AGREEMENT AND PLAN OF MERGER
By and Between
SOUND FEDERAL BANCORP
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
And
PEEKSKILL FINANCIAL CORPORATION
Dated as of February 16, 2000
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions..............................................2
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Effects of Merger; Surviving Corporation.................6
Section 2.02 Conversion of Shares.....................................7
Section 2.03 Exchange Procedures......................................8
Section 2.04 Stock Options/Restricted Stock...........................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PFC
Section 3.01 Organization............................................10
Section 3.02 Capitalization..........................................11
Section 3.03 Authority; No Violation.................................11
Section 3.04 Consents. ..............................................12
Section 3.05 Financial Statements....................................12
Section 3.06 Taxes. ................................................13
Section 3.07 No Material Adverse Effect. ............................13
Section 3.08 Contracts...............................................14
Section 3.09 Ownership of Property; Insurance Coverage...............15
Section 3.10 Legal Proceedings.......................................16
Section 3.11 Compliance With Applicable Law..........................16
Section 3.12 ERISA/Employee Compensation.............................17
Section 3.13 Brokers, Finders and Financial Advisors................18
Section 3.14 Environmental Matters. .................................18
Section 3.15 Loan Portfolio..........................................20
Section 3.16 Information to be Supplied..............................21
Section 3.17 Securities Documents....................................21
Section 3.18 Related Party Transactions..............................21
Section 3.19 Schedule of Termination Benefits........................21
Section 3.20 Deposits................................................22
Section 3.21 Antitakeover Provisions Inapplicable....................22
Section 3.22 Fairness Opinion........................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SOUND FEDERAL BANCORP
Section 4.01 Organization....................................................22
Section 4.02 Authority; No Violation.........................................23
Section 4.03 Consents. ......................................................24
Section 4.04 Compliance With Applicable Law..................................24
Section 4.05 Information to be Supplied. ....................................25
Section 4.06 Financing.......................................................25
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of PFC's Business.......................................25
Section 5.02 Access; Confidentiality.........................................28
Section 5.03 Regulatory Matters and Consents.................................29
Section 5.04 Taking of Necessary Action......................................30
Section 5.05 Certain Agreements..............................................31
Section 5.06 No Other Bids and Related Matters...............................31
Section 5.07 Duty to Advise; Duty to Update PFC's Disclosure Schedules.......32
Section 5.08 Conduct of Sound Federal Bancorp's Business.....................33
Section 5.09 Board and Committee Minutes.....................................33
Section 5.10 Undertakings by PFC and Sound Federal Bancorp...................33
Section 5.11 Employee and Termination Benefits; Directors and Management.....35
Section 5.12 Duty to Advise; Duty to Update Sound Federal
Bancorp's Disclosure Schedules..................................37
Section 5.13 Amendment of First Federal's Federal Stock Charter..............37
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to PFC's Obligations under this Agreement............37
Section 6.02 Conditions to Sound Federal Bancorp's Obligations
under this Agreement............................................38
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination.....................................................39
Section 7.02 Effect of Termination...........................................40
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses.........................................................40
Section 8.02 Non-Survival of Representations and Warranties...................41
Section 8.03 Amendment, Extension and Waiver..................................41
Section 8.04 Entire Agreement.................................................41
Section 8.05 No Assignment....................................................41
Section 8.06 Notices..........................................................42
Section 8.07 Captions.........................................................42
Section 8.08 Counterparts.....................................................42
Section 8.09 Severability.....................................................43
Section 8.10 Governing Law....................................................43
Exhibits:
Exhibit A Agreement of Company Merger
Exhibit B Plan of Bank Merger
Exhibit C Plan of Complete Liquidation and Dissolution
Exhibit D Form of PFC Voting Agreement
Exhibit E Stock Option Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
16, 2000, is by and among Sound Federal Bancorp, a federal corporation ("Sound
Federal Bancorp"), Sound Federal Savings and Loan Association, a federally
chartered savings association ("Sound Federal"), and Peekskill Financial
Corporation, a Delaware corporation ("PFC"). Each of Sound Federal Bancorp,
Sound Federal and PFC is sometimes individually referred to herein as a "party,"
and Sound Federal Bancorp, Sound Federal and PFC are sometimes collectively
referred to herein as the "parties."
