AGREEMENT AND PLAN
OF MERGER
between
SOVEREIGN BANCORP, INC.
and
ML BANCORP, INC.
September 18, 1997
AGREEMENT
TABLE OF CONTENTS
Page
BACKGROUND ................................................. 1
AGREEMENT .................................................. 1
ARTICLE I
THE MERGERS
Section 1.01 Definitions .................................. 2
Section 1.02 The Merger ................................... 7
Section 1.03 The Bank Merger .............................. 13
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ML
Section 2.01 Organization ................................. 14
Section 2.02 Capitalization ............................... 15
Section 2.03 Authority; No Violation ...................... 16
Section 2.04 Consents ..................................... 17
Section 2.05 Financial Statements ......................... 18
Section 2.06 Taxes ........................................ 18
Section 2.07 No Material Adverse Effect ................... 19
Section 2.08 Contracts .................................... 19
Section 2.09 Ownership of Property; Insurance Coverage .... 20
Section 2.10 Legal Proceedings ............................ 21
Section 2.11 Compliance With Applicable Law ............... 22
Section 2.12 ERISA ........................................ 22
Section 2.13 Brokers, Finders and Financial Advisors ...... 23
Section 2.14 Environmental Matters ........................ 24
Section 2.15 Allowance for Loan Losses .................... 24
Section 2.16 Information to be Supplied ................... 24
Section 2.17 Securities Documents ......................... 24
Section 2.18 Related Party Transactions ................... 25
Section 2.19 Loans ........................................ 25
Section 2.20 Accounting for the Merger; Reorganization .... 25
Section 2.21 Fairness Opinion ............................. 25
Section 2.22 Quality of Representations ................... 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Section 3.01 Organization ................................. 26
Section 3.02 Capital Structure ............................ 27
Section 3.03 Authority; No Violation ...................... 27
Section 3.04 Consents ..................................... 28
Section 3.05 Financial Statements ......................... 29
Section 3.06 Taxes ........................................ 30
Section 3.07 No Material Adverse Effect ................... 30
Section 3.08 Ownership of Property; Insurance Coverage .... 30
Section 3.09 Legal Proceedings ............................ 31
Section 3.10 Compliance With Applicable Law ............... 31
Section 3.11 Information to be Supplied ................... 32
Section 3.12 ERISA ........................................ 32
Section 3.13 Securities Documents ......................... 33
Section 3.14 Environmental Matters ........................ 33
Section 3.15 Allowance for Loan Losses .................... 34
Section 3.16 Brokers and Finders .......................... 34
Section 3.17 Loans ........................................ 34
Section 3.18 Accounting for the Merger; Reorganization .... 34
Section 3.19 Quality of Representations ................... 34
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of ML's Business ..................... 35
Section 4.02 Access; Confidentiality ...................... 38
Section 4.03 Regulatory Matters and Consents .............. 39
Section 4.04 Taking of Necessary Action ................... 40
Section 4.05 Indemnification; Insurance ................... 41
Section 4.06 No Other Bids and Related Matters ............ 42
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedule ..................................... 43
Section 4.08 Conduct of Sovereign's Business .............. 43
Section 4.09 Current Information .......................... 44
Section 4.10 Undertakings by Sovereign and ML ............. 45
Section 4.11 Employee Benefits and Termination Benefits ... 47
Section 4.12 Stock Exchange Listing ....................... 53
Section 4.13 Affiliate Letters ............................ 53
Section 4.14 Directors and Officers ....................... 53
Section 4.15 Sovereign Rights Agreement ................... 54
Section 4.16 ML Share Issuance ............................ 54
ARTICLE V
CONDITIONS
Section 5.01 Conditions to ML's Obligations under this
Agreement .................................... 55
Section 5.02 Conditions to Sovereign's Obligations under
this Agreement ............................... 57
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination .................................. 59
Section 6.02 Effect of Termination ........................ 62
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses ..................................... 62
Section 7.02 Non-Survival of Representations and
Warranties ................................... 62
Section 7.03 Amendment, Extension and Waiver .............. 62
Section 7.04 Entire Agreement ............................. 63
Section 7.05 No Assignment ................................ 63
Section 7.06 Notices ...................................... 63
Section 7.07 Captions ..................................... 64
Section 7.08 Accountants .................................. 64
Section 7.09 Counterparts ................................. 64
Section 7.10 Severability ................................. 64
Section 7.11 Governing Law ................................ 65
Exhibit 1-A ML's Affiliate Agreement
Exhibit 1-B Sovereign's Affiliate Agreement
Exhibit 2 Stock Option Agreement
Exhibit 3 Bank Plan of Merger
Exhibit 4 Form of Opinion of Sovereign's Counsel
Exhibit 5 Matters to be Covered in Tax Opinion of
Counsel to Sovereign and/or ML
Exhibit 6 Form of Opinion of ML's Counsel
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of
September 18, 1997, is made by and between SOVEREIGN BANCORP,
INC. ("Sovereign"), a Pennsylvania corporation, having its
principal place of business in Wyomissing, Pennsylvania, and ML
BANCORP, INC. ("ML"), a Pennsylvania corporation, having its
principal place of business in Villanova, Pennsylvania.
BACKGROUND
1. Sovereign and ML desire for ML to merge with and
into Sovereign, with Sovereign surviving such merger, in
accordance with the applicable laws of the Commonwealth of
Pennsylvania, and in accordance with the plan of merger set forth
herein.
2. Sovereign and ML desire that the merger of ML and
Sovereign constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended,
and be accounted for as a pooling-of-interests under generally
accepted accounting principles.
3. As a condition and inducement to Sovereign's
willingness to enter into this Agreement, (a) the directors and
certain officers of ML are concurrently executing a Letter
Agreement in the form attached hereto as Exhibit 1-A, and (b) ML
is concurrently granting to Sovereign an option to acquire, under
certain circumstances, ML's common stock (the "Sovereign Option")
pursuant to a Stock Option Agreement between Sovereign and ML in
the form attached hereto as Exhibit 2.
4. As a condition and inducement to ML's willingness
to enter into this Agreement, the directors and certain officers
of Sovereign are concurrently executing a Letter Agreement in the
form attached hereto as Exhibit 1-B.
5. Sovereign desires to merge Main Line Bank, a
federal savings bank and a wholly-owned subsidiary of ML ("Main
Line Bank"), into and with Sovereign Bank, a federal savings bank
and a wholly-owned subsidiary of Sovereign ("Sovereign Bank"),
with Sovereign Bank surviving such merger in accordance with the
Bank Plan of Merger in the form attached hereto as Exhibit 3.
6. Sovereign and ML desire to provide the terms and
conditions governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement,
the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer
or director of such Person and any Affiliate of such
executive officer or director.
Agreement means this agreement, and any amendment
or supplement hereto, which constitutes a "plan of merger"
between Sovereign and ML.
Applicable Exchange Ratio shall have the meaning
given to such term in Section 1.02(e)(ii)(A).
Applications means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
Articles of Merger means the articles of merger to
be executed by Sovereign and ML and to be filed in the PDS,
in accordance with the applicable laws of the Commonwealth
of Pennsylvania.
Bank Merger means the merger of Main Line Bank
with and into Sovereign Bank, with Sovereign Bank surviving
such merger, contemplated by Section 1.03 of this Agreement.
Bank Plan of Merger has the meaning given to that
term in Section 1.03 of this Agreement.
BCL means the Pennsylvania Business Corporation
Law of 1988, as amended.
Closing Date means the fifth business day
following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation
of the Merger specified in Article V of this Agreement
(other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing),
or such other date as Sovereign and ML may mutually agree.
Determination Date means the earlier of (i) the
date on which the OTS approves the Merger and the Bank
Merger (or the later of such dates if the OTS approves such
transactions on different dates) and (ii) March 31, 1998.
Dissenting Shares shall have the meaning set forth
in Section 1.02(e)(ii)(E) hereof.
DOJ means the United States Department of Justice.
Effective Date means the date upon which the
Articles of Merger shall be filed in the PDS, and shall be
the same as the Closing Date.
Environmental Law means any federal, state, local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection,
preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently
listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated,
whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
from time to time thereunder.
FDIA means the Federal Deposit Insurance Act, as
amended.
FDIC means the Federal Deposit Insurance
Corporation.
GAAP means generally accepted accounting
principles as in effect at the relevant date.
HOLA means the Home Owners' Loan Act, as amended.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
ML Common Stock means the common stock of ML
described in Section 2.02(a).
ML Disclosure Schedule means a disclosure schedule
delivered by ML to Sovereign pursuant to Article II of this
Agreement.
ML Financials means (i) the audited consolidated
financial statements of ML as of March 31, 1997 and for the
three years ended March 31, 1997, including the notes
thereto, and (ii) the unaudited interim consolidated
financial statements of ML as of each calendar quarter
thereafter included in Securities Documents filed by ML.
ML Options means options to purchase shares of ML
Common Stock granted pursuant to the ML Stock Option Plans.
ML Regulatory Reports means the Annual Reports of
ML on Form H-(b)11 filed since March 31, 1995 through the
Closing Date, any Current Report of ML on Form H-(b)11 filed
with the OTS from March 31, 1995 through the Closing Date
and the Thrift Financial Reports of Main Line Bank and
accompanying schedules for each calendar quarter, beginning
with the quarter ended March 31, 1995, through the Closing
Date.
ML Stock Option Plans means the 1994 Stock Option
Plan and the 1997 Stock Option Plan.
ML Subsidiaries means (i) any corporation, 50% or
more of the capital stock of which is owned, either directly
or indirectly, by ML, except any corporation the stock of
which is held in the ordinary course of the lending
activities of Main Line Bank, and (ii) ML Capital Trust I.
Material Adverse Effect shall mean, with respect
to Sovereign or ML, respectively, any effect that is
material and adverse to its assets, financial condition or
results of operations on a consolidated basis, provided,
however, that Material Adverse Effect shall not be deemed to
include (a) any change in the value of the respective
investment and loan portfolios of Sovereign or ML resulting
from a change in interest rates generally, (b) any change
occurring after the date hereof in any federal or state law,
rule or regulation or in GAAP, which change affects banking
institutions generally, including any changes affecting the
Bank Insurance Fund or the Savings Association Insurance
Fund, (c) reasonable expenses (not to exceed $2.5 million,
plus reasonable legal fees, cost and expense relating to any
litigation arising as a result of the Merger, reasonable
costs associated with compliance with Section 4.16 hereof
and the cost associated with Section 4.11(e) hereof)
incurred in connection with this Agreement and the
transactions contemplated hereby, (d) actions or omissions
of a party (or any of its Subsidiaries) taken with the prior
informed written consent of the other party in contemplation
of the transactions contemplated hereby (including without
limitation any actions taken by ML pursuant to
Section 4.10(a)(vi) of this Agreement), and (e) any effect
with respect to a party hereto caused, in whole or in part,
by the other party.
Merger means the merger of ML with and into
Sovereign, with Sovereign surviving such merger,
contemplated by this Agreement.
NASD means the National Association of Securities
Dealers, Inc.
OTS means the Office of Thrift Supervision.
PDS means the Department of State of the
Commonwealth of Pennsylvania.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group"
(as that term is defined in Section 13(d)(3) of the Exchange
Act).
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any amendments and
supplements thereto, to be transmitted to holders of ML
Common Stock and Sovereign Common Stock in connection with
the transactions contemplated by this Agreement.
Registration Statement means the registration
statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed
with the SEC under the Securities Act with respect to the
Sovereign Common Stock and Sovereign Stock Purchase Rights
to be issued in connection with the transactions
contemplated by this Agreement.
Regulatory Agreement has the meanings given to
that term in Sections 2.11 and 3.10 of this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including
without limitation the OTS, the FDIC, or the respective
staffs thereof.
Rights means warrants, options, rights,
convertible securities and other capital stock equivalents
which obligate an entity to issue its securities.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy
material, and other documents required to be filed under the
Securities Laws.
Securities Laws means the Securities Act, the
Exchange Act, the Investment Company Act of 1940, as
amended, the Investment Advisors Act of 1940, as amended,
the Trust Indenture Act of 1939, as amended, and in each
case the rules and regulations promulgated from time to time
thereunder.
Sovereign Common Stock has the meaning given to
that term in Section 3.02(a) of this Agreement.
Sovereign Disclosure Schedule means a disclosure
schedule delivered by Sovereign to ML pursuant to
Article III of this Agreement.
Sovereign Financials means (i) the audited
consolidated financial statements of Sovereign as of
December 31, 1996 and for the three years ended December 31,
1996, including the notes thereto, and (ii) the unaudited
interim consolidated financial statements of Sovereign as of
each calendar quarter thereafter included in Securities
Documents filed by Sovereign.
Sovereign Market Price means, as of any date, the
average between the closing high bid and low asked prices of
a share of Sovereign Common Stock on the Nasdaq National
Market System (as reported in The Wall Street Journal, or if
not reported therein, in another authoritative source).
Sovereign Market Value means the average of the
Sovereign Market Prices for the twenty (20) consecutive
trading days ending on the trading day preceding the
Determination Date.
Sovereign Option means the option granted to
Sovereign to acquire shares of ML Common Stock referenced in
the recitals to this Agreement.
Sovereign Regulatory Reports means the Annual
Reports of Sovereign on Form H-(b)11 filed with the OTS
since December 31, 1995 through the Closing Date, any
Current Report of Sovereign on Form H-(b)11 filed with the
OTS from December 31, 1995 through the Closing Date and the
Thrift Financial Reports of Sovereign Bank and accompanying
schedules for each calendar quarter, beginning with the
quarter ended December 31, 1995, through the Closing Date.
Sovereign Rights Agreement means the Rights
Agreement dated as of September 19, 1989, as amended
September 27, 1995, between Sovereign and Chemical Bank, as
rights agent, relating to Sovereign's Series A Junior
Participating Preferred Stock.
Sovereign Stock Purchase Rights means Rights to
purchase a unit of Sovereign's Series A Junior Participating
Preferred Stock in accordance with the terms of the
Sovereign Rights Agreement.
Sovereign Subsidiaries means (i) any corporation,
50% or more of the capital stock of which is owned, either
directly or indirectly, by Sovereign, except any corporation
the stock of which is held in the ordinary course of the
lending activities of a bank and (ii) Sovereign Capital
Trust I and any similar entity sponsored or created by
Sovereign after the date hereof.
Subsidiary means any corporation, 50% or more of
the capital stock of which is owned, either directly or
indirectly, by another entity, except any corporation the
stock of which is held in the ordinary course of the lending
activities of a bank.
Section 1.02 The Merger.
(a) Closing. The closing will take place at
10:00 a.m. on the Closing Date at the offices of ▇▇▇▇▇▇▇ & ▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, unless another
time and place are agreed to by the parties hereto; provided, in
any case, that all conditions to closing set forth in Article V
(other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing) have
been satisfied or waived at or prior to the Closing Date. On the
Closing Date, ML and Sovereign shall cause the Articles of Merger
to be duly executed and to be filed in the PDS.
(b) The Merger. Subject to the terms and
conditions of this Agreement, on the Effective Date, ML shall
merge with and into Sovereign in accordance with the provisions
of the BCL. Sovereign shall be the surviving corporation of the
Merger and shall continue its corporate existence under the laws
of the Commonwealth of Pennsylvania. From and after the
Effective Date, the Merger shall have the effects set forth in
Section 1929 of the BCL.
(c) Sovereign's Articles of Incorporation and
Bylaws. On and after the Effective Date, the articles of
incorporation and the bylaws of Sovereign, as in effect
immediately prior to the Effective Date, shall automatically be
and remain the articles of incorporation and bylaws of Sovereign,
as the surviving corporation in the Merger, until thereafter
altered, amended or repealed.
(d) Board of Directors and Officers of Sovereign.
(i) On the Effective Date, the Board of
Directors of Sovereign, as the surviving corporation in the
Merger, shall consist of those persons holding such office
immediately prior to the Effective Date.
(ii) On the Effective Date, the officers of
Sovereign duly elected and holding office immediately prior to
the Effective Date shall be the officers of Sovereign, as the
surviving corporation in the Merger, existing on such Effective
Date.
(e) Conversion of Shares.
(i) Sovereign Common Stock.
(A) Each share of Sovereign Common
Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date,
continue to be issued and outstanding as an identical share
of Sovereign Common Stock. Shares of Sovereign Common Stock
owned by ML (other than shares held in trust, managed,
custodial or nominee accounts and the like or held by mutual
funds for which a subsidiary of ML acts as investment
advisor, that in any such case are beneficially owned by
third parties (any such shares, "trust account shares") and
shares acquired in respect of debts previously contracted
(any such shares, "DPC shares")) shall become treasury stock
of Sovereign.
(B) Each share of Sovereign Common
Stock issued and held in the treasury of Sovereign as of the
Effective Date, if any, shall, on and after the Effective
Date, continue to be issued and held in the treasury of
Sovereign.
(ii) ML Common Stock.
(A) Subject to the provisions of
subparagraphs (B), (C), (D) and (E) of this
Section 1.02(e)(ii), each share of ML Common Stock issued
and outstanding immediately prior to the Effective Date
(other than shares of ML Common Stock, if any, then owned by
Sovereign or ML or any ML Subsidiary) shall, on the
Effective Date, by reason of the Merger and without any
action on the part of the holder thereof, be converted into
and become a right to receive:
(i) if the Sovereign Market Value
is greater than or equal to $13.80 and less than or
equal to $18.67, then 1.67 shares of fully paid and
nonassessable shares of Sovereign Common Stock, and the
corresponding number of Sovereign Stock Purchase Rights
pursuant to the Sovereign Rights Agreement;
(ii) if the Sovereign Market Value
is less than $13.80, then that number (rounded to the
nearest hundredth) of shares of fully paid and
nonassessable shares of Sovereign Common Stock, and the
corresponding number of Sovereign Stock Purchase Rights
pursuant to the Sovereign Rights Agreement, equal to
$23.05 divided by the Sovereign Market Value, provided
that if the Sovereign Market Value is less than $12.18,
Sovereign shall have the option to elect, by written
notice to ML, and subject to ML's and Sovereign's
rights under Section 6.01(c) hereof, to have the
Exchange Ratio be equal to that number (rounded to the
nearest hundredth) of shares of fully paid and
nonassessable shares of Sovereign Common Stock, and the
corresponding number of Sovereign Stock Purchase Rights
pursuant to the Sovereign Rights Agreement, equal to
$23.05 divided by $12.18; or
(iii) if the Sovereign Market
Value is greater than $18.67, then that number (rounded
to the nearest hundredth) of shares of fully paid and
nonassessable shares of Sovereign Common Stock, and the
corresponding number of Sovereign Stock Purchase Rights
pursuant to the Sovereign Rights Agreement, equal to
$31.18 divided by the Sovereign Market Value, provided
that if on or prior to the Effective Date there has
been any public announcement of a proposed acquisition
or sale of all or substantially all of Sovereign's
assets or a merger, consolidation or similar
transaction involving Sovereign in which Sovereign is
not the surviving entity or in which shareholders of
Sovereign before such transaction will not hold in the
aggregate shares of the surviving or new corporation to
be outstanding immediately after the consummation
thereof entitled to cast at least a majority of the
votes entitled to be cast generally for the election of
directors, the Exchange Ratio shall be 1.67.
The Exchange Ratio, as determined pursuant to any of
Sections 1.02(e)(ii)(A)(i), 1.02(e)(ii)(A)(ii) or
1.02(e)(ii)(A)(iii), is hereinafter referred to as the
"Applicable Exchange Ratio".
(B) Each share of ML Common Stock
(other than trust account shares or DPC shares) owned by
Sovereign or a Sovereign Subsidiary on the Effective Date,
if any, shall be cancelled.
(C) Each share of ML Common Stock
issued and held in the treasury of ML or owned by ML or any
ML Subsidiary (other than trust account shares or DPC
shares) as of the Effective Date, if any, shall be
cancelled, and no cash, stock or other property shall be
delivered in exchange therefor.
(D) No fraction of a whole share of
Sovereign Common Stock and no scrip or certificates therefor
shall be issued in connection with the Merger. Any former
holder of ML Common Stock who would otherwise be entitled to
receive a fraction of a share of Sovereign Common Stock
shall receive, in lieu thereof, cash in an amount equal to
such fraction of a share multiplied by the Sovereign Market
Price determined as of the Effective Date.
(E) Each outstanding share of ML Common
Stock the holder of which has perfected his right to dissent
under the BCL and has not effectively withdrawn or lost such
right as of the Effective Date shall not be converted into
or represent a right to receive shares of Sovereign Common
Stock hereunder, and the holder thereof shall be entitled
only to such rights as are granted by the BCL. ML shall
give Sovereign prompt notice upon receipt by ML of any such
written demands for payment of the fair value of such shares
of ML Common Stock ("Dissenting Shares") and of withdrawals
of such demands and any other instruments provided pursuant
to the BCL (any shareholder duly making such demand being
hereinafter called a "Dissenting Shareholder"). If any
Dissenting Shareholder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such
payment at any time, such holder's shares of ML Common Stock
shall be converted into the right to receive Sovereign
Common Stock in accordance with Section 1.02(e)(ii) of this
Agreement. Any payments made in respect of Dissenting
Shares shall be made by Sovereign, as the surviving
corporation of the Merger.
(f) Stock Options.
(i) On the Effective Date, each ML Option
which is then outstanding, whether or not exercisable, shall
cease to represent a right to acquire shares of ML Common
Stock and shall be converted automatically into an option to
purchase shares of Sovereign Common Stock and the
corresponding number of Sovereign Stock Purchase Rights, and
Sovereign shall assume each ML Option, in accordance with
the terms of the applicable ML Stock Option Plan and stock
option agreement by which it is evidenced, except that from
and after the Effective Date, (i) Sovereign and its Board of
Directors or a duly authorized committee thereof shall be
substituted for ML and ML's Board of Directors or duly
authorized committee thereof administering such ML Stock
Option Plan, (ii) each ML Option assumed by Sovereign may be
exercised solely for shares of Sovereign Common Stock and
Sovereign Stock Purchase Rights, (iii) the number of shares
of Sovereign Common Stock subject to such ML Option shall be
equal to the number of shares of ML Common Stock subject to
such ML Option immediately prior to the Effective Date
multiplied by the Applicable Exchange Ratio, provided that
any fractional shares of Sovereign Common Stock resulting
from such multiplication shall be rounded down to the
nearest share, and (iv) the per share exercise price under
each such ML Option shall be adjusted by dividing the per
share exercise price under each such ML Option by the
Applicable Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding
clauses (iii) and (iv) of the preceding sentence, each ML
Option which is an "incentive stock option" shall be
adjusted as required by Section 424 of the IRC, and the
regulations promulgated thereunder, so as not to constitute
a modification, extension or renewal of the option within
the meaning of Section 424(h) of the IRC. Sovereign and ML
agree to take all necessary steps to effect the foregoing
provisions of this Section 1.02(f).
