effective
Time has not occurred by the close of business on December 31, 1998, provided
that this right to terminate shall not be available to any party whose failure
to perform an obligation in breach of such party's obligations under this
Agreement has been the cause of, or resulted in, the failure of the Merger and
the other transactions contemplated hereby to be consummated by such date;
(f) by the Company if the Average Closing Price is less than $15.00,
subject to the next three sentences. If the Company elects to exercise its
termination right pursuant to this Section 7.1(f), it shall give written notice
to the Acquiror (provided that such notice of election to terminate may be
withdrawn at any time). During the five-day period commencing with its receipt
of such notice, the Acquiror shall have the option to increase the consideration
to be received by the holders of the Company Common Stock hereunder by adjusting
the Exchange Ratio to equal a number (calculated to the nearest one-hundredth)
obtained by dividing (A) $18.60 by (B) the Average Closing Price. If the
Acquiror so elects within such five-day period, it shall give prompt written
notice to the Company of such election and the revised Exchange Ratio, whereupon
no termination shall have occurred pursuant to this Section 7.1(f) and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified).
7.2 EFFECT OF TERMINATION
51
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality, expenses and termination fee set forth
in Section 5.4(c) and Section 8.1, respectively, and this Section 7.2 shall
survive any such termination and (ii) a termination pursuant to Section 7.1(b),
(c), (d) or (e) shall not relieve the breaching party from liability for willful
breach of any covenant, undertaking, representation or warranty giving rise to
such termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished at, the Effective Time other than covenants that by their terms are
to be performed after the Effective Time (including without limitation the
covenants set forth in Sections 5.9, 5.10 and 5.11 hereof), provided that the
covenant of the Acquiror contained in Section 5.6(b)(iv) hereof shall survive
and be applicable following the Effective Time, and further provided that no
such representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive the Acquiror or the Company (or any director,
officer or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either the Acquiror
or the Company.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Company) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and may waive (i) any inaccuracies of the other party in the representations or
warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements of
the other party, (iii) to the extent permitted by law, satisfaction of any of
the conditions precedent to its obligations contained herein or (iv) the
performance by the other party of any of its obligations set forth herein,
provided that any such waiver granted, or any amendment or supplement pursuant
to Section 7.5 hereof executed after shareholders of the Company have approved
this Agreement shall not modify either the amount or form of the consideration
to be provided hereby to the holders of Company Common Stock upon consummation
of the Merger or otherwise materially adversely affect such shareholders without
the approval of the shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized by or
under the direction of their respective Boards of Directors.
ARTICLE VIII
52
MISCELLANEOUS
8.1 EXPENSES; TERMINATION FEE
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, provided that (i) expenses of printing the Form S-4 and
the registration fee to be paid to the Commission in connection therewith shall
be shared equally between the Company and the Acquiror and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither the Acquiror nor
the Company shall be released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
(b) In the event that this Agreement is terminated by the Acquiror
pursuant to Section 7.1(b), and no Purchase Event or Preliminary Purchase Event,
as defined in the Company Stock Option Agreement, shall have occurred, the
Company shall pay to the Acquiror within five business days of any such
termination by the Acquiror, in immediately available funds, the sum of
$500,000. In the event that a Purchase Event, as defined in the Company Stock
Option Agreement, shall have occurred during the 12 month period referred to in
Section 3(a)(C) of the Company Stock Option Agreement and the Acquiror shall
elect to exercise its right to exercise the Option granted to it pursuant to the
Company Stock Option Agreement, then the Acquiror shall, concurrently with such
Option exercise return to the Company the $500,000 received pursuant to the
prior sentence, together with interest earned thereon at the federal funds rate
from the date of receipt to the date of repayment. In the event that this
Agreement is terminated by the Company pursuant to Section 7.1(b), the Acquiror
shall pay to the Company within five business days of any such termination by
the Company, in immediately available funds, the sum of $250,000.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors. 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 as set forth in Sections 5.9, 5.10 and 5.11(b) and (c) hereof.