RECITALS
WHEREAS, Sound Federal Bancorp, a registered saving and loan holding
company, with principal offices in Mamaroneck, New York, owns all of the issued
and outstanding capital stock of Sound Federal, a federally-chartered savings
bank organized under the laws of the United States, with principal offices in
Mamaroneck, New York.
WHEREAS, PFC, a registered savings and loan holding company, with principal
offices in Peekskill, New York, owns all of the issued and outstanding capital
stock of First Federal Savings Bank ("First Federal "), a federally-chartered
savings bank organized under the laws of the United States, with principal
offices in Peekskill, New York.
WHEREAS, the Boards of Directors of the respective parties hereto deem it
advisable and in the best interests of the respective companies and their
stockholders to consummate the business combination transaction contemplated
herein in which: (i) Sound Federal shall incorporate a to-be- formed company
which shall be merged into PFC (the "Merger") and in connection therewith, and
subject to the rights of dissenting stockholders which have been asserted and
duly perfected in accordance with the provisions of Section 262 of the DGCL,
each share of PFC Common Stock and each option to purchase such stock granted
pursuant to the PFC Option Plans, outstanding immediately prior to the Closing
Date shall be canceled in exchange for the right to receive the cash payments
specified herein, (ii) simultaneously with (i), PFC shall be liquidated with the
result that Sound Federal will acquire all the assets and liabilities of PFC and
PFC shall cease to exist, and (ii) First Federal shall merge with and into Sound
Federal, with Sound Federal surviving the merger with the result that Sound
Federal will acquire all the assets and liabilities of First Federal and First
Federal shall cease to exist (the transactions are sometimes collectively
referred to as the "Merger");
WHEREAS, in connection with the execution of this Agreement, as an
inducement to Sound Federal Bancorp to enter into this Agreement, PFC and Sound
Federal Bancorp have entered into a Stock Option Agreement dated as of even date
herewith pursuant to which PFC will grant Sound Federal Bancorp the right to
purchase certain shares of PFC Common Stock; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
Merger, and the other transactions contemplated by this Agreement and the Stock
Option Agreement (collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. Except as otherwise provided herein, 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 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 Sound Federal
Bancorp, Sound Federal, a to-be- formed interim company and PFC.
"Applications" means the applications for regulatory approval
which are required by the transactions contemplated hereby.
"Bank Merger" means the merger of First Federal with and into
Sound Federal, with Sound Federal as the surviving institution.
"Bank Merger Effective Date" shall mean the date, after the Bank
Merger is approved by the Office of Thrift Supervision ("OTS"), that
all filings are made with the OTS to perfect the Bank Merger.
"Closing Date" means the date determined by Sound Federal
Bancorp, in its sole discretion, upon five (5) days prior written
notice to PFC, but in no event later than fifteen (15) days after the
last condition precedent pursuant to this Agreement has been fulfilled
or waived (including the expiration of any applicable waiting period),
or such other date as to which Sound Federal Bancorp and PFC shall
mutually agree.
"Code" means the Internal Revenue Code of 1986, as amended.
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"DGCL" means the Delaware General Corporation Law.
"DOL" means the U.S. Department of Labor.
"Environmental Law" means any Federal or state law, statute,
rule, regulation, code, order, judgement, decree, injunction, common
law or agreement with any Federal or state governmental authority
relating to (i) the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal
life or any other natural resource), (ii) human health or safety, or
(iii) exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of, hazardous substances, in each case
as amended and now in effect.
"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.
"Exchange Agent" means the entity selected by Sound Federal
Bancorp and agreed to by PFC, as provided in Section 2.03(a) of this
Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" means the Federal Home Loan Bank.