(ii) As soon as practicable after the
Effective Date, Sovereign shall deliver to each participant
in each ML Stock Option Plan an appropriate notice setting
forth such participant's rights pursuant thereto and the
grants subject to such ML Stock Option Plan shall continue
in effect on the same terms and conditions, including
without limitation the duration thereof, subject to the
adjustments required by Section 1.02(f)(i) hereof after
giving effect to the Merger. Within 30 days after the
Effective Date, Sovereign shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), with respect to
the shares of Sovereign Common Stock and Sovereign Stock
Purchase Rights subject to such options and shall use its
reasonable best efforts to maintain the current status of
the prospectus or prospectuses contained therein for so long
as such options remain outstanding.
(g) Surrender and Exchange of ML Stock
Certificates.
(i) Exchange of Certificates. Each holder
of shares of ML Common Stock who surrenders to Sovereign (or
its agent) the certificate or certificates representing such
shares will be entitled to receive, as soon as practicable
after the Effective Date, in exchange therefor a certificate
or certificates for the number of whole shares of Sovereign
Common Stock into which such holder's shares of ML Common
Stock have been converted pursuant to the Merger, together
with a check for cash in lieu of any fractional share in
accordance with Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates. Each
certificate for shares of Sovereign Common Stock issued in
exchange for certificates for ML Common Stock pursuant to
Section 1.02(g)(i) hereof will be dated the Effective Date
and be entitled to dividends and all other rights and
privileges pertaining to such shares of stock from and after
the Effective Date. Until surrendered, each certificate
theretofore evidencing shares of ML Common Stock will, from
and after the Effective Date, evidence solely the right to
receive certificates for shares of Sovereign Common Stock
pursuant to Section 1.02(g)(i) hereof and a check for cash
in lieu of any fractional share in accordance with
Section 1.02(e)(ii)(D) hereof. If certificates for shares
of ML Common Stock are exchanged for Sovereign Common Stock
at a date following one or more record dates for the payment
of dividends or of any other distribution on the shares of
Sovereign Common Stock, Sovereign will pay cash in an amount
equal to dividends theretofore payable on such Sovereign
Common Stock and pay or deliver any other distribution to
which holders of shares of Sovereign Common Stock have
theretofore become entitled. Upon surrender of certificates
for shares of ML Common Stock in exchange for certificates
for Sovereign Common Stock, Sovereign also shall pay any
dividends to which such holder of ML Common Stock may be
entitled as a result of the declaration of a dividend on the
ML Common Stock by ML in accordance with the terms of this
Agreement with a record date prior to the Effective Date and
a payment date after the Effective Date. No interest will
accrue or be payable in respect of dividends or cash
otherwise payable under this Section 1.02(g) upon surrender
of certificates for shares of ML Common Stock.
Notwithstanding the foregoing, no party hereto will be
liable to any holder of ML Common Stock for any amount paid
in good faith to a public official or agency pursuant to any
applicable abandoned property, escheat or similar law.
Until such time as certificates for shares of ML Common
Stock are surrendered by a ML shareholder to Sovereign for
exchange, Sovereign shall have the right to withhold
dividends or any other distributions on the shares of
Sovereign Common Stock issuable to such shareholder.
(iii) Exchange Procedures. Each certificate
for shares of ML Common Stock delivered for exchange under
this Section 1.02(g) must be endorsed in blank by the
registered holder thereof or be accompanied by a power of
attorney to transfer such shares endorsed in blank by such
holder. If more than one certificate is surrendered at one
time and in one transmittal package for the same shareholder
account, the number of whole shares of Sovereign Common
Stock for which certificates will be issued pursuant to this
Section 1.02(g) will be computed on the basis of the
aggregate number of shares represented by the certificates
so surrendered. If shares of Sovereign Common Stock or
payments of cash are to be issued or made to a person other
than the one in whose name the surrendered certificate is
registered, the certificate so surrendered must be properly
endorsed in blank, with signature(s) guaranteed, or
otherwise in proper form for transfer, and the person to
whom certificates for shares of Sovereign Common Stock is to
be issued or to whom cash is to be paid shall pay any
transfer or other taxes required by reason of such issuance
or payment to a person other than the registered holder of
the certificate for shares of ML Common Stock which are
surrendered. As promptly as practicable after the Effective
Date, Sovereign shall send or cause to be sent to each
shareholder of record of ML Common Stock transmittal
materials for use in exchanging certificates representing ML
Common Stock for certificates representing Sovereign Common
Stock into which the former have been converted in the
Merger. Certificates representing shares of Sovereign
Common Stock and checks for cash in lieu of fractional
shares shall be mailed to former shareholders of ML as soon
as reasonably possible but in no event later than fifteen
(15) business days following the receipt of certificates
representing former shares of ML Common Stock duly endorsed
or accompanied by the materials referenced herein and
delivered by certified mail, return receipt requested (but
in no event earlier than the second business day following
the Effective Date).
(iv) Closing of Stock Transfer Books;
Cancellation of ML Certificates. Upon the Effective Date,
the stock transfer books for ML Common Stock will be closed
and no further transfers of shares of ML Common Stock will
thereafter be made or recognized. All certificates for
shares of ML Common Stock surrendered pursuant to this
Section 1.02(g) will be cancelled by Sovereign.
(h) Anti-Dilution Provisions. If, Sovereign has,
at any time after the date hereof and before the Effective Date,
(A) issued a dividend in shares of Sovereign Common Stock,
(B) combined the outstanding shares of Sovereign Common Stock
into a smaller number of shares, (C) subdivided the outstanding
shares of Sovereign Common Stock, or (D) reclassified the shares
of Sovereign Common Stock, then the number of shares of Sovereign
Common Stock to be delivered to ML shareholders who are entitled
to receive shares of Sovereign Common Stock in exchange for
shares of ML Common Stock shall be adjusted so that each ML
shareholder shall be entitled to receive such number of shares of
Sovereign Common Stock as such shareholder would have been
entitled to receive if the Effective Date had occurred prior to
the happening of such event. (By way of illustration, if
Sovereign shall declare a stock dividend of 7% payable with
respect to a record date on or prior to the Effective Date and
the conditions set forth above are satisfied, the Applicable
Exchange Ratio shall be adjusted upward by 7%).
Section 1.03 The Bank Merger. Sovereign and ML shall
use their reasonable best efforts to cause Main Line Bank to
merge with and into Sovereign Bank, with Sovereign Bank surviving
such merger, on or as soon as practicable after the Effective
Date. Concurrently with, or as soon as practicable after, the
execution and delivery of this Agreement, Sovereign shall cause
Sovereign Bank, and ML shall cause Main Line Bank, to execute and
deliver the Bank Plan of Merger attached hereto as Exhibit 3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ML
ML hereby represents and warrants to Sovereign that,
except as specifically set forth in the ML Disclosure Schedule
delivered to Sovereign by ML on the date hereof:
Section 2.01 Organization.
(a) ML is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania. ML is a savings and loan holding company duly
registered under the HOLA. ML has the corporate power and
authority to carry on its business and operations as now being
conducted and to own and operate the properties and assets now
owned and being operated by it. ML is not qualified or licensed
to do business as a foreign corporation in any other jurisdiction
and is not required to be so qualified or licensed as the result
of the ownership or leasing of property or the conduct of its
business except where the failure to be so qualified or licensed
would not have a Material Adverse Effect on ML.
(b) Main Line Bank is a federal savings bank duly
organized and validly existing under the laws of the United
States. Main Line Bank has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it. Neither Main Line Bank nor any other ML
Subsidiary is qualified or licensed to do business as a foreign
corporation in any other jurisdiction and neither is required to
be so qualified or licensed as the result of the ownership or
leasing of property or the conduct of its business, except where
the failure to be so qualified or licensed would not have a
Material Adverse Effect on ML.
(c) There are no ML Subsidiaries other than Main
Line Bank and those identified in the ML Disclosure Schedule.
(d) The deposits of Main Line Bank are insured by
the FDIC to the extent provided in the FDIA.
(e) The respective minute books of ML and Main
Line Bank and each other ML Subsidiary accurately record, in all
material respects, all material corporate actions of their
respective shareholders and boards of directors (including
committees).
(f) Prior to the date of this Agreement, ML has
delivered to Sovereign true and correct copies of the articles of
incorporation and bylaws of ML and the charter and bylaws of Main
Line Bank as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of ML consists
of (a) 30,000,000 shares of common stock, $0.01 par value ("ML
Common Stock"), of which 11,865,564 shares are outstanding,
validly issued, fully paid and nonassessable and free of
preemptive rights, and (b) 5,000,000 shares of preferred stock,
no par value, none of which are issued or outstanding. Neither
ML nor Main Line Bank nor any other ML Subsidiary has or is bound
by any subscription, option, warrant, call, commitment,
agreement, plan or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive
dividends or other distributions on any shares of ML Common
Stock, ML preferred stock or any other security of ML or any
securities representing the right to vote, purchase or otherwise
receive any shares of ML Common Stock, ML preferred stock or any
other security of ML, other than (i) shares issuable under the
Sovereign Option, (ii) 1,442,200 shares of ML Common Stock
issuable under the ML Stock Option Plans, (iii) rights of each of
the five non-employee directors of ML to receive scheduled grants
of 1,000 shares of ML Common Stock pursuant to the ML Recognition
and Retention Plan and options to purchase 4,000 shares of ML
Common Stock under the ML 1994 Stock Option Plan in October 1997
and (iv) rights of holders of 9.875% Capital Securities issued by
ML Capital Trust I, including without limitation the rights of
such holders to acquire ML 9.875% Junior Subordinated Deferable
Interest Debentures under certain circumstances, all as set forth
in detail in the ML Disclosure Schedule.
(b) The authorized capital stock of Main Line
Bank consists of 1,000,000 shares of common stock, par value
$0.01 per share ("Main Line Bank Common Stock"), of which 1,000
shares are outstanding, validly issued, fully paid,
nonassessable, free of preemptive rights and owned by ML. Except
for agreements entered into in connection with the issuance of
9.875% Capital Securities by ML Capital Trust I, neither ML nor
any ML Subsidiary has or is bound by any subscription, option,
warrant, call, commitment, agreement or other Right of any
character relating to the purchase, sale or issuance or voting
of, or right to receive dividends or other distributions on any
shares of the capital stock of any ML Subsidiary or any other
security of any ML Subsidiary or any securities representing the
right to vote, purchase or otherwise receive any shares of the
capital stock or any other security of any ML Subsidiary. Except
in the case of 9.875% Capital Securities issued by ML Capital
Trust I, either ML or Main Line Bank owns all of the outstanding
shares of capital stock of each ML Subsidiary free and clear of
all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature.
(c) Except as set forth in the ML Disclosure
Schedule, neither (i) ML, (ii) Main Line Bank nor (iii) any other
ML Subsidiary, owns any equity interest, directly or indirectly,
other than treasury stock, in any other company or controls any
other company, except for equity interests held in the investment
portfolios of ML Subsidiaries, equity interests held by ML
Subsidiaries in a fiduciary capacity, and equity interests held
in connection with the commercial loan activities of ML
Subsidiaries. There are no subscriptions, options, warrants,
calls, commitments, agreements or other Rights outstanding and
held by ML or Main Line Bank with respect to any other company's
capital stock or the equity of any other person.
(d) To the best of ML's knowledge, except as
disclosed in ML's proxy statement dated June 13, 1997, no person
or "group" (as that term is used in Section 13(d)(3) of the
Exchange Act), is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding
shares of ML Common Stock.
Section 2.03 Authority; No Violation.
(a) ML has full corporate power and authority to
execute and deliver this Agreement and to complete the
transactions contemplated hereby. Main Line Bank has full
corporate power and authority to execute and deliver the Bank
Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by ML and the completion by ML of
the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of ML and, except for approval
by the shareholders of ML as required under the BCL, ML's
articles of incorporation and bylaws and Nasdaq requirements
applicable to it, no other corporate proceedings on the part of
ML are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by ML and, subject to approval of the shareholders of
ML as required under the BCL, ML's articles of incorporation and
bylaws and Nasdaq requirements applicable to it and receipt of
the required approvals from Regulatory Authorities described in
Section 3.04 hereof, constitutes the valid and binding obligation
of ML, enforceable against ML in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity. The Bank Plan
of Merger, upon its execution and delivery by Main Line Bank
concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of Main Line
Bank, enforceable against Main Line Bank in accordance with its
terms, subject to applicable conservatorship or receivership
provisions of the FDIA, or insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this
Agreement by ML, (B) the execution and delivery of the Bank Plan
of Merger by Main Line Bank, (C) subject to receipt of approvals
from the Regulatory Authorities referred to in Section 3.04
hereof and ML's and Sovereign's compliance with any conditions
contained therein, the completion of the transactions
contemplated hereby, and (D) compliance by ML or Main Line Bank
with any of the terms or provisions hereof or of the Bank Plan of
Merger, will not (i) conflict with or result in a breach of any
provision of the articles of incorporation or other
organizational document or bylaws of ML or any ML Subsidiary;
(ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to ML or
any ML Subsidiary or any of their respective properties or
assets; or (iii) except as set forth in the ML Disclosure
Schedule, violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of ML or any ML
Subsidiary under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, commitment or other instrument or obligation to
which ML or any ML Subsidiary is a party, or by which they or any
of their respective properties or assets may be bound or
affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material
Adverse Effect on ML.
Section 2.04 Consents. Except for the consents,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 3.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the shareholders of ML under the BCL, ML's articles
of incorporation and bylaws and Nasdaq requirements applicable to
it, and the approval of the Bank Plan of Merger by ML as sole
shareholder of Main Line Bank under the HOLA, and by the Main
Line Bank Board of Directors, and except as disclosed in the ML
Disclosure Schedule, no consents or approvals of, or filings or
registrations with, any public body or authority are necessary,
and no consents or approvals of any third parties are necessary,
or will be, in connection with (a) the execution and delivery of
this Agreement by ML or the Bank Plan of Merger by Main Line
Bank, and (b) the completion by ML of the transactions
contemplated hereby or by Main Line Bank of the Bank Merger. As
of the date hereof, ML has no reason to believe that (i) any
required consents or approvals will not be received or will be
received with conditions, limitations or restrictions
unacceptable to it or which would adversely impact ML's or Main
Line Bank's ability to complete the transactions contemplated by
this Agreement or that (ii) any public body or authority, the
consent or approval of which is not required or any filing with
which is not required, will object to the completion of the
transactions contemplated by this Agreement.
Section 2.05 Financial Statements.
(a) ML has previously delivered, or will deliver,
to Sovereign the ML Regulatory Reports. The ML Regulatory
Reports have been, or will be, prepared in all material respects
in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements,
and fairly present, or will fairly present in all material
respects, the financial position, results of operations and
changes in shareholders' equity of ML as of and for the periods
ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) ML has previously delivered to Sovereign the
ML Financials. The ML Financials have been, or will be, prepared
in accordance with GAAP applied on a consistent basis throughout
the periods covered by such statements, except as noted therein,
and fairly present, or will fairly present, the consolidated
financial position, results of operations and cash flows of ML as
of and for the periods ending on the dates thereof, in accordance
with generally accepted accounting principles applied on a
consistent basis, except as noted therein.
(c) At the date of each balance sheet included in
the ML Financials or the ML Regulatory Reports, neither ML nor
Main Line Bank (as the case may be) had, or will have any
liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such ML Financials or ML Regulatory
Reports or in the footnotes thereto which are not fully reflected
or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss
contingencies which are not material in the aggregate and which
are incurred in the ordinary course of business, consistent with
past practice and except for liabilities, obligations and loss
contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of
any unaudited statements, to normal, recurring audit adjustments
and the absence of footnotes.
Section 2.06 Taxes.
(a) ML and the ML Subsidiaries are members of the
same affiliated group within the meaning of IRC Section 1504(a).
ML has duly filed, and will file, all federal, state and local
tax returns required to be filed by or with respect to ML and all
ML Subsidiaries on or prior to the Closing Date (all such returns
being accurate and correct in all material respects) and has duly
paid or will pay, or made or will make, provisions for the
payment of all federal, state and local taxes which have been
incurred by or are due or claimed to be due from ML and any ML
Subsidiary by any taxing authority or pursuant to any tax sharing
agreement or arrangement (written or oral) on or prior to the
Closing Date other than taxes which (i) are not delinquent or
(ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to ML or any ML Subsidiary.
Section 2.07 No Material Adverse Effect. ML has not
suffered any Material Adverse Effect since June 30, 1997.
Section 2.08 Contracts.
(a) Except as described in ML's proxy statement
dated June 13, 1997 and Annual Reports on Form 10-K for the years
ended March 31, 1995, 1996 and 1997, previously delivered to
Sovereign, in the footnotes to the audited consolidated financial
statements of ML as of March 31, 1997, and for the three years
ended March 31, 1997, or in the ML Disclosure Schedule, neither
ML nor any ML Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or arrangement with
any past or present officer, director or employee of ML or any ML
Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any past or present officers,
directors or employees of ML or any ML Subsidiary; (iii) any
collective bargaining agreement with any labor union relating to
employees of ML or any ML Subsidiary; (iv) any agreement which by
its terms limits the payment of dividends by any ML Subsidiary;
(v) any instrument evidencing or related to indebtedness for
borrowed money whether directly or indirectly, by way of purchase
money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which ML or any ML Subsidiary is an
obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, Federal
Home Loan Bank advances, bankers acceptances and "treasury tax
and loan" accounts established in the ordinary course of business
and transactions in "federal funds" or which contains financial
covenants or other restrictions (other than those relating to the
payment of principal and interest when due) which would be
applicable on or after the Closing Date to Sovereign or any
Sovereign Subsidiary; or (vi) any contract (other than this
Agreement) limiting the freedom of any ML Subsidiary to engage in
any type of banking or bank-related business permissible under
law.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a),
described in the ML proxy statement dated June 13, 1997 or in a
footnote to the ML Financials, have been provided to Sovereign on
or before the date hereof, are listed on the ML Disclosure
Schedule and are in full force and effect on the date hereof and
neither ML nor any ML Subsidiary (nor, to the knowledge of ML,
any other party to any such contract, plan, arrangement or
instrument) has breached any provision of, or is in default in
any respect under any term of, any such contract, plan,
arrangement or instrument which breach has resulted in or will
result in a Material Adverse Effect with respect to ML. Except
as set forth in the ML Disclosure Schedule, no party to any
material contract, plan, arrangement or instrument will have the
right to terminate any or all of the provisions of any such
contract, plan, arrangement or instrument as a result of the
transactions contemplated by this Agreement. Except as set forth
in the ML Disclosure Schedule, none of the employees (including
officers) of ML or any ML Subsidiary possess the right to
terminate their employment as a result of the execution of this
Agreement. Except as set forth in the ML Disclosure Schedule, no
plan, employment agreement, termination agreement, or similar
agreement or arrangement to which ML or any ML Subsidiary is a
party or under which ML or any ML Subsidiary may be liable
contains provisions which permit an employee or independent
contractor to terminate it without cause and continue to accrue
future benefits thereunder. Except as set forth in the ML
Disclosure Schedule, no such agreement, plan or arrangement
(x) provides for acceleration in the vesting of benefits or
payments due thereunder upon the occurrence of a change in
ownership or control of ML or any ML Subsidiary absent the
occurrence of a subsequent event; (y) provides for benefits which
may cause the disallowance of a federal income tax deduction
under IRC Section 280G; or (z) requires ML or any ML Subsidiary
to provide a benefit in the form of ML Common Stock or determined
by reference to the value of ML Common Stock.
Section 2.09 Ownership of Property; Insurance
Coverage.
(a) Except as disclosed in the ML Disclosure
Schedule, ML and the ML Subsidiaries have, or will have as to
property acquired after the date hereof, good and, as to real
property, marketable title to all assets and properties owned by
ML or any ML Subsidiary in the conduct of their businesses,
whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the
balance sheets contained in the ML Regulatory Reports and in the
ML Financials or acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for
fair value, in the ordinary course of business, since the date of
such balance sheets), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items
which secure repurchase agreements and liabilities for borrowed
money from a Federal Home Loan Bank, (ii) statutory liens for
amounts not yet delinquent or which are being contested in good
faith and (iii) items permitted under Article IV. ML and the ML
Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by ML and
its Subsidiaries in the conduct of their businesses to occupy or
use all such properties as presently occupied and used by each of
them. Except as disclosed in the ML Disclosure Schedule, such
existing leases and commitments to lease constitute or will
constitute operating leases for both tax and financial accounting
purposes and the lease expense and minimum rental commitments
with respect to such leases and lease commitments are as
disclosed in the notes to the ML Financials.
(b) With respect to all agreements pursuant to
which ML or any ML Subsidiary has purchased securities subject to
an agreement to resell, if any, ML or such ML Subsidiary, as the
case may be, has a valid, perfected first lien or security
interest in the securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby.
(c) ML and the ML Subsidiaries currently maintain
insurance considered by ML to be reasonable for their respective
operations and similar in scope and coverage to that maintained
by other businesses similarly engaged. Neither ML nor any ML
Subsidiary has received notice from any insurance carrier that
(i) such insurance will be cancelled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect
to such policies of insurance will be substantially increased.
There are presently no material claims pending under such
policies of insurance and no notices have been given by ML or
Main Line Bank under such policies. All such insurance is valid
and enforceable and in full force and effect, and within the last
three years ML has received each type of insurance coverage for
which it has applied and during such periods has not been denied
indemnification for any material claims submitted under any of
its insurance policies.