8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight
53
mail service or by registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
If to the Acquiror:
U.S.B. Holding Co., Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Senior Executive Vice President and Chief Financial
Officer
Fax: (000) 000-0000
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
12th Floor
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to the Company:
Tappan Zee Financial, Inc.
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Fax: (000) 000-0000
With a required copy to:
Xxxxxxx Xxxxxxxx & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth
54
in Section 6.1(f) hereof, (ii) the transaction will still be accounted for as a
pooling-of-interests under GAAP, (iii) consideration to be paid to the holders
of the Company Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification and (iv) such modification will not materially
delay or jeopardize receipt of any required regulatory approvals or any other
condition to the obligations of the Acquiror set forth in Sections 6.1 and 6.3
hereof.
55
56
8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 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.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and entirely to
be performed within such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
U.S.B. HOLDING CO., INC.
Attest:
/s/ Xxxxxxx X. Fury By: /s/ Xxxxxx X. Xxxxx
----------------------------- -----------------------------
Name: Xxxxxxx X. Fury Name: Xxxxxx X. Xxxxx
Title: Secretary Title: President and Chief
Executive Officer
TAPPAN ZEE FINANCIAL, INC.
Attest:
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------- -----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Secretary Title: President and Chief Executive
Officer
57
EXHIBIT A
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of March 6, 1998 (the "Agreement"),
between Tappan Zee Financial, Inc., a Delaware corporation ("Issuer"), and
U.S.B. Holding Co., Inc., a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of March 6, 1998 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan, Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 294,134 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") of $18.50, provided, however, that in no
event shall the number of Option Shares for which the Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer Common Stock without
giving effect to any shares subject to or issued pursuant to the Option.
1
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b) thereof (a
"Default Termination"), (C) 12 months after the termination of the Plan by
Grantee pursuant to a Default Termination, and (D) 12 months after termination
of the Plan (other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; and provided,
further, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws, including without limitation the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and the Home Owners'
Loan Act, as amended ("HOLA"). The term "Holder" shall mean the holder or
holders of the Option from time to time, and which is initially Grantee. The
rights set forth in Section 8 hereof shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise of the
Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 25% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
2
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 15% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHCA, the HOLA, the Bank Merger Act, as amended, or the Change in
Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a date not earlier than three
business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), provided that the
first notice of exercise shall be
3
sent to Issuer within 180 days after the first Purchase Event of which Grantee
has been notified and, provided further, that if prior notification to or
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the Office of Thrift Supervision ("OTS") or any other
Governmental Entity is required in connection with such purchase, Holder shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the three business day and 15 business day
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS
OF A STOCK OPTION AGREEMENT DATED AS OF MARCH __, 1998. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
4
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable Purchase Price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Certificate of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) AUTHORIZED STOCK. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance upon
exercise of the Option that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time
5
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer as follows:
(a) DUE AUTHORIZATION. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Grantee
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Certificate of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument or
obligation to which Grantee is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Grantee or any of its properties or
assets.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common
6
Stock shall be changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property or the outstanding shares of
Issuer Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company, or (iii) to sell or otherwise transfer assets representing more
than 50% of the consolidated assets of Issuer and its subsidiaries to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case (but at the election of the Holder in the case of clause (iii)), the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction of which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of assets
representing more than 50% of the consolidated assets of Issuer and its
subsidiaries.
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price
per share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has been made, (x) the price per share of Issuer Common
Stock to be paid by any third party pursuant to an agreement with
Issuer, (y) the highest closing price for shares of Issuer Common Stock
7
within the six-month period immediately preceding the consolidation,
merger or sale in question and (z) in the event of a sale of assets
representing more than 50% of the consolidated assets of Issuer and its
subsidiaries or deposits, an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current
market value of the remaining assets of Issuer, as determined by a
nationally-recognized investment banking firm selected by Holder,
divided by (ii) the number of shares of Issuer Common Stock outstanding
at such time. In the event that a Tender Offer or an Exchange Offer is
made for Issuer Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls such
person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision) than other shares
of common stock issued by Substitute Option Issuer).
