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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of September 19, 1995, by and among
North Fork Bank, a New York-chartered stock commercial bank ("NFB"), Banco
Exterior de Espana, S.A., a banking corporation organized under the laws of the
Kingdom of Spain (the "Company"), and Extebank, a New York-chartered stock
commercial bank and a wholly-owned subsidiary of the Company (the "Company
Bank").
WHEREAS, the Company Bank is engaged in both domestic and international
banking operations;
WHEREAS, NFB seeks to purchase all of the capital stock of the Company
Bank (the "Stock Purchase"), and thereby acquire the domestic banking business
of the Company Bank and its Subsidiaries (as hereinafter defined) as such
business is described in the draft "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (hereinafter referred to as the
"Domestic Business");
WHEREAS, prior to the Stock Purchase, the Company Bank will transfer to
the Company the International Business (as hereinafter defined);
WHEREAS, NFB (which is sometimes hereinafter referred to as the
"Surviving Bank") and the Company Bank will enter into a Subsidiary Agreement
and Plan of Merger (which shall be a plan of complete liquidation of the Company
Bank for purposes of Sections 332(a) and 337(a) of the Internal Revenue Code of
1986, as amended (the "Code")) substantially in the form of Exhibit A hereto
(the "Bank Merger Agreement") providing for the merger (the "Merger") of the
Company Bank with and into NFB immediately following the Closing; and
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WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Stock Purchase and also to prescribe
certain conditions to the consummation of such transaction.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE PURCHASE AND SALE OF SHARES
1.1. Transfer of Shares by the Company. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below), the Company
agrees to sell 619,597 shares (the "Shares") of the Company Bank's common stock,
par value $5.00 per share (the "Common Stock"), and deliver the certificates
evidencing the Shares to NFB, free and clear of all Encumbrances (as defined
below).
1.2. Purchase of Shares by the Bank; Purchase Price. Subject to the
terms and conditions of this Agreement, NFB agrees to acquire the Shares from
the Company and to pay U.S. $47 million (the "Purchase Price") to the Company;
provided, that if the Closing Date occurs after January 16, 1996, and if, prior
to such date, the covenant contained in Section 5.17 shall have been breached by
NFB, the Purchase Price shall be an amount equal to the product obtained by
multiplying (i) $47,000,000, (ii) the quotient obtained by dividing (a) the
number of days elapsed between January 17, 1996 and the Closing Date by (b) 360
and (iii) the Federal Funds Rate as published in the "Money Rates" section of
the Wall Street Journal as of January 17, 1996.
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1.3. Closing; Payment of Purchase Price. (a) The sale and purchase of
the Shares (the "Closing") hereunder shall be deemed to occur at the close of
business on the Closing Date (as defined below). Subject to the terms and
conditions of this Agreement, the parties hereto shall use their best efforts to
cause the Closing Date to be January 2, 1996 or on a business day as soon as
reasonably practicable thereafter (the "Closing Date"). The Closing shall take
place at 9:00 a.m., local time, on the Closing Date at the offices of NFB's
counsel.
(b) On the Closing Date, the following actions shall be taken:
(i) NFB shall pay the Purchase Price to the Company by wire
transfer of immediately available funds to such account or accounts as the
Company shall designate in writing at least two business days prior to the
Closing Date;
(ii) NFB shall pay up to $1,350,000 of the fees and expenses of
the firms listed on Section 2.7 of the Disclosure Schedule;
(iii) the Company shall deliver certificates for the Shares, duly
endorsed in blank or with stock powers duly endorsed in blank, together
with such other documents as NFB may reasonably request to evidence the
transfer to NFB of good and valid title in and to all of the Shares, free
and clear of any and all Encumbrances (as defined below);
(iv) immediately following the Closing, the Company Bank shall
merge into NFB pursuant to the terms of the Bank Merger Agreement; and
(v) each party shall take such other actions, and shall execute
and deliver such other instruments or documents, as shall be required under
the terms of this Agreement and the Bank Merger Agreement.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to NFB as follows:
2.1. Corporate Organization. (a) The Company is a corporation duly
organized and validly existing under the laws of the Kingdom of Spain.
(b) The Company Bank is a commercial bank duly organized, validly
existing and in good standing under the laws of the State of New York. The
deposit accounts of the Company Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund to the
fullest extent permitted by the Federal Deposit Insurance Act, and all premiums
and assessments required to be paid in connection therewith have been paid by
the Company Bank. The Company Bank has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or the location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure to be
so licensed or qualified would not have a Material Adverse Effect (as
hereinafter defined). Each Subsidiary of the Company Bank has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. The articles of organization and by-laws of the Company
Bank, copies of which are attached to Section 2.1 of the Disclosure Schedule
which is being delivered to NFB
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concurrently herewith (the "Disclosure Schedule"), are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
As used in this Agreement, the term "Material Adverse Effect" means a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of the Company Bank and its Subsidiaries taken
as a whole; provided, however, that for purposes of determining whether any
event or condition has had a Material Adverse Effect, the Company Bank and its
Subsidiaries shall be considered without regard to the International Business.
As used in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.
(c) The minute books of the Company Bank and each of its
Subsidiaries contain true, complete and accurate records in all material
respects of all meetings and other corporate actions held or taken since
December 31, 1992 of their respective stockholders and Boards of Directors
(including committees of their respective Boards of Directors).
2.2. Capitalization. (a) The Company owns, beneficially and of record,
all of the Shares, free and clear of all liens, claims, charges, encumbrances
and security interests (collectively, "Encumbrances") whatsoever, and the Shares
are duly authorized and validly issued and are fully paid, nonassessable (except
to the extent required by Sections 114 and 632 of the New York Banking Law) and
free of preemptive rights, with no personal liability attaching to the ownership
thereof (except as aforesaid). The authorized capital stock of the Company Bank
consists of 619,597 shares of Common Stock all of which shares are issued and
outstanding and no shares are held in the Company Bank's treasury. Other than
the Shares, there are no shares of
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capital stock of the Company Bank issued or outstanding. There are no shares of
Common Stock reserved for issuance. Except for this Agreement, there are no
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Common
Stock or any other equity security of the Company Bank or any securities
representing the right to purchase or otherwise receive any shares of Common
Stock or any other equity security of the Company Bank.
(b) Section 2.2(b) of the Disclosure Schedule sets forth a true,
complete and correct list of all of the Subsidiaries of the Company Bank. The
Company Bank owns, directly or indirectly, all of the issued and outstanding
shares of the capital stock of each of such Subsidiaries, free and clear of all
Encumbrances, and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. No Subsidiary of the Company Bank
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such Subsidiary. Except
for the Subsidiaries of the Company Bank, there are no Affiliates of the Company
Bank engaged in the Domestic Business in the Region (as hereinafter defined)
other than intercompany transactions between the Company and such Affiliates. As
used in this Agreement, the term "Affiliate" shall have the meaning given such
term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
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2.3. Authority; No Violation. (a) The Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. 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 on the part of the
Company, and no other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery by NFB) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by laws affecting insured depository institutions,
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally (including laws affecting the rights and remedies
of creditors of insured depository institutions).
(b) The Company Bank has full corporate power and authority to
execute and deliver this Agreement and the Bank Merger Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Bank Merger Agreement, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
approved by the Board of Directors of the Company Bank and by the Company as the
sole stockholder of the Company Bank, and no other corporate proceedings on the
part of the Company Bank are necessary to approve this Agreement and the Bank
Merger Agreement and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by the
Company Bank and (assuming
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the due authorization, execution and delivery by NFB) constitutes a valid and
binding agreement of the Company Bank, enforceable against the Company Bank in
accordance with its terms, except as enforcement may be limited by laws
affecting insured depository institutions, general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally (including laws
affecting the rights and remedies of creditors of insured depository
institutions). The Bank Merger Agreement, upon execution and delivery by the
Company Bank, will be duly and validly executed and delivered by the Company
Bank and will (assuming due authorization, execution and delivery by NFB)
constitute a valid and binding agreement of the Company Bank, enforceable
against the Company Bank in accordance with its terms, except as enforcement may
be limited by laws affecting insured depository institutions, general principles
of equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally (including laws affecting the rights and remedies of creditors of
insured depository institutions).
(c) Except as set forth in Section 2.3(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company or
by the Company Bank nor the execution and delivery of the Bank Merger Agreement
by the Company Bank nor the consummation by the Company or the Company Bank, as
the case may be, of the transactions contemplated hereby or thereby, nor
compliance by the Company or the Company Bank, as the case may be, with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Estatutos of the Company or the articles of organization or by-laws of the
Company Bank or any of its Subsidiaries, or (ii) assuming that the consents and
approvals referred to in Section 2.4
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hereof are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company, the Company Bank or any Subsidiaries of the Company Bank, or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company, the
Company Bank or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Company, the
Company Bank or any of its Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults which, either individually or in the
aggregate, would not have a Material Adverse Effect.
2.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), the FDIC under the Bank Merger Act, as amended (the
"Bank Merger Act"), the New York State Banking Department (the "Banking
Department") under the New York Banking Law, and the approval of, and expiration
of waiting periods relating to, such applications and notices, as the case may
be, and (b) such additional filings, authorizations, consents or approvals as
may be set forth in Section 2.4 of the Disclosure Schedule, no consents or
approvals of or filings or registrations with any
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court, administrative agency or commission or other governmental authority or
instrumentality, whether foreign, federal, state or local (each a "Governmental
Entity") or with any third party are necessary in connection with (1) the
execution and delivery by the Company and the Company Bank of this Agreement,
(2) the consummation by the Company and the Company Bank of the transactions
contemplated hereby, (3) the execution and delivery by the Company Bank of the
Bank Merger Agreement and (4) the consummation by the Company Bank of the Merger
and the transactions contemplated by the Bank Merger Agreement except, in each
case, for consents, approvals, filings or registrations the failure to obtain or
make, either individually or in the aggregate, would not have a Material Adverse
Effect.
2.5. Reports. The Company Bank and each of its Subsidiaries have filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1992 with or pursuant to the requirements of (i) the Federal
Reserve Board, (ii) the FDIC, (iii) the Banking Department, (iv) any foreign
Governmental Entity and (v) any other self-regulatory organization, and have
paid all fees and assessments due and payable in connection therewith. Except
for examinations conducted by a Governmental Entity in the regular course of the
business of the Company Bank and its Subsidiaries, and except as set forth in
Section 2.5 of the Disclosure Schedule, no Governmental Entity has initiated any
proceeding or, to the knowledge of the Company Bank, investigation into the
business or operations of the Company Bank or any of its Subsidiaries since
December 31, 1992. There is no unresolved material violation or material
criticism asserted or made by any Governmental Entity contained in any report or
statement relating to any examination of the Company Bank or any of its
Subsidiaries.