Section 2.10 Legal Proceedings. Except as disclosed
in the ML Disclosure Schedule, neither ML nor any ML Subsidiary
is a party to any, and there are no pending or, to the best of
ML's knowledge, threatened legal, administrative, arbitration or
other proceedings, claims (whether asserted or unasserted),
actions or governmental investigations or inquiries of any nature
(i) against ML or any ML Subsidiary, (ii) to which ML or any ML
Subsidiary's assets are or may be subject, (iii) challenging the
validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability
of ML to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely
determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on ML.
Section 2.11 Compliance With Applicable Law.
(a) ML and ML Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all
material respects with, applicable laws, statutes, orders, rules
or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise
have a Material Adverse Effect on ML.
(b) Except as disclosed in the ML Disclosure
Schedule, neither ML nor any ML Subsidiary has received any
notification or communication from any Regulatory Authority
(i) asserting that ML or any ML Subsidiary is not in compliance
with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces; (ii) threatening to revoke any
license, franchise, permit or governmental authorization which is
material to ML or any ML Subsidiary; (iii) requiring or
threatening to require ML or any ML Subsidiary, or indicating
that ML or any ML Subsidiary may be required, to enter into a
cease and desist order, agreement or memorandum of understanding
or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of ML or any ML
Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting,
or purporting to direct, restrict or limit, in any manner the
operations of ML or any ML Subsidiary, including without
limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described
in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither ML nor any ML Subsidiary has consented to
or entered into any Regulatory Agreement, except as heretofore
disclosed to Sovereign.
Section 2.12 ERISA. ML has previously delivered to
Sovereign true and complete copies of all employee pension
benefit plans within the meaning of ERISA Section 3(2), profit
sharing plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement
plans, employment agreements, annual or long term incentive
plans, severance plans, policies and agreements, group insurance
plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick
leave, short-term disability, long-term disability, and medical
plans) and all other employee benefit plans, policies, agreements
and arrangements, all of which are set forth in the ML Disclosure
Schedule, maintained or contributed to for the benefit of the
employees or former employees (including retired employees) and
any beneficiaries thereof or directors or former directors of ML
or any ML Subsidiary, together with (i) the most recent actuarial
(if any) and financial reports relating to those plans which
constitute "qualified plans" under IRC Section 401(a), (ii) the
most recent annual reports relating to such plans filed by them,
respectively, with any government agency, and (iii) all rulings
and determination letters which pertain to any such plans.
Neither ML, any ML Subsidiary nor any pension plan maintained by
ML or any ML Subsidiary, has incurred, directly or indirectly,
within the past six (6) years any liability under Title IV of
ERISA (including to the Pension Benefit Guaranty Corporation) or
to the IRS with respect to any pension plan qualified under IRC
Section 401(a) which liability has resulted in or will result in
a Material Adverse Effect with respect to ML, except liabilities
to the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any
reportable event under ERISA Section 4043 occurred with respect
to any such pension plan. With respect to each of such plans
that is subject to Title IV of ERISA, the present value of the
accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed
the then current value of the assets of such plan allocable to
such accrued benefits. Neither ML nor any ML Subsidiary has
incurred or is subject to any liability under ERISA Section 4201
for a complete or partial withdrawal from a multi-employer plan.
All "employee benefit plans," as defined in ERISA Section 3(3),
comply and within the past six (6) years have complied in all
material respects with (i) relevant provisions of ERISA and
(ii) in the case of plans intended to qualify for favorable
income tax treatment, provisions of the IRC relevant to such
treatment. No prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408 or any transaction prohibited under IRC
Section 4975) has occurred within the past six (6) years with
respect to any employee benefit plan maintained by ML or any ML
Subsidiary which would result in the imposition, directly or
indirectly, of an excise tax under IRC Section 4975 or other
penalty under ERISA or the IRC, which, individually or in the
aggregate, has resulted in or will result in a Material Adverse
Effect with respect to ML. ML and the ML Subsidiaries provide
continuation coverage under group health plans for separating
employees and "qualified beneficiaries" in accordance with the
provisions of IRC Section 4980B(f). Such group health plans are
in compliance with Section 1862(b)(1) of the Social Security Act.
Neither ML nor any ML Subsidiary is aware of any existing or
contemplated audit of any of its employee benefit plans by the
Internal Revenue Service or U.S. Department of Labor.
Section 2.13 Brokers, Finders and Financial Advisors.
Except for ML's engagement of Sandler ▇'▇▇▇▇▇ & Partners L.P. in
connection with the transactions contemplated by this Agreement,
neither ML nor any ML Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any
broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement or in connection with
any transaction other than the Merger, or, except for its
commitments disclosed in the ML Disclosure Schedule, incurred any
liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this
Agreement or in connection with any transaction other than the
Merger, which has not been reflected in the ML Financials. The
ML Disclosure Schedule shall contain as an exhibit the engagement
letter between ML and Sandler ▇'▇▇▇▇▇ & Partners L.P.
Section 2.14 Environmental Matters. To the knowledge
of ML, neither ML nor any ML Subsidiary, nor any properties owned
or operated by ML or any ML Subsidiary has been or is in
violation of or liable under any Environmental Law which
violation or liability, individually or in the aggregate,
resulted in, or will result, in a Material Adverse Effect with
respect to ML. There are no actions, suits or proceedings, or
demands, claims, notices or investigations (including without
limitation notices, demand letters or requests for information
from any environmental agency) instituted or pending, or to the
knowledge of ML, threatened, relating to the liability of any
property owned or operated by ML or any ML Subsidiary under any
Environmental Law.
Section 2.15 Allowance for Loan Losses. The allowance
for loan losses reflected, and to be reflected, in the ML
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the ML Financials have been, and will be,
established in accordance with the requirements of GAAP and all
applicable regulatory criteria.
Section 2.16 Information to be Supplied. The
information to be supplied by ML and Main Line Bank for inclusion
in the Registration Statement (including the Prospectus/Proxy
Statement) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act and as of the
date the Prospectus/Proxy Statement is mailed to shareholders of
Sovereign and ML and up to and including the date(s) of the
meetings of shareholders of Sovereign and ML to which such
Prospectus/Proxy Statement relates, contain any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements therein not misleading. The
information supplied, or to be supplied, by ML for inclusion in
the Applications will, at the time such documents are filed with
any Regulatory Authority and up to and including the date(s) of
the obtainment of any required regulatory approvals or consents,
be accurate in all material aspects.
Section 2.17 Securities Documents. ML has delivered
to Sovereign copies of its (i) annual reports on SEC Form 10-K
for the years ended March 31, 1997, 1995 and 1994, (ii) a
quarterly report on SEC Form 10-Q for the quarter ended June 30,
1997, and (iii) proxy materials used in connection with its
meetings of shareholders held in 1997, 1996 and 1995. Such
reports and such proxy materials complied, at the time filed with
the SEC, in all material respects, with the Exchange Act and all
applicable rules and regulations of the SEC.
Section 2.18 Related Party Transactions. Except as
disclosed (i) in the ML Disclosure Schedule, (ii) in the ML proxy
statement dated June 13, 1997 or (iii) in the footnotes to the ML
Financials, ML is not a party to any transaction (including any
loan or other credit accommodation but excluding deposits in the
ordinary course of business) with any Affiliate of ML (except an
ML Subsidiary); and all such transactions (a) were made in the
ordinary course of business, (b) were made on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
Persons, and (c) did not involve more than the normal risk of
collectability or present other unfavorable features. Except as
set forth on the ML Disclosure Schedule, no loan or credit
accommodation to any Affiliate of ML is presently in default or,
during the three year period prior to the date of this Agreement,
has been in default or has been restructured, modified or
extended. Neither ML nor Main Line Bank has been notified that
principal and interest with respect to any such loan or other
credit accommodation will not be paid when due or that the loan
grade classification accorded such loan or credit accommodation
by Main Line Bank is inappropriate.
Section 2.19 Loans. Each loan reflected as an asset
in the ML Financial Statements (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true,
genuine and correct (ii) to the extent secured, has been secured
by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on ML.
Section 2.20 Accounting for the Merger;
Reorganization. As of the date hereof, ML does not have any
reason to believe that the Merger will fail to qualify (i) for
pooling-of-interests accounting treatment under GAAP, assuming
compliance by ML and Sovereign with the requirements of
Section 4.16 hereof, or (ii) as a reorganization under
Section 368(a) of the IRC.
Section 2.21 Fairness Opinion. ML has received a
written opinion from Sandler ▇'▇▇▇▇▇ & Partners L.P. to the
effect that, as of the date hereof, the consideration to be
received by shareholders of ML pursuant to this Agreement is
fair, from a financial point of view, to such shareholders.
Section 2.22 Quality of Representations. The
representations made by ML in this Agreement are true, correct
and complete in all material respects, and do not omit statements
necessary to make them not misleading under all facts and
circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Sovereign hereby represents and warrants to ML that,
except as set forth in the Sovereign Disclosure Schedule
delivered by Sovereign to ML on or prior to the date hereof:
Section 3.01 Organization.
(a) Sovereign is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Sovereign is a savings and loan
holding company duly registered under the HOLA. Sovereign has
the corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each
Sovereign Subsidiary is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its
incorporation and each possesses full corporate power and
authority to carry on its respective business and to own, lease
and operate its properties as presently conducted. Neither
Sovereign nor any Sovereign Subsidiary is required by the conduct
of its business or the ownership or leasing of its assets to
qualify to do business as a foreign corporation in any
jurisdiction other than the Commonwealth of Pennsylvania and the
states of Delaware and New Jersey, except where the failure to be
so qualified would not have a Material Adverse Effect on
Sovereign.
(b) Sovereign Bank is a federal savings bank,
duly organized and validly existing under the laws of the United
States. Sovereign Bank has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it.
(c) The deposits of Sovereign Bank are insured by
the FDIC to the extent provided in the FDIA.
(d) The respective minute books of Sovereign and
Sovereign Bank accurately record in all material respects all
material corporate action of their respective shareholders and
boards of directors (including committees).
(e) Prior to the execution of this Agreement,
Sovereign has delivered to ML true and correct copies of the
articles of incorporation and the bylaws of Sovereign and
Sovereign Bank, respectively, as in effect on the date hereof.
Section 3.02 Capital Structure.
(a) The authorized capital stock of Sovereign
consists of (a) 200,000,000 shares of common stock, no par value
("Sovereign Common Stock"), of which, at the date of this
Agreement, 12,319 shares were issued and held by Sovereign as
treasury stock and 88,071,493 shares are outstanding, validly
issued, fully paid and nonassessable, and (b) 7,500,000 shares of
preferred stock, no par value, of which, at the date of this
Agreement, 2,000,000 shares of 6-1/4% Cumulative, Convertible
Preferred Stock, Series B, are outstanding, validly issued, fully
paid and nonassessable. No shares of Sovereign Common Stock were
issued in violation of any preemptive rights. Sovereign has no
Rights authorized, issued or outstanding, other than (i) the
Sovereign Stock Purchase Rights, (ii) options to acquire
2,588,135 shares of Sovereign Common Stock under Sovereign's
stock option plans, including the non-employee directors
compensation plan, and (iii) pursuant to Sovereign's employee
stock ownership plan, employee stock purchase plan, and dividend
reinvestment and stock purchase plan. As of December 31, 1996,
Sovereign had approximately 8,500 shareholders of record.
(b) To the best of Sovereign's knowledge, except
as disclosed in Sovereign's proxy statement dated March 19, 1997,
no person or "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) is the beneficial owner (as defined in
Section 13(d) of the Exchange Act) of 5% or more of the
outstanding shares of Sovereign Common Stock.
(c) Sovereign owns all of the capital stock of
Sovereign Bank, free and clear of any lien or encumbrance.
Except for the Sovereign Subsidiaries, Sovereign does not
possess, directly or indirectly, any material equity interest in
any corporation, except for equity interests held in the
investment portfolios of Sovereign Subsidiaries, equity interests
held by Sovereign Subsidiaries in a fiduciary capacity, and
equity interests held in connection with the commercial loan
activities of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Sovereign has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Sovereign Bank has full
corporate power and authority to execute and deliver the Bank
Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by Sovereign and the completion by
Sovereign of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Sovereign and,
except for approval of the shareholders of Sovereign under Nasdaq
requirements applicable to it, no other corporate proceedings on
the part of Sovereign are necessary to complete the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sovereign and, subject to approval by
the shareholders of Sovereign under Nasdaq requirements
applicable to it and receipt of the required approvals of
Regulatory Authorities described in Section 3.04 hereof,
constitutes the valid and binding obligation of Sovereign,
enforceable against Sovereign in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity. The Bank Plan
of Merger, upon its execution and delivery by Sovereign Bank
concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of Sovereign
Bank, enforceable against Sovereign Bank in accordance with its
terms, subject to applicable conservatorship and receivership
provisions of the FDIA, or insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this
Agreement by Sovereign, (B) the execution and delivery of the
Bank Plan of Merger by Sovereign Bank, (C) subject to receipt of
approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and ML's and Sovereign's compliance with any
conditions contained therein, the consummation of the
transactions contemplated hereby, and (D) compliance by Sovereign
or Sovereign Bank with any of the terms or provisions hereof or
of the Bank Plan of Merger will not (i) conflict with or result
in a breach of any provision of the articles of incorporation or
other organizational document or bylaws of Sovereign or any
Sovereign Subsidiary; (ii) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Sovereign or any Sovereign Subsidiary or any of
their respective properties or assets; or (iii) violate, conflict
with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default), under, result in the
termination of, accelerate the performance required by, or result
in a right of termination or acceleration or the creation of any
lien, security interest, charge or other encumbrance upon any of
the properties or assets of Sovereign or any Sovereign Subsidiary
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease,
agreement or other investment or obligation to which Sovereign or
any Sovereign Subsidiary is a party, or by which they or any of
their respective properties or assets may be bound or affected,
except for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on Sovereign.
Section 3.04 Consents. Except for consents,
approvals, filings and registrations from or with the OTS, the
DOJ, the SEC, the PDS, the NASD and state "blue sky" authorities,
and compliance with any conditions contained therein, and the
approval of this Agreement by the shareholders of Sovereign in
accordance with Nasdaq requirements applicable to it, and the
approval of the Bank Plan of Merger by Sovereign as sole
shareholder of Sovereign Bank under the HOLA, and by the
Sovereign Bank Board of Directors, no consents or approvals of,
or filings or registrations with, any public body or authority
are necessary, and no consents or approvals of any third parties
are necessary, or will be, in connection with (a) the execution
and delivery of this Agreement by Sovereign or the Bank Plan of
Merger by Sovereign Bank, and (b) the completion by Sovereign of
the transactions contemplated hereby or by Sovereign Bank of the
Bank Merger. As of the date hereof, Sovereign has no reason to
believe that (i) any required consents or approvals will not be
received or will be received with conditions, limitations or
restrictions unacceptable to it or which would adversely impact
Sovereign's or Sovereign Bank's ability to complete the
transactions contemplated by this Agreement or that (ii) any
public body or authority, the consent or approval of which is not
required or any filing with which is not required, will object to
the completion of the transactions contemplated by this
Agreement.
Section 3.05 Financial Statements.
(a) Sovereign has made, or will make, the
Sovereign Regulatory Reports available to ML for inspection. The
Sovereign Regulatory Reports have been, or will be, prepared in
all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods
covered by such statements, and fairly present, or will fairly
present in all material respects, the financial position, results
of operations, and changes in shareholders' equity of Sovereign
as of and for the periods ended on the dates thereof, in
accordance with applicable regulatory accounting principles
applied on a consistent basis.
(b) Sovereign has previously delivered, or will
deliver, to ML the Sovereign Financials. The Sovereign
Financials have been, or will be, prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
by such statements, except as noted therein, and fairly present,
or will fairly present, the consolidated financial position,
results of operations and cash flows of Sovereign as of and for
the periods ending on the dates thereof, in accordance with GAAP
applied on a consistent basis, except as noted therein.
(c) At the date of each balance sheet included in
the Sovereign Financials or Sovereign Regulatory Reports,
Sovereign did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in
such Sovereign Financials or Sovereign Regulatory Reports or in
the footnotes thereto which are not fully reflected or reserved
against therein or disclosed in a footnote thereto, except for
liabilities, obligations or loss contingencies which are not
material in the aggregate and which are incurred in the ordinary
course of business, consistent with past practice, and except for
liabilities, obligations or loss contingencies which are within
the subject matter of a specific representation and warranty
herein and subject, in the case of any unaudited statements, to
normal recurring audit adjustments and the absence of footnotes.
Section 3.06 Taxes. Sovereign and the Sovereign
Subsidiaries are members of the same affiliated group within the
meaning of IRC Section 1504(a). Sovereign has duly filed, and
will file, all federal, state and local tax returns required to
be filed by or with respect to Sovereign and all Sovereign
Subsidiaries on or prior to the Closing Date (all such returns
being accurate and correct in all material respects) and has duly
paid or will pay, or made or will make, provisions for the
payment of all federal, state and local taxes which have been
incurred by or are due or claimed to be due from Sovereign and
any Sovereign Subsidiary by any taxing authority or pursuant to
any tax sharing agreement or arrangement (written or oral) on or
prior to the Closing Date other than taxes which (i) are not
delinquent or (ii) are being contested in good faith.
Section 3.07 No Material Adverse Effect. Sovereign
has not suffered any Material Adverse Effect since June 30, 1997.
Section 3.08 Ownership of Property; Insurance
Coverage.
(a) Sovereign and the Sovereign Subsidiaries have
good and, as to real property, marketable title to all assets and
properties owned by Sovereign or any of its Subsidiaries in the
conduct of their businesses, whether such assets and properties
are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the
Sovereign Regulatory Reports and in the Sovereign Financials or
acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of for fair value, in
the ordinary course of business, since the date of such balance
sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure
liabilities for borrowed money and that are described in the
Sovereign Disclosure Schedule or permitted under Article IV
hereof, and (ii) statutory liens for amounts not yet delinquent
or which are being contested in good faith. Sovereign and the
Sovereign Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by
Sovereign and its Subsidiaries in the conduct of their businesses
to occupy and use all such properties as presently occupied and
used by each of them.
(b) Sovereign and the Sovereign Subsidiaries
currently maintain insurance in amounts considered by Sovereign
to be reasonable for their respective operations, and such
insurance is similar in scope and coverage to that maintained by
other businesses similarly engaged. Neither Sovereign nor any
Sovereign Subsidiary has received notice from any insurance
carrier that (i) such insurance will be cancelled or that
coverage thereunder will be reduced or eliminated or (ii) premium
costs with respect to such insurance will be substantially
increased.
Section 3.09 Legal Proceedings. Neither Sovereign nor
any Sovereign Subsidiary is a party to any, and there are no
pending or, to the best of Sovereign's knowledge, threatened
legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations or inquiries of any nature
(i) against Sovereign or any Sovereign Subsidiary, (ii) to which
Sovereign's or any Sovereign Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of
the transactions contemplated by this Agreement, or (iv) which
could adversely affect the ability of Sovereign to perform under
this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii)
which, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on Sovereign.
Section 3.10 Compliance With Applicable Law.
(a) Sovereign and the Sovereign Subsidiaries hold
all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their businesses under, and have
complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or
local governmental authority relating to them, other than where
such failure to hold or such noncompliance will neither result in
a limitation in any material respect on the conduct of their
businesses nor otherwise have a Material Adverse Effect on
Sovereign.
(b) Neither Sovereign nor any Sovereign
Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that Sovereign or any
Sovereign Subsidiary is not in compliance with any of the
statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material
to Sovereign or any Sovereign Subsidiary; (iii) requiring or
threatening to require Sovereign or any Sovereign Subsidiary, or
indicating that Sovereign or any Sovereign Subsidiary may be
required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any manner the
operations of Sovereign or any Sovereign Subsidiary, including
without limitation any restriction on the payment of dividends;
or (iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of
Sovereign or any Sovereign Subsidiary, including without
limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described
in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither Sovereign nor any Sovereign Subsidiary has
consented to or entered into any Regulatory Agreement, except as
heretofore disclosed to ML.
Section 3.11 Information to be Supplied. The
information to be supplied by Sovereign for inclusion in the
Registration Statement (including the Prospectus/Proxy Statement)
will not, at the time the Registration Statement is declared
effective pursuant to the Securities Act and as of the date the
Prospectus/Proxy Statement is mailed to shareholders of Sovereign
and ML and up to and including the date(s) of the meetings of
shareholders of Sovereign and ML to which such Prospectus/Proxy
Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein not misleading. The information
supplied, or to be supplied, by Sovereign for inclusion in the
Applications will, at the time such documents are filed with any
Regulatory Authority and up to and including the date(s) of the
obtainment of any required regulatory approvals or consents, be
accurate in all material aspects.
Section 3.12 ERISA. Sovereign has previously made
available to ML true and complete copies of the employee pension
benefit plans within the meaning of ERISA Section 3(2), profit
sharing plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement
plans, annual incentive plans, group insurance plans, and all
other employee welfare benefit plans within the meaning of ERISA
Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), and all
other employee benefit plans, policies, agreements and
arrangements, all of which are set forth on the Sovereign
Disclosure Schedule, maintained or contributed to for the benefit
of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former
directors of Sovereign or any Sovereign Subsidiary, together with
(i) the most recent actuarial (if any) and financial reports
relating to those plans which constitute "qualified plans" under
IRC Section 401(a), (ii) the most recent annual reports relating
to such plans filed by them, respectively, with any government
agency, and (iii) all rulings and determination letters which
pertain to any such plans. Neither Sovereign nor any Sovereign
Subsidiary, and no pension plan maintained by Sovereign or any
Sovereign Subsidiary, has incurred, directly or indirectly,
within the past six (6) years any liability under Title IV of
ERISA (including to the Pension Benefit Guaranty Corporation) or
to the IRS with respect to any pension plan qualified under IRC
Section 401(a) which liability has resulted in or will result in
a Material Adverse Effect with respect to Sovereign, except
liabilities to the Pension Benefit Guaranty Corporation pursuant
to ERISA Section 4007, all of which have been fully paid, nor has
any reportable event under ERISA Section 4043 occurred with
respect to any such pension plan. With respect to each of such
plans that is subject to Title IV of ERISA, the present value of
the accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed
the then current value of the assets of such plan allocable to
such accrued benefits. Neither Sovereign nor any Sovereign
Subsidiary has incurred or is subject to any liability under
ERISA Section 4201 for a complete or partial withdrawal from a
multi-employer plan. All "employee benefit plans," as defined in
ERISA Section 3(3), comply and within the past six (6) years have
complied in all material respects with (i) relevant provisions of
ERISA, and (ii) in the case of plans intended to qualify for
favorable income tax treatment, provisions of the IRC relevant to
such treatment. No prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408 or any transaction prohibited under IRC
Section 4975) has occurred within the past six (6) years with
respect to any employee benefit plan maintained by Sovereign or
any Sovereign Subsidiary that would result in the imposition,
directly or indirectly, of an excise tax under IRC Section 4975
or other penalty under ERISA or the IRC, which individually or in
the aggregate, has resulted in or will result in a Material
Adverse Effect with respect to Sovereign. Sovereign and the
Sovereign Subsidiaries provide continuation coverage under group
health plans for separating employees and "qualified
beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in compliance with Section
1862(b)(1) of the Social Security Act.