8
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval), in which case the ten-day period referred to in the first sentence of
this Section 8(b) shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. If the
Federal Reserve Board, the OTS or any other Governmental Entity disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give
9
notice of such fact to Holder. If the Federal Reserve Board, the OTS or any
other Governmental Entity prohibits the repurchase in part but not in whole,
then Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by the Federal Reserve Board, the OTS or other Governmental
Entity, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five business days of receipt
of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement
10
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of Issuer Common Stock or
other securities that have been acquired by or are issuable to Holder upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by Holder in such request, including without limitation a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and Issuer shall use its best efforts to qualify such
shares or other securities for sale under any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof, and (B) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders concerned were afforded the opportunity to
11
register such shares under the Securities Act and such shares were
registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder
or Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) EXPENSES. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b);
provided, however, that underwriting discounts and commissions relating to
Option Shares, fees and disbursements of counsel to the Holder(s) of Option
Shares being registered and any other expenses incurred by such Holder(s) in
connection with any such registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
12
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Issuer, the
selling Holders and the underwriters in connection with the statement or
omissions which results in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any amount
in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(g) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Holder to indemnify shall be several
and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any
13
Option Shares by the Holder(s) in accordance with and to the extent permitted by
any rule or regulation permitting nonregistered sales of securities promulgated
by the Commission from time to time, including, without limitation, Rule 144A.
Issuer shall at its expense provide the Holder with any information necessary in
connection with the completion and filing of any reports or forms required to be
filed by them under the Securities Act or the Exchange Act, or required pursuant
to any state securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision by
written instrument signed by a duly authorized executive officer of such party.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
14
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
U.S.B. Holding Co., Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Senior Executive Vice President and
Chief Financial Officer
Fax: (000) 000-0000
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X., 00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
15
If to Issuer:
Tappan Zee Financial, Inc.
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Fax: (000) 000-0000
16
With a required copy to:
Xxxxxxx Xxxxxxxx & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
17
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
U.S.B. HOLDING CO., INC.
Attest:
By:
----------------------------- -----------------------------
Name: Xxxxxxx X. Fury Name: Xxxxxx X. Xxxxx
Title: Secretary Title: President and Chief
Executive Officer
TAPPAN ZEE FINANCIAL, INC.
Attest:
By:
----------------------------- -----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Secretary Title: President and Chief
Executive Officer
18
EXHIBIT B
March__, 1998
U.S.B. Holding Co., Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
U.S.B. Holding Co., Inc. ("USB") and Tappan Zee Financial, Inc.
("Tappan Zee") desire to enter into an agreement dated March__, 1998
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) Tappan Zee will merge with and into USB with USB surviving the
merger, and (b) shareholders of Tappan Zee will receive common stock of USB in
exchange for common stock of Tappan Zee outstanding on the closing date (the
foregoing, collectively, referred to herein as the "Merger").
The undersigned have been advised that as of the date of this letter
each may be deemed to be an "affiliate" of Tappan Zee, as the term "affiliate"
is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations promulgated under the Securities Act of 1993, as amended (the
"Securities Act") by the Securities and Exchange Commission (the "Commission")
and as the term "affiliate" is used for purposes of the Commission's rules and
regulations applicable to the determination of whether a merger can be accounted
for as a "pooling-of-interests" as specified in the Commission's Accounting
Series Release 135, as amended by Staff Accounting Bulletins Nos. 65 and 76
("ASR 135").
USB has required, as a condition to its execution and delivery to
Tappan Zee of the Agreement, that the undersigned, being directors and executive
officers of Tappan Zee, execute and deliver to USB this Letter Agreement.
In consideration of the foregoing, each of the undersigned hereby
irrevocably:
(a) Agrees to be present (in person or by proxy) at all
meetings of shareholders of Tappan Zee called to vote for approval of the
Agreement and the Merger so that all shares of common stock of Tappan Zee then
owned by the undersigned will be counted for the purpose of determining the
presence of a quorum at such meetings and to vote or cause to be voted all such
shares other than any such shares owned through a Company Employee Plan (as
defined in the Agreement) (i) in favor of approval and adoption of the Agreement
and the transactions contemplated thereby (including any amendments or
modifications of the terms thereof approved by the Board of Directors of Tappan
Zee) and (ii) against approval or adoption of any other merger, business
combination, recapitalization, partial liquidation or similar transaction
involving Tappan Zee. Agrees to use reasonable best efforts to cause the Merger
to be consummated and, except as permitted by Section 5.7 of the Agreement, not
to solicit, initiate or engage in any negotiations or discussions with any party
other than USB with respect to any offer, sale, transfer or other
U.S.B. Holding Co., Inc.