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2.6. Financial Statements. (a) The Company has delivered to NFB copies
of (i) the audited consolidated balance sheets of the Company Bank and its
Subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended, in each case accompanied by the audit report of Xxxxxx Xxxxxxxx LLP,
independent public accountants with respect to the Company Bank ("Xxxxxx
Xxxxxxxx") and (ii) the audited consolidated balance sheet of the Company Bank
and its Subsidiaries as of June 30, 1995 (the "June 30 Balance Sheet") and the
related audited consolidated statement of income for the six-month period then
ended (the "June 30 Income Statement"), accompanied by the audit report of
Xxxxxx Xxxxxxxx. The December 31, 1994 consolidated balance sheet of the Company
Bank and the June 30 Balance Sheet (including in each case the related notes,
where applicable) fairly present the consolidated financial position of the
Company Bank and its Subsidiaries as of the dates thereof, and the other
financial statements referred to in this Section 2.6 (including the related
notes, where applicable) fairly present (subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and not material in
amount), the results of the consolidated operations and consolidated financial
position of the Company Bank and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply in all material respects
with applicable accounting requirements; and each of such statements (including
the related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved. The books and records of the
Company Bank and its Subsidiaries have been, and are being, maintained in all
material respects in
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accordance with generally accepted accounting principles ("GAAP") and any other
applicable legal and accounting requirements and reflect only actual
transactions.
(b) The column entitled "Domestic" on the June 30 Balance Sheet
fairly presents the pro forma consolidated financial position of the Domestic
Business as of the date thereof. The column entitled "Domestic" on the June 30
Income Statement fairly presents the pro forma results of the consolidated
operations of the Domestic Business for the fiscal period therein set forth.
2.7. Broker's Fees. Neither the Company nor the Company Bank nor any of
the Subsidiaries of the Company Bank nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except that the Company has engaged
the firms listed on Section 2.7 of the Disclosure Schedule in accordance with
the terms of letter agreements, true, complete and correct copies of which are
attached to Section 2.7 of the Disclosure Schedule.
2.8. Absence of Certain Changes or Events. Except as may be set forth
in Section 2.8 of the Disclosure Schedule or as expressly permitted by this
Agreement, since June 30, 1995: (a) neither the Company Bank nor any of its
Subsidiaries has: (i) issued or sold any equity securities; (ii) mortgaged,
pledged or subjected to any Encumbrance or lease any of its material assets,
tangible or intangible, or permitted or suffered any such asset to be subjected
to any Encumbrance or lease, except in the ordinary course of business; (iii)
acquired or disposed of any material assets or properties, or entered into any
contract for any such acquisition or disposition, except acquisitions and
dispositions effected in the ordinary course of business; (iv) solely with
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respect to the Company Bank, declared, paid, or set apart any sum or property
for any dividend or other distribution or paid or transferred any funds or
property to its shareholders or, directly or indirectly, redeemed or otherwise
acquired any of its capital stock; (v) other than in the ordinary course of
business, increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer, employee, or director
from the amount in effect as of December 31, 1994, granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus; (vi) forgiven or canceled any material
indebtedness or contractual obligation; (vii) suffered any material strike, work
stoppage, slow-down, or other labor disturbance; (viii) entered into any lease
of real or personal property, except for any lease involving payment of amounts
not in excess of $25,000 per annum; or (ix) entered into any other material
transaction other than in the ordinary course of business; and (b) no event
other than changes in general conditions (including laws and regulations)
applicable to the banking industry, or in general economic conditions, has
occurred which has caused a Material Adverse Effect.
2.9. Legal Proceedings. (a) Except as set forth in Section 2.9 of the
Disclosure Schedule, neither the Company Bank nor any of its Subsidiaries is a
party to any, and there are no pending or, to the Company Bank's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature
(collectively, "Proceedings") against the Company Bank or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which there is a reasonable probability of
an adverse determination and which, if adversely determined, would, individually
or in the aggregate, have a Material Adverse Effect.
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(b) Except as set forth in Section 2.9(b) of the Disclosure
Schedule, there is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company Bank or any of its Subsidiaries or any of
their respective assets which has had a Material Adverse Effect.
(c) Section 2.9 of the Disclosure Schedule sets forth all
Proceedings pending as of the date hereof against the Company Bank or any of its
Subsidiaries, indicating for each such Proceeding a brief description of the
nature of the claim, the remedy sought, the identity of the parties, the forum
in which the claim has been brought and the procedural posture of the
Proceeding.
2.10. Taxes. Except as set forth in Schedule 2.10 of the Disclosure
Schedule and except as, individually or in the aggregate, would not have a
Material Adverse Effect: (a) all returns, declarations, reports, estimates,
information returns and statements required to be filed under federal, state,
local or any foreign tax laws by or on behalf of the Company Bank or any of its
Subsidiaries or any affiliated, combined or unitary group of which the Company
Bank or any of its Subsidiaries is or was a member ("Returns") have been timely
filed and were true, complete and correct;
(b) the Company Bank and each of its Subsidiaries has paid or has
had paid on its behalf, within the time and in the manner prescribed by law, all
Taxes for which it is liable including, without limitation, withholding Taxes as
described in Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws and all withholding from employee wages or other remuneration, or
has established reserves with respect thereto pursuant to Section 2.10(c) of the
Disclosure Schedule;
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(c) the reserves for Taxes (except for deferred Taxes) reflected
on the books and records of the Company Bank and its Subsidiaries are sufficient
for the payment of all unpaid Taxes (whether or not currently disputed) which
are incurred or may be incurred with respect to the period reflected by such
books and records and for all years and periods ended prior thereto;
(d) reserved;
(e) the statute of limitations for the assessment of federal
income Taxes with respect to the Company Bank and each of its Subsidiaries has
expired for all periods through 1990;
(f) neither the Company Bank nor any of its Subsidiaries has
requested any extension of time within which to file any Return, which Return
has not since been filed;
(g) there are no outstanding waivers of any statute of limitations
with respect to any taxable year or period or any Return of the Company Bank or
any of its Subsidiaries;
(h) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending against
the Company Bank or any of its Subsidiaries;
(i) no power of attorney has been granted by the Company Bank or
any of its Subsidiaries with respect to any matter relating to Taxes which is
currently in force;
(j) there are no liens for Taxes upon any property or assets of
the Company Bank or any of its Subsidiaries, except for liens for Taxes not yet
due;
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(k) neither the Company Bank nor any of its Subsidiaries (A) is a
party to any agreement providing for the allocation or sharing of Taxes or (B)
is required to include in income any adjustment pursuant to Section 481(a) of
the Code, and none of the Company, the Company Bank or any of its Subsidiaries
has knowledge that the Internal Revenue Service has proposed any such adjustment
or change in accounting method;
(l) neither the Company Bank nor any of its Subsidiaries is a
party to any agreement, contract or arrangement that could result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code;
(m) neither the Company Bank nor any of its Subsidiaries has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code;
(n) neither the Company Bank nor any of its Subsidiaries has filed
a consent pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code);
(o) no property of the Company or any of its Subsidiaries is
property that the Company Bank or any of its Subsidiaries is or will be required
to treat as being owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect prior
to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168 of the Code;
(p) neither the Company Bank nor any of its Subsidiaries computes
its bad debt reserves in accordance with Section 593 of the Code;
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(q) neither the Company Bank nor any of its Subsidiaries is a
"loss corporation" within the meaning of Section 382(k)(1) of the Code;
(r) the Company Bank is not and, during the applicable period
specified in Section 897(c)(1)(ii) of the Code, has not been a United States
real property holding company (as defined in Section 897(c)(2) of the Code); and
(s) neither the Company Bank nor any of its Subsidiaries is
subject to the provisions of Section 1503(d) of the Code.
For purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority (domestic or foreign).
2.11. Employees. (a) Other than as set forth in Section 2.11(a) of the
Disclosure Schedule, there are no employee benefit plans, arrangements or
agreements ("Plans") that are maintained or contributed to or required to be
contributed to by the Company Bank, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company Bank would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), for the benefit of any employee or former employee of the
Company Bank or any of its Subsidiaries.
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(b) Except as set forth in Section 2.11(b) of the Disclosure
Schedule, (i) each of the Plans has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is an "employee benefit plan" as defined
in Section 3(3) of ERISA and which is subject to Title IV of ERISA, the present
value of accrued benefits under such Plan, based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
Plan's actuary with respect to such Plan, did not, as of its latest valuation
date, exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company Bank, any of its Subsidiaries or any ERISA
Affiliate beyond their retirement or other termination of service, other than
(w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the
books of the Company Bank, any of its Subsidiaries or the ERISA Affiliates or
(z) benefits the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no plan which is an "employee benefit plan" as defined
in Section 3(3) of ERISA and which is subject to Title IV of ERISA has been
terminated or completely or partially withdrawn from so as to result, directly
or indirectly, in any liability under Title IV of ERISA of the Company Bank or
any of its Subsidiaries that has not been satisfied in full, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by the Company Bank, any of its
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Subsidiaries or any ERISA Affiliates with respect to each Plan in respect of
current or prior plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither the Company Bank, any of its
Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection
with which the Company Bank or any of its Subsidiaries could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code and (ix) there are no
material pending, or, to the knowledge of the Company Bank, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Plans or any trusts related thereto and (x) the consummation
of the transactions contemplated by this Agreement will not accelerate the time
of payment or vesting or increase the amount of compensation due any such
employee or officer.
(c) Except as set forth in Section 2.11(c) of the Disclosure
Schedule, the Company Bank has no obligations under any stock option or stock
performance-based plans of the Company Bank or any of its Subsidiaries.
2.12. Compliance with Applicable Law. The Company Bank and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations (each, a
"License") necessary for the lawful conduct of their respective businesses under
and pursuant to all, and have complied with and are not in default in any
respect under any, applicable laws, statutes, orders, rules, regulations,
policies and/or guidelines of any Governmental Entity relating to the Company
Bank or any of its Subsidiaries, except where the failure to hold such License
or such noncompliance or default would not, individually or in the aggregate,
have a Material Adverse Effect, and neither
20
the Company Bank nor any of its Subsidiaries knows of, or has received notice
of, any material violations of any such laws, statutes, orders, rules,
regulations, policies and/or guidelines.
2.13. Contracts. (a) Except as set forth in Section 2.13(a) of the
Disclosure Schedule, neither the Company Bank nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, plan, commitment or
understanding (whether written or oral) (i) with respect to the employment of
any directors, officers, employees or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement, will (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from NFB, the
Company, the Company Bank, or any of their respective Subsidiaries to any
officer or employee thereof, (iii) which is an agreement involving the payment
of more than $40,000 per annum, (iv) which materially restricts the conduct of
any line of business by the Company Bank or its Subsidiaries or (v) is a
collective bargaining agreement. Each contract, arrangement, plan, commitment or
understanding of the type described in this Section 2.13(a), whether or not set
forth in Section 2.13(a) of the Disclosure Schedule, is referred to herein as a
"Covered Contract". The Company Bank has previously delivered to the Bank true
and correct copies of each Covered Contract.
(b) Except as set forth in Section 2.13(b) of the Disclosure
Schedule, (i) each Covered Contract is valid and binding and in full force and
effect, (ii) the Company Bank and each of its Subsidiaries have in all material
respects performed all obligations required to be performed by it under each
Covered Contract, except where such noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect, (iii) no event or condition
exists which constitutes or, after notice or lapse of time or both, would
constitute, a material default on
21
the part of the Company Bank or any of its Subsidiaries under any such Covered
Contract, except where such default, individually or in the aggregate, would not
have a Material Adverse Effect and (iv) no other party to such Covered Contract
is, to the knowledge of the Company Bank, in default in any material respect
thereunder.