Section 3.13 Securities Documents. Sovereign has
delivered to ML copies of its (i) annual reports on SEC Form 10-K
for the years ended December 31, 1996, 1995 and 1994,
(ii) quarterly reports on SEC Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997, (iii) current reports on SEC
Form 8-K dated February 5, 1997, February 6, 1997, February 13,
1997, March 18, 1997 and June 17, 1997 and (iv) proxy statement
dated March 19, 1997 used in connection with its annual meeting
of shareholders held in April 1997. Such reports and such proxy
materials complied, at the time filed with the SEC, in all
material respects, with the Exchange Act and the applicable rules
and regulations of the SEC.
Section 3.14 Environmental Matters. To the knowledge
of Sovereign, neither Sovereign nor any Sovereign Subsidiary, nor
any properties owned or operated by Sovereign or any Sovereign
Subsidiary has been or is in violation of or liable under any
Environmental Law which violation or liability, individually or
in the aggregate, resulted in or will result in a Material
Adverse Effect with respect to Sovereign. There are no actions,
suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand
letters or requests for information from any environmental
agency) instituted or pending, or to the knowledge of Sovereign,
threatened, relating to the liability of any property owned or
operated by Sovereign or any Sovereign Subsidiary under any
Environmental Law.
Section 3.15 Allowance for Loan Losses. The allowance
for loan losses reflected, and to be reflected, in the Sovereign
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the Sovereign Financials have been, and will
be, established in accordance with the requirements of GAAP and
all applicable regulatory criteria.
Section 3.16 Brokers and Finders. In connection with
the transactions contemplated by this Agreement, neither
Sovereign nor any Sovereign Subsidiary, nor any of their
respective officers, directors, employees or agents, has employed
any broker, finder or financial advisor, or incurred any
liability for any fees or commissions to any such person, in
connection with the transactions contemplated by this Agreement.
Section 3.17 Loans. Each loan reflected as an asset
in the Sovereign Financial Statements (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true,
genuine and correct (ii) to the extent secured, has been secured
by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Sovereign.
Section 3.18 Accounting for the Merger;
Reorganization. As of the date hereof, Sovereign does not have
any reason to believe that the Merger will fail to qualify
(i) for pooling-of-interests treatment under GAAP, assuming
compliance by ML and Sovereign with the requirements of
Section 4.16 hereof, or (ii) as a reorganization under
Section 368(a) of the IRC.
Section 3.19 Quality of Representations. The
representations made by Sovereign in this Agreement are true,
correct and complete in all material respects and do not omit
statements necessary to make the representations not misleading
under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of ML's Business.
(a) From the date of this Agreement to the
Closing Date, ML and each ML Subsidiary will conduct its business
and engage in transactions, including extensions of credit, only
in the ordinary course and consistent with past practice and
policies, except as otherwise required by this Agreement or with
the written consent of Sovereign. ML will use its reasonable
good faith efforts, and will cause Main Line Bank to use its
reasonable good faith efforts, to (i) preserve its business
organizations intact, (ii) maintain good relationships with
employees, and (iii) preserve for itself the good will of
customers of ML and ML Subsidiaries and others with whom business
relationships exist. From the date hereof to the Closing Date,
except as otherwise consented to or approved by Sovereign in
writing or as permitted or required by this Agreement, ML will
not, and ML will not permit any ML Subsidiary to:
(i) amend or change any provision of its
certificate or articles of incorporation, charter, or
bylaws;
(ii) except as required by Section 4.16,
change the number of authorized or issued shares of its
capital stock or issue or grant any option, warrant, call,
commitment, subscription, Right or agreement of any
character relating to its authorized or issued capital stock
or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of capital stock, or
declare, set aside or pay any dividend or other distribution
in respect of capital stock, or redeem or otherwise acquire
any shares of capital stock, except that (A) ML may issue up
to an aggregate of 1,442,200 shares of ML Common Stock upon
the valid exercise of ML Options, (B) ML may issue shares of
ML Common Stock and options to purchase shares of ML Common
Stock in October 1997 to the extent required by the ML
Recognition and Retention Plan and the ML 1994 Stock Option
Plan, as set forth in Section 2.02 hereof, (C) ML may issue
shares of ML Common Stock pursuant to the Sovereign Option,
(D) ML may pay one regular quarterly cash dividend in the
calendar quarter ended December 31, 1997, not to exceed
$.10 per share of ML Common Stock outstanding; and
thereafter, ML may pay a quarterly cash dividend not to
exceed $.033 per share of ML Common Stock outstanding,
provided that if the shareholders of each of Sovereign and
ML have not approved the Merger prior to the end of any such
calendar quarter occurring after December 31, 1997, ML may
declare and pay an additional dividend equal to $.067 per
share of ML Common Stock outstanding for such quarter and
(E) ML Capital Trust I may make distributions on its 9.875%
Capital Securities in accordance with their terms. As
promptly as practicable following the date of this
Agreement, the Board of Directors of ML shall cause its
regular quarterly dividend record dates and payment dates to
be the same as Sovereign's regular quarterly dividend record
dates and payment dates for Sovereign Common Stock, and ML
shall not change its regular dividend payment dates and
record dates without prior written consent of Sovereign.
Nothing contained in this Section 4.01(ii) or in any other
Section of this Agreement shall be construed to permit ML
shareholders to receive two dividends either from ML or from
ML and Sovereign in any quarter or to deny or prohibit them
from receiving one dividend from ML or Sovereign in any
quarter. Nothing contained herein shall be deemed to affect
the ability of an ML Subsidiary to pay dividends on its
capital stock to ML subject to applicable regulatory
restrictions.
(iii) grant any severance or termination pay
(other than pursuant to written policies or written
agreements of ML or ML Subsidiaries in effect on the date
hereof and provided to Sovereign prior to the date hereof)
to, or enter into any new or amend any existing employment
agreement with, or increase the compensation of, any
employee, officer or director of ML or any ML Subsidiary,
except for routine periodic increases, individually and in
the aggregate, in accordance with past practice;
(iv) merge or consolidate ML or any ML
Subsidiary with any other corporation; sell or lease all or
any substantial portion of the assets or business of ML or
any ML Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other
person, firm, association, corporation or business
organization other than in connection with the collection of
any loan or credit arrangement between any ML Subsidiary and
any other person; enter into a purchase and assumption
transaction with respect to deposits and liabilities; permit
the revocation or surrender by any ML Subsidiary of its
certificate of authority to maintain, or file an application
for the relocation of, any existing branch office, or file
an application for a certificate of authority to establish a
new branch office;
(v) sell or otherwise dispose of the capital
stock of Main Line Bank or sell or otherwise dispose of any
asset of ML or of any ML Subsidiary other than in the
ordinary course of business consistent with past practice;
subject any asset of ML or of any ML Subsidiary to a lien,
pledge, security interest or other encumbrance (other than
in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal
funds" and the satisfaction of legal requirements in the
exercise of trust powers) other than in the ordinary course
of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money), except in the ordinary
course of business consistent with past practice;
(vi) take any action which would result in
any of the representations and warranties of ML set forth in
this Agreement becoming untrue as of any date after the date
hereof or in any of the conditions set forth in Article V
hereof not being satisfied, except in each case as may be
required by applicable law;
(vii) change any method, practice or
principle of accounting, except as may be required from time
to time by GAAP (without regard to any optional early
adoption date) or any Regulatory Authority responsible for
regulating ML or Main Line Bank;
(viii) waive, release, grant or transfer any
rights of value or modify or change in any material respect
any existing material agreement to which ML or any ML
Subsidiary is a party, other than in the ordinary course of
business consistent with past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or
arrangement that was not in effect on the date of this
Agreement, or, except as required by law, materially amend
any existing plan or arrangement except to the extent such
amendments do not result in an increase in cost; provided,
however, that ML may contribute to the ML pension plan an
amount not to exceed the minimum amount required under ERISA
or the IRC only if (A) such amount is usual and ordinary,
consistent with past practice and (B) ML obtains an opinion
of legal counsel that the full amount of such contribution
will be deductible by ML for federal tax purposes;
(x) purchase any security for its investment
portfolio not rated "A" or higher by either Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investor Services, Inc.;
(xi) amend or otherwise modify the
underwriting and other lending guidelines and policies of
Main Line Bank in effect as of the date hereof or otherwise
fail to conduct its lending activities in the ordinary
course of business consistent with past practice;
(xii) enter into, renew, extend or modify
any other transaction with any Affiliate, other than deposit
and loan transactions in the ordinary course of business and
which are in compliance with the requirements of applicable
laws and regulations;
(xiii) enter into any interest rate swap,
floor or cap or similar commitment, agreement or
arrangement;
(xiv) except for the execution of this
Agreement, take any action that would give rise to a right
of payment to any individual under any employment agreement;
(xv) take any action that would preclude the
Merger from qualifying (A) for pooling-of-interests
accounting treatment under GAAP or (B) as a reorganization
within the meaning of Section 368 of the IRC, provided,
however, that nothing contained herein shall limit the
ability of ML to comply with its obligations under the Stock
Option Agreement; or
(xvi) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be
considered in the ordinary course of business for ML or any ML
Subsidiary to do any of the following: (i) make any capital
expenditure of $100,000 or more not disclosed on ML Disclosure
Schedule 4.01, without the prior written consent of Sovereign;
(ii) make any sale, assignment, transfer, pledge, hypothecation
or other disposition of any assets having a book or market value,
whichever is greater, in the aggregate in excess of $5,000,000,
other than pledges of assets to secure government deposits, to
exercise trust powers, sales of assets received in satisfaction
of debts previously contracted in the normal course of business,
issuance and sales of loans, or transactions in the investment
securities portfolio by ML or a ML Subsidiary or repurchase
agreements, in each case, in the ordinary course of business; or
(iii) undertake or enter any lease, contract or other commitment
for its account, other than in the normal course of providing
credit to customers as part of its banking business, involving a
payment by ML or any ML Subsidiary of more than $100,000
annually, or containing a material financial commitment and
extending beyond 12 months from the date hereof.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, ML or Sovereign, as the case may be, shall afford
to, and shall cause each ML Subsidiary or Sovereign Subsidiary to
afford to, the other party and its authorized agents and
representatives, complete access to their respective properties,
assets, books and records and personnel, at reasonable hours and
after reasonable notice; and the officers of ML and Sovereign
will furnish any person making such investigation on behalf of
the other party with such financial and operating data and other
information with respect to the businesses, properties, assets,
books and records and personnel as the person making such
investigation shall from time to time reasonably request.
(b) ML and Sovereign each agree to conduct such
investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and
employee relationships of the other party.
(c) In addition to the access permitted by
subparagraph (a) above, from the date of this Agreement through
the Closing Date, ML shall permit employees of Sovereign
reasonable access to and participation in matters relating to
problem loans, loan restructurings and loan work-outs of ML and
the ML Subsidiaries, provided that nothing contained in this
subparagraph shall be construed to grant Sovereign or any
Sovereign employee any decision-making authority with respect to
such matters. Sovereign shall have the right, however, at
Sovereign's expense, to cause ML or any ML Subsidiary to obtain
an appraisal by an independent third party experienced in such
matters, and mutually satisfactory to Sovereign and ML, of the
assets or property securing any loan made by ML or any ML
Subsidiary, with a principal balance of $1.0 million or more.
(d) All information furnished to Sovereign by ML
or by ML to Sovereign previously in connection with the
transactions contemplated by this Agreement or pursuant hereto
shall be held in confidence to the extent required by, and in
accordance with, the confidentiality agreements, dated August 20,
1997, between ML and Sovereign (the "Confidentiality
Agreements").
Section 4.03 Regulatory Matters and Consents.
(a) ML and Sovereign shall promptly prepare a
Prospectus/Proxy Statement to be mailed to their respective
shareholders in connection with the meetings of their respective
shareholders and transactions contemplated hereby, and to be
filed by Sovereign with the SEC in the Registration Statement,
which Prospectus/Proxy Statement shall conform to all applicable
legal requirements. Sovereign shall, as promptly as practicable
following the preparation thereof, file the Registration
Statement with the SEC and ML and Sovereign shall use all
reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable
after such filing. Sovereign will advise ML, promptly after
Sovereign receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or
the suspension of the qualification of the shares of capital
stock issuable pursuant to the Registration Statement, or the
initiation or threat of any proceeding for any such purpose, or
of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. Sovereign
shall use its reasonable best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities laws or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
Sovereign will provide ML with as many copies of such
Registration Statement and all amendments thereto promptly upon
the filing thereof as ML may reasonably request.
(b) Sovereign and ML will prepare all
Applications to Regulatory Authorities and make all filings for,
and use their reasonable best efforts to obtain as promptly as
practicable after the date hereof, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory
Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement.
(c) ML will furnish Sovereign with all
information concerning ML and ML Subsidiaries as may be
reasonably necessary or advisable in connection with the
Registration Statement and any Application or filing made by or
on behalf of Sovereign to any Regulatory Authority in connection
with the transactions contemplated by this Agreement and the Bank
Plan of Merger.
(d) Sovereign and ML shall have the right to
review in advance, and to the extent practicable each will
consult with the other on, all information which appears in any
filing made with or written materials submitted to the SEC, any
Regulatory Authority or any third party in connection with the
transactions contemplated by this Agreement and the Bank Plan of
Merger. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and
authorizations of the SEC, Regulatory Authorities and third
parties necessary or advisable to consummate the transactions
contemplated by this Agreement and the Bank Plan of Merger and
each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated hereby
and thereby.
(e) Sovereign will promptly furnish ML with
copies of all Applications and other written communications to,
or received by Sovereign or any Sovereign Subsidiary from, any
Regulatory Authority in respect of the transactions contemplated
hereby and the Bank Plan of Merger.
Section 4.04 Taking of Necessary Action. Sovereign
and ML shall each use its reasonable best efforts in good faith,
and each of them shall cause its Subsidiaries to use their
reasonable best efforts in good faith, to take or cause to be
taken all action necessary or desirable on its part so as to
permit completion of the Merger and the Bank Merger as soon as
practicable after the date hereof, including, without limitation,
(A) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or
professional entity whose consent or approval is required or
desirable for consummation of the transactions contemplated
hereby (including assignment of leases without any change in
terms), provided that neither ML nor any ML Subsidiary shall
agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of
Sovereign, and (B) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take, or cause, or to the best
of its ability permit to be taken, any action that would
substantially impair the prospects of completing the Merger and
the Bank Merger pursuant to this Agreement and the Bank Plan of
Merger; provided that nothing herein contained shall preclude
Sovereign or ML or from exercising its rights under this
Agreement or the Stock Option Agreement.
Section 4.05 Indemnification; Insurance.
(a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, in which any person who is now, or
has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Date, a director or officer or
employee of ML or any of its Subsidiaries (the "Indemnified
Parties") is, or is threatened to be, made a party to a suit
based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director,
officer or employee of ML, any of the ML Subsidiaries or any of
their respective predecessors or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Date, the
parties hereto agree to cooperate and use their best efforts to
defend against and respond thereto to the extent permitted by the
BCL and the Articles of Incorporation and Bylaws of ML. On or
after the Effective Date, Sovereign shall indemnify, defend and
hold harmless all prior and then-existing directors and officers
of ML or of any ML Subsidiary, against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement (with the prior approval of
Sovereign) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is
or was a director, officer or employee of ML or any ML
Subsidiary, whether pertaining to any matter existing or
occurring at or prior to the Effective Date and whether asserted
or claimed prior to, or at or after, the Effective Date
("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement or the transactions
contemplated hereby, to the same extent as such officer, director
or employee may be indemnified by ML or any ML Subsidiary as of
the date hereof including the right to advancement of expenses,
provided, however, that any such officer, director or employee of
ML or any ML Subsidiary may not be indemnified by Sovereign
and/or Sovereign Bank if such indemnification is prohibited by
applicable law.
(b) Sovereign shall maintain ML's existing
directors' and officers' liability insurance policy (or a policy
providing comparable coverage amounts on terms generally no less
favorable, including Sovereign's existing policy if it meets the
foregoing standard) covering persons who are currently covered by
such insurance for a period of five years after the Effective
Date; provided, however, that in no event shall Sovereign be
obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Section 4.05(b), any amount per annum
in excess of 150% of the amount of the annual premiums paid as of
the date hereof by ML for such insurance (the "Maximum Amount").
If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount,
Sovereign shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount. In
the event that Sovereign acts as its own insurer for all of its
directors and officers with respect to matters typically covered
by a directors' and officers' liability insurance policy,
Sovereign's obligations under this Section 4.05(b) may be
satisfied by such self insurance, so long as its senior debt
ratings by Standard & Poor's Corporation and ▇▇▇▇▇'▇ Investors
Services, Inc. are not lower than such ratings as of the date
hereof.
(c) In the event that Sovereign or any of its
respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and
assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth
in this Section 4.05.
Section 4.06 No Other Bids and Related Matters. So
long as this Agreement remains in effect, ML shall not and ML
shall not authorize or permit any of its directors, officers,
employees or agents, to directly or indirectly (i) respond to,
solicit, initiate or encourage any inquiries relating to, or the
making of any proposal which relates to, an Acquisition
Transaction (as defined below), (ii) recommend or endorse an
Acquisition Transaction, (iii) participate in any discussions or
negotiations regarding an Acquisition Transaction, (iv) provide
any third party (other than Sovereign or an affiliate of
Sovereign) with any nonpublic information in connection with any
inquiry or proposal relating to an Acquisition Transaction or
(v) enter into an agreement with any other party with respect to
an Acquisition Transaction. Notwithstanding the foregoing,
(i) for a period of 30 days after the date of this Agreement, the
Board of Directors of ML may respond to unsolicited inquiries
relating to an Acquisition Transaction or (ii) the Board of
Directors may recommend or endorse an Acquisition Transaction if,
after having consulted with and considered the written advice of
its financial advisers and outside counsel, it has determined in
good faith that the failure to do so would result in a reasonable
likelihood that the directors, under the BCL, have breached their
fiduciary duty. ML will immediately cease and cause to be
terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Sovereign with
respect to any of the foregoing, and will take all actions
necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.06. ML will notify
Sovereign orally (within one day) and in writing (as promptly as
practicable) if any inquiries or proposals relating to an
Acquisition Transaction are received by, any such information is
requested from, or any such negotiations or discussions are
sought to be initiated or continued with, ML. As used in this
Agreement, "Acquisition Transaction" shall mean one of the
following transactions with a party other than Sovereign of an
affiliate of Sovereign (i) a merger or consolidation, or any
similar transaction, involving ML or an ML Subsidiary, (ii) a
purchase, lease or other acquisition of all or a substantial
portion of the assets or liabilities of ML or an ML Subsidiary or
(iii) a purchase or other acquisition (including by way of share
exchange, tender offer, exchange offer or otherwise) of a
substantial interest in any class or series of equity securities
of ML (other than as permitted by Section 4.01(a)(ii) hereof) or
an ML Subsidiary.
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedule. Each party shall promptly advise the other party of
any change or event having a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations,
warranties or covenants set forth herein. Each party shall
update its respective Disclosure Schedule as promptly as
practicable after the occurrence of an event or fact which, if
such event or fact had occurred prior to the date of this
Agreement, would have been disclosed in such Disclosure Schedule.
The delivery of such updated Schedule shall not relieve a party
from any breach or violation of this Agreement and shall not have
any effect for the purposes of determining the satisfaction of
the condition set forth in Section 5.01(c) or 5.02(c) hereof, as
applicable.
Section 4.08 Conduct of Sovereign's Business.
(a) From the date of this Agreement to the
Closing Date, Sovereign will use its best efforts to (x) preserve
its business organizations intact, (y) maintain good
relationships with employees, and (z) preserve for itself the
goodwill of customers of Sovereign and Sovereign Subsidiaries and
others with whom business relationships exist.
(b) Except with the prior written consent of ML
or as expressly contemplated hereby, between the date hereof and
the Effective Date, Sovereign shall not, and shall cause each
Sovereign Subsidiary not to:
(i) declare, set aside, make or pay any
extraordinary cash dividend or other distribution of cash or
property in respect of the Sovereign Common Stock, except
for stock dividends and regular quarterly cash dividends,
provided, however, that nothing contained herein shall be
deemed to affect the ability of a Sovereign Subsidiary to
pay dividends on its capital stock to Sovereign;
(ii) amend its Articles of Incorporation or
equivalent document or Bylaws in a manner which would
adversely affect in any manner the terms of the Sovereign
Common Stock or the ability of Sovereign or Sovereign Bank
to consummate the transactions contemplated hereby;
(iii) take any action that would preclude
the Merger from qualifying (A) for pooling-of-interests
accounting treatment under GAAP or (B) as a reorganization
within the meaning of Section 368 of the IRC; provided,
however, that nothing contained herein shall limit the
ability of Sovereign to exercise its rights under the Stock
Option Agreement;
(iv) take any action which would result in
any of the representations and warranties of Sovereign
contained in this Agreement becoming untrue as of any date
after the date hereof or in any of the conditions set forth
in Article V hereof not being satisfied, except in each case
as may be required by applicable law; or
(v) agree to do any of the foregoing.