"GAAP" means generally accepted accounting principles as in
effect at the relevant date and consistently applied.
"Hazardous Material" means any substance (whether solid, liquid
or gas) which is or could be detrimental to human health or safety or
to the environment, currently or hereafter listed, defined, designated
or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or
by quantity, including any substance containing any such substance as
a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance, oil
or petroleum, or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea
formaldehyde foam insulation, lead and polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act, as amended.
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"IRS" means the Internal Revenue Service.
"Loan Property" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to Sound
Federal Bancorp or PFC, any adverse effect on its assets, financial
condition or results of operations which is material to its assets,
financial condition or results of operations on a consolidated basis,
except for any material adverse effect caused by (i) any change in the
market value of the assets of Sound Federal Bancorp or PFC resulting
from a change in interest rates generally or (ii) any individual or
combination of changes occurring after the date hereof in any federal
or state law, rule or regulation or in GAAP, which change(s) affect(s)
financial institutions generally, including any changes affecting the
Bank Insurance Fund or the Savings Association Insurance Fund, or
(iii) any action taken by PFC or a PFC Subsidiary at the request of
Sound Federal Bancorp, or (iv) expenses incurred to complete the
transaction contemplated by this Agreement.
"Merger Effective Date" means that date upon which the last of
the corporate transactions which comprise the Merger becomes
effective, in accordance with applicable laws and regulations.
"OTS" means the Office of Thrift Supervision.
"Participation Facility"shall have the meaning given to such term
in Section 3.14(b) of this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under
the Exchange Act).
"PFC Common Stock" has the meaning given to that term in Section
3.02(a) of this Agreement.
"PFC Disclosure Schedules" means the Disclosure Schedules
delivered by PFC to Sound Federal Bancorp pursuant to Article III of
this Agreement.
"PFC Financials" means (i) the audited consolidated financial
statements of PFC as of June 30, 1998 and 1999 and for the three years
ended June 30, 1999, including the notes thereto, and (ii) the
unaudited interim consolidated financial statements of PFC as of each
calendar quarter thereafter included in Securities Documents filed by
PFC.
"PFC Regulatory Reports" means the Thrift Financial Reports of
First Federal and accompanying schedules, as filed with the OTS, for
each calendar quarter beginning with the quarter ended December 31,
1999, through the Closing Date, and all Annual, Quarterly and
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Current Reports filed on Form H-(b)11 with the OTS by PFC from December
31, 1999 through the Closing Date.
"PFC Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by PFC
or First Federal, except any corporation the stock of which is held as
security by First Federal in the ordinary course of its lending
activities.
"Proxy Statement" means the proxy statement, together with any
supplements thereto, to be transmitted to holders of PFC Common Stock
in connection with the transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in
Section 3.11 of this Agreement.
"Regulatory Authority" means any agency or department of any
federal or state government, including without limitation the OTS, the
FDIC, the FRB, the SEC 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.
"SAIF" means the Savings Association Insurance Fund, as
administered by the FDIC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated from time to time
thereunder.
"Securities Documents" means all registration statements,
schedules, statements, forms, reports, proxy material, and other
documents required to be filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act
and the rules and regulations promulgated from time to time
thereunder.
"Sound Federal Bancorp Disclosure Schedules" means the Disclosure
Schedules delivered by Sound Federal Bancorp to PFC pursuant to
Article IV of this Agreement.
"Sound Federal Bancorp Financials" means (i) the audited
consolidated financial statements of Sound Federal Bancorp as of March
31, 1998 and 1999 and for the three years ended March 31, 1999,
including the notes thereto, and (ii) the unaudited interim
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consolidated financial statements of Sound Federal Bancorp as of each
calendar quarter thereafter included in Securities Documents filed by
Sound Federal Bancorp.