March__, 1998
Page 2
disposition of, any shares of common stock of Tappan Zee now or hereafter owned
by the undersigned;
(b) Agrees not to vote or execute any written consent to
rescind or amend in any manner any prior vote or written consent, as a
shareholder of Tappan Zee, to approve or adopt the Agreement;
(c) Agrees not to offer, sell, transfer or otherwise dispose
of any shares of common stock of USB received in the Merger, except (i) at such
time as a registration statement under the Securities Act covering sales of such
USB common stock is effective and a prospectus is made available under the
Securities Act, (ii) within the limits, and in accordance with the applicable
provisions of, Rule 145(d) under the Securities Act, or (iii) in a transaction
which, in the opinion of counsel satisfactory to USB or as described in a
"no-action" or interpretive letter from the staff of the Commission , is not
required to be registered under the Securities Act; and acknowledges and agrees
that USB is under no obligation to register the sale, transfer or other
disposition of USB common stock by the undersigned or on behalf of the
undersigned, or to take any other action necessary to make an exemption from
registration available;
(d) Agrees that during the period beginning on the date hereof
and ending 30 days prior to the consummation of the Merger, shall not sell,
transfer, reduce the risk of the undersigned with respect to or otherwise
dispose of any shares of common stock of Tappan Zee without notifying USB in
advance of the proposed transfer and giving USB a reasonable opportunity to
review the transfer before it is consummated. USB, if advised to do so by its
independent public accountants, may instruct the undersigned not to make or
permit the transfer because it may interfere with the "pooling-of-interests"
treatment of the Merger. The undersigned shall abide by any such instructions.
(e) Agrees not to enter into any transactions with respect to
any shares of USB common stock during the 20 consecutive AMEX Trading Days (as
defined in the Agreement) ending with and including the date on which the last
of the regulatory approvals (as discussed in Section 6.1(b) of the Agreement)
required for consummation of the Merger is obtained.
(f) Notwithstanding the foregoing, agrees not to sell, or in
any other way reduce the risk of the undersigned relative to, any shares of
common stock of Tappan Zee or of common stock of USB, during the period
commencing thirty days prior to the effective date of the Merger and ending on
the date on which financial results covering at least thirty days of post-Merger
combined operations of USB and Tappan Zee have been published within the meaning
of Section 201.01 of the Commission's Codification of Financial Reporting
Policies, provided, however, that excluded from the foregoing undertaking shall
be such sales, pledges, transfers or other dispositions of shares of Tappan Zee
common stock or shares of USB common stock which, in USB's sole judgment, are
individually and in the aggregate de minimis within the meaning of Topic 2-E of
the Staff Accounting Bulletin Series of the SEC;
U.S.B. Holding Co., Inc.
March__, 1998
Page 3
(g) Agrees that neither Tappan Zee nor USB shall be bound by
any attempted sale of any shares of Tappan Zee common stock or USB common stock,
respectively, and Tappan Zee's and USB's transfer agents shall be given
appropriate stop transfer orders and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance with the terms
of this Letter Agreement; and further agrees that the certificate representing
shares of USB common stock owned by the undersigned will be endorsed with a
restrictive legend consistent with the terms of this Letter Agreement;
(h) Acknowledges and agrees that the provisions of
subparagraphs (c), (d), (e), (f) and (g) hereof also apply to shares of USB
common stock and Tappan Zee common stock owned by (i) his or her spouse, (ii)
any of his or her relatives or relatives of his or her spouse occupying his or
her home, (iii) any trust or estate in which he or she, his or her spouse, or
any such relative owns at least a 10% beneficial interest or of which any of
them serves as trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any Affiliate of the
undersigned, his or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest;
(i) Represents that the undersigned has no plan or intention
to sell, exchange, or otherwise dispose of any shares of common stock of USB
prior to expiration of the time period referred to in subparagraph (f) hereof;
and
(j) Represents that the undersigned has the capacity to enter
into this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
-------------------------
It is understood and agreed that the provisions of subparagraphs (a)
and (b) of this Letter Agreement relate solely to the capacity of the
undersigned as a shareholder or other beneficial owner of shares of Tappan Zee
common stock and is not in any way intended to affect the exercise by the
undersigned of the undersigned's responsibilities as a director or officer of
Tappan Zee. It is further understood and agreed that such subparagraphs of this
Letter Agreement are not in any way intended to affect the exercise by the
undersigned of any fiduciary responsibility which the undersigned may have in
respect of any shares of Tappan Zee common stock held by the undersigned as of
the date hereof.