Section 4.09 Current Information.
(a) During the period from the date of this
Agreement to the Effective Date, each party shall, upon the
request of the other party, cause one or more of its designated
representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial
condition, operations and business and matters relating to the
completion of the transactions contemplated hereby. As soon as
reasonably available, but in no event more than 45 days after the
end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending
December 31 in the case of Sovereign and March 31 in the case of
ML), ML and Sovereign will deliver to the other party its
quarterly report on Form 10-Q under the Exchange Act, and, as
soon as reasonably available, but in no event more than 90 days
after the end of each fiscal year ended December 31 in the case
of Sovereign and March 31 in the case of ML, ML and Sovereign
will deliver to the other party its Annual Report on Form 10-K.
Within 25 days after the end of each month, ML and Sovereign will
deliver to the other party a consolidated balance sheet and a
consolidated statement of operations, without related notes, for
such month.
(b) Each party shall provide to the other party a
copy of the minutes of any meeting of the Board of Directors of
such party or any Subsidiary thereof, or any committee thereof,
or any senior management committee, promptly after such minutes
are approved at a subsequent meeting of the board or committee,
but in any event within 40 days of the meeting of such board or
committee to which such minutes relate, except that with respect
to any meeting held within 30 days of the Closing Date, such
minutes shall be provided prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and ML.
(a) From and after the date of this Agreement, ML
shall:
(i) Phase I Environmental Audit. Permit
Sovereign, if Sovereign elects to do so, at its own expense,
to cause a "phase I environmental audit" to be performed at
any physical location owned or occupied by ML or any ML
Subsidiary on the date hereof;
(ii) Approval of Bank Plan of Merger.
Approve the Bank Plan of Merger as sole shareholder of Main
Line Bank and obtain the approval of, and cause the
execution and delivery of, the Bank Plan of Merger by Main
Line Bank;
(iii) Timely Review. If requested by
Sovereign at Sovereign's sole expense, cause its independent
certified public accountants to perform a review of its
unaudited consolidated financial statements as of the end of
any calendar quarter, in accordance with Statement of
Auditing Standards No. 36, and to issue its report on such
financial statements as soon as is practicable thereafter;
(iv) Outside Service Bureau Contracts. If
requested to do so by Sovereign, use its reasonable best
efforts to obtain an extension of any contract with an
outside service bureau or other vendor of services to ML or
any ML Subsidiary, on terms and conditions mutually
acceptable to ML and Sovereign;
(v) List of Nonperforming Assets. Provide
Sovereign, within fifteen (15) days after the quarterly
meeting of its Asset Review Committee, a written list of
nonperforming assets as of the end of such month; and
(vi) Reserves and Merger-Related Costs. On
or before the Effective Date, establish such additional
accruals and reserves as may be necessary to conform the
accounting reserve practices and methods (including credit
loss practices and methods) of ML to those of Sovereign (as
such practices and methods are to be applied to ML from and
after the Closing Date) and Sovereign's plans with respect
to the conduct of the business of ML following the Merger
and otherwise to reflect Merger-related expenses and costs
incurred by ML, provided, however, that ML shall not be
required to take such action (A) more than five (5) days
prior to the Effective Date; and (B) unless Sovereign agrees
in writing that all conditions to closing set forth in
Section 5.02 have been satisfied or waived (except for the
expiration of any applicable waiting periods); prior to the
delivery by Sovereign of the writing referred to in the
preceding clause, ML shall provide Sovereign a written
statement, certified without personal liability by the chief
executive officer of ML and dated the date of such writing,
that the representation made in Section 2.15 hereof is true
as of such date or, alternatively, setting forth in detail
the circumstances that prevent such representation from
being true as of such date. No accrual or reserve made by
ML or any ML Subsidiary pursuant to this subsection, or any
litigation or regulatory proceeding arising out of any such
accrual or reserve, shall constitute or be deemed to be a
breach or violation of any representation, warranty,
covenant, condition or other provision of this Agreement or
to constitute a termination event within the meaning of
Section 6.01(d) hereof.
(b) From and after the date of this Agreement,
Sovereign and ML shall each:
(i) Shareholders Meetings. Each of ML and
Sovereign shall take all action necessary to properly call
and convene a special meeting of its shareholders as soon as
practicable after the date hereof to consider and vote upon
this Agreement and the transactions contemplated hereby.
The Board of Directors of ML and the Board of Directors of
Sovereign will recommend that the shareholders of ML and
Sovereign, respectively, approve this Agreement and the
transactions contemplated hereby, provided that the Board of
Directors of ML or the Board of Directors of Sovereign may
fail to make such recommendation, or withdraw, modify or
change any such recommendation, if such Board of Directors,
after having consulted with and considered the written
advice of its financial advisers and outside counsel, has
determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation,
would result in a reasonable likelihood that the directors,
under the BCL, have breached their fiduciary duty. If
required by the other party, a party shall retain a proxy
solicitor in connection with the solicitation of the
approval of its shareholders of this Agreement and the
transactions contemplated hereby.
(ii) Public Announcements. Cooperate and
cause its respective officers, directors, employees and
agents to cooperate in good faith, consistent with their
respective legal obligations, in the preparation and
distribution of, and agree upon the form and substance of,
any press release related to this Agreement and the
transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation,
communications to ML shareholders and ML's internal
announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any
disclosure which its counsel deems necessary under
applicable law;
(iii) Maintenance of Insurance. Maintain,
and cause their respective Subsidiaries to maintain,
insurance in such amounts as are reasonable to cover such
risks as are customary in relation to the character and
location of its properties and the nature of its business;
(iv) Maintenance of Books and Records.
Maintain, and cause their respective Subsidiaries to
maintain, books of account and records in accordance with
GAAP applied on a basis consistent with those principles
used in preparing the financial statements heretofore
delivered;
(v) Delivery of Securities Documents.
Deliver to the other, copies of all Securities Documents
simultaneously with the filing thereof; and
(vi) Taxes. File all federal, state, and
local tax returns required to be filed by them or their
respective Subsidiaries on or before the date such returns
are due (including any extensions) and pay all taxes shown
to be due on such returns on or before the date such payment
is due.
Section 4.11 Employee Benefits and Termination
Benefits.
(a) Employee Benefits. On and after the
Effective Date, the employee pension and welfare benefit plans of
Sovereign and ML (as well as any other plan of ML providing for
benefits not subject to ERISA) may, at Sovereign's election and
subject to the requirements of the IRC, continue to be maintained
separately or consolidated, except as set forth below. In
connection with implementation of the foregoing, the following
provisions and guidelines shall apply:
(i) Sovereign Employee Stock Ownership Plan
("ESOP"). Employees of ML and ML Subsidiaries who become
employees of Sovereign or a Sovereign Subsidiary shall
become entitled to participate in the Sovereign ESOP in
accordance with its terms by treating them as newly employed
individuals without any prior service credit under such
plan.
(ii) ML ESOP.
(A) Each participant in the ML Employee
Stock Ownership Plan ("ML ESOP") not fully vested will,
in accordance with the terms of the ML ESOP, become
fully vested in his or her ML ESOP account as of the
Effective Date. As soon as practicable after the
execution of this Agreement, ML, Main Line Bank and
Sovereign will cooperate to cause the ML ESOP to be
amended and other action taken, in a manner reasonably
acceptable to ML and Sovereign, to provide that the ML
ESOP will terminate upon the Effective Date. Between
the date hereof and the Effective Date, the existing ML
ESOP indebtedness shall be paid in the ordinary course
of business and ML or Main Line Bank shall make such
contributions to the ML ESOP as necessary to fund such
payments. Any indebtedness of the ML ESOP remaining as
of the Effective Date shall be repaid from the Trust
associated with the ML ESOP through application or sale
of the Sovereign Common Stock received by the ML ESOP;
provided, however, that (i) any related sale or
distribution of shares by the ML ESOP shall be effected
in accordance with the requirements of federal and any
applicable state securities laws and regulations,
including any rules of the NASD, (ii) any related sale
or distribution of shares by the ML ESOP and any
participant shall be effected in such a manner (and
with such safeguards as may be necessary or
appropriate) so as not to jeopardize the intended
"pooling of interests" accounting treatment of the
Merger, and (iii) all distributions from the ML ESOP
after the Effective Date shall be in shares of
Sovereign Common Stock. Upon the repayment of the ML
ESOP loan, the remaining funds in the ML ESOP suspense
account will be allocated (to the extent permitted by
Sections 401(a), 415 or 4975 of the IRC and the
applicable laws and regulations including, without
limitation, the applicable provisions of ERISA) to ML
ESOP participants (as determined under the terms of the
ML ESOP). ML and Sovereign agree that, subject to the
conditions described herein, as soon as practicable
after the Effective Date and repayment of the ML ESOP
loan, participants in the ML ESOP shall be entitled at
their election to have the amounts in their ML ESOP
accounts either distributed to them in a lump sum or
rolled over to another tax-qualified plan (including
Sovereign plans to the extent permitted by Sovereign)
or individual retirement account.
(B) The actions relating to termination
of the ML ESOP will be adopted conditioned upon the
consummation of the Merger and upon receiving a
favorable determination letter from the Internal
Revenue Service ("IRS") with regard to the continued
qualification of the ML ESOP after any required
amendments. ML and Sovereign will cooperate in
submitting appropriate requests for any such
determination letter to the IRS and will use their best
efforts to seek the issuance of such letter as soon as
practicable following the date hereof. ML and
Sovereign will adopt such additional amendments to the
ML ESOP as may be reasonably required by the IRS as a
condition to granting such determination letter,
provided that such amendments do not (i) substantially
change the terms outlined herein, (ii) have a Material
Adverse Effect on ML or (iii) result in an additional
material liability to Sovereign.
(C) As of and following the Effective
Date, Sovereign shall cause the ML ESOP to be
maintained for the exclusive benefit of employees and
other persons who were participants or beneficiaries
therein prior to the Effective Date and proceed with
termination of the ML ESOP through distribution of its
assets in accordance with its terms subject to the
amendments described herein and as otherwise may be
required to comply with applicable law or to obtain a
favorable determination from the IRS as to the
continuing qualified status of the ML ESOP, provided,
however, that no such termination distributions of the
ML ESOP shall occur after the Effective Date until a
favorable termination letter has been received from the
IRS.
(iii) Sovereign Defined Benefit Pension Plan
("DB Plan"). Employees of ML and ML Subsidiaries who become
employees of Sovereign or a Sovereign Subsidiary shall
become entitled to participate in Sovereign's DB Plan in
accordance with its terms. In this regard, each such
employee shall (A) receive, for purposes of participation
and vesting only, credit for all service with ML or an ML
Subsidiary credited to each such employee under ML's DB Plan
as of the date of its termination or cessation of accrual of
benefits, and (B) enter the Sovereign DB Plan on the entry
date concurrent with or next following the employee's
satisfaction of such plan's minimum participation
requirements.
(iv) ML DB Plan. ML may proceed with the
presently contemplated termination and/or cessation of the
accrual of benefits under its DB Plan and allocation of
excess benefits and Sovereign shall take no action
inconsistent therewith if the DB Plan is not terminated and
allocation of excess benefits thereunder are not completed
prior to the Effective Date, it being the intention of the
parties that such actions be taken after the Effective Date
under such circumstances. No termination or cessation
distribution shall be made until ML or Sovereign has
received a favorable determination letter from the IRS.
(v) Sovereign 401(k) Retirement Savings Plan
("401(k) Plan"). Employees of ML and ML Subsidiaries who
become employees of Sovereign or a Sovereign Subsidiary
shall become entitled to participate in the Sovereign 401(k)
Plan in accordance with its terms. In this regard, each
such employee shall (A) receive, for purposes of
participation and vesting only, credit for all service with
ML or an ML Subsidiary credited to each such employee under
ML's 401(k) Plan as of the date of the date of the Merger,
and (B) enter the Sovereign 401(k) Plan on the entry date
concurrent with or next following the employee's
satisfaction of such plan's minimum participation
requirements.
(vi) ML Savings Plan ("401(k) Plan").
Following the Merger, Sovereign will initially continue to
maintain ML's 401(k) Plan until its participants generally
become eligible to participate in the Sovereign 401(k) Plan.
Thereafter, Sovereign shall have the right, but not the
obligation, to combine the two plans on such terms as it
deems appropriate and in accordance with applicable law.
(vii) Sovereign and ML Nonqualified Deferred
Compensation Plans ("Excess Benefit Plans"). Following the
Merger, Sovereign will, as soon as administratively
feasible, consolidate the Excess Benefit Plans maintained by
Sovereign and ML to supplement certain pension benefits lost
by some employees by reason of limitations contained in the
IRC. Such consolidation shall be effected in such a manner
that no person receive redundant benefits or lose existing
benefits. The intent of the preceding sentence is that
affected employees of ML and ML Subsidiaries generally shall
be entitled only to the sum of (A) the benefits accrued
under the ML Excess Benefit Plan(s) as of the plan
consolidation, and (B) the benefits accrued thereafter under
the combined Excess Benefit Plan.
(viii) ML Recognition and Retention Plan
("RRP"). The RRP shall continue in effect following the
Effective Date as a Sovereign plan. No action shall be
taken that would adversely affect the rights of plan
participants who hold outstanding grants or awards of shares
of ML Common Stock, whether before or after the Effective
Date. Except as expressly permitted by this Agreement, no
further grants or awards shall be made under the RRP
following the date of this Agreement. Any shares of ML
Common Stock outstanding under such Plan's related trust,
but not subject to a grant or award, shall be converted into
Sovereign Common Stock as of the Effective Date.
(ix) Welfare Benefit Plans. Following the
Merger, the welfare benefit plans of Sovereign and ML (and
their respective subsidiaries) shall initially remain
unchanged. Sovereign shall undertake a study, in
consultation with appropriate professional advisors, with a
view toward the possible combination of some or all of such
plans or the benefits provided thereunder. Following such
study, Sovereign shall take such action with respect to such
plans (which may include the implementation of new benefits,
reduction or elimination of some benefits, and the
alteration of the respective cost allocation between
employer and employee) as it deems appropriate under the
circumstances.
(x) ML Bonus Plans and Arrangements. ML may
continue to administer such bonus programs and arrangements
as are disclosed pursuant to this Agreement through the
Effective Date, with such equitable modifications as may be
appropriate to take into account the circumstances of the
Merger and the timing thereof. In the event the Merger
shall occur after such current fiscal year, bonuses shall be
provided on a pro rata basis with respect to the interim
period; provided, however, that bonuses for such interim
period, in the aggregate, shall not exceed $200,000.
(xi) Employer Loan Program. Prior to
consummation of the Merger, Main Line Bank may continue to
originate loans pursuant to its employee loan program in
effect as of the date hereof, as disclosed pursuant to this
Agreement, and upon consummation of the Bank Merger,
Sovereign agrees to cause Sovereign Bank to honor all of the
loans originated by Main Line Bank pursuant to such employee
loan program or its predecessors.
(xii) Other ML Plans. From the date of this
Agreement through the Effective Date of the Merger, without
the prior written consent of Sovereign and except as
otherwise expressly permitted by this Agreement, no further
benefits, grants or awards shall be made available under any
other ML plans to employees or directors, including, without
limitation, the granting of stock options, stock
appreciation rights, restricted stock, and performance
shares.
(b) Severance Policy. Sovereign agrees to cause
Sovereign Bank to provide the severance pay and benefits
specified in the Main Line Bank severance policy to any employee
of Main Line Bank whose employment is terminated in connection
with the Merger within three (3) months of the Effective Date,
either because such employee's position is eliminated or such
employee is not offered comparable employment (i.e., not offered
employment for a position of generally similar job description or
responsibilities in a location within 65 miles from ML's
headquarters), excluding any employee who has an existing
employment or special termination agreement or whose employment
is terminated for Cause (as defined below). For purposes of this
Section 4.11(b), "Cause" shall mean termination because of the
employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties or willful violation of any law,
rule or regulation (other than traffic violations or similar
offenses). The benefits provided to terminated ML and Main Line
Bank employees under this subsection are the only severance
benefits payable by ML or Main Line Bank under any plan or policy
(excluding severance benefits provided under existing employment
or special termination agreements or as otherwise required by
law) and shall be in lieu of any termination benefits to which
such employees would otherwise be entitled under Sovereign's or
Sovereign Bank's severance policies or programs then in effect.
ML shall amend its severance policy, to the extent reasonably
necessary, so that the effect of its administration shall not be
in conflict with the provisions of this Agreement, including,
without limitation, provisions relating to bonuses and out-
placement services.
(c) Intention Regarding Future Employment.
Within ninety (90) days of the date hereof, Sovereign and
Sovereign Bank shall use their reasonable best efforts to inform
the employees of ML and Main Line Bank of the likelihood of such
employees having continued employment with Sovereign Bank
following the Effective Date and, where appropriate, shall use
their reasonable best efforts to interview the ML and Main Line
Bank employees to determine if there are mutually beneficial
employment opportunities available at Sovereign Bank. It is the
intent of Sovereign Bank in connection with reviewing applicants
for employment positions to give any Main Line Bank employee who
is terminated in connection with the Merger within three (3)
months of the Effective Date the same consideration as is
afforded Sovereign Bank employees for such positions in
accordance with existing formal or informal polices for a period
of three (3) months from such date of termination.
(d) Employment and Other Contracts. Sovereign
agrees to honor all employment contracts, consulting contracts
and other special termination agreements that ML and the ML
Subsidiaries have with their current or former employees and
which have been disclosed to Sovereign pursuant to this
Agreement.
(e) Retention Bonuses. Each employee of ML or
one of the ML Subsidiaries identified in the ML Disclosure
Schedule shall be entitled to receive a "retention" bonus from ML
or Main Line Bank equal to no more than six (6) months of such
employee's annual base salary as of the date of this Agreement in
the event that such employee remains an employee of ML or one of
the ML Subsidiaries, as applicable, until the Effective Date (or
in certain cases, the date the systems conversion occurs after
the Effective Date) and satisfactorily fulfills the duties and
responsibilities of the position of such employee of ML or one of
the ML Subsidiaries, as the case may be, through the Effective
Date; provided that retention bonuses, in the aggregate, shall
not exceed $350,000.
(f) Out-Placement. Sovereign shall pay the cost
of out-placement services for employees who are terminated
without Cause (as defined in Section 4.11(b)) in connection with
the Merger within three (3) months after the Effective Date.
Sovereign shall not be obligated to pay any out-placement fees in
connection with the foregoing or more than $50,000 in the
aggregate for such services.
Section 4.12 Stock Exchange Listing. Sovereign shall
use all reasonable efforts to cause the shares of Sovereign
Common Stock to be issued in connection with the Merger to be
approved for quotation on the Nasdaq Stock Market's National
Market, subject to official notice of issuance, as of or prior to
the Effective Date.
Section 4.13 Affiliate Letters.
(a) Each party has provided to the other party a
schedule of each person that, to the best of its knowledge, is
deemed to be an "Affiliate" of it, as that term is used in Rule
145 under the Securities Act or Accounting Series Releases 130
and 135 of the Commission.
(b) Each of ML and Sovereign shall use its
reasonable best efforts to cause each person who may be deemed to
be an Affiliate of ML and Sovereign respectively, to execute and
deliver to Sovereign as soon as practicable after the date of
this Agreement, and in any event prior to the date of the
meetings of shareholders of ML and Sovereign to be called
pursuant to Section 4.10(b)(i) hereof, a written agreement in the
form of Exhibit 1-A and 1-B in the case of Affiliates of ML and
Sovereign, respectively.
Section 4.14 Directors and Officers.
(a) Effective as of the effective date of the
Bank Merger, Sovereign shall cause Sovereign Bank to elect or
appoint ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as President of the Pennsylvania Division
of Sovereign Bank, which shall consist of all Pennsylvania and
Delaware branches of Sovereign Bank existing at the Effective
Date.
(b) Sovereign and Sovereign Bank shall use their
reasonable best efforts to enter into a new employment agreement
with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ substantially in the form set forth in the
ML Disclosure Schedule, with such other changes thereto as may be
mutually agreed upon by Sovereign, Sovereign Bank and Mr. Marlo,
effective as of the effective date of the Bank Merger.
(c) On the effective date of the Bank Merger, the
directors of Sovereign Bank, as the surviving institution in the
Bank Merger, shall consist of (i) those persons holding such
office immediately prior to the effective date of the Bank Merger
and (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, who shall be appointed as a director of
Sovereign Bank effective as of the effective date of the Bank
Merger. Mr. Marlo shall be appointed to hold office until the
1999 annual reorganization meeting of the Board of Directors of
Sovereign Bank and until his successor is elected and qualified.
Sovereign agrees to cause Mr. Marlo, so long as he remains an
active employee of Sovereign or Sovereign Bank, to be renominated
as a director of Sovereign Bank for election at the 1999 and 2000
annual reorganization meetings of the Board of Directors of
Sovereign Bank and agrees to vote its shares of Sovereign Bank in
favor of such election at such meetings.
(d) On the effective date of the Bank Merger, the
officers of Sovereign Bank shall be (i) the officers of Sovereign
Bank, as the surviving corporation in the Bank Merger,
immediately prior to such effective date, and (ii) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, who shall be appointed as President of the Pennsylvania
Division of Sovereign Bank effective as of the effective date of
the Bank Merger.
(e) On the Effective Date, Sovereign Bank shall
establish for a period of at least two years the Pennsylvania
Division of Sovereign Bank Advisory Board (the "Advisory
Board"), which shall consist of all non-employee members of the
ML Board of Directors immediately prior to the Effective Date.
The members of the Advisory Board shall be paid an annual
retainer of $18,750 ($25,000 in the case of ▇▇▇▇ ▇▇▇▇▇▇▇▇).