"Sound Federal Bancorp Subsidiary" means any corporation, 50% or
more of the capital stock of which is owned, either directly or
indirectly, by Sound Federal Bancorp or Sound Federal, except any
corporation the stock of which is held as security by Sound Federal in
the ordinary course of its lending activities.
"Sound Federal Bancorp Option" means the option granted to Sound
Federal Bancorp to acquire shares of PFC Common Stock pursuant to the
Stock Option Agreement.
"Stock Option Agreement" means the Stock Option Agreement dated
as of even date herewith pursuant to which PFC has granted Sound
Federal Bancorp the right to purchase certain shares of PFC Common
Stock and which is attached to this Agreement as Exhibit E thereto.
"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 as security
by either Sound Federal Bancorp or PFC, as the case may be, in the
ordinary course of its lending activities.
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Effects of Merger; Surviving Corporation.
(a) (i) On the Merger Effective Date, a to-be-formed company formed by
Sound Federal ("Interim") shall be merged with and into PFC; the separate
existence of Interim shall cease; PFC shall be the surviving corporation in the
Merger (the "Surviving Corporation") and a wholly-owned subsidiary of Sound
Federal; and all of the property (real, personal and mixed), rights, powers and
duties and obligations of Interim shall be taken and deemed to be transferred to
and vested in PFC, as the Surviving Corporation in the Merger, without further
act or deed; all in accordance with federal law.
(ii) On the Merger Effective Date: the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated to read
in its entirety as the Charter of Interim, as in effect immediately prior to the
Merger Effective Date; and the Bylaws of the Surviving Corporation shall be
amended and restated to read in their entirety as the Bylaws of Interim, as in
effect immediately prior to the Merger Effective Date, until thereafter altered,
amended or repealed in accordance with applicable law.
(iii) On the Merger Effective Date, the directors of Interim
duly elected and holding office immediately prior to the Effective Date shall be
the directors of the Surviving
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Corporation in the Merger, each to hold office until his or her successor is
elected and qualified or otherwise in accordance with the Certificate of
Incorporation and Bylaws of the Surviving
Corporation.
(iv) On the Merger Effective Date, the officers of Interim
duly elected and holding office immediately prior to the Effective Date shall be
the officers of the Surviving Corporation in the Merger, each to hold office
until his or her successor is elected and qualified or otherwise in accordance
with the Certificate of Incorporation and the Bylaws of the Surviving
Corporation.
(b) Notwithstanding any provision of this Agreement to the contrary,
Sound Federal Bancorp and Sound Federal may elect, subject to the filing of all
necessary applications and the receipt of all required regulatory approvals, to
modify the structure of the transactions contemplated hereby, and the parties
shall enter into such alternative transactions, so long as (i) there are no
adverse tax consequences to any of the stockholders of PFC as a result of such
modification, (ii) the Merger Consideration is not thereby changed in kind or
reduced in amount because of such modification and (iii) such modification will
not be likely to materially delay or jeopardize receipt of any required
regulatory approvals.
Section 2.02 Conversion of Shares.
(a) At the Merger Effective Date, by virtue of the merger of Interim with
and into PFC and without any action on the part of PFC or the holders of shares
of PFC Common Stock:
(i) Each outstanding share of PFC Common Stock issued and
outstanding at the Merger Effective Date, except as provided in clause (ii) and
(iii) of this Section, shall cease to be outstanding, shall cease to exist and
shall be converted into the right to receive $22.00 in cash ( the
"Merger Consideration").
(ii) Any shares of PFC Common Stock which are owned or held by
either party hereto or any of their respective Subsidiaries (other than in a
fiduciary capacity or in connection with debts previously contracted) at the
Merger Effective Date shall cease to exist, the certificates for such shares
shall as promptly as practicable be canceled, such shares shall not be converted
into the Merger Consideration, and no cash or shares of capital stock of Sound
Federal Bancorp shall be issued or exchanged therefor.