-------------------------
The undersigned have carefully read this Letter Agreement and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon transfer of shares of
U.S.B. Holding Co., Inc.
March__, 1998
Page 4
Tappan Zee common stock or USB common stock to the extent that the undersigned
deems necessary with counsel of the undersigned's choice or counsel for Tappan
Zee.
-------------------------
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
-------------------------
This Letter Agreement shall terminate concurrently with any termination
of the Agreement in accordance with its terms.
-------------------------
U.S.B. Holding Co., Inc.
March__, 1998
Page 5
The undersigned intend to be legally bound hereby.
Sincerely,
Number of Shares of
Tappan Zee
Common Stock Owned
------------------
__________________________
Xxxxxx Xxxx
__________________________
Xxxxxxx X. Xxxxxxx
__________________________
Xxxx X. Xxxxxx
__________________________
Xxxxxx X. Xxxxx
__________________________
Xxxxx X. Xxxxxx
__________________________
Xxxxx X. Xxxxxxxx
__________________________
Xxxx X. Xxxxxxxx
EXHIBIT C
March__, 1998
U.S.B. Holding Co., Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Tappan Zee Financial, Inc.
Tarrytowns Bank, FSB
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
U.S.B. Holding Co., Inc. ("USB") and Tappan Zee Financial, Inc.
("Tappan Zee") desire to enter into an agreement dated March__, 1998
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) Tappan Zee will merge with and into USB with USB surviving the
merger, and (b) shareholders of Tappan Zee will receive common stock of USB in
exchange for common stock of Tappan Zee outstanding on the closing date (the
foregoing, collectively, referred to as the "Merger"). As a result of the
Merger, Tarrytowns Bank, FSB (the "Bank") will become a wholly owned subsidiary
of USB.
As part of the Agreement, USB desires to have the Bank and USB enter
into an agreement with the undersigned executive (the "Executive") in the form
set forth as Exhibit F to the Agreement upon consummation of the Merger (the
"New Consulting Agreement"), and to have the Bank and USB honor the terms of the
New Consulting Agreement. The New Consulting Agreement will replace and
supersede the Executive's Employment Agreement with Tappan Zee dated June 23,
1997 (the "1997 Tappan Zee Agreement") and the Executive's Employment Agreement
with the Bank dated June 23, 1997 (the "1997 Bank Agreement") (collectively, the
"1997 Agreements"). As part of this arrangement, USB and the Bank each
acknowledge and agree that the change of the Executive's employment status from
executive officer to consultant to occur upon the Executive's execution of the
New Consulting Agreement shall not be deemed to be the termination of the
Executive's employment or service with the Bank nor shall it be deemed to be the
"retirement" of the Executive for purposes of determining the length of any
exercise period applicable to stock options that have been awarded to the
Executive under Tappan Zee's 1996 Stock Option Plan for Officers and Employees
and which are outstanding as of the date hereof.
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 2
USB has required, as a condition to its execution and delivery to
Tappan Zee of the Agreement, that the undersigned Executive execute and deliver
to USB this Letter Agreement.