Section 4.15 Sovereign Rights Agreement. Sovereign
agrees that any Sovereign Rights issued pursuant to the Sovereign
Rights Agreement shall be issued with respect to each share of
Sovereign Common Stock issued pursuant to the terms hereof
regardless whether there has occurred a "Distribution Date" under
the terms of such Sovereign Rights Agreement prior to the
Effective Date, as well as to take all action necessary or
advisable to enable the holder of each such share of Sovereign
Common Stock to obtain the benefit of such Sovereign Stock
Purchase Rights notwithstanding their prior distribution,
including without limitation, amendment of the Sovereign Rights
Agreement.
Section 4.16 ML Share Issuance. After ML and
Sovereign shareholder approval of the Merger and prior to the
Effective Date, ML shall use its reasonable best efforts to offer
and sell for fair value to individuals or entities unaffiliated
with ML and Sovereign such number of shares of ML Common Stock as
shall be sufficient, in the opinion of Sovereign's and ML's
independent accountants, require the Merger to be accepted for as
a pooling-of-interests under GAAP. ML shall consult with
Sovereign with respect to the amount of shares to be sold and the
timing and manner of such sale, which may involve placement
agents or, with Sovereign's consent, underwriters. If Sovereign
receives from its independent certified public accountants
written advice that ML cannot sell a sufficient number of shares
to satisfy the requirements of this Section, then Sovereign, to
ensure that the Merger will not fail to qualify for pooling-of-
interests accounting treatment, whether in conjunction with the
aforementioned ML share issuance or otherwise, shall use its
reasonable best efforts to offer and sell for fair value to
individuals or entities unaffiliated with ML and Sovereign all or
part of the shares of ML Common Stock held by it if such offer
and sale would ensure that the Merger will not fail to qualify
for pooling-of-interests accounting treatment.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to ML's Obligations under this
Agreement. The obligations of ML hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the
following conditions, unless waived by ML pursuant to
Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, Sovereign and Sovereign Bank
to authorize the execution, delivery and performance of this
Agreement and the Bank Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement
and the Bank Plan of Merger, shall have been duly and validly
taken by Sovereign and Sovereign Bank; and ML shall have received
certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of
Sovereign required by this Agreement to be performed by Sovereign
at or prior to the Closing Date shall have been duly performed
and complied with in all material respects;
(c) Representations and Warranties. The
representations and warranties of Sovereign set forth in this
Agreement shall be true and correct, as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty
(i) which specifically relates to an earlier date or (ii) where
the breach of the representation or warranty would not, either
individually or in the aggregate, constitute a Material Adverse
Effect with respect to Sovereign;
(d) Approvals of Regulatory Authorities.
Sovereign shall have received all required approvals of
Regulatory Authorities of the Merger, and delivered copies
thereof to ML; and all notice and waiting periods required
thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(f) Officer's Certificate. Sovereign shall have
delivered to ML a certificate, dated the Closing Date and signed,
without personal liability, by its chairman or president, to the
effect that the conditions set forth in subsections (a) through
(e) of this Section 5.01 have been satisfied, to the best
knowledge of the officer executing the same;
(g) Opinion of Sovereign's Counsel. ML shall
have received an opinion of ▇▇▇▇▇▇▇ & ▇▇▇, counsel to Sovereign,
dated the Closing Date, in form and substance reasonably
satisfactory to ML and its counsel to the effect set forth on
Exhibit 4 attached hereto;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained; and neither the Registration Statement nor
any such approval by state securities or "blue sky" authorities
shall be subject to a stop order or threatened stop order by the
SEC or any such authority.
(i) Tax Opinion. ML shall have received an
opinion of Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ substantially to the
effect set forth in paragraphs (6)-(10) on Exhibit 5 attached
hereto;
(j) Pooling Letter. KPMG Peat Marwick shall have
issued a letter dated as of the Effective Date to ML and Ernst &
Young LLP shall have issued a letter dated as of the Effective
Date to Sovereign, to the effect that, based on a review of this
Agreement and related agreements and the facts and circumstances
then known to it, the Merger shall be accounted for as a pooling-
of-interests under GAAP, and Sovereign shall have received from
the Affiliates of Sovereign and ML the agreements referred to in
Section 4.13(b) hereof to the extent necessary to ensure in the
reasonable judgment of ML and Sovereign that the Merger shall be
accounted for in such manner.
(k) Approval of ML's Shareholders. This
Agreement shall have been approved by the shareholders of ML by
such vote as is required under the BCL, ML's articles of
incorporation and bylaws or under Nasdaq requirements applicable
to it; and
(l) Other. Sovereign and Sovereign Bank shall
have furnished ML with such certificates of its respective
officers or others and such documents to evidence fulfillment of
the conditions set forth in this Section 5.01 as ML may
reasonable request.
Section 5.02 Conditions to Sovereign's Obligations
under this Agreement. The obligations of Sovereign hereunder
shall be subject to satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by Sovereign
pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, ML and Main Line Bank to
authorize the execution, delivery and performance of this
Agreement and the Bank Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement
and the Bank Plan of Merger, shall have been duly and validly
taken by ML and Main Line Bank; and Sovereign shall have received
certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of
ML required by this Agreement to be performed by ML at or prior
to the Closing Date shall have been duly performed and complied
with in all material respects;
(c) Representations and Warranties. The
representations and warranties of ML set forth in this Agreement
shall be true and correct as of the date of this Agreement, and
as of the Closing Date as though made on and as of the Closing
Date, except as to any representation or warranty (i) which
specifically relates to an earlier date or (ii) where the breach
of the representation or warranty would not, either individually
or in the aggregate, result in a Material Adverse Effect with
respect to ML;
PS\ Approvals of Regulatory Authorities.
Sovereign shall have received all required approvals of
Regulatory Authorities for the Merger, without the imposition of
any term or condition that would have a Material Adverse Effect
on Sovereign upon completion of the Merger; and all notice and
waiting periods required thereunder shall have expired or been
terminated;
(e) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(f) Officer's Certificate. ML shall have
delivered to Sovereign a certificate, dated the Closing Date and
signed, without personal liability, by its chairman of the board
or president, to the effect that the conditions set forth in
subsections (a) through (c) and (e) of this Section 5.02 have
been satisfied, to the best knowledge of the officer executing
the same;
(g) Opinions of ML's Counsel. Sovereign shall
have received an opinion of Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P., special counsel to ML, dated the Closing Date, in form
and substance reasonably satisfactory to Sovereign and its
counsel to the effect set forth on Exhibit 6 attached hereto;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained; and neither the Registration Statement nor
any such approval by state securities or "blue sky" authorities
shall be subject to a stop order or threatened stop order by the
SEC or any such authority.
(i) Tax Opinion. Sovereign shall have received
an opinion of ▇▇▇▇▇▇▇ & ▇▇▇, its counsel, substantially to the
effect set forth on Exhibit 5 attached hereto;
(j) Pooling Letter. Each of Sovereign and ML
shall have received the letters specified in Section 5.01(j).
(k) Phase I Environmental Audit Results. The
results of any "phase I environmental audit" conducted pursuant
to Section 4.10(a)(i) with respect to owned or occupied bank
premises shall be reasonably satisfactory to Sovereign; provided,
however, that (i) any such environmental audit must be initiated
within 45 days of the date of this Agreement, (ii) Sovereign must
elect to terminate this Agreement or waive its right to terminate
the Agreement under this Section 5.02(k) within 15 days of
receiving the results of such environmental audit and
(iii) Sovereign may not terminate this Agreement under this
Section 5.02(k) unless the results of such audits result in a
Material Adverse Effect on ML;
(l) Approval of Sovereign's Shareholders. This
Agreement shall have been approved by the shareholders of
Sovereign by such vote as is required under Sovereign's articles
of incorporation and bylaws or under Nasdaq requirements
applicable to it;
(m) Other. ML and Main Line Bank shall have
furnished Sovereign with such certificates of its respective
officers or others and such documents to evidence fulfillment of
the conditions set forth in this Section 5.02 as Sovereign may
reasonably request.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be
terminated on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By Sovereign or ML:
(i) if the Closing Date shall not have
occurred on or before May 31, 1998, unless the failure of
such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe in
any material respect its agreements set forth in this
Agreement required to be performed or observed by such party
on or before the Closing Date; or
(ii) if either party has received a final
unappealable administrative order from a Regulatory
Authority whose approval or consent has been requested that
such approval or consent will not be granted, or in the case
of a termination by Sovereign, will not be granted absent
the imposition of terms and conditions which would permit
satisfaction of the condition set forth at Section 5.02(d)
hereof, unless the failure of such occurrence shall be due
to the failure of the party seeking to terminate this
Agreement to perform or observe in any material respect its
agreements set forth herein required to be performed or
observed by such party on or before the Closing Date; or
(c) By ML, at any time during the ten-day period
following the Determination Date if both of the following
conditions are satisfied:
(1) the Sovereign Market Value shall be less
than $12.18 and Sovereign shall make the election specified
in the proviso clause to Section 1.02(e)(ii)(A)(ii) hereof;
and
(2) (i) the quotient obtained by dividing
the Sovereign Market Value by $16.24 (such number being
referred to herein as the "Sovereign Ratio") shall be less
than (ii) the quotient obtained by dividing the Index Price
on the Determination Date by the Index Price on the Starting
Date and subtracting 0.10 from the quotient in this clause
(2)(ii);
subject, however, to the following: If ML shall elect to
terminate this Agreement pursuant to this Section 6.01(c), it
shall give written notice thereof to Sovereign (provided that
such notice of election to terminate may be withdrawn at any time
within the aforementioned ten-day period). During the five-day
period commencing with its receipt of such notice, Sovereign
shall have the option to elect to increase the Exchange Ratio to
equal the number (rounded to the nearest hundredth) obtained by
dividing $23.05 by the Sovereign Market Value and the Closing
Date shall be postponed by the minimum amount of time necessary,
if any, to accommodate Sovereign's election of such option (i.e.
up to a five-day period). If Sovereign so elects within such
five-day period, it shall give prompt written notice to ML of
such election and the Exchange Ratio, whereupon no termination
shall have occurred pursuant to this Section 6.01(c) and this
Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and
any references in this Agreement to "Exchange Ratio" or
"Applicable Exchange Ratio" shall thereafter be deemed to refer
to the Exchange Ratio as adjusted pursuant to this
Section 6.01(c).
For purposes of this Section 6.01(c), the
following terms shall have the meanings indicated.
"Index Group" shall mean the thrift or bank
holding companies listed below, the common stocks of all of which
shall be publicly traded and as to which there shall not have
been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the
acquiror's market capitalization. In the event that any such
company or companies are removed from the Index Group, the
weights (which have been determined based upon the number of
shares of outstanding common stock) shall be redistributed
proportionately for purposes of determining the Index Price. The
thrift or bank holding companies and the weights attributed to
them are as follows:
Thrift Holding Companies % Weighting
Charter One Financial 17.84%
Greenpoint Financial Corp. 17.47%
Dime Bancorp Inc. 14.61%
Golden State Bancorp Inc. 10.66%
Washington Federal Inc. 9.13%
Bank United Corp. 8.69%
Peoples Heritage Financial
Group, Inc. 7.50%
Long Island Bancorp Inc. 7.18%
Astoria Financial Corp 6.92%
Total 100.00%
"Index Price" on a given date shall mean the
weighted average (weighted in accordance with the factors listed
above) of the closing sales prices of the companies composing the
Index Group.
"Starting Date" shall mean the last trading day
immediately preceding the date of the first public announcement
of entry into this Agreement.
If any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between
the Starting Date and the Determination Date, the prices for the
common stock of such company shall be appropriately adjusted for
the purposes of applying this Section 6.01(c);
(d) at any time on or prior to the Effective
Date, by ML in writing if Sovereign has, or by Sovereign in
writing if ML has, in any material respect, breached (i) any
material covenant or undertaking contained herein or (ii) any
representation or warranty contained herein, which in the case of
a breach by Sovereign would have a Material Adverse Effect on
Sovereign and in the case of a breach by ML would have a Material
Adverse Effect on ML, in any case if such breach has not been
substantially cured by the earlier of 30 days after the date on
which written notice of such breach is given to the party
committing such breach or the Effective Date or if on such date
such breach no longer causes a Material Adverse Effect; or
(e) by either the Board of Directors of Sovereign
or the Board of Directors of ML if the Board of Directors of the
other party shall have withdrawn, modified or changed in a manner
adverse to the terminating party its approval or recommendation
of this Agreement and the transactions contemplated hereby.
Section 6.02 Effect of Termination. If this Agreement
is terminated pursuant to Section 6.01 hereof, this Agreement
shall forthwith become void (other than Section 4.02(d) and
Section 7.01 hereof, which shall remain in full force and
effect), and there shall be no further liability on the part of
Sovereign or ML to the other, except for any liability arising
out of any uncured willful breach of any covenant or other
agreement contained in this Agreement, any fraudulent breach of a
representation or warranty, in this Agreement and any obligation
or liability arising under the Stock Option Agreement. Nothing
contained in this Section 6.02 shall be deemed to prohibit
Sovereign or ML from maintaining an action against a third party
for tortious interference or otherwise.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of
printing and mailing the Proxy Statement/Prospectus which shall
be shared equally, each party hereto shall bear and pay all costs
and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and
Warranties. All representations, warranties and, except to the
extent specifically provided otherwise herein, agreements and
covenants, other than those covenants that by their terms are to
be performed after the Effective Date, including without
limitation the covenants set forth in Sections 1.02(f) and (g),
4.05, 4.11 and 4.14 hereof, which will survive the Merger, shall
terminate on the Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject
to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may
(a) amend this Agreement, (b) extend the time for the performance
of any of the obligations or other acts of either party hereto,
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions
contained in Articles IV and V hereof or otherwise, provided that
any amendment, extension or waiver granted or executed after
shareholders of ML or Sovereign have approved this Agreement
shall not modify either the amount or the form of the
consideration to be provided hereby to holders of ML Common Stock
upon consummation of the Merger or otherwise materially adversely
affect the shareholders of ML or Sovereign without the approval
of the shareholders who would be so affected. This Agreement may
not be amended except by an instrument in writing authorized by
the respective Boards of Directors and signed, by duly authorized
officers, on behalf of the parties hereto. Any agreement on the
part of a party hereto to any extension or waiver shall be valid
only if set forth in an instrument in writing signed by a duly
authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement,
including the documents and other writings referred to herein or
delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with
respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 1.02(f) and (g), 4.05, 4.11(d)
and 4.14.
Section 7.05 No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 7.06 Notices. All notices or other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy,
addressed as follows:
(a) If to Sovereign, to:
Sovereign Bancorp, Inc.
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Attention: ▇▇▇ ▇. ▇▇▇▇▇, President and Chief
Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
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(b) If to ML, to:
ML Bancorp, Inc.
Two Aldwyn Center
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President and Chief
Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
The ▇▇▇▇▇▇ Building
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Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
Section 7.08 Accountants. In the event that the
conditions to closing specified in Section 5.01(j) and 5.02(j)
are not satisfied because either (but not both) Ernst & Young or
KPMG Peat Marwick is unable to deliver the letter required by
such sections, then the parties hereto agree to appoint another
national accounting firm mutually acceptable to each party to
determine if the Merger is required to be accounted for as a
pooling-of-interests. The written determination by such national
accounting firm shall be binding on both parties for purposes of
determining whether the conditions contained in Section 5.01(j)
and 5.02(j) has been satisfied. In the event that the provisions
of this Section 7.08 become applicable, the date specified in
Section 6.01(b)(i) shall be extended until the earlier of (i) the
date of the written determination by such national accounting
firm or (ii) June 30, 1998.
Section 7.09 Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 7.10 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 7.11 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (including the law of conflicts of law) of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the day and year first above written.
SOVEREIGN BANCORP, INC.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇
President and Chief
Executive Officer
ML BANCORP, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief
Executive Officer
Exhibit 1-A
September 18, 1997
Sovereign Bancorp, Inc.
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Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and ML Bancorp, Inc.
("ML") desire to enter into an agreement dated September 18, 1997
("Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) ML will merge with and into
Sovereign with Sovereign surviving the merger, and
(b) shareholders of ML will receive common stock of Sovereign in
exchange for common stock of ML outstanding on the closing date
(the foregoing, collectively, referred to herein as the
"Merger").
Sovereign has required, as a condition to its execution and
delivery to ML of the Agreement, that the undersigned execute and
deliver to Sovereign this Letter Agreement.
In consideration of the foregoing, each of the undersigned
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at
all meetings of shareholders of ML called to vote for approval of
the Agreement and the Merger so that all shares of common stock
of ML then owned by the undersigned will be counted for the
purpose of determining the presence of a quorum at such meetings
and to vote or cause to be voted all such shares in favor of
approval and adoption of the Agreement and the transactions
contemplated thereby (including any amendments or modifications
of the terms thereof approved by the Board of Directors of ML);
(b) Agrees not to vote or execute any written consent
to rescind or amend in any manner any prior vote or written
consent, as a shareholder of ML, to approve or adopt the
Agreement;
(c) Agrees to use reasonable best efforts to cause the
Merger to be consummated;
(d) Agrees not to sell, transfer or otherwise dispose
of any common stock of ML on or prior to the record date for the
meeting of ML shareholders to vote on the Merger without the
prior written consent of Sovereign;
(e) Agrees not to solicit, initiate or engage in any
negotiations or discussions with any party other than Sovereign
with respect to any offer, sale, transfer or other disposition
of, any shares of common stock of ML now or hereafter owned by
the undersigned;
(f) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of Sovereign received in
the Merger, except (i) at such time as a registration statement
under the Securities Act of 1933, as amended ("Securities Act")
covering sales of such Sovereign common stock is effective and a
prospectus is made available under the Securities Act,
(ii) within the limits, and in accordance with the applicable
provisions of, Rule 145(d) under the Securities Act, or (iii) in
a transaction which, in the opinion of counsel satisfactory to
Sovereign or as described in a "no-action" or interpretive letter
from the staff of the Securities and Exchange Commission ("SEC"),
is not required to be registered under the Securities Act; and
acknowledges and agrees that Sovereign is under no obligation to
register the sale, transfer or other disposition of Sovereign
common stock by the undersigned or on behalf of the undersigned,
or to take any other action necessary to make an exemption from
registration available;
(g) Notwithstanding the foregoing, agrees not to sell,
or in any other way reduce the risk of the undersigned relative
to, any shares of common stock of ML or of common stock of
Sovereign, during the period commencing thirty days prior to the
effective date of the Merger and ending on the date on which
financial results covering at least thirty days of post-Merger
combined operations of Sovereign and ML have been published
within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, provided, however, that excluded
from the foregoing undertaking shall be such sales, pledges,
transfers or other dispositions of shares of ML common stock or
shares of Sovereign common stock which, in Sovereign's sole
judgment, are individually and in the aggregate de minimis within
the meaning of Topic 2-E of the Staff Accounting Bulletin Series
of the SEC;
(h) Agrees that neither ML nor Sovereign shall be
bound by any attempted sale of any shares of ML common stock or
Sovereign common stock, respectively, and ML's and Sovereign's
transfer agents shall be given appropriate stop transfer orders
and shall not be required to register any such attempted sale,
unless the sale has been effected in compliance with the terms of
this Letter Agreement; and further agrees that the certificate
representing shares of Sovereign common stock owned by the
undersigned may be endorsed with a restrictive legend consistent
with the terms of this Letter Agreement;
(i) Acknowledges and agrees that the provisions of
subparagraphs (f), (g) and (h) hereof also apply to shares of
Sovereign common stock and ML common stock owned by (i) his or
her spouse, (ii) any of his or her relatives or relatives of his
or her spouse occupying his or her home, (iii) any trust or
estate in which he or she, his or her spouse, or any such
relative owns at least a 10% beneficial interest or of which any
of them serves as trustee, executor or in any similar capacity,
and (iv) any corporation or other organization in which the
undersigned, any affiliate of the undersigned, his or her spouse,
or any such relative owns at least 10% of any class of equity
securities or of the equity interest;
(j) Represents that the undersigned has no plan or
intention to sell, exchange, or otherwise dispose of any shares
of common stock of Sovereign prior to expiration of the time
period referred to in subparagraph (g) hereof; and
(k) Represents that the undersigned has the capacity
to enter into this Letter Agreement and that it is a valid and
binding obligation enforceable against the undersigned in
accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights and general equitable
principles.
_________________________
It is understood and agreed that the provisions of
subparagraphs (a), (b), (c), (d) and (e) of this Letter Agreement
relate solely to the capacity of the undersigned as a shareholder
or other beneficial owner of shares of ML common stock and is not
in any way intended to affect the exercise by the undersigned of
the undersigned's responsibilities as a director or officer of
ML. It is further understood and agreed that such subparagraphs
of this Letter Agreement are not in any way intended to affect
the exercise by the undersigned of any fiduciary responsibility
which the undersigned may have in respect of any shares of ML
common stock held by the undersigned as of the date hereof.
_________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
_________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
_________________________
The undersigned intend to be legally bound hereby.
Sincerely,
___________________________________
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___________________________________
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__________________________________
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___________________________________
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___________________________________
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___________________________________
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Exhibit 1-B
September 18, 1997
ML Bancorp, Inc.
Two Aldwyn Center
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Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and ML Bancorp, Inc.
("ML") desire to enter into an agreement dated September 18, 1997
("Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) ML will merge with and into
Sovereign with Sovereign surviving the merger, and
(b) shareholders of ML will receive common stock of Sovereign in
exchange for common stock of ML outstanding on the closing date
(the foregoing, collectively, referred to herein as the
"Merger").
ML has required, as a condition to its execution and
delivery to Sovereign of the Agreement, that the undersigned
execute and deliver to Sovereign this Letter Agreement.