2.14. Agreements with Regulatory Agencies. Except as set forth in
Section 2.14 of the Disclosure Schedule, neither the Company Bank nor any of its
Subsidiaries is subject to any cease-and-desist or other written order or
written directive issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions at
the request of (each, whether or not set forth on Section 2.14 of the Disclosure
Schedule, a "Regulatory Agreement"), any state, federal or foreign bank
regulatory authority that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has the Company Bank or any of its Subsidiaries been advised
by any state, federal or foreign bank regulatory authority that it is
considering issuing or requesting any Regulatory Agreement.
2.15. Investment Securities. Section 2.15 of the Disclosure Schedule
sets forth (i) the book and estimated market value as of August 31, 1995 of the
investment securities, mortgage-backed securities and securities held for sale
of the Company Bank and its Subsidiaries and (ii) an investment securities
report as of such date which includes security descriptions, CUSIP numbers, pool
face values, book values and coupon rates. Except for the above-described
securities that are Transferred Assets, none of such securities are denominated
in currencies other
22
than U.S. dollars, except for such securities which do not have a market value
that exceeds U.S. $1,000,000.
2.16. Undisclosed Liabilities. Except (a) as set forth in the
Disclosure Schedule, (b) for those liabilities that are fully reflected or
reserved against on the June 30 Balance Sheet, (c) for liabilities incurred in
the ordinary course of business consistent with past practice since June 30,
1995 and (d) for liabilities which are being assumed by the Company pursuant to
Section 5.10, neither the Company Bank nor any of its Subsidiaries has incurred
any liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except for liabilities that are not
material to the Company Bank and its Subsidiaries taken as a whole, without
regard to the International Business.
2.17. Reserved.
2.18. Environmental Matters. Except as set forth in Section 2.18 of the
Disclosure Schedule:
(a) Each of the Company Bank and its Subsidiaries are, and have
been, in compliance with all applicable federal, state and local laws including
common law, regulations and ordinances and with all applicable decrees, orders
and contractual obligations relating to pollution, the discharge of, or exposure
to, materials in the environment or workplace ("Environmental Laws"), except for
violations which, either individually or in the aggregate, would not and cannot
reasonably be expected to have a Material Adverse Effect;
(b) There is no suit, claim, action or proceeding pending or, to
the knowledge of the Company Bank, threatened, before any Governmental Entity or
other forum in which the Company Bank or any of its Subsidiaries has been or,
with respect to threatened
23
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any Environmental Laws (other than with
respect to any Loan Property or Participation Facility), or (y) relating to the
release, threatened release or exposure to any material described in any of the
Environmental Laws (other than with respect to any Loan Property) whether or not
occurring at or on a site owned, leased or operated by the Company Bank or any
of its Subsidiaries, except where such noncompliance or release would not have,
either individually or in the aggregate, in a Material Adverse Effect;
(c) To the knowledge of the Company Bank, during the period of
the Company Bank's or any of its Subsidiaries' ownership or operation of any of
their respective current properties, there has been no release of materials in,
on, under or affecting any such Property (other than any Loan Property, or
Participation Facility), except where such release has not had and cannot
reasonably be expected to result in, either individually or in the aggregate, a
Material Adverse Effect. To the knowledge of the Company Bank, prior to the
period of the Company Bank's or any of its Subsidiaries' ownership or operation
of any of their respective current properties, there was no release or
threatened release of materials in, on, under or affecting any such properties
(other than any Loan Property or Participation Facility), except where such
release has not had and cannot be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect; and
For purposes of this Section 2.18 (x) "Loan Property" means any
property in which the Company Bank or any of its Subsidiaries holds a security
interest, and, where required, by the context, said term means the owner or
operator of such property and (y) "Participation Facility" means any facility in
which the Company Bank or any of its Subsidiaries participates in
24
the Management and, where required by the context, said term means the owner or
operator of such property.
2.19. Derivative Transactions, Letters of Credit and Loan Commitments.
Except as set forth in Section 2.19 of the Disclosure Schedule and except for
Transferred Assets and Transferred Liabilities (as such terms are hereinafter
defined) and in the case of clauses (b) and (c) below with respect to such items
which in the aggregate are not material in amount, neither the Company Bank nor
any of its Subsidiaries (a) is a party to transactions in or involving forwards,
futures, options on futures, options, swaps, caps, collars, floors, swaptions,
structured notes or other derivative instruments, whether relating to
currencies, interest rates, securities or commodities, (b) has entered into or
is subject to any commercial letters of credit, standby letters of credit or
similar obligations, or (c) has entered into or is subject to any Loan
Commitments, however denominated, to extend credit, except such Loan Commitments
in U.S. dollars relating to the Domestic Business which are not and should not
be classified as "Special Mention", "Substandard", "Doubtful" or "Loss", or
words of similar import. The financial position of the Company Bank and its
Subsidiaries on a consolidated basis under or with respect to each such
disclosed instrument has in all material respects been reflected in the books
and records of the Company Bank and its Subsidiaries in accordance with GAAP
consistently applied.
2.20. Loan Portfolio. Except as set forth in Section 2.20 of the
Disclosure Schedule and other than with respect to the Transferred Assets, as of
the date of this Agreement, neither the Company Bank nor any of its Subsidiaries
is a party to any written or oral (i) non-U.S. dollar denominated Loans (as
hereinafter defined) with or to any obligor except for such Loans which do not,
in the aggregate, exceed U.S. $1,000,000 at any time or (ii) Loan with any
director
25
or executive officer of the Company Bank or any of its Subsidiaries, or to the
best knowledge of the Company Bank, any person, corporation or enterprise
controlling, controlled by or under common control with any of the foregoing
other than residential mortgage loans and consumer credit in accordance with
applicable bank regulatory laws.
2.21. Title to Assets. Except as set forth in Section 2.21 of the
Disclosure Schedule and except for Permitted Liens and except as would not,
individually or in the aggregate, have a Material Adverse Effect, to the
knowledge of the Company Bank, there are no Liens on the real property of the
Company Bank or any of its Subsidiaries (the "Fee Properties" and the "Leased
Properties" and, collectively, the "Real Property") and each of the Company Bank
and its Subsidiaries has (a) good and valid title to the Fee Properties and (b)
a valid leasehold interest in the Leased Properties. None of the Company Bank,
any Subsidiary of the Company Bank or, to the knowledge of the Company Bank, any
other party is in default (and there does not exist any event which with notice
or lapse of time or both would constitute a default) under any of the leases
relating to the Real Property, except for such defaults thereunder which, in the
aggregate, would not have a Material Adverse Effect. To the knowledge of the
Company Bank, all such leases referred to in the second preceding sentence are
valid and binding and in full force and effect. As used in this Agreement,
"Permitted Liens" shall mean liens for current Taxes not yet due or being
contested in good faith and for which appropriate reserves under GAAP have been
established, Liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation,
26
and minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use or value of the property subject thereto.
2.22. Scheduled Assets. Except as set forth in Section 2.22 of the
Disclosure Schedule and except for Loans and the Transferred Assets described in
Section 5.10 (a)(i) and 5.10(a)(iii), Schedule A hereto (the "Asset Schedule")
sets forth a true, correct and complete list as of the date hereof of all
Problem Assets. As used herein, the term "Problem Assets" shall mean (a) all
Loans or other assets of the Company Bank or any of its Subsidiaries that are
classified (by an examiner of a Governmental Entity or by an internal examiner)
as "Special Mention," "Substandard," "Doubtful," "Loss," or otherwise adversely
criticized with words of similar import or as "In-Substance Foreclosure"
(including an indication of whether such asset is on accrual or non-accrual
status), (b) Loans or other assets of the Company Bank or any of its
Subsidiaries that are classified as non-performing or non-accrual, and (c)
Loans, under the terms of which the obligor is over 90 days delinquent in
payment of principal or interest or in default of any other provision. The
assets reflected on the Asset Schedule are hereinafter referred to as the
"Scheduled Assets."
2.23. Approvals. As of the date of this Agree- ment, neither the
Company nor the Company Bank knows of any reason why all of the Requisite
Regulatory Approvals (as hereinafter defined) shall not be obtained.
2.24. Loans. Except as described on Section 2.24 of the Disclosure
Schedule and for the Transferred Assets and except where the failure of any of
the following to be true, would not, individually or in the aggregate, have a
Material Adverse Effect, with respect to each Loan or
27
Loan Commitment (as such terms are hereinafter defined) of the Company Bank and
its Subsidiaries, to the Company's knowledge:
(a)(i) Each Loan Document (as hereinafter defined) constitutes a
valid, legal and binding obligation of the obligor thereunder, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, laws governing fraudulent conveyance or equitable subordination and
other similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity, (ii) each Loan Document
contains customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization (including
realization by judicial foreclosure) of the benefits intended to be provided by
the security interest or lien, if any, created and granted by such Loan
Document, subject to bankruptcy, insolvency, reorganization, moratorium, laws
governing fraudulent conveyance or equitable subordination and other similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity, and (iii) all Liens (as
hereinafter defined) in any collateral described in each Loan Commitment and
Loan Document as security for each Loan and Loan Commitment constitute valid and
perfected Liens in such collateral (assuming the relevant person obligated on or
in respect to such Loan or Loan Commitment, including any guarantor,
hypothecator or other provider of security (each, a "Debtor") has rights in the
collateral as to permit attachment), subject to (x) bankruptcy, insolvency,
reorganization, moratorium, laws governing fraudulent conveyance or equitable
subordination and other similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of equity and
(y) federal and state laws relating to fraudulent conveyances and preferences;
28
(b) All Loans, Loan Commitments and related Loan Documents were
issued, made and maintained in accordance with applicable law; under existing
law, there is no valid claim against the Company Bank with respect to, or valid
defense to the enforcement of, such Loan or Loan Commitment and neither the
Company Bank nor any of its Affiliates has taken or failed to take any action
that would, and the transactions contemplated hereby do not, entitle any Debtor
or other party to assert successfully any claim or defense against the Company
Bank (including without limitation any right not to repay any such obligation or
any part thereof);
(c) None of the rights or remedies under the Loan Documents in
favor of the Company Bank have been amended, modified, waived, supplemented,
subordinated or otherwise altered by the Company Bank other than in good faith
and in the ordinary course of business and all writings and other documents
relating to any such amendment, modification, waiver, supplement, subordination
or other alteration of any Loan or Loan Commitment are included among the Loan
Documents; and
(d) Each file of Loan Documents pertaining to each Loan includes
all documents relating to each such Loan that are necessary to enforce such
Loan.
As used in this Agreement, the term "Liens" shall mean any mortgage,
lien, pledge, charge, assignment for security purposes, security interest, or
encumbrance of any kind, including any related unconditional sale agreement or
capital lease or other title retention agreement.