In order to induce USB to enter into the Agreement, and in
consideration of the New Consulting Agreement to be entered into upon
consummation of the Merger, the undersigned Executive hereby irrevocably (except
as set forth below):
(a) with respect to the Incentive Stock Option Agreement
between the Executive and Tappan Zee dated July 11, 1996 (the "Option
Agreement"), agrees that neither consummation of the Merger nor approval of the
Merger by Tappan Zee's shareholders shall result in an acceleration of the
Executive's right to exercise any of the options covered by the Option
Agreement, with it being understood that any such options which are not
exercisable as of consummation of the Merger shall continue to become
exercisable in accordance with the other terms of the Options Agreement and the
New Consulting Agreement, including those relating to retirement (as modified
herein), death or disability:
(b) with respect to the Restricted Stock Award Notice between
the Executive and Tappan Zee dated July 11, 1996 (the "Restricted Stock
Notice"), agrees that neither consummation of the Merger nor approval of the
Merger by Tappan Zee's shareholders shall result in any accelerated vesting of
the shares of stock covered by the Restricted Stock Notice, with it being
understood that any such restricted shares which have not vested as of
consummation of the Merger shall continue to vest in accordance with the other
terms of the Restricted Stock Notice and the New Consulting Agreement, including
those relating to retirement (as modified herein), death or disability;
(c) agrees to waive in connection with the transactions
contemplated by the Agreement, including but not limited to consummation of the
Merger, any rights which the Executive may have under Section 9(b)(vi) of the
1997 Tappan Zee Agreement and Section 9(b)(vi) of the 1997 Bank Agreement;
(d) in light of the proposed New Consulting Agreement, agrees
to waive in connection with the transactions contemplated by the Agreement,
including but not limited to consummation of the Merger, the provisions of
Section 17 of the 1997 Tappan Zee Agreement and Section 16 of the 1997 Bank
Agreement;
(e) provides written notice of non-extension to both Tappan
Zee and the Bank that his "Employment Period" (as defined in Section 2(a) of
both the 1997 Tappan Zee Agreement and the 1997 Bank Agreement) shall not be
extended any further, and as a result of this written notice of non-extension
being given in accordance with Section 2(b) of both the 1997 Tappan Zee
Agreement and the 1997 Bank Agreement, his "Employment Period" and his
"remaining Unexpired Employment Period" (as defined in Section 2(b) of both the
1997 Tappan Zee Agreement and the
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 3
1997 Bank Agreement) shall each end on the third anniversary of the date of this
Letter Agreement; and
(f) agrees not to retire or stop performing services prior to
or within one year following the consummation of the Merger for purposes of any
of the following benefits or plans: his Option Agreement; his Restricted Stock
Notice; and any other benefit plan of Tappan Zee or the Bank which is not a
qualified plan under Section 401(a) of the Internal Revenue Code.
This Letter Agreement shall terminate concurrently with any termination
of the Agreement in accordance with its terms, or concurrently with the
consummation of the Merger if the New Consulting Agreement has not been executed
and delivered by all parties other than the Executive, in which event the
written notice of non-extension in clause (e) above shall also be deemed null
and void. This Letter Agreement shall not impair or adversely affect any rights
which the Executive (or his legal representatives and testate or interstate
distributees) may have (i) under the 1997 Agreements in the event the
Executive's employment with Tappan Zee and the Bank is terminated prior to
consummation of the Merger due to the Executive's death or disability, or (ii)
under the New Consulting Agreement in the event the Executive's consulting
services with the Bank are terminated following consummation of the Merger due
to the Executive's death, disability or discharge without cause or, following
one year after consummation of the Merger, his retirement.
The under signed Executive intends to be legally bound hereby and has
affixed his signature hereto as of this __th day of March 1998.
__________________________
Xxxxxxx X. Xxxxxxx
EXHIBIT D
March__, 1998
U.S.B. Holding Co., Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Tappan Zee Financial, Inc.
Tarrytowns Bank, FSB
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
U.S.B. Holding Co., Inc. ("USB") and Tappan Zee Financial, Inc.
("Tappan Zee") desire to enter into an agreement dated March__, 1998
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) Tappan Zee will merge with and into USB with USB surviving the
merger, and (b) shareholders of Tappan Zee will receive common stock of USB in
exchange for common stock of Tappan Zee outstanding on the closing date (the
foregoing, collectively, referred to as the "Merger"). As a result of the
Merger, Tarrytowns Bank, FSB (the "Bank") will become a wholly owned subsidiary
of USB.