(iii) The Surviving Corporation shall pay for any Dissenters'
Shares in accordance with Section 262 of the DGCL, and the holders thereof shall
not be entitled to receive any Merger Consideration; provided, that if appraisal
rights under Section 262 of the DGCL with respect to any Dissenters' Shares
shall have been effectively withdrawn or lost, such shares will thereupon cease
to be treated as Dissenters' Shares and shall be converted into the right to
receive the Merger Consideration pursuant to this Section 2.02.
7
(iv) Each share of Sound Federal Bancorp Common Stock issued
and outstanding immediately before the Merger Effective Date shall remain an
outstanding share of Common Stock
of Sound Federal Bancorp.
(v) The holders of certificates representing shares of PFC
Common Stock (any such certificate being hereinafter referred to as a
"Certificate") shall cease to have any rights as stockholders of PFC, except
such rights, if any, as they may have pursuant to applicable law.
Section 2.03 Exchange Procedures.
(a) As promptly as practicable after the Effective Date (but in no event
later than five (5) business days after the Effective Date), an Exchange Agent
designated by Sound Federal Bancorp shall prepare and mail to each holder of
record of an outstanding share Certificate or Certificates a Letter of
Transmittal containing instructions for the surrender of the Certificate or
Certificates held by such holder for payment therefor. Upon surrender of the
Certificate or Certificates to the Exchange Agent in accordance with the
instructions set forth in the Letter of Transmittal, such holder shall promptly
receive in exchange therefor the Merger Consideration, without interest thereon.
Approval of this Agreement by the stockholders of PFC shall constitute
authorization for Sound Federal Bancorp to designate and appoint such Exchange
Agent. Neither Sound Federal Bancorp nor the Exchange Agent shall be obligated
to deliver the Merger Consideration to a former stockholder of PFC until such
former stockholder surrenders his Certificate or Certificates or, in lieu
thereof, any such appropriate affidavit of loss and indemnity agreement and bond
as may be reasonably required by Sound Federal Bancorp.
(b) If payment of the Merger Consideration is to be made to a person other
than the person in whose name a Certificate surrendered in exchange therefor is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay any transfer or other taxes required by
reason for the payment to a person other than the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) On or prior to the Merger Effective Date, Sound Federal Bancorp shall
deposit or cause to be deposited, in trust with the Exchange Agent, an amount of
cash equal to the aggregate Merger Consideration that the PFC stockholders shall
be entitled to receive on the Merger Effective Date pursuant to Section 2.02
hereof.
(d) The payment of the Merger Consideration, and cash in lieu of any
fractional shares, upon the conversion of PFC Common Stock in accordance with
the above terms and conditions shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to such PFC Common Stock.
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(e) Promptly following the date which is twelve months after the Merger
Effective Date, the Exchange Agent shall deliver to Sound Federal Bancorp all
cash, certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly representing shares
of PFC Common Stock may surrender such Certificate to Sound Federal Bancorp and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of PFC Common Stock formerly represented by such Certificate, without any
interest or dividends thereon.
(f) After the close of business on the Merger Effective Date , there shall
be no transfers on the stock transfer books of PFC of the shares of PFC Common
Stock which are outstanding immediately prior to the Merger Effective Date, and
the stock transfer books of PFC shall be closed with respect to such shares. If,
after the Merger Effective Date, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration as provided in this Article II.
(g) In the event any certificate for PFC Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall deliver in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of the fact by
the holder thereof, the cash to be paid in the Merger as provided for herein;
provided, however, that Sound Federal Bancorp may, in its sole discretion and as
a condition precedent to the delivery thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such reasonable sum as
Sound Federal Bancorp may require as indemnity against any claim that may be
made against PFC, Sound Federal Bancorp or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
(h) Sound Federal Bancorp is hereby authorized to adopt additional
requirements with respect to the matters referred to in this Section 2.03 not
inconsistent with the provisions of this Agreement or unduly burdensome to the
shareholders of PFC.
Section 2.04 Stock Options/Restricted Stock.