29
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF NFB
NFB hereby represents and warrants to the Company as follows:
3.1. Corporate Organization. NFB is a commercial bank duly organized,
validly existing and in good standing under the laws of the State of New York.
The deposit accounts of NFB are insured by the FDIC through the Bank Insurance
Fund to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by NFB. Each of NFB's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
3.2. Authority; No Violation. (a) NFB has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of NFB and no other corporate
proceedings on the part of NFB are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by NFB and (assuming the due authorization, execution and delivery by
the Company and the Company Bank) constitutes a valid and binding agreement of
NFB, enforceable against NFB in accordance with its terms, except as enforcement
may be limited by laws affecting insured depository institutions, general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally (including laws affecting the rights and remedies of
creditors of insured depository institutions).
30
(b) NFB has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of NFB and by North Fork
Bancorporation, Inc. as the sole stockholder of NFB, and no other corporate
proceedings on the part of NFB are necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
NFB, will be duly and validly executed and delivered by NFB and will (assuming
the due authorization, execution and delivery by the Company Bank) constitute a
valid and binding agreement of NFB, enforceable against NFB in accordance with
its terms, except as enforcement may be limited by laws affecting insured
depository institutions, general principles of equity whether applied in a court
of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally (including laws affecting the
rights and remedies of creditors of insured depository institutions).
(c) Neither the execution and delivery of this Agreement or the
Bank Merger Agreement by NFB, nor the consummation by NFB of the transactions
contemplated hereby or thereby, nor compliance by NFB with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the Certificate
of Incorporation or By-Laws of NFB or any of its Affiliates or (ii) assuming
that the consents and approvals referred to in Section 3.3 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to NFB or any of its Affiliates or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit
31
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of NFB or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which NFB or any of its Affiliates is a party, or by
which they or any of their respective properties or assets may be bound or
affected, except for such violations, conflicts, breaches or defaults which
either individually or in the aggregate would not prevent or materially delay
NFB from performing its obligations hereunder.
3.3. Consents and Approvals. Except for the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, the
FDIC under the Bank Merger Act and the Banking Department under the New York
Banking Law, and the approval of, or expiration of waiting periods relating to,
such applications and notices, as the case may be, no consents or approvals of
or filings or registrations with any Governmental Entity or with any third party
are necessary in connection with the execution and delivery by NFB of this
Agreement and the Bank Merger Agreement and the consummation by NFB of the
transactions contemplated hereby and thereby except, in each case, for consents,
approvals, filings or registrations the failure to obtain or make, either
individually or in the aggregate, would not prevent or materially delay NFB from
performing its obligations hereunder.
3.4. Approvals. As of the date of this Agreement, NFB does not know of
any reason why all of the Requisite Regulatory Approvals shall not be obtained.
32
3.5. Financing. NFB has current assets or other financial arrangements
such that at the Closing, NFB will have funds sufficient to enable it to carry
out its obligations under this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of the Company and the Company Bank. During the period
from the date of this Agreement and continuing until the Closing, except as
expressly contemplated or permitted by this Agreement or with the prior written
consent of NFB, the Company shall cause the Company Bank to carry on its
business in the ordinary course consistent with past practice. The Company shall
cause the Company Bank to use its best efforts to (x) preserve its business
organization and that of its Subsidiaries intact and (y) keep available to
itself and the Company Bank the present services of the employees of the Company
Bank and its Subsidiaries. Without limiting the generality of the foregoing, and
except as set forth in Section 4.1 of the Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by NFB, the Company
shall not permit the Company Bank or any of its Subsidiaries to:
(a) other than as necessary to effectuate the provisions of this
Agreement, declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock;
(b) Reserved.
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
33
(d) amend its Articles of Organization, By-laws or other similar
governing documents;
(e) enter into any new line of business;
(f) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Domestic Business, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructuring in the
ordinary course of business consistent with past practices;
(g) Reserved.
(h) change its methods of accounting in effect at June 30, 1995,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by the Company Bank's independent auditors;
(i) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between the Company Bank or any
Subsidiary of the Company Bank and one or more of its current or former
directors, officers or employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice or except as required
by applicable law, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof;
34
(j) except as set forth in Section 4.1 of the Disclosure Schedule
or as expressly contemplated by this Agreement, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise
dispose of, any of its assets, properties or other rights or agreements, other
than pursuant to existing contracts or commitments that are not, individually or
in the aggregate, material to the Domestic Business or activities in the
ordinary course of business consistent with past practice (including disposal of
real property acquired by the Company Bank or any of its Subsidiaries in
satisfaction of a debt previously contracted in a manner consistent with past
practice);
(k) other than in the ordinary course of business consistent with
past practice, incur or assume any liabilities or incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation or
other entity;
(l) file any application to relocate or terminate the operations
of any banking office of it or any of its Subsidiaries;
(m) commit any act or omission which constitutes a material
breach or default by the Company Bank or any of its Subsidiaries under any
material agreement or license to which the Company Bank or any of its
Subsidiaries is a party or by which any of them or their respective properties
is bound;
(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructuring in the ordinary course of business consistent with
past banking practices;
35
(o) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company Bank or any of
its Subsidiaries is a party or by which the Company Bank or any of its
Subsidiaries or their respective properties are bound;
(p) take any action which would cause the termination or
cancellation by the FDIC of insurance in respect of the Company Bank's deposits;
or
(q) agree to do any of the foregoing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Regulatory Matters. (a) The parties hereto shall cooperate with
each other and use their best efforts to promptly prepare and 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 third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement and the Bank Merger Agreement. 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 the Bank Merger Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(b) The parties hereto shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any filing,
36
notice or application made by or on behalf of the parties hereto or any of their
respective Subsidiaries to any Governmental Entity in connection with the Stock
Purchase and the Merger and the other transactions contemplated by this
Agreement and the Bank Merger Agreement.
(c) The parties hereto shall promptly furnish each other with
copies of written communications received by any of them or any of their
respective Subsidiaries, Affiliates or Associates (as such term is defined in
Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement)
from, or delivered by any of the foregoing to, any Governmental Entity in
respect of the transactions contemplated hereby and by the Bank Merger
Agreement.
5.2. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall cause
the Company Bank and each of its Subsidiaries to afford to the officers,
employees, accountants, counsel and other representatives of NFB, access, during
normal business hours during the period prior to the Closing, to all its
properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, the
Company shall cause the Company Bank and its Subsidiaries to make available to
NFB (i) a copy of each report, schedule and other document filed or received by
it during such period pursuant to the requirements of Federal or state laws
(other than reports or documents which the Company Bank is not permitted to
disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as NFB may reasonably request. Neither the
Company Bank nor any of its Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of the Company Bank's customers, jeopardize any
attorney-client privilege or contravene any law, rule, regulation, order,
judgment,
37
decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. NFB will hold all such information in confidence to
the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated September 15, 1995, between NFB and the Company
(the "Confidentiality Agreement").
(b) Any information furnished by NFB to the Company or the
Company Bank and their representatives pursuant hereto shall be treated as the
sole property of NFB and, if the Stock Purchase shall not occur, the Company and
the Company Bank and their representatives shall return to NFB all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. The
Company and the Company Bank shall, and shall use their respective best efforts
to cause their representatives to, keep confidential all such information, and
shall not directly or indirectly use such information for any competitive or
other commercial purpose. The obligation to keep such information confidential
shall continue for five years from the date the proposed Stock Purchase is
abandoned and shall not apply to (i) any information which (x) was already in
the Company's or the Company Bank's possession prior to the disclosure thereof
by NFB; (y) was then generally known to the public; or (z) was disclosed to the
Company or the Company Bank by a third party not bound by an obligation of
confidentiality that was known or that reasonably should have been known to the
Company or the Company Bank or (ii) disclosures made as required by law. It is
further agreed that, if in the absence of a protective order or the receipt of a
waiver hereunder the Company or the Company Bank is nonetheless, in the opinion
of
38
its counsel, compelled to disclose information concerning NFB to any tribunal or
governmental body or agency or else stand liable for contempt or suffer other
censure or penalty, the Company or the Company Bank, as the case may be, may
disclose such information to such tribunal or governmental body or agency
without liability hereunder.
(c) No investigation by NFB shall affect the representations,
warranties, covenants or agreements of the Company or the Company Bank set forth
herein, including, without limitation, the indemnification obligations contained
in Article VIII hereof.
5.3. Legal Conditions to Stock Purchase and the Merger. Each of NFB,
the Company and the Company Bank shall, and shall cause its Subsidiaries to, use
their best efforts (a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which may be
imposed on such party or its Subsidiaries with respect to the Stock Purchase or
the Merger and, subject to the conditions set forth in Article VI hereof, to
consummate the transactions contemplated by this Agreement and the Bank Merger
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company or NFB or any of their respective Subsidiaries in connection with
the Stock Purchase and the Merger and the other transactions contemplated by
this Agreement.
5.4. Employee Benefit Plans. The employees of the Company Bank
associated with the Domestic Business (the "Company Bank Employees") shall be
entitled to participate in NFB's employee benefit plans in which similarly
situated employees of NFB participate, to the same extent as comparable
employees of NFB. As of the Closing, NFB shall permit the Company
39
Bank Employees to participate in NFB's group hospitalization, medical, life and
disability insurance plans (the "NFB Welfare Plans") on the same terms and
conditions as applicable to comparable employees of NFB. NFB shall cause to be
waived any preexisting condition restrictions otherwise applicable under any NFB
Welfare Plan to a Company Bank Employee or his or her covered dependents (but
only to the extent waived immediately prior to the Closing Date under any
similar plan of the Company Bank with respect to such employee or dependent) and
give effect, in determining any deductible and maximum out-of-pocket
limitations, to claims incurred, amounts paid by and amounts reimbursed to
Company Bank Employees with respect to similar plans maintained for their
benefit immediately prior to the Closing Date. As of the Closing, NFB shall
permit the Company Bank Employees to participate in NFB's defined benefit
pension plan, thrift plan, severance, and similar plans on the same terms and
conditions as employees of NFB and its Subsidiaries, giving effect (solely for
purposes of NFB's defined benefit pension plan and thrift plan) to years of
service with the Company Bank and its Subsidiaries (to the extent the Company
Bank gave effect) as if such service were with NFB, for purposes of eligibility
to participate and vesting, but not for benefit accrual purposes. With respect
to the Company Bank Savings Plan and Pension Plan, the parties hereto shall
cooperate in effecting a transfer of assets and liabilities under such plan that
will result in the Company retaining liability for the benefits of Transferred
Employees and former employees of the Company Bank and its Subsidiaries and NFB
and the Company Bank retaining liability for the benefits of Company Bank
Employees.
5.5. Subsequent Interim Financial Statements. As soon as reasonably
available, but in no event more than 30 days after the end of each fiscal
quarter ending after the date of this
40
Agreement, upon the request of NFB, the Company Bank will deliver to NFB its
unaudited consolidated balance sheets and related statements of income,
shareholders' equity and cash flows for the fiscal quarter then ended, in each
case prepared on the same basis as the June 30 Balance Sheet and the June 30
Income Statement and separately reflecting the International Business and the
Domestic Business.