As part of the Agreement, USB desires to have the Bank and USB enter
into an agreement with the undersigned executive (the "Executive") in the form
set forth as Exhibit G to the Agreement upon consummation of the Merger (the
"New Employment Agreement"), and to have the Bank and USB honor the terms of the
New Employment Agreement. The New Employment Agreement will replace and
supersede the Executive's Employment Agreement with Tappan Zee dated June 23,
1997 (the "1997 Tappan Zee Agreement") and the Executive Employment with the
Bank dated June 23, 1997 (the "1997 Bank Agreement") (collectively, the "1997
Agreements").
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 2
USB has required, as a condition to its execution and delivery to
Tappan Zee of the Agreement, that the undersigned Executive execute and deliver
to USB this Letter Agreement.
In order to induce USB to enter into the Agreement, and in
consideration of the New York Employment Agreement to be entered into upon
consummation of the Merger, the undersigned Executive hereby irrevocably (except
as set forth below):
(a) with respect to the Incentive Stock Option Agreement
between the Executive and Tappan Zee dated July 11, 1996 (the "Option
Agreement), agrees that neither consummation of the Merger nor approval of the
Merger by Tappan Zee's shareholders shall result in an acceleration of the
Executive's right to exercise any of the options covered by the Option
agreement, with it being understood that any such options which are not
exercisable as of consummation of the Merger shall continue to become
exercisable in accordance with the other terms of the Option Agreement and the
New Employment Agreement, including those relating to death or disability;
(b) with respect to the Restricted Stock Award Notice between
the Executive and Tappan Zee dated July 11, 1996 (the "Restricted Stock
Notice"), agrees that neither consummation of the Merger nor approval of the
Merger by Tappan Zee's shareholders shall result in any accelerated vesting of
the shares of stock covered by the Restricted Stock Notice, with it being
understood that any such restricted shares which have not vested as of
consummation of the Merger shall continue to vest in accordance with the other
terms of the Restricted Stock Notice and the New Employment Agreement, including
those relating to death or disability;
(c) agrees to waive in connection with the transactions
contemplated by the Agreement, including but not limited to consummation of the
Merger, any rights which the Executive may have under Section 9(b)(vi) of the
1997 Tappan Zee Agreement and Section 9(b)(vi) of the 1997 Bank Agreement;
(d) in light of the proposed New Employment Agreement, agrees
to waive in connection with the transactions contemplated by the Agreement,
including but not limited to consummation of the Merger, the provisions of
Section 17 of the 1997 Tappan Zee Agreement and Section 16 of the 1997 Bank
Agreement; and
(e) provides written notice of non-extension to both Tappan
Zee and the Bank that his "Employment Period" (as defined in Section 2(a) of
both the 1997 Tappan Zee Agreement and the 1997 Bank Agreement) shall not be
extended any further, and as a result of this written notice of non-extension
being given in accordance with Section 2(b) of both the 1997 Tappan Zee
Agreement and the 1997 Bank Agreement, his "Employment Period" and his
"Remaining Unexpired Employment Period" (as defined in Section 2(b) of both the
1997 Tappan Zee Agreement and the 1997 Bank Agreement) shall each end on the
third anniversary of the date of this Letter Agreement.
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 3
This Letter Agreement shall terminate concurrently with any termination
of the Agreement in accordance with its terms, or concurrently with the
consummation of the Merger if the New Employment Agreement has not been executed
and delivered by all parties other than the Executive, in which event the
written notice of non-extension in clause (e) above shall also be deemed null
and void. This Letter Agreement shall not impair or adversely affect any rights
which the Executive (or his legal representatives and testate or intestate
distributees) may have (i) under the 1997 Agreements in the event the
Executive's employment with Tappan Zee and the Bank is terminated prior to
consummation of the Merger due to the Executive's death or disability, or (ii)
under the New Employment Agreement in the event the Executive's employment with
the Bank is terminated following consummation of the Merger due to the
Executive's death, disability or discharge without cause.