In consideration of the foregoing, each of the undersigned
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at
all meetings of shareholders of Sovereign called to vote for
approval of the Agreement and the Merger so that all shares of
common stock of Sovereign then owned by the undersigned will be
counted for the purpose of determining the presence of a quorum
at such meetings and to vote or cause to be voted all such shares
(i) in favor of approval and adoption of the Agreement and the
transactions contemplated thereby (including any amendments or
modifications of the terms thereof approved by the Board of
Directors of Sovereign), and (ii) against approval or adoption of
any other merger, business combination, recapitalization, partial
liquidation or similar transaction involving Sovereign which
would have the effect of Sovereign not being able to fulfill its
obligations under the Agreement;
(b) Agrees not to vote or execute any written consent
to rescind or amend in any manner any prior vote or written
consent, as a shareholder of Sovereign, to approve or adopt the
Agreement;
(c) Agrees to use reasonable best efforts to cause the
Merger to be consummated;
(d) Agrees not to sell, transfer or otherwise dispose
of any common stock of Sovereign on or prior to the record date
for the meeting of Sovereign shareholders to vote on the Merger
without the prior written consent of ML;
(e) Agrees not to sell, or in any other way reduce the
risk of the undersigned relative to, any shares of common stock
of ML or of common stock of Sovereign, during the period
commencing thirty days prior to the effective date of the Merger
and ending on the date on which financial results covering at
least thirty days of post-Merger combined operations of Sovereign
and ML have been published within the meaning of Section 201.01
of the Codification of Financial Reporting Policies of the
Securities and Exchange Commission ("SEC"), provided, however,
that excluded from the foregoing undertaking shall be such sales,
pledges, transfers or other dispositions of shares of ML common
stock or shares of Sovereign common stock which, in Sovereign's
sole judgment, are individually and in the aggregate de minimis
within the meaning of Topic 2-E of the Staff Accounting Bulletin
Series of the SEC;
(f) Agrees that neither ML nor Sovereign shall be
bound by any attempted sale of any shares of ML common stock or
Sovereign common stock, respectively, and ML's and Sovereign's
transfer agents shall be given appropriate stop transfer orders
and shall not be required to register any such attempted sale,
unless the sale has been effected in compliance with the terms of
this Letter Agreement; and further agrees that the certificate
representing shares of Sovereign common stock owned by the
undersigned may be endorsed with a restrictive legend consistent
with the terms of this Letter Agreement;
(g) Acknowledges and agrees that the provisions of
subparagraphs (e) and (f) hereof apply to shares of Sovereign
common stock and ML common stock owned by (i) his or her spouse,
(ii) any of his or her relatives or relatives of his or her
spouse occupying his or her home, (iii) any trust or estate in
which he or she, his or her spouse, or any such relative owns at
least a 10% beneficial interest or of which any of them serves as
trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any
affiliate of the undersigned, his or her spouse, or any such
relative owns at least 10% of any class of equity securities or
of the equity interest;
(h) Represents that the undersigned has no plan or
intention to sell, exchange, or otherwise dispose of any shares
of common stock of Sovereign prior to expiration of the time
period referred to in subparagraph (e) hereof; and
(i) Represents that the undersigned has the capacity
to enter into this Letter Agreement and that it is a valid and
binding obligation enforceable against the undersigned in
accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights and general equitable
principles.
_________________________
It is understood and agreed that the provisions of
subparagraphs (a), (b), (c), and (d) of this Letter Agreement
relate solely to the capacity of the undersigned as a shareholder
or other beneficial owner of shares of Sovereign common stock and
is not in any way intended to affect the exercise by the
undersigned of the undersigned's responsibilities as a director
or officer of Sovereign. It is further understood and agreed
that such subparagraphs of this Letter Agreement are not in any
way intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in
respect of any shares of Sovereign common stock held by the
undersigned as of the date hereof.
_________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
_________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
_________________________
The undersigned intend to be legally bound hereby.
Sincerely,
___________________________________
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___________________________________
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___________________________________
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__________________________________
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___________________________________
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___________________________________
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___________________________________
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___________________________________
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
___________________________________
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___________________________________
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Exhibit 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement")
dated September 18, 1997, is by and between SOVEREIGN BANCORP,
INC., a Pennsylvania corporation ("Sovereign") and ML BANCORP,
INC., a Pennsylvania corporation ("ML").
BACKGROUND
1. Sovereign and ML desire to enter into an Agreement
and Plan of Merger, dated September 18, 1997 (the "Agreement"),
providing, among other things, for the acquisition by Sovereign
of ML through the merger of ML with and into Sovereign, with
Sovereign surviving the merger (the "Merger").
2. As a condition to Sovereign to enter into the
Plan, ML is granting to Sovereign an option to purchase up to
that number of shares of common stock, par value $.01 per share
(the "Common Stock") of ML as shall equal 19.9% of shares of
Common Stock of ML issued and outstanding as of the date hereof,
on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual
covenants and agreements set forth herein, Sovereign and ML,
intending to be legally bound hereby, agree:
1. Grant of Option. ML hereby grants to Sovereign,
on the terms and conditions set forth herein, the option to
purchase (the "Option") up to 2,361,245 shares of Common Stock of
ML (as adjusted as set forth herein, the "Option Shares") at a
price per share (as adjusted as set forth herein, the "Option
Price") equal to $21.875, provided, however, that in no event
shall the number of Option Shares for which the Option is
exercisable exceed 19.9% of the issued and outstanding shares of
ML Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
2. Exercise of Option.
(a) Provided that (i) Sovereign shall not be, on
the date of exercise, in material breach of the agreements or
covenants contained in the Agreement or this Stock Option
Agreement, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United
States shall be in effect on the date of exercise, upon or after
the occurrence of a Triggering Event (as such term is hereinafter
defined) Sovereign may exercise the Option, in whole or in part,
at any time or one or more times, from time to time; provided
that the Option shall terminate and be of no further force and
effect upon the earliest to occur of (A) the Effective Date of
the Merger, as provided in the Agreement, (B) termination of the
Agreement in accordance with the terms thereof prior to the
occurrence of a Triggering Event or a Preliminary Triggering
Event, other than a termination of the Agreement pursuant to
Section 6.01(d), unless in the case of termination by ML pursuant
to Section 6.01(d), such termination is as a result of a willful
breach of the Agreement by Sovereign (a termination pursuant to
Section 6.01(d), except a termination by ML as a result of a
willful breach by Sovereign, being referred to herein as a
"Default Termination"), (C) 18 months after the termination of
the Agreement by Sovereign or ML pursuant to a Default
Termination, and (D) 18 months after termination of the Agreement
(other than pursuant to a Default Termination) following the
occurrence of a Triggering Event or a Preliminary Triggering
Event; and provided, further, that any purchase of shares upon
exercise of the Option shall be subject to compliance with
applicable securities and banking laws. The rights set forth in
Section 3 hereof shall terminate when the right to exercise the
Option terminates (other than as a result of a complete exercise
of the Option) as set forth above.
(b) As used herein, the term "Triggering Event"
means the occurrence of any of the following events:
(i) a person or group (as such terms are
defined in the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations
thereunder), other than Sovereign or an affiliate of
Sovereign, acquires beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) of 25% or more of the
then outstanding shares of Common Stock (excluding any
shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission); or
(ii) a person or group, other than Sovereign
or an affiliate of Sovereign, enters into an agreement or
letter of intent or memorandum of understanding with ML
pursuant to which such person or group or any affiliate of
such person or group would (i) merge or consolidate, or
enter into any similar transaction, with ML, (ii) acquire
all or substantially all of the assets or liabilities of ML
or all or substantially all of the assets or liabilities of
Main Line Bank (or any successor subsidiary), the wholly-
owned subsidiary of ML ("ML Bank"), or (iii) acquire
beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities
representing, 25% or more of the then outstanding shares of
Common Stock (excluding any shares eligible to be reported
on Schedule 13G of the Securities and Exchange Commission)
or the then outstanding shares of common stock of ML Bank,
or ML shall have authorized, recommended or publicly
proposed, or publicly announced an intention to authorize,
recommend or propose, such an agreement or letter of intent
or memorandum of understanding.
(c) As used herein, the term "Preliminary
Triggering Event" means the occurrence of any of the following
events:
(i) a person or group (as such terms are
defined in the Exchange Act and the rules and regulations
thereunder), other than Sovereign or an affiliate of
Sovereign, acquires beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) of 10% or more of the
then outstanding shares of Common Stock (excluding any
shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission);
(ii) a person or group, other than Sovereign
or an affiliate of Sovereign, publicly announces a bona fide
proposal (including a written communication that is or
becomes the subject of public disclosure) for (i) any
merger, consolidation or acquisition of all or substantially
all the assets or liabilities of ML or all or substantially
all the assets or liabilities of ML Bank, or any other
business combination involving ML or ML Bank, or (ii) a
transaction involving the transfer of beneficial ownership
of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10%
or more of the then outstanding shares of Common Stock or
the then outstanding shares of Common Stock of ML Bank
(collectively, a "Proposal"), and thereafter, if such
Proposal has not been Publicly Withdrawn (as such term is
hereinafter defined) at least 30 days prior to the meeting
of shareholders of ML called to vote on the Merger, ML's
shareholders fail to approve the Merger by the vote required
by applicable law at the meeting of shareholders called for
such purpose or such meeting has been cancelled; or
(iii) the Board of Directors of ML shall
(A) fail to recommend the Merger, (B) recommend an
Acquisition Transaction or (C) have withdrawn or modified
in a manner adverse to Sovereign the recommendation of the
Board of Directors of ML with respect to the Agreement and
thereafter ML's shareholders fail to approve the Merger by
the vote required by law at the meeting of shareholders
called for such purpose or such meeting is not scheduled or
is cancelled; or
(iv) a person or group, other than Sovereign
or an affiliate of Sovereign, makes a bona fide Proposal and
thereafter, but before such Proposal has been Publicly
Withdrawn, ML shall have breached any representation,
warranty, covenant or obligation contained in the Agreement
and such breach would entitle Sovereign to terminate the
Agreement under Section 6.01(d) thereof (without regard to
the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the
Merger pursuant to the Agreement).
If more than one of the transactions giving rise to a Triggering
Event or a Preliminary Triggering Event under this Section 2 is
undertaken or effected, then all such transactions shall give
rise only to one Triggering Event or Preliminary Triggering
Event, as applicable, which Triggering Event or Preliminary
Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2
shall mean an unconditional bona fide withdrawal of the Proposal
coupled with a public announcement of no further interest in
pursuing such Proposal or in acquiring any controlling influence
over ML or in soliciting or inducing any other person (other than
Sovereign or an affiliate of Sovereign) to do so.
Notwithstanding the foregoing, the obligation of ML to
issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate): (i) until the receipt of all required
governmental or regulatory approvals or consents necessary for ML
to issue the Option Shares or Sovereign to exercise the Option,
or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of
competent jurisdiction is in effect which prohibits the sale or
delivery of the Option Shares, and, in each case, notwithstanding
any provision to the contrary set forth herein, the Option shall
not expire or otherwise terminate.
ML shall notify Sovereign promptly in writing of the
occurrence of any Triggering Event known to it, it being
understood that the giving of such notice by ML shall not be a
condition to the right of Sovereign to exercise the Option. ML
will not take any action which would have the effect of
preventing or disabling ML from delivering the Option Shares to
Sovereign upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement, except to the
extent required by applicable securities and banking laws and
regulations. In the event Sovereign wishes to exercise the
Option, Sovereign shall send a written notice to ML (the date of
which is hereinafter referred to as the "Notice Date") specifying
the total number of Option Shares it wishes to purchase and a
place and date between two and ten business days inclusive from
the Notice Date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two
days after the later of receipt of any necessary regulatory
approvals or the expiration of any legally required notice or
waiting period, if any.
3. Repurchase of Option by ML.
(a) Subject to the last sentence of Section 2(a),
at the request of Sovereign at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 3(d)) and
ending 18 months immediately thereafter, ML shall repurchase from
Sovereign (x) the Option and (y) all shares of Common Stock
purchased by Sovereign pursuant hereto with respect to which
Sovereign then has beneficial ownership. The date on which
Sovereign exercises its rights under this Section 3 is referred
to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 3 Repurchase Consideration") equal
to the sum of:
(i) the aggregate Purchase Price paid by
Sovereign for any shares of Common Stock acquired pursuant
to the Option with respect to which Sovereign then has
beneficial ownership;
(ii) the excess, if any, of (x) the
Applicable Price (as defined below) for each share of Common
Stock over (y) the Option Price (subject to adjustment
pursuant to Section 6), multiplied by the number of shares
of Common Stock with respect to which the Option has not
been exercised; and
(iii) the excess, if any, of the Applicable
Price over the Option Price (subject to adjustment pursuant
to Section 6) paid (or, in the case of Option Shares with
respect to which the Option has been exercised, but the
Closing has not occurred, payable) by Sovereign for each
share of Common Stock with respect to which the Option has
been exercised and with respect to which Sovereign then has
beneficial ownership, multiplied by the number of such
shares.
(b) If Sovereign exercises it rights under this
Section 3, ML shall, within ten (10) business days after the
Request Date, pay the Section 3 Repurchase Consideration to
Sovereign in immediately available funds, and contemporaneously
with such payment, Sovereign shall surrender to ML the Option and
the certificate evidencing the shares of Common Stock purchased
thereunder with respect to which Sovereign then has beneficial
ownership, and Sovereign shall warrant that it has sole record
and beneficial ownership of such shares, and that the same are
then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of any banking agency or department of any federal or state
government, including without limitation the OTS, the FDIC, or
the respective staffs thereof (the "Regulatory Authority"), is
required in connection with the payment of all or any portion of
the Section 3 Repurchase Consideration, Sovereign shall have the
ongoing option to revoke its request for repurchase pursuant to
Section 3, in whole or in part, or to require that ML deliver
from time to time that portion of the Section 3 Repurchase
Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application
and the obtaining of any such approval), in which case the ten
(10) business day period of time that would otherwise run
pursuant to the preceding sentence for the payment of the portion
of the Section 3 Repurchase Consideration shall run instead from
the date on which, as the case may be, any required notification
period has expired or been terminated or such approval has been
obtained and, in either event, any requisite waiting period shall
have passed. If any Regulatory Authority disapproves of any part
of ML's proposed repurchase pursuant to this Section 3, ML shall
promptly give notice of such fact to Sovereign. If any
Regulatory Authority prohibits the repurchase pursuant to this
Section 3, ML shall promptly give notice of such fact to
Sovereign. If any Regulatory Authority prohibits the repurchase
in part but not in whole, then Sovereign shall have the right
(i) to revoke the repurchase request or (ii) to the extent
permitted by such Regulatory Authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Sovereign shall thereupon have the right
to exercise the Option as to the number of Option Shares for
which the Option was exercisable at the Request Date less the sum
of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 3(a)(ii) and the number
of shares covered by the portion of the Option (if any) that has
been repurchased. Sovereign shall notify ML of its determination
under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the
"Applicable Price" means the highest of (i) the highest price per
share of Common Stock paid for any such share by the person or
groups described in Section 3(d)(i), (ii) the price per share of
Common Stock received by a holder of Common Stock in connection
with any merger or other business combination transaction
described in Section 3(d)(ii), (iii) or (iv), or (iii) the
highest closing sales price per share of Common Stock quoted on
the Nasdaq Stock Market during the 40 business days preceding the
Request Date; provided, however, that in the event of a sale of
less than all of ML's assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets and the
current market value of the remaining assets of ML as determined
by a nationally-recognized investment banking firm selected by
Sovereign, divided by the number of shares of Common Stock
outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing
clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm
selected by Sovereign and reasonably acceptable to ML, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a Repurchase Event shall
occur if (i) any person or group (as such terms are defined in
the Exchange Act and the rules and regulations thereunder), other
than Sovereign or an affiliate of Sovereign, acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of, or the right to acquire beneficial ownership of, 25% or
more of the then-outstanding shares of Common Stock, (ii) ML
shall have merged or consolidated with any person, other than
Sovereign or an affiliate of Sovereign, and shall not be the
surviving or continuing corporation of such merger or
consolidation, (iii) any person, other than Sovereign or an
affiliate of Sovereign, shall have merged into ML and ML shall be
the surviving corporation, but, in connection with such merger,
the then-outstanding shares of Common Stock have been changed
into or exchanged for stock or other securities of ML or any
other person or cash or any other property or the outstanding
shares of Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding
shares and share equivalents of the surviving corporation or
(iv) ML shall have sold or otherwise transferred more than 25% of
its consolidated assets to any person, other than Sovereign or an
affiliate of Sovereign.
4. Payment and Delivery of Certificates. At any
Closing hereunder, (a) Sovereign will make payment to ML of the
aggregate price for the Option Shares so purchased by wire
transfer of immediately available funds to an account designated
by ML, (b) ML will deliver to Sovereign a stock certificate or
certificates representing the number of Option Shares so
purchased, registered in the name of Sovereign or its designee,
in such denominations as were specified by Sovereign in its
notice of exercise, and (c) Sovereign will pay any transfer or
other taxes required by reason of the issuance of the Option
Shares so purchased.
A legend will be placed on each stock certificate
evidencing Option Shares issued pursuant to this Stock Option
Agreement, which legend will read substantially as follows:
"The shares of stock evidenced by this
certificate have not been the subject of a registration
statement filed under the Securities Act of 1933, as
amended (the "Act"), and declared effective by the
Securities and Exchange Commission. These shares may
not be sold, transferred or otherwise disposed of prior
to such time unless ML Bancorp, Inc. receives an
opinion of counsel acceptable to it stating that an
exemption from the registration provisions of the Act
is available for such transfer."
5. Registration Rights. Upon or after the occurrence
of a Triggering Event and upon receipt of a written request from
Sovereign, ML shall prepare and file as soon as practicable a
registration statement under the Securities Act of 1933 (the
"Securities Act") with the Securities and Exchange Commission
covering the Option and such number of Option Shares as Sovereign
shall specify in its request, and ML shall use its best efforts
to cause such registration statement to be declared effective in
order to permit the sale or other disposition of the Option and
the Option Shares, provided that Sovereign shall in no event have
the right to have more than one such registration statement
become effective, and provided further that ML shall not be
required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel
to ML delivers to ML and to Sovereign its opinion to the effect
that no such filing is required under applicable laws and
regulations with respect to such sale or disposition; provided
further, however, that ML may delay any registration of Option
Shares above for a period not exceeding 90 days in the event that
ML shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of
securities by ML. Sovereign shall provide all information
reasonably requested by ML for inclusion in any registration
statement to be filed hereunder. In connection with such filing,
ML shall use its reasonable best efforts to cause to be delivered
to Sovereign such certificates, opinions, accountant's letters
and other documents as Sovereign shall reasonably request and as
are customarily provided in connection with registration of
securities under the Securities Act. ML shall provide to
Sovereign such number of copies of the preliminary prospectus and
final prospectus and any amendments and supplements thereto as
Sovereign may reasonably request.
All reasonable expenses incurred by ML in complying
with the provisions of this Section 5, including, without
limitation, all registration and filing fees, reasonable printing
expenses, reasonable fees and disbursements of counsel for ML and
blue sky fees and expenses, shall be paid by ML. Underwriting
discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Sovereign and
any other expenses incurred by Sovereign in connection with such
filing shall be borne by Sovereign. In connection with such
filing, ML shall indemnify and hold harmless Sovereign against
any losses, claims, damages or liabilities, joint or several, to
which Sovereign may become subject, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
preliminary or final registration statement or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and ML will reimburse Sovereign for any
legal or other expense reasonably incurred by Sovereign in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that ML will not
be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such preliminary or final registration statement
or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished by or on behalf of
Sovereign specifically for use in the preparation thereof.
Sovereign will indemnify and hold harmless ML to the same extent
as set forth in the immediately preceding sentence but only with
reference to written information furnished by or on behalf of
Sovereign for use in the preparation of such preliminary or final
registration statement or such amendment or supplement thereto;
and Sovereign will reimburse ML for any legal or other expense
reasonably incurred by ML in connection with investigating or
defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary contained herein, no
indemnifying party shall be liable for any settlement effected
without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock
dividends, split-ups, recapitalizations, combinations,
conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
7. Filings and Consents. Each of Sovereign and ML
will use its reasonable best efforts to make all filings with,
and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions
contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, Sovereign shall file a report of beneficial
ownership on Form 13D with the Securities and Exchange Commission
under the Exchange Act which discloses the rights of Sovereign
hereunder.
8. Representations and Warranties of ML. ML hereby
represents and warrants to Sovereign as follows:
(a) Due Authorization. ML has full corporate
power and authority to execute, deliver and perform this Stock
Option Agreement and all corporate action necessary for
execution, delivery and performance of this Stock Option
Agreement has been duly taken by ML. This Stock Option
Agreement constitutes a legal, valid and binding obligation of
ML, enforceable against ML in accordance with its terms (except
as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors'
rights or by general equity principles).
(b) Authorized Shares. ML has taken all
necessary corporate action to authorize and reserve for issuance
all shares of Common Stock that may be issued pursuant to any
exercise of the Option.
9. Representations and Warranties of Sovereign.
Sovereign hereby represents and warrants to ML that Sovereign has
full corporate power and authority to execute, deliver and
perform this Stock Option Agreement and all corporate action
necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Sovereign. This Stock
Option Agreement constitutes a legal, valid and binding
obligation of Sovereign, enforceable against Sovereign in
accordance with its terms (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
10. Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for a
breach of this Stock Option Agreement and that the obligations of
the parties hereto shall be specifically enforceable.
11. Entire Agreement. This Stock Option Agreement and
the Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter
hereof.
12. Assignment or Transfer. Sovereign may not sell,
assign or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person or group of persons
other than to a subsidiary of Sovereign. Sovereign represents
that it is acquiring the Option for Sovereign's own account and
not with a view to, or for sale in connection with, any
distribution of the Option or the Option Shares. Sovereign is
aware that neither the Option nor the Option Shares is the
subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act, but instead each is being
offered in reliance upon the exemption from the registration
requirement provided by Section 4(2) thereof and the
representations and warranties made by Sovereign in connection
therewith.
13. Amendment of Stock Option Agreement. By mutual
consent of the parties hereto, this Stock Option Agreement may be
amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation
of any governmental authority or any applicable order of any
court or for any other purpose.
14. Validity. The invalidity or unenforceability of
any provision of this Stock Option Agreement shall not affect the
validity or enforceability of any other provisions of this Stock
Option Agreement, which shall remain in full force and effect.
15. Notices. All notices, requests, consents and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
delivered personally, by telegram or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
(i) If to Sovereign, to:
Sovereign Bancorp, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, President
and Chief Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇
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▇.▇. ▇▇▇ ▇▇▇
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to ML, to:
ML Bancorp, Inc.
▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
and Chief Executive Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
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▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is to be
given may have previously furnished to the others in writing in
the manner set forth above (provided that notice of any change of
address shall be effective only upon receipt thereof).