5.6. Additional Agreements. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, or the Bank Merger Agreement, or to vest the Surviving Bank with full
title to all properties, assets, rights, approvals, immunities and franchises of
any of the parties to the Stock Purchase or the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by NFB.
5.7. Advice of Changes. From time to time prior to the Closing (and on
the date prior to the Closing Date), the Company will promptly (or, in the case
of the matters described below that are not material, within a reasonable time
following the discovery of such matter) supplement or amend the Disclosure
Schedule delivered in connection with the execution of this Agreement to reflect
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby. No supplement or amendment
to such Disclosure Schedule shall have any effect for the purpose of determining
the accuracy of the Company's representation and warranties, the satisfaction of
any of the conditions set forth in Article VI hereof, the compliance
41
by the Company with its covenants and agreements contained herein or the
obligation of the Company to indemnify NFB pursuant to Article VIII hereof.
5.8. Current Information. During the period from the date of this
Agreement to the Closing, the Company Bank will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of NFB and to report (i) the general status
of the ongoing operations of the Company Bank and its Subsidiaries and (ii) the
status of, and the action proposed to be taken with respect to, those Loans held
by the Company or any Subsidiary of the Company which are non-performing assets
and which are not reflected on the Asset Schedule. The Company Bank will
promptly notify NFB of any material change in the normal course of business or
in the operation of the properties of the Company Bank or any of its
Subsidiaries and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving the Company Bank or any of its
Subsidiaries, and will keep NFB fully informed of such events.
5.9. Execution and Authorization of Bank Merger Agreement; Consummation
of the Merger. NFB and the Company Bank shall execute and deliver the Bank
Merger Agreement. The parties hereto shall take all necessary action to effect
the Merger immediately following the Closing.
5.10. Transfer of the International Business. (a) At or prior to the
Closing, the Company shall cause the Company Bank to transfer, assign, convey
and deliver to the Company, and the Company shall acquire from the Company Bank,
all of the business and operations of the Company Bank conducted as part of the
"International Operations" of the Company Bank as
42
described in the draft "Management's Discussion and Analysis of Financial
Condition and Results of Operations" attached to Section 5.10 of the Disclosure
Schedule (such business and operations being referred to herein as the
"International Business"), and all right, title and interest of the Company Bank
as of the Closing Date in and to the assets, rights, properties, claims and
contracts in respect of the International Business as of the close of business
on the Closing Date, including without limitation the Transferred Assets
(provided that for purposes of determining compliance with this covenant for
purposes of satisfaction of the condition to closing set forth on Section 6.2(b)
(and not for any other purpose, including without limitation under clause (c) of
Section 8.1), such compliance shall be determined solely with reference to the
Transferred Assets).
As used herein, the term "Transferred Assets" shall mean:
(i) assets of the Company Bank which are reflected on the June
30 Balance Sheet under the column entitled "International" (collectively,
"Balance Sheet Assets") except to the extent that any such assets have
previously been disposed of by the Company Bank;
(ii) the Scheduled Assets, except to the extent that any such
assets have previously been disposed of by the Company Bank;
(iii) any assets of the Company Bank acquired or generated
subsequent to June 30, 1995 which, based on the criteria used by the
Company Bank and Xxxxxx Xxxxxxxx (the "AA Criteria") in establishing the
June 30 Balance Sheet (which criteria are described in the notes to the
June 30 Balance Sheet (it being understood that such criteria may not
necessarily specifically articulate a basis for allocating each and every
asset and liability to either the International Business or the Domestic
Business)), would have been
43
reflected on the June 30 Balance Sheet under the column entitled
"International" if such assets had been acquired or generated as of June
30, 1995 (collectively, the "After-Acquired Assets"), except to the extent
that any such assets have previously been disposed of by the Company Bank;
(iv) earned and unpaid interest with respect to any Loan which
constitutes a Balance Sheet Asset, a Scheduled Asset or an After-Acquired
Asset;
(v) Assumed Contracts and Other Obligations (as hereinafter
defined);
(vi) books and records related to the In- ternational Business;
(vii) all accounts as to which the Company Bank or any of its
Subsidiaries acts as a fiduciary, including but not limited to accounts for
which any of such entities serves as a trustee, agent, custodian, personnel
representative, guardian, conservator, or investment advisor (collectively,
the "Fiduciary Business"); and
(viii) such additional liquid securities or cash as may be
necessary to prevent the Company Bank from having shareholders' equity at
the Closing Date in excess of the amount referred to in Section 5.15 of
this Agreement.
As used herein, the term "Assumed Contracts and Other Obligations"
means those Contracts (as hereinafter defined) and all other obligations or
liabilities of the Company Bank or any of its Subsidiaries relating to or
arising from the International Business, except in each case those expiring or
terminating between the date hereof and the Closing Date. As used herein, the
term "Contracts" means any arrangement, note, bond, commitment, franchise,
guarantee, indemnity, instrument, license or other agreement, understanding or
obligation, whether written or
44
oral, and all rights, interests and obligations arising thereunder or in
connection therewith, in each case relating to or arising from the International
Business.
Notwithstanding anything to the contrary contained in this Agreement,
the Transferred Assets shall not include the following assets, which assets
shall remain as assets of the Company Bank following the Closing:
(i) all of the branch offices of the Company Bank, which branch
offices are listed in Section 5.10 of the Disclosure Schedule;
(ii) the Company Bank's charter documents, non-transferable
licenses, permits, charters, corporate seals, minute books, stock books and
other corporate records having to do with the corporate organization and
capitalization of the Company Bank, and all records relating to Taxes;
provided, however, that the Transferred Assets shall include copies of all
records relating to those Taxes constituting Transferred Liabilities
reasonably requested by the Company and, if the Company is requested by any
Governmental Entity or required in connection with any suit, action or
proceeding to produce originals of such records, NFB shall provide such
originals to the Company for such purpose;
(iii) the Company Bank's personnel records pertaining to any
employees of the Company Bank, personnel references and security or
background investigation materials which were prepared or obtained at the
time of hiring with respect to employees of the Company Bank and any other
books and records which the Company Bank is required by law to retain,
provided that the Transferred Assets shall include copies of any portion of
such retained books and records that relate to the employees of the
International Business reasonably requested by the Company and, if the
Company is
45
requested by any Governmental Entity or required in connection with any
suit, action or proceeding to produce originals of such records, NFB shall
provide such originals to the Company for such purpose.
(b) At or prior to the Closing, the Company shall assume, agree
to pay, perform and discharge when due all liabilities and obligations relating
to in any manner or arising out of the International Business, whether primary
or secondary, direct or indirect, absolute or contingent, contractual, tortious
or otherwise, including without limitation the Transferred Liabilities (provided
that for purposes of determining compliance with this covenant for purposes of
satisfaction of the condition to closing set forth on Section 6.2(b) (and not
for any other purpose, including without limitation under clause (c) of Section
8.1), such compliance shall be determined solely with reference to the
Transferred Liabilities). As used herein, the term "Transferred Liabilities"
shall mean:
(i) liabilities of the Company Bank which are reflected on the
June 30 Balance Sheet under the column entitled "International"
(collectively, "Balance Sheet Liabilities") except to the extent that any
such liabilities have previously been satisfied or discharged by the
Company Bank;
(ii) any liabilities of the Company Bank acquired, generated or
incurred subsequent to June 30, 1995 which, based on the AA Criteria, would
have been reflected on the June 30 Balance Sheet under the column entitled
"International" if such liabilities had been acquired, generated or
incurred as of June 30, 1995 (collectively, the "After-Acquired
Liabilities") except to the extent that any such liabilities have
previously been satisfied or discharged by the Company Bank;
46
(iii) obligations under Loans and Loan Commitments (as
hereinafter defined) included as part of the International Business and
obligations under Loan Documents (as hereinafter defined) relating to such
Loans and Loan Commitments;
(iv) obligations under Assumed Contracts and Other Obligations;
(v) liabilities that may arise in connection with any
litigation or other claim that has been or may be brought against the
Company Bank or any of its subsidiaries or any of their respective
directors or NFB as the successor to the Company Bank in connection with or
arising out of the International Business, the Fiduciary Business (as
hereinafter defined) or in respect of NFB's indemnification obligations
with respect thereto, including without limitation those claims against the
Company Bank described in Section 5.10 of the Disclosure Schedule;
(vi) obligations arising under participation arrangements sold
to third parties with respect to Loans and Loan Commitments included in the
Transferred Assets;
(vii) all Employment Liabilities (as hereinafter defined)
relating to the transfer of employment contemplated by Section 5.10(c); and
(viii) all obligations and liabilities relating to, or arising out
of, the Fiduciary Business.
As used herein, the term "Loan" shall mean all:
(i) loans, advances or other extensions of credit, including
interests in loan participations and assignments, customer liabilities on
letters of credit, bankers acceptances and participations in letters of
credit (including in all cases loans made to pay
47
interest accruing on loans, whether or not due or payable (sometimes
referred to as capitalized interest)); and
(ii) all amendments, modifications, renewals, extensions,
refinancings and refundings of or for any of the foregoing.
As used herein, the term "Loan Commitments" shall mean the collective
reference to each commitment or obligation to extend credit to any person
(including pursuant to a letter of credit or banker's acceptance) or to
participate therein, whether or not such commitment, obligation or participation
has been accepted or utilized by such person.
As used herein, the term "Loan Documents" shall mean the agreements,
instruments, certificates, or other documents at any time evidencing or
otherwise relating to, governing, or executed in connection with, or as security
for, a Loan or Loan Commitment, including without limitation, notes, bond, loan
agreements, letter of credit applications, letters of credit, lease financing
contracts, bankers' acceptances, drafts, guarantees, deeds of trust, mortgages,
assignments, security agreements, pledges, subordination or priority agreement,
lien priority agreements, undertakings, security instruments, financing
statements, certificates, documents, legal opinions, participation and
assignment agreements and inter-creditor agreements, and all amendments,
modifications, renewals, extensions, rearrangements, and substitutions with
respect to any of the foregoing.
(c) Prior to the Closing, the Company shall cause those employees of
the Company Bank listed on Section 5.10(c) of the Disclosure Schedule (the
"Transferred Employees") to be transferred to the employ of the Company and, at
the time of such transfer, such employees shall cease to be employees of the
Company Bank.
48
5.11. Reserved.
5.12. Intercompany Accounts Settlement. Prior to the Closing, (a) the
Company Bank and its Subsidiaries shall pay and discharge all amounts of
intercompany indebtedness owed by the Company Bank or any of its Subsidiaries to
the Company or any Affiliate of the Company (other than the Company Bank and its
Subsidiaries) and (b) the Company shall pay and discharge (or cause to be paid
and discharged) all amounts of intercompany indebtedness owed by the Company or
any Affiliate (other than the Company Bank and its Subsidiaries) to the Company
Bank or any of its Subsidiaries.