The undersigned Executive intends to be legally bound hereby and has
affixed his signature hereto as of this 6th day of March 1998.
__________________________
Xxxxx X. Xxxxxx
EXHIBIT E
March __, 1998
Tappan Zee Financial, Inc.
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned, being directors and executive officers of U.S.B.
Holding Co., Inc. (the "Acquiror"), are delivering this letter to you in
connection with the proposed merger (the "Merger") of Tappan Zee Finanical, Inc.
(the "Company") with and into the Acquiror, pursuant to the Agreement and Plan
of Merger, dated March __, 1998 (the "Agreement").
The undersigned have been advised that as of the date of this letter
each may be deemed to be an "affiliate" of the Acquiror, as the term "affiliate"
is used for purposes of the rules and regulations of the Securities and Exchange
Commission (the "Commission") applicable to the determination of whether a
merger can be accounted for as a "pooling-of-interests" as specified in the
Commission's Accounting Series Release 135, as amended by Staff Accounting
Bulletins Nos. 65 and 76 ("ASR 135").
The undersigned represent and covenant with the Acquiror and the
Company that:
(a) During the period beginning on the date hereof and ending 30 days
prior to the consummation of the Merger, the undersigned shall not sell,
transfer, reduce the undersigned's risk with respect to or otherwise dispose of
("transfer") any shares of Acquiror common stock owned by the undersigned, and
shall not permit any relative who shares the undersigned's home, or any person
or entity who or which the undersigned controls, from transferring any shares of
Acquiror common stock owned by such person or entity, without notifying the
Acquiror in advance of the proposed transfer and giving the Acquiror a
reasonable opportunity to object to the transfer before it is consummated. The
Acquiror, upon advice of its independent public accountants, may instruct the
undersigned not to make or permit the transfer because it may interfere with the
"pooling-of-interests" treatment of the Merger. The undersigned shall abide by
any such instructions.
(b) During the period beginning 30 days prior to the consummation of
the Merger and ending immediately after financial results covering at least 30
days of post-Merger combined operations have been published by the Acquiror by
means of filing of a Form 10-Q or Form 8-K under the Securities Exchange Act of
1934, the issuance of a quarterly earnings report or any other public issuance
which satisfies the requirements of ASR 135, the undersigned shall not transfer
any shares of Acquiror common stock owned by the
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 2
undersigned, and the undersigned shall not permit any relative who shares the
undersigned's home, or any person or entity who or which the undersigned
controls, to transfer any shares of Acquiror common stock owned by such person
or entity.
(c) The undersigned shall not enter into any transaction with respect
to any shares of Acquiror common stock, and shall not permit any relative who
shares the undersigned's home, or any person or entity who or which the
undersigned controls, from entering into any transaction with respect to any
shares of Acquiror common stock, during the 20 consecutive AMEX Trading Days (as
defined in the Agreement) ending with and including the date on which the last
of the regulatory approvals (as defined in Section 6.1(b) of the Agreement)
required for consummation of the Merger is obtained.
(d) The undersigned have carefully read this Letter Agreement and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon transfer of shares of Acquiror common stock to the extent the
undersigned deems necessary with counsel of the undersigned's choice or counsel
for the Acquiror.
This letter shall terminate concurrently with any termination of the
Agreement in accordance with its terms.
The undersigned intend to be legally bound hereby.
Very truly yours,
Number of Shares of
Acquiror
Common Stock Owned
------------------
__________________________
Xxxxxx X. Xxxxx
__________________________
Xxxxxxx X. Xxxxxx
__________________________
Xxxxxxx X. Fury
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 3
Number of Shares of
Acquiror
Common Stock Owned
------------------
__________________________
Xxxxxxx Xxxxxxx
__________________________
Xxxxxx X. Xxxxxxxx
__________________________
Xxxx X. Xxxxxxxx
__________________________
Xxxxxxx X. Xxxxxx
__________________________
Xxxxxx X. Xxxxxxxx
__________________________
Xxxxxx X. Xxxxxxxxx
U.S.B. Holding Co., Inc.
Tappan Zee Financial, Inc.
March__, 1998
Page 4