16. Governing Law. This Stock Option Agreement shall
be governed by and construed in accordance with the domestic
internal law (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option
Agreement are inserted for convenience and reference purposes,
and shall not limit or otherwise affect any of the terms or
provisions hereof.
18. Waivers and Extensions. The parties hereto may,
by mutual consent, extend the time for performance of any of the
obligations or acts of either party hereto. Each party may waive
(i) compliance with any of the covenants of the other party
contained in this Stock Option Agreement and/or (ii) the other
party's performance of any of its obligations set forth in this
Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, nothing in this Stock Option Agreement,
express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Expenses. Except as otherwise provided herein,
all costs and expenses incurred by the parties hereto in
connection with the transactions contemplated by this Stock
Option Agreement or the Option shall be paid by the party
incurring such cost or expense.
22. Defined Terms. Capitalized terms which are used
but not defined herein shall have the meanings ascribed to such
terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto,
pursuant to resolutions adopted by its Board of Directors, has
caused this Stock Option Agreement to be executed by its duly
authorized officer and has caused its corporate seal to be
affixed hereunto and to be duly attested, all as of the day and
year first above written.
SOVEREIGN BANCORP, INC.
By_________________________________
▇▇▇ ▇. ▇▇▇▇▇,
President and Chief
Executive Officer
ML BANCORP, INC.
By_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief
Executive
Officer
Exhibit 3
BANK PLAN OF MERGER
THIS BANK PLAN OF MERGER ("Plan of Merger") dated
September 18, 1997, is by and between SOVEREIGN BANK, a Federal
Savings Bank ("Sovereign Bank"), and MAIN LINE BANK, a Federal
Savings Bank ("ML Bank").
BACKGROUND
1. Sovereign Bank is a federal savings bank and a
wholly-owned subsidiary of Sovereign Bancorp, Inc., a
Pennsylvania corporation ("Sovereign"). The authorized capital
stock of Sovereign Bank consists of 1,000 shares of common stock,
par value $1.00 per share ("Sovereign Bank Common Stock"), of
which at the date hereof 1,000 shares are issued and outstanding.
2. ML Bank is a federal savings bank and a
wholly-owned subsidiary of ML Bancorp, Inc., a Pennsylvania
corporation ("ML"). The authorized capital stock of ML Bank
consists of 1,000,000 shares of common stock, par value $0.01 per
share ("ML Bank Common Stock"), of which at the date hereof
__________ shares are issued and outstanding.
3. The respective Boards of Directors of Sovereign
Bank and ML Bank deem the merger of ML Bank with and into
Sovereign Bank, pursuant to the terms and conditions set forth or
referred to herein, to be desirable and in the best interests of
the respective corporations and their respective shareholders.
4. The respective Boards of Directors of Sovereign
Bank and ML Bank have adopted resolutions approving this Plan of
Merger. The respective Boards of Directors of Sovereign and ML
have adopted resolutions approving an Agreement dated
September 18, 1997 (the "Agreement") between Sovereign and ML,
pursuant to which this Plan of Merger is being executed by
Sovereign Bank and ML Bank.
AGREEMENT
In consideration of the premises and of the mutual
covenants and agreements herein contained, and in accordance with
the applicable laws and regulations of the United States of
America, Sovereign Bank and ML Bank, intending to be legally
bound hereby, agree:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan of
Merger and in accordance with the applicable laws and regulations
of the United States of America, on the Effective Date (as that
term is defined in Article V hereof): ML Bank shall merge with
and into Sovereign Bank; the separate existence of ML Bank shall
cease; and Sovereign Bank shall be the surviving corporation
(such transaction referred to herein as the "Merger" and
Sovereign Bank, as the surviving corporation in the Merger,
referred to herein as the "Surviving Bank"). The name of the
Surviving Bank shall be "Sovereign Bank" and it shall have its
home office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ and its branch offices at the locations listed on
Exhibit "A."
ARTICLE 00
CHARTER AND BYLAWS
On and after the Effective Date, the Charter and Bylaws
of Sovereign Bank, as in effect immediately prior to the
Effective Date, shall automatically be and remain the Charter and
Bylaws of the Surviving Bank, until altered, amended or repealed.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
3.1 Board of Directors. On and after the Effective
Date, the directors of the Surviving Bank shall consist of the
directors of Sovereign Bank duly elected and holding office
immediately prior to the Effective Date and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
Directors shall be elected annually and shall hold office until
their successors are elected and qualified. The names and
residence addresses of the directors are:
Name Residence Address
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇ ▇. ▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇ Hard [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ [INTENTIONALLY OMITTED.]
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇ ▇. ▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ [INTENTIONALLY OMITTED.]
3.2 Officers. On and after the Effective Date, the
officers of the Surviving Bank shall consist of the officers of
Sovereign Bank duly elected and holding office immediately prior
to the Effective Date and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, who shall be elected
as President of the Pennsylvania Division of Sovereign Bank
pursuant to Section 4.14(a) of the Agreement.
ARTICLE IV
CONVERSION OF SHARES
4.1 Stock of Sovereign Bank. Each share of Sovereign
Bank Common Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date, continue
to be issued and outstanding as a share of common stock of the
Surviving Bank.
4.2 Stock of ML Bank. Each share of ML Bank Common
Stock issued and outstanding immediately prior to the Effective
Date, and each share of ML Bank Common Stock issued and held in
the treasury of ML as of the Effective Date, if any, shall, on
the Effective Date, be cancelled, and no cash, stock or other
property shall be delivered in exchange therefor.
ARTICLE V
EFFECTIVE DATE OF THE MERGER
The Merger shall be effective on the date on which
articles of combination executed by Sovereign Bank and ML Bank
are filed with and endorsed by the Office of Thrift Supervision
("OTS") pursuant to 12 C.F.R. Section 552.13(k), unless a later
date is specified in such articles of combination (the "Effective
Date").
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date: the
separate existence of ML Bank shall cease; and all of the
property (real, personal and mixed), rights, powers, duties and
obligations of ML Bank shall be taken and deemed to be
transferred to and vested in the Surviving Bank, without further
act or deed, as provided by applicable laws and regulations,
including without limitation 12 C.F.R. Section 552.13(l).
6.2 Savings Accounts. After the Effective Date,
Sovereign Bank will continue to issue savings accounts on the
same basis as immediately prior to the Effective Date.
6.3 Liquidation Account. After the Effective Date,
Sovereign Bank will continue to maintain the Sovereign Bank
liquidation account for the benefit of eligible account holders
on the same basis as immediately prior to the Effective Date, and
ML Bank's liquidation account for the benefit of eligible account
holders shall automatically be deemed assumed by Sovereign Bank,
as of the Effective Date, on the same basis as it existed
immediately prior to the Effective Date.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Sovereign Bank and ML Bank to effect
the Merger shall be subject to (i) the approval of this Plan of
Merger by Sovereign and ML in their capacities as the sole
shareholder of Sovereign Bank and ML Bank, respectively,
(ii) receipt of approval of the Merger from the OTS and any other
applicable regulatory authority, (iii) receipt of any necessary
approval to operate the main office of ML Bank and the branch
offices of ML Bank as offices of the Surviving Bank and (iv) the
consummation of the merger of ML into Sovereign pursuant to the
Agreement on or before the Effective Date.
ARTICLE VIII
TERMINATION
This Plan of Merger shall terminate upon any
termination of the Agreement in accordance with its terms.
ARTICLE IX
AMENDMENT
Subject to applicable law, this Plan of Merger may be
amended, by action of the respective Boards of Directors of the
parties hereto, at any time prior to consummation of the Merger,
but only by an instrument in writing signed by duly authorized
officers on behalf of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Extensions; Waivers. Any of the terms and
conditions of this Plan of Merger may be waived at any time by
whichever of the parties hereto is, or the sole shareholder of
which is, entitled to the benefit thereof by a written instrument
signed by a duly authorized officer of such party.
10.2 Notices. Any notice or other communication
required or permitted under this Plan of Merger shall be given,
and shall be effective, in accordance with the provisions of
Section 7.06 of the Agreement.
10.3 Captions. The headings of the several Articles
and Sections herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning
or interpretation of, this Plan of Merger.
10.4 Counterparts. For the convenience of the parties
hereto, this Plan of Merger may be executed in several
counterparts, each of which shall be deemed the original, but all
of which together shall constitute one and the same instrument.
10.5 Governing Law. This Plan of Merger shall be
governed by and construed in accordance with the laws of the
United States of America and, in the absence of controlling
Federal law, in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, Sovereign Bank and ML Bank have
caused this Bank Plan of Merger to be executed by their duly
authorized officers and their corporate seals to be hereunto
affixed on the date first written above.
SOVEREIGN BANK
By________________________________
▇▇▇ ▇. ▇▇▇▇▇,
President
MAIN LINE BANK
By________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President
EXHIBIT "A"
to Plan of Merger
SOVEREIGN BANK
BRANCH LOCATIONS
[INTENTIONALLY OMITTED.]
EXHIBIT 4
FORM OF OPINION OF COUNSEL TO SOVEREIGN
ML shall have received from counsel to Sovereign, an
opinion, dated as of the Closing Date, substantially to the
effect that, subject to normal exceptions and qualifications:
(a) Sovereign and Sovereign Bank have full corporate
power to carry out the transactions contemplated in the Agreement
and the Bank Plan of Merger, respectively. The execution and
delivery of the Agreement and the Bank Plan of Merger and the
consummation of the transactions contemplated thereunder have
been duly and validly authorized by all necessary corporate
action on the part of Sovereign and Sovereign Bank, and the
Agreement and the Plan constitute valid and legally binding
obligations of Sovereign and Sovereign Bank, respectively, except
as may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or
hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of federal
savings institutions or their holding companies, (ii) general
equitable principles, and (iii) laws relating to the safety and
soundness of insured depository institutions, and except that no
opinion need be rendered as to the effect or availability of
equitable remedies or injunctive relief (regardless of whether
such enforceability is considered in a proceeding in equity or at
law). Subject to satisfaction of the conditions set forth in the
Agreement, neither the transactions contemplated in the Agreement
or the Plan, nor compliance by Sovereign and Sovereign Bank with
any of the respective provisions thereof, will (i) conflict with
or result in a breach or default under (A) the articles of
incorporation or bylaws of Sovereign or the charter or bylaws of
Sovereign Bank, or, (B) to the knowledge of such counsel, any
note, bond, mortgage, indenture, license, agreement or other
material instrument or obligation to which Sovereign or Sovereign
Bank is a party; or (ii) based on certificates of officers and
without independent verification, to the knowledge of such
counsel, result in the creation or imposition of any material
lien or encumbrance upon the property of Sovereign or Sovereign
Bank, except such material lien, instrument or obligation that
has been disclosed pursuant to the Agreement or the Plan; or
(iii) violate in any material respect any order, writ, injunction
or decree known to such counsel, or any federal or Pennsylvania
statute, rule or regulation applicable to Sovereign or Sovereign
Bank.
(b) Sovereign Bank is a validly existing federally-
chartered savings bank organized under the laws of the United
States of America. The deposits of Sovereign Bank are insured to
the maximum extent provided by law by the Federal Deposit
Insurance Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which Sovereign or
Sovereign Bank is a party which would, if determined adversely to
Sovereign or Sovereign Bank, have a material adverse effect on
the financial condition or results of operation of Sovereign and
Sovereign Bank taken as a whole, or which presents a claim to
restrain or prohibit the transactions contemplated by the
Agreement and the Plan, respectively.
(d) No consent, approval, authorization or order of
any federal or state court or federal or state governmental
agency or body, or to such counsel's knowledge is required for
the consummation by Sovereign or Sovereign Bank of the
transactions contemplated by the Agreement and the Plan, except
for such consents, approvals, authorizations or orders as have
been obtained or which would not have a Material Adverse Effect
upon Sovereign upon consummation of the Merger.
(e) Upon the filing and effectiveness of the Articles
of Merger with the PDS and Articles of Combination with the OTS
in accordance with the Agreement and the Plan, the mergers of
Sovereign and ML and of Sovereign Bank and ML Bank contemplated
by the Agreement and the Plan, respectively, will have been
effected in compliance with all applicable federal and
Pennsylvania laws and regulations in all material respects.
(f) The shares of Sovereign Common Stock to be issued
in connection with the merger of ML and Sovereign contemplated by
the Agreement have been duly authorized and will, when issued in
accordance with the terms of the Agreement, be validly issued,
fully paid and nonassessable, free and clear of any mortgage,
pledge, lien, encumbrance or claim (legal or equitable).
(g) In addition to the foregoing opinions, counsel
shall state that the sole basis of such counsel's participation
in conferences with officers and employees of Sovereign in
connection with the Proxy Statement/Prospectus, and without other
independent investigation or inquiry, such counsel has no reason
to believe that the Proxy Statement/Prospectus, including any
amendments or supplements thereto (except for the financial
information, financial statements, notes to financial statements,
financial schedules and other financial or statistical data and
stock valuation information contained or incorporated by
reference therein and except for any information supplied by ML
or ML Bank for inclusion therein, as to which counsel need
express no belief), as of the date of mailing thereof, contained
any untrue statement of a material fact with respect to Sovereign
or omitted to state any material fact with respect to Sovereign
necessary to make any statement therein with respect to
Sovereign, in light of the circumstances under which it was made,
not misleading. Counsel may state in connection with the
foregoing, that such counsel has not independently verified and
does not assume the responsibility for the accuracy, completeness
or fairness of any information or statements contained in the
Proxy Statement/Prospectus, except with respect to identified
statements of law or regulations or legal conclusions relating to
Sovereign or the transactions contemplated in the Agreement and
the Plan and that it is relying as to materiality as to factual
matters on certificates of officers and representatives of the
parties to the Agreement and other factual representations by ML
and Main Line Bank.
Such counsel's opinion shall be limited to matters
governed by federal banking and securities laws and by the BCL.
EXHIBIT 5
FORM OF TAX OPINION OF ▇▇▇▇▇▇▇ & ▇▇▇
Sovereign and ML shall have received an opinion of ▇▇▇▇▇▇▇ &
▇▇▇ substantially to the effect that, under the provisions of the
IRC:
1. The transfer by ML of all of its assets to Sovereign in
exchange for Sovereign Common Stock (including fractional share
interests) and the assumption by Sovereign of all of ML's
liabilities will constitute a reorganization within the meaning
of Section 368(a)(1)(A) of the IRC.
2. ML and Sovereign will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
89 Neither ML nor Sovereign will recognize any gain or
loss upon the transfer of ML's assets to Sovereign in exchange
solely for Sovereign Common Stock (including fractional share
interests) and the assumption by Sovereign of the liabilities of
ML.
4. The basis of the ML assets in the hands of Sovereign
will be the same as the basis of such assets in the hands of ML
immediately prior to the Merger.
5. The holding period of the assets of ML to be received
by Sovereign will include the period during which the assets were
held by ML.
6. No gain or loss will be recognized by the shareholders
of ML on the receipt of Sovereign Common Stock (including
fractional share interests) solely in exchange for their shares
of ML Common Stock.
7. The basis of the Sovereign Common Stock (including
fractional share interests) to be received by the ML shareholders
in the Merger will be the same as the basis of the ML Common
Stock surrendered in exchange therefor.
8. The holding period of the Sovereign Common Stock
(including fractional share interests) to be received by the ML
shareholders in the Merger will include the period during which
the ML shareholders held their ML Common Stock, provided the
shares of ML Common Stock are held as a capital asset on the
Effective Date.
9. The payment of cash in lieu of fractional share
interests of Sovereign Common Stock will be treated as if the
fractional share interests were distributed as part of the Merger
and then redeemed by Sovereign. Such cash payments will be
treated as having been received as distribution in full payment
in exchange for the fractional share interests redeemed, as
provided in Section 302(a) of the IRC.
10. The Sovereign Stock Purchase Rights transferred with
the shares of Sovereign Common Stock will not constitute "other
property" within the meaning of Section 356(a)(1)(B) of the IRC.
11. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, Sovereign will succeed to and take into
account the earnings and profits, or deficit in earnings and
profits, of ML as of the Effective Date. Any deficit in the
earnings and profits of Sovereign or ML will be used only to
offset the earnings and profits accumulated after the Merger.
12. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, Sovereign will succeed to and take into
account the items of ML described in Section 381(c) of the IRC.
Such items will be taken into account by Sovereign subject to the
conditions and limitations of Sections 381, 382, 383, and 384 of
the IRC and the Treasury regulations thereunder.
13. The Bank Merger will constitute a reorganization within
the meaning of Section 368(a)(1)(A) of the IRC.
14. ML Bank and Sovereign Bank will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
15. Neither ML Bank nor Sovereign Bank will recognize any
gain or loss upon the transfer of ML Bank's assets to Sovereign
Bank in constructive exchange solely for Sovereign Bank common
stock and the assumption by Sovereign Bank of the liabilities of
ML Bank.
16. The basis of the ML Bank assets in the hands of
Sovereign Bank will be the same as the basis of such assets in
the hands of ML Bank immediately prior to the Bank Merger.
17. The holding period of the ML Bank assets in the hands
of Sovereign Bank will include the period during which such
assets were held by ML Bank.
18. No gain or loss will be recognized by Sovereign, as the
shareholder of ML Bank, upon the constructive receipt of shares
of Sovereign Bank common stock in exchange for the ML Bank common
stock surrendered in exchange therefor in the Bank Merger.
19. The basis of the Sovereign Bank common stock to be held
by Sovereign after the Bank Merger will equal the basis of such
stock immediately before the Bank Merger, increased by the basis
of the ML Bank common stock surrendered in the constructive
exchange.
20. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, Sovereign Bank will succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of ML Bank as of the effective date of the Bank Merger.
Any deficit in the earnings and profits of Sovereign Bank or ML
Bank will be used only to offset the earnings and profits
accumulated after the Bank Merger.
21. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, Sovereign Bank will succeed to and take
into account the items of ML Bank described in Section 381(c) of
the IRC. Such items will be taken into account by Sovereign Bank
subject to the conditions and limitations of Sections 381, 382,
383, and 384 of the IRC and the Treasury regulations thereunder.
EXHIBIT 6
FORM OF OPINION OF COUNSEL TO ML
Sovereign shall have received from counsel to ML, an
opinion, dated as of the Closing Date, substantially to the
effect that, subject to normal exceptions and qualifications:
(a) ML and Main Line Bank have full corporate power to
carry out the transactions contemplated in the Agreement and the
Bank Plan of Merger, respectively. The execution and delivery of
the Agreement and the Bank Plan of Merger and the consummation of
the transactions contemplated thereunder have been duly and
validly authorized by all necessary corporate action on the part
of ML and Main Line Bank, and the Agreement and the Plan
constitute a valid and legally binding obligation, in accordance
with their respective terms, of ML and Main Line Bank,
respectively, except as may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, receivership,
conservatorship, and other laws now or hereafter in effect
relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of federal savings
institutions or their holding companies, (ii) general equitable
principles, and (iii) laws relating to the safety and soundness
of insured depository institutions, and except that no opinion
need be rendered as to the effect or availability of equitable
remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). Subject to satisfaction of the conditions set forth in the
Agreement, neither the transactions contemplated in the Agreement
and the Plan, nor compliance by ML and Main Line Bank with any of
the respective provisions thereof, will (i) conflict with or
result in a breach or default under (A) the certificate of
incorporation or bylaws of ML or the charter or bylaws of Main
Line Bank, or (B) based on certificates of officers and without
independent verification, to the knowledge of such counsel, any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which ML or Main Line Bank is a
party; or (ii) to the knowledge of such counsel, result in the
creation or imposition of any material lien, instrument or
encumbrance upon the property of ML or Main Line Bank, except
such material lien, instrument or obligation that has been
disclosed to Sovereign pursuant to the Agreement and the Plan, or
(iii) violate in any material respect any order, writ,
injunction, or decree known to such counsel, or any statute, rule
or regulation applicable to ML or Main Line Bank.
(b) Main Line Bank is a validly existing federally-
chartered savings bank organized under the laws of the United
States of America. The deposits of Main Line Bank are insured to
the maximum extent provided by law by the Federal Deposit
Insurance Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which ML or Main Line Bank
is a party which would, if determined adversely to ML or Main
Line Bank, have a material adverse effect on the business,
properties, results of operations, or condition, financial or
otherwise, of ML or Main Line Bank taken as a whole or which
presents a claim to restrain or prohibit the transactions
contemplated by the Agreement and the Plan, respectively.
(d) No consent, approval, authorization, or order of
any federal or state court or federal or state governmental
agency or body, or to such counsel's knowledge of any third
party, is required for the consummation by ML or Main Line Bank
of the transactions contemplated by the Agreement and the Plan,
except for such consents, approvals, authorizations or orders as
have been obtained or which would not have a Material Adverse
Effect upon Sovereign upon consummation of the Merger.
In addition to the foregoing opinions, counsel shall
state that on the sole basis of such counsel's participation in
conferences with officers and employees of ML in connection with
the preparation of the Prospectus/Proxy Statement and without
other independent investigation or inquiry, such counsel has no
reason to believe that the Prospectus/Proxy Statement, including
any amendments or supplements thereto (except for the financial
information, financial statements, notes to financial statements,
financial schedules and other financial or statistical data and
stock valuation information contained or incorporated by
reference therein and except for any information supplied by
Sovereign for inclusion therein, as to which counsel need express
no belief), as of the date of mailing thereof and as of the date
of the meeting of shareholders of ML to approve the Merger,
contained any untrue statement of a material fact or omitted to
state a material fact necessary to make any statement therein, in
light of the circumstances under which it was made, not
misleading. Counsel may state in connection with the foregoing
that such counsel has not independently verified and does not
assume any responsibility for the accuracy, completeness or
fairness of any information or statements contained in the
Prospectus/Proxy Statement, except with respect to identified
statements of law or regulations or legal conclusions relating to
ML or ML Bank or the transactions contemplated in the Agreement
and the Plan and that it is relying as to materiality as to
factual matters on certificates of officers and representatives
of the parties to the Agreement and other factual representations
by ML and Main Line Bank.
Such counsel's opinion shall be limited to matters
governed by federal banking and securities laws and by the BCL.