5.13. Termination of Intercompany Agreements. Other than as expressly
contemplated by this Agreement, the Company shall, and will cause each of its
Affiliates (other than the Company Bank and its Subsidiaries) to terminate,
effective at or prior to Closing, in accordance with their terms, any and all
agreements then in effect as between the Company, any Affiliate of the Company
(other than the Company Bank or any of its Subsidiaries) or any predecessor
thereof, on the one hand, and the Company Bank or any of its Subsidiaries, on
the other hand and, at such time, all rights under any such agreement shall
terminate and all liabilities under any such agreement shall be paid and
discharged in accordance with the provisions of Section 5.13. Notwithstanding
the foregoing, the parties shall enter into mutually satisfactory arrangements
with respect to assets on the books of the Company that are currently being
serviced by the Company Bank.
5.14. Covenants Not to Compete and Solicit. From and after the Closing
Date and continuing until the eighteen-month anniversary thereof, the Company
shall not, and shall not permit any of its Subsidiaries to: (a) directly or
indirectly acquire or establish any office in the
49
boroughs of Queens or Brooklyn or the counties of Nassau or Suffolk (together,
the "Region") which is engaged in the business of accepting deposits or
originating loans or (b) solicit loans or other products or services of the type
currently made or offered by the Domestic Business to any persons who reside (in
the case of individuals) or conduct the substantial part of their business in
the Region.
5.15. Shareholders' Equity. (a) No later than December 15, 1995, the
Company shall deliver to NFB a pro forma consolidated balance sheet of the
Company Bank as of November 30, 1995, giving effect to the transfer of the
International Business as contemplated by Section 5.10 hereof and prepared on
the basis and with the adjustments set forth in this Section 5.15 (the "November
30 Balance Sheet"). From and after the delivery of the November 30 Balance
Sheet, the parties hereto shall monitor the assets and the liabilities of the
Company Bank on a regular and frequent basis and shall cooperate and act in good
faith to jointly prepare a consolidated balance sheet of the Company Bank as of
the close of business on the business day immediately preceding the Closing Date
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with GAAP applied on a consistent basis with the preparation of the
June 30 Balance Sheet, subject to the adjustments referred to in this Section
5.15.
(b) The Company and the Company Bank shall take all actions
necessary to cause the shareholders' equity of the Company Bank as reflected on
the Closing Balance Sheet to be $30 million after taking into account (i) the
transfer of the International Business (together with the Transferred Assets and
Transferred Liabilities) as contemplated by Section 5.10 hereof, (ii) the
application of Financial Accounting Standards No. 115 ("FAS 115"), (iii) the
establishment
50
of the amounts referred to in paragraph (c) of this Section 5.15, and (iv) the
exclusion referred to in clause (z) of paragraph (d) of this Section 5.15.
(c) The Company shall establish as liabilities on the Closing
Balance Sheet (whether or not in accordance with GAAP) amounts equal to (i)
except as otherwise provided below, all Employment Liabilities with respect to
the employment or termination of employment of employees or former employees
(including, without limitation, the Transferred Employees (as hereinafter
defined)) of the Company Bank or any of its Subsidiaries incurred, or arising
out of, events occurring (or, in the case of medical benefits, claims incurred)
on or prior to the Closing Date (collectively, "Pre-Closing Employee
Liabilities"), to the extent not theretofore discharged; (ii) all liabilities
and obligations for Taxes of the Company Bank and its Subsidiaries arising in or
attributable to any Pre-Closing Period (as hereinafter defined), including,
without limitation, any liabilities for Taxes arising out of, attributable to,
or incurred in connection with or with respect to, any of the transactions
contemplated by this Agreement, and any ad valorem, withholding, real or
personal or intangible property, sales or other Taxes which are not due or
assessed until after the Closing Date but which are attributable to any
Pre-Closing Period (collectively, "Pre-Closing Tax Liabilities") in each case to
the extent not theretofore discharged; (iii) all fees, costs and expenses
incurred or payable by the Company Bank in connection with the transactions
contemplated by this Agreement, except as set forth in Section 1.3(b)(ii), to
the extent not theretofore discharged (the "Transactional Costs"), (iv) all
attorney and accounting fees, costs and expenses incurred or payable by the
Company Bank or any of its Subsidiaries for the period on or prior to the
Closing Date, whether or not incurred or payable in the ordinary course of
business and including without limitation any such fees and expenses incurred in
connection with any
51
potential securities offering by the Company Bank or any current or proposed
Affiliate thereof, to the extent not theretofore discharged (the "Professional
Fees") and (vi) all current costs and expenses incurred in connection with the
operation of the Company Bank for the period on or prior to the Closing Date
(the "Current Expenses"). As used herein, the term "Employment Liabilities"
shall mean any liabilities, obligations, losses, claims, demands, suits,
actions, damages, costs, expenses or commitments related to compensation,
retirement benefits, severance or other welfare benefits ("Costs"), whether
arising under a plan, agreement, arrangement, policy, understanding or
applicable federal, state or local law, other than Costs in respect of the
contract identified in Section 2.8(v) of the Disclosure Schedule.
(d) The parties hereto acknowledge that certain of the
Transferred Assets may not be transferable from the Company Bank to the Company
as a matter of law, contract or otherwise (any such asset being referred to
herein as a "paragraph (d) asset"). The parties hereto agree that in the case of
(i) paragraph (d) assets and (ii) tax assets (other than the deferred tax asset
relating to the Domestic Business), (x) NFB shall hold all such assets for the
benefit of the Company, (y) any cash or other property received by NFB in
respect of any such assets shall be delivered by NFB to the Company within five
business days after receipt thereof by NFB, and (z) none of such assets shall be
reflected on the Closing Balance Sheet.
(e) Neither compliance by NFB with this Section 5.15 nor the
consummation by NFB of the Stock Purchase in reliance on the Closing Balance
Sheet shall affect the representations, warranties, covenants or agreements of
the Company or the Company Bank set forth herein, including, without limitation,
the covenants of the Company contained in this Section 5.15 and the
indemnification obligations contained in Article VIII hereof.
52
(f) Within five business after the Closing Date, the parties
shall complete the preparation of a balance sheet as of the close of business on
the Closing Date (the "Final Balance Sheet"). The Final Balance Sheet shall be
prepared on the same basis as the Closing Balance Sheet and shall reflect all of
the adjustments referred to in this Section 5.15. In the event the amount
reflected as shareholders' equity on the Final Balance Sheet is less than $30
million, then on the next business day after the completion of the Final Balance
Sheet the Company shall pay to NFB in immediately available funds the amount by
which $30 million exceeds the amount of shareholders' equity on the Final
Balance Sheet. In the event the amount reflected as shareholders' equity on the
Final Balance Sheet is more than $30 million, then on the next business day
after the completion of the Final Balance Sheet NFB shall pay to the Company in
immediately available funds the amount by which the amount of shareholders'
equity on the Final Balance Sheet exceeds $30 million. Any payments made
pursuant to the preceding two sentences shall be with interest from but not
including the Closing Date to and including the date of payment at the rate set
forth in Section 1.2 hereof. If for any reason the parties are unable to agree
on all aspects of the Final Balance Sheet within such five business day period,
then the parties shall jointly select an independent accounting firm to resolve
any disputes between the parties. The determination of such firm shall be
binding upon the parties and any amount determined to be due from one party to
the other shall be paid in immediately available funds (together with interest
from and after the Closing Date at the rate set forth in Section 1.2 hereof) on
the business day immediately following the date of such determination. The party
who is required to make a payment pursuant to the preceding sentence shall pay
all of the fees and expenses of such accounting firm.
53
5.16. FIRTPA Compliance. The Company shall deliver at the Closing to
NFB a certification that the stock of the Company Bank does not constitute a
U.S. real property interest in a form which complies with the requirements of
Section 1445 of the Code and the regulations promulgated thereunder.
5.17. Certain Actions. Except as disclosed in writing prior to the date
hereof by NFB or its legal counsel, NFB will not take any action that would
jeopardize or materially delay the receipt of the Requisite Regulatory
Approvals.
5.18 Fiduciary Business. NFB shall indemnify the directors of the
Company Bank against and hold each of them harmless from any and all claims in
respect of, relating to, or arising out of, the Fiduciary Business.
54
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation To Effect the Stock
Purchase. The respective obligation of each party to effect the Stock Purchase
shall be subject to the satisfaction at or prior to the Closing of the follow-
ing conditions:
(a) Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby and by the Bank Merger Agreement (including the
Stock Purchase and the Merger) shall have been obtained and shall remain in full
force and effect (all such approvals being referred to herein as the "Requisite
Regulatory Approvals") and all statutory waiting periods in respect thereof
shall have expired.
(b) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Stock Purchase, the Merger or any of the other transactions
contemplated by this Agreement or the Bank Merger Agreement shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Stock Purchase or the
Merger.
6.2. Conditions to Obligations of NFB. The obligation of NFB to effect
the Stock Purchase is also subject to the satisfaction or waiver by NFB at or
prior to the Closing of the following conditions:
55
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (other than the
representation contained in Section 2.9(c)) shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. NFB shall have
received a certificate signed on behalf of the Company by the Managing Director
of the Company to the foregoing effect.
(b) Performance of Obligations of the Company and the Company
Bank. Each of the Company and the Company Bank shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and NFB shall have received a
certificate signed on behalf of the Company by the Managing Director of the
Company to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by
any Governmental Entity seeking an Injunction shall be pending.
(d) Legal Opinion. NFB shall have received the opinion of Xxxxx
Xxxx & Xxxxxxxx, counsel to the Company, dated the Closing Date, covering the
matters set forth on Exhibit 6.2(d)(a) and Spanish counsel to the Company, who
may be an employee of the Company, covering the matters set forth on Exhibit
6.2(d)(b). As to any matter in such opinion which involves matters of fact or
matters relating to laws other than Federal or New York law, such counsel may
rely upon the certificates of officers of the Company and the Company Bank and
of public officials and opinions of local counsel, reasonably acceptable to NFB,
provided a copy of such reliance opinion shall be attached as an exhibit to the
opinion of such counsel.
56
(e) Shareholders' Equity. The shareholders' equity of the
Company Bank, as reflected on the books and records of the Company Bank, in
accordance with GAAP, taking into account the application of FAS 115, as of the
Closing Date and subsequent to the transfer of the International Business
(together with the Transferred Assets and Transferred Liabilities) as
contemplated by Section 5.10 hereof and the establishment of the amounts
referred to in Section 5.15 hereof, shall not be less than $30,000,000.
(f) Loan Loss Reserve. The loan loss reserve of the Company Bank,
as reflected on the books and records of the Company Bank, as of the Closing
Date and subsequent to the transfer of the International Business as
contemplated by Section 5.10 hereof, shall not be less than $6,006,900 minus the
amount equal to one-half of the carrying value of the loan set forth in the
Asset Schedule.
6.3. Conditions to Obligations of the Company and the Company Bank. The
obligation of each of the Company and the Company Bank to effect the Stock
Purchase is also subject to the satisfaction or waiver by the Company or the
Company Bank at or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of NFB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided, however,
that for purposes of determining the satisfaction of the foregoing condition,
such representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such representations and
warranties to be so true and correct,
57
individually or in the aggregate, will prevent the consummation of the
transactions contemplated hereby.
(b) Performance of Obligations of NFB. NFB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) No Pending Governmental Actions. No proceeding initiated by
any Governmental Entity seeking an Injunction shall be pending.
(d) Legal Opinion. The Company shall have received the opinion of
Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel to NFB, dated the Closing Date,
covering the matters set forth on Exhibit 6.3(d). As to any matter in such
opinion which involves matters of fact or matters relating to laws other than
Federal or New York law, such counsel may rely upon the certificates of officers
of NFB and of public officials and opinions of local counsel, reasonably
acceptable to the Company and the Company Bank, provided a copy of such reliance
opinions shall be attached as an exhibit to the opinion of such counsel.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual consent in writing of the Company and NFB;
(b) by either NFB or the Company upon written notice to the other
party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental
58
Entity which must grant such Requisite Regulatory Approval, unless within the
60-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 7.1(b)(i) if such denial or request or
recommendation for withdrawal or failure to file and request for rehearing or an
amended application 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;
(c) by either NFB or the Company if the Closing shall not have
occurred on or before April 30, 1996, unless the failure of the Closing to occur
or the Requisite Regulatory Approvals to have been obtained by such respective
dates 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;
(d) by either NFB or the Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within thirty days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
7.1(d) unless the breach of
59
representation or warranty, together with all other such breaches, would entitle
the party receiving such representation not to consummate the transactions
contemplated hereby under Section 6.2(a) (in the case of a breach of
representation or warranty by the Company) or Section 6.3(a) (in the case of a
breach of representation or warranty by NFB); provided, further, however, that
no party may terminate this Agreement under this subsection (d) prior to
December 31, 1995;
(e) by either NFB or the Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there have been a material breach of any
of the covenants or agreements set forth in this Agreement on the part of the
other party, which breach shall not have been cured within thirty days following
receipt by the breaching party of written notice of such breach from the other
party hereto; provided, however, that no party may terminate this Agreement
under this subsection (e) prior to December 31, 1995.
7.2. Effect of Termination; Expenses. (a) In the event of termination
of this Agreement by either NFB or the Company as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 5.2(a), and Sections 5.2(b), 7.2 and 10.1, shall
survive any termination of this Agreement, and (ii) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
(b) In the event (i) this Agreement is terminated by the Company
or the Stock Purchase is otherwise abandoned, (ii) NFB shall have breached the
covenant contained in Section 5.17 and (iii) at the time of such termination or
abandonment, NFB would not be entitled
60
not to consummate the Agreement pursuant to Section 6.2(a) or Section 6.2(b) if
the Closing Date were otherwise scheduled to occur on such date of termination
or abandonment, then, without limiting any of the Company's or the Company
Bank's remedies available under law, NFB shall pay the Company $1,500,000.
7.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto by a duly authorized instrument
in writing signed on behalf of each of the parties hereto.
7.4. Extension; Waiver. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE VIII
INDEMNIFICATION
8.1. Obligations of the Company. From and after the Closing Date, the
Company shall indemnify, defend and hold harmless NFB and its directors,
officers and Affiliates from and against any and all claims, losses,
liabilities, costs, penalties, fines and expenses (including attorney's,
accountant's, consultant's and expert's fees and expenses), damages, obligations
to third
61
parties, expenditures, proceedings, judgments, awards or demands ("Losses")
which any of them may suffer, incur or sustain arising out of, attributable to,
or resulting from: (a) any inaccuracy in or breach of any of the representations
or warranties of the Company made in or pursuant to this Agreement (it being
agreed that solely for purposes of establishing whether any matter is
indemnifiable pursuant to this clause (a), the accuracy of the representations
and warranties made by the Company shall be determined without giving effect to
the qualifications to such representations and warranties concerning
"materiality," the Company's or the Company Bank's "knowledge," and "Material
Adverse Effect," and all such representations and warranties shall be tested as
if such qualifications were not included therein); (b) any breach or
nonperformance of any of the covenants or agreements made by the Company in or
pursuant to this Agreement; (c) the International Business, including without
limitation the Transferred Assets or the Transferred Liabilities (whether
arising before, on or after the Closing Date), (d) any litigation not set forth
on Schedule 2.9 (whether arising prior to, on or after the Closing Date) which
arises out of any act or omission of the Company Bank or any of its Affiliates
on or prior to the Closing Date and (e) the reconciliation of the Company Bank's
accounts with ACS.
8.2. Adjustments. Notwithstanding any other provisions of this
Agreement:
(a) The Company shall, and hereby does, indemnify NFB and its
Affiliates against and hold each of them harmless from any and all Pre-Closing
Tax Liabilities to the extent not discharged on or before the Closing Date;
provided, however, that the Company shall not be required to indemnify NFB with
respect to Pre-Closing Tax Liabilities unless and until the aggregate
Pre-Closing Tax Liabilities exceed the amounts reflected in respect of
Pre-Closing Tax Liabilities (other than deferred Tax liabilities in respect of
the Domestic Business on the Final
62
Balance Sheet). Upon the occurrence of such event, the Company shall pay to NFB
the amount of such excess, and, thereafter, the Company shall indemnify NFB with
respect to all Pre-Closing Tax Liabilities. If, following the expiration of the
statute of limitations, including extensions thereof, with respect to all
Pre-Closing Periods and the payment of all Pre-Closing Tax Liabilities, the
amounts reflected in respect of Pre-Closing Tax Liabilities (other than deferred
Tax Liabilities) exceed the Pre-Closing Tax Liabilities, NFB shall pay to the
Company the amount of such excess.
(b) The Company shall, and hereby does, indemnify NFB and its
Affiliates against and hold each of them harmless from any and all Pre-Closing
Employee Liabilities to the extent not discharged on or before the Closing Date;
provided, however, that the Company shall not be required to indemnify NFB with
respect to Pre-Closing Employee Liabilities unless and until the aggregate
Pre-Closing Employee Liabilities exceed the amounts reflected in respect of
Pre-Closing Employee Liabilities on the Final Balance Sheet. Upon the occurrence
of such event, the Company shall pay to NFB the amount of such excess, and,
thereafter, the Company shall indemnify NFB with respect to all Pre-Closing
Employee Liabilities. If, following the payment of all Pre-Closing Employee
Liabilities, the amounts reflected in respect of Pre-Closing Employee
Liabilities exceed the Pre-Closing Employee Liabilities, NFB shall pay to the
Company the amount of such excess.
(c) Any amounts paid pursuant to Sections 8.2(a) and 8.2(b) shall
be with interest for the number of days from the Closing Date (in the event of
payments by NFB) or the date such payment was made (in the case of payments by
the Company) to the date of payment at, in all cases, the Federal Funds Rate as
published in the "Money Rates" section of The Wall Street Journal as of the
Closing Date.
63
(d) Any amounts paid pursuant to Sections 8.2(a) and 8.2(b) shall
be treated as adjustments to the Purchase Price for tax purposes.
(e) Each of the amounts reflected as liabilities on the Closing
Balance Sheet with respect to Transactional Costs, Professional Fees and Current
Expenses shall be reduced by the amount of any payment duly made by NFB or any
of its Affiliates in respect of such liability following the Closing Date. To
the extent that the amount of any such liability is reduced, as a result of
payments made by NFB, below zero (a "Deficiency"), the Company shall pay to NFB
the absolute value of the amount of such Deficiency with interest on such amount
for the number of days from the date the Deficiency arose to the date of payment
of the Deficiency by the Company at the Federal Funds Rate as published in the
"Money Rates" section of The Wall Street Journal as of the Closing Date.
(f) If, after all of the liabilities with respect to each of the
Transactional Costs, Professional Fees and Current Expenses have been paid by
NFB or any of its Affiliates, the amount reflected as a liability with respect
to each of the Transactional Costs, Professional Fees and Current Expenses is
greater than zero, NFB shall pay the Company the amount of such excess with
interest on such amount for the number of days from the Closing Date to the date
of such payment at the Federal Funds Rate as published in the "Money Rates"
section of The Wall Street Journal as of the Closing Date.
8.3. Procedure. (a) Any party entitled to be indemnified under this
Agreement (an "Indemnified Party") seeking indemnification for any Loss or
potential Loss arising from a claim asserted by a third party against the
Indemnified Party (a "Third Party Claim") shall give written notice to the
Company (the "Indemnifying Party"). Written notice to the Indemnifying
64
Party of the existence of a Third Party Claim shall be given by the Indemnified
Party within 30 days after its receipt of a written assertion of liability from
the third party; provided, however, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article VIII by any
failure to provide timely notice of the existence of a Third Party Claim to the
Indemnifying Party except and only to the extent that the Indemnifying Party
actually incurs an out-of-pocket expense or otherwise has been damaged or
prejudiced as a result of such delay. In the event that the Company receives
notice from a third party of a claim or potential claim against an Indemnified
Party for Taxes, the Company shall give written notice to such Indemnified Party
of such claim and such parties shall otherwise comply with the procedures
contained herein.
(b) Except as otherwise provided herein, the Indemnifying Party
may elect to compromise or defend, at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel (which counsel shall be reasonably
satisfactory to the Indemnified Party), any Third Party Claim. If the
Indemnifying Party elects to compromise or defend such Third Party Claim, it
shall, within 30 days after receiving notice of the Third Party Claim, notify
the Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Third Party Claim. If the Indemnifying Party elects not to
compromise or defend against the Third Party Claim, or fails to notify the
Indemnified Party of its election to do so as herein provided, or otherwise
abandons the defense of such Third Party Claim, (i) the Indemnified Party may
pay (without prejudice of any of its rights as against the Indemnifying Party),
compromise or defend such Third Party Claim and (ii) the costs and expenses of
the Indemnified Party incurred in connection therewith shall be indemnifiable by
the Indemnifying Party pursuant to the terms of this Agreement.
65
Notwithstanding anything to the contrary contained herein, in connection with
any Third Party Claim (i) for Taxes or (ii) in which the Indemnified Party shall
reasonably conclude, based upon the advice of its counsel, that (x) there is a
conflict of interest between the Indemnifying Party and the Indemnified Party in
the conduct of the defense of such Third Party Claim or (y) there are specific
defenses available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party and which could be
materially adverse to the Indemnifying Party, then the Indemnified Party shall
have the right to assume and direct the defense and compromise of such Third
Party Claim. In such an event, the Indemnifying Party shall pay the fees and
disbursements of counsel to each of the Indemnifying Party and the Indemnified
Party. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnified Party may settle or compromise any claim (unless the sole relief
payable to a third party in respect of such Third Party Claim is monetary
damages that are paid in full by the party settling or compromising such claim)
over the objection of the other, provided, however, that consent to settlement
or compromise shall not be unreasonably withheld. In any event, except as
otherwise provided herein, the Indemnified Party and the Indemnifying Party may
each participate, at its own expense, in the defense of such Third Party Claim.
If the Indemnifying Party chooses to defend any claim, the Indemnified Party
shall make available to the Indemnifying Party any personnel or any books,
records or other documents within its control that are reasonably necessary or
appropriate for such defense, subject to the receipt of appropriate
confidentiality agreements. Notwithstanding anything to the contrary contained
in this paragraph (b), in the event prompt action is required with respect to
the defense of a Third Party Claim, the Indemnified Party shall, subject to the
terms and conditions of this Article VIII, have the right to assume the defense
of such Third Party
66
Claim; provided, however, that in the event that the Indemnifying Party
subsequently elects to assume the defense of such Third Party Claim, then the
provisions set forth in this paragraph (b) shall be applicable and the
Indemnifying Party shall, subject to the terms and conditions of this Article
VIII, reimburse the Indemnified Party for any costs and expenses incurred by the
Indemnified Party prior to the date the Indemnifying Party assumes control of
such Third Party Claim. Notwithstanding anything to the contrary contained in
this Agreement, the Indemnifying Party shall not settle any Third Party Claim
with respect to Taxes without the consent of the Indemnified Party, which
consent shall not be unreasonably withheld.
(c) Notwithstanding the foregoing, if an offer of settlement or
compromise is made by a third party claimant, and the Indemnifying Party
notifies the Indemnified Party in writing of the Indemnifying Party's
willingness to accept the settlement offer and pay the amount called for by such
offer, and the Indemnified Party declines to accept such offer, the Indemnified
Party may continue to contest such claim, free of any participation by the
Indemnifying Party, and the amount of any ultimate liability with respect to
such Indemnifiable Claim that the Indemnifying Party has an obligation to pay
hereunder shall be limited to the lesser of (A) the amount of the settlement
offer that the Indemnified Party declined to accept plus the costs and expenses
of the Indemnified Party prior to the date the Indemnifying Party notifies the
Indemnified Party of the Indemnifying Party's willingness to settle or
compromise such Third Party Claim and (B) the aggregate Losses of the
Indemnified Party with respect to such claim.
(d) Any claim on account of a Loss which does not involve a Third
Party Claim shall be asserted by written notice given by the party claiming
indemnity to the Company. The Company shall have a period for 30 days within
which to respond thereto. If the
67
Company does not respond within such 30-day period, the Company shall be deemed
to have accepted responsibility to make payment, subject to the provisions
hereof, and shall have no further right to contest the validity of such claim.
If the Company does respond within such 30-day period and rejects such claim in
whole or in part, the party claiming indemnity shall be free to pursue such
remedies as may be available to such party by applicable law.
Notwithstanding anything to the contrary contained in this Agreement,
no claim shall be made against the Company for indemnification under clauses
(a), (b) and (d) of Section 8.1 with respect to any Loss unless the aggregate of
all such Losses described in such clauses (a), (b) and (d) of Section 8.1 shall
exceed $1,000,000 (the "Basket"), and the Company shall only be required to pay
or be liable for any such Losses arising under such clauses in Section 8.1 to
the extent that their aggregate amount exceeds the Basket, and then only with
respect to Losses incurred in excess of such amount, provided, however, that the
Basket contained in this Section 8.3(d) shall not apply to, and
dollar-for-dollar recovery shall be available with respect to, Losses suffered,
incurred or sustained which arise out of, result from or are attributable to
breaches of the representations contained in Sections 2.2 and 2.10 hereof and
breaches of the covenants contained in Sections 5.10, 5.15 and Article IX
hereof.
The Indemnifying Party shall not be liable for any breach of
representation or warranty hereunder if the Loss therefrom, in any individual
case, amounts to $15,000 or less; however, such Losses shall be included in
calculating the $1 million threshold established in the immediately preceding
sentence, provided, however, that in the case of any Loss exceeding $15,000,
subject to the Basket, the entire Loss, and not solely the portion of such Loss
in excess of $15,000, shall be indemnifiable by the Indemnifying Party and
provided further, however, that
68
where a number of Losses are each individually less than $15,000, but the
aggregate of such Losses exceeds $15,000, and all such Losses are based upon,
arise from or are attributable to the same or a series of closely related
matters, then subject to the Basket, such Losses shall be indemnifiable by the
Indemnifying Party pursuant to Section 8.1(a). No indemnification shall be
available for any Loss incurred by NFB in respect of the matter listed as item
No. 3 in Section 2.9 of the Disclosure Schedule, although if NFB incurs such a
Loss at a time when all other Losses in the aggregate are less than the Basket,
then the Loss attributable to such item may be applied to the Basket.
(e) No action or claim pursuant to Section 8.1(a) hereof resulting
from breaches of the representations and warranties of the Company or any claim
for indemnity in respect thereof shall be brought or made unless, prior to the
expiration of the survival period for the applicable representation or warranty
as set forth below, the action or claim shall have been the subject of a good
faith written notice from the Indemnified Party to the Indemnifying Party which
notice specifies in reasonable detail the nature of the claim (it being
understood that such written notice may be delivered prior to the incurrence or
suffering of a Loss by an Indemnified Party if facts are described in sufficient
detail in such notice as to warrant the delivery of a good faith notice in which
case the party giving such notice shall be entitled to indemnification in
accordance with the provisions hereof notwithstanding that such Loss may occur
after the expiration of the applicable survival period). The representations and
warranties of the Company contained in this Agreement or in any certificate or
instrument delivered pursuant to this Agreement shall survive the Closing and
shall expire on the eighteen-month anniversary of the Closing Date, provided,
however, that the representations and warranties contained in (i) Section
69
2.2 shall survive the Closing indefinitely and (ii) Section 2.10 shall survive
until 30 days after the expiration of the applicable statute of limitations
periods (taking into account extensions thereof). The covenants of any party
contained herein (including, without limitation, those relating to
indemnification) shall survive the Closing indefinitely other than the covenants
contained in Sections 4.1, 5.1, 5.2 (except as provided otherwise therein), 5.3,
5.5, 5.7, 5.8, and 5.9, which shall expire on the eighteen-month anniversary of
the Closing Date.
ARTICLE IX
CERTAIN TAX MATTERS
9.1. Tax Returns. (a) Except as otherwise provided in Section 9.3, NFB
shall file or cause to be prepared for filing, all Returns of or which include
the Company Bank or any of its Subsidiaries (including any amendments thereto)
with respect to any taxable period ending on or prior to the Closing Date or
treated as ending on the Closing Date pursuant to Section 9.1(b) (a "Pre-Closing
Period") with respect to which the due date for filing is after the Closing
Date; provided, however, that 30 days before the date on which such Returns are
required to be filed, NFB shall provide to the Company copies of such Returns;
and, before NFB executes and files such Returns or pays any Taxes shown to be
due thereon, the Company shall have the right to object reasonably to anything
contained in such Returns that is reported in a manner which is inconsistent
with the manner reported in such Returns for the immediately preceding taxable
period.
(b) If, for any federal, state, local or foreign tax purpose, a
taxable period of the Company Bank or any of its Subsidiaries does not terminate
on the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing
70
authority to treat such taxable period for all purposes as a short taxable
period ending as of the close of the Closing Date. In any case where applicable
law does not permit such an election to be made, then for purposes of this
Agreement, the parties shall treat such taxable period as ending on the Closing
Date. In such a case, Taxes for the entire taxable period shall be allocated to
the period ending on or prior to the Closing Date using an
interim-closing-of-the-books method assuming that such taxable period ended at
the close of the Closing Date, except that (i) exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a perdiem basis, (ii) real property Taxes
shall be allocated in accordance with the principles of Section 164(d) of the
Code, (iii) any and all Taxes arising out of, attributable to or incurred in
connection with or with respect to the International Business and the
transactions contemplated by Section 5.10 shall be allocated to the period prior
to the Closing Date. For purposes of this Agreement, any taxable period ending
or treated by the parties as ending on the Closing Date shall constitute a
Pre-Closing Period.
(c) To the extent that the Company is subject to an obligation for
indemnification with respect to such Returns, the Company shall have the right
to object reasonably to anything contained in such Returns that is reported in a
manner which is inconsistent with the manner reported in such Returns for the
immediately preceding taxable period.
9.2. Refunds. The Company shall be entitled to any refunds of Taxes
attributable to any Pre-Closing Period. NFB shall be entitled to any refund
attributable to any period after the Closing date.
9.3. Conveyance Taxes. The Company and NFB shall each pay one-half of
the liability for all sales, transfer, stamp, real property transfer or real
property gains and similar Taxes
71
(collectively "Conveyance Taxes") attributable to, arising out of, or incurred
in connection with or with respect to the transactions effected pursuant to this
Agreement. The Company agrees to file all required Returns and reports due in
connection with the Conveyance Taxes and assumed under this Section 9.2. To the
extent the Company and NFB are required to file any joint Returns or reports,
the Company will submit to NFB for its review and comment, ten days in advance
of the due date for such filing, copies of all such Returns or reports it
intends to file and will in good faith consider all comments made by the Bank.
9.4. Post-Closing Taxes. Notwithstanding anything herein to the
contrary, the Company shall have no liability under this Agreement in respect of
Taxes of the Company Bank or any of its Subsidiaries attributable to any action
(including, without limitation, the Merger), of NFB, the Company Bank or any of
its Subsidiaries that occurs after the Closing.
ARTICLE X
GENERAL PROVISIONS
10.1. Expenses. Except as provided in Sections 1.3(b)(ii) and 5.15(f)
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
10.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to NFB, to:
72
North Fork Bank
0000 Xxxxx 00
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Chief Financial
Officer and Executive Vice President
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
and
(b) if to the Company or the Company Bank, to:
Banco Exterior de Espana, S.A.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Marco Xxxxxxx Xxxxxx
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
10.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The phrases "the date of this Agreement", "the date hereof" and
73
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 19, 1995.
10.4. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.5. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement and the Bank Merger Agreement.
10.6. 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.
10.7. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court, federal or
state, within the State of New York, this being in addition to any other remedy
to which they are entitled at law or in equity.
10.8. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any
74
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
10.9. Publicity. Except as otherwise required by law or the rules of
the NYSE, so long as this Agreement is in effect, neither NFB nor the Company
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.
10.10. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. This
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
10.11. Consent to Jurisdiction; Service of Process. The parties hereto
hereby exclusively and irrevocably submit to the jurisdiction of the state
courts
75
of New York and federal courts located in New York over any action suit or
proceeding arising out of or relating to this Agreement and any of the
agreements entered into in connection herewith and the Company, the Company Bank
and NFB hereby irrevocably agree that all claims in respect of any such suit,
action or proceeding shall be heard and determined in such courts. The parties
hereby irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such suit, action or proceeding brought in such court or any defense of
inconvenient forum for the maintenance of such suit, action or proceeding. Each
of the parties hereto agrees that a judgment in any such action, suit or pro-
ceeding may be enforced in other jurisdictions by suit on the judgment or in any
manner provided by law.
Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof in accordance
with the provisions of Section 10.2 of this Agreement.
76
IN WITNESS WHEREOF, the Bank, the Company and the Company Bank
have caused this Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
BANCO EXTERIOR DE ESPANA, S.A.
By:/s/ Marco X. Xxxxxx
---------------------------------
Name: Marco Xxxxxxx Xxxxxx
Title: Director General
EXTEBANK
By:/s/ Marco X. Xxxxxx
---------------------------------
Name: Marco Xxxxxxx Xxxxxx
Title: Chairman
NORTH FORK BANK
By:/s/ Xxxx X. Xxxxx
---------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman, Chief Executive
Officer & President