(a) At the Merger Effective Date, each option granted by PFC (a "PFC
Option") to purchase shares of PFC Common Stock issued and outstanding pursuant
to the Peekskill Financial Corporation 1996 Stock Option Plan (the "PFC Stock
Option Plan"), whether or not such option is exercisable on the Merger Effective
Date, shall, by reason of the merger of Interim with and into PFC, cease to be
outstanding and be converted into the right to receive in cash an amount equal
to (i) the difference (if a positive number) between (A) $22.00 and (B) the
exercise price of each such option multiplied by (ii) the number of shares of
PFC Common Stock subject to the option.
(b) At the Merger Effective Date, each unvested share of restricted stock
awarded pursuant to the Peekskill Financial Corporation 1996 Recognition and
Retention Plan shall automatically vest and the holder thereof shall be entitled
to receive $22.00 per share.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PFC
PFC represents and warrants to Sound Federal Bancorp that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III), except as set forth in the PFC
Disclosure Schedules delivered by PFC to Sound Federal Bancorp prior to the date
hereof. PFC has made a good faith effort to ensure that the disclosure on each
schedule of the PFC Disclosure Schedules corresponds to the section reference
herein. However, for purposes of the PFC Disclosure Schedules, any item
disclosed on any schedule therein is deemed to be fully disclosed with respect
to all schedules under which such item may be relevant.
Section 3.01 Organization.
(a) PFC is a corporation duly organized ,validly existing and in good
standing under the laws of the State of Delaware, and is duly registered as a
savings and loan holding company under the HOLA. PFC has full corporate power
and authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on PFC.
(b) First Federal is a federal savings bank organized and validly existing
under the laws of the United States. Except as set forth in PFC DISCLOSURE
SCHEDULE 3.01(b), First Federal is the only PFC Subsidiary. The deposits of
First Federal are insured by the FDIC through the SAIF to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by First Federal. Each other PFC
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
(c) First Federal is a member in good standing of the Federal Home Loan
Bank of New York and owns the requisite amount of stock therein.
(d) Except as disclosed in PFC DISCLOSURE SCHEDULE 3.01(d), the respective
minute books of PFC and each PFC Subsidiary accurately record, in all material
respects, all material corporate actions of their respective shareholders and
boards of directors (including committees) through the date of this Agreement.
(e) Prior to the date of this Agreement, PFC has delivered to Sound Federal
Bancorp true and correct copies of the certificate of incorporation, charter and
bylaws of PFC and First Federal.
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Section 3.02 Capitalization.
(a) The authorized capital stock of PFC consists of 4,900,000 shares of
common stock, $0.01 par value ("PFC Common Stock"), of which 1,762,228 shares
are outstanding, validly issued, fully paid and nonassessable and free of
preemptive rights, and 2,337,522 shares are held by PFC as treasury stock and
100,000 shares of preferred stock, $0.01 par value per share, of which no shares
are issued and outstanding. Neither PFC nor any PFC Subsidiary has or is bound
by any 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
PFC Common Stock, or any other security of PFC or any securities representing
the right to vote, purchase or otherwise receive any shares of PFC Common Stock
or any other security of PFC, other than shares issuable under the Sound Federal
Bancorp Option and other than shares issuable under the PFC Stock Option Plans
and other than as set forth in reasonable detail in the PFC DISCLOSURE SCHEDULE
3.02(a). PFC DISCLOSURE SCHEDULE 3.02(a) sets forth the name of each holder of
options to purchase PFC Common Stock, the number of shares each such individual
may acquire pursuant to the exercise of such options, the vesting dates, and the
exercise price relating to the options held. PFC DISCLOSURE SCHEDULE 3.02 (a)
also sets forth the name of each holder of restricted stock and the number of
shares of restricted stock held by such person.
(b) PFC owns all of the capital stock of First Federal, free and clear of
any lien or encumbrance. Except for the PFC Subsidiaries, PFC does not possess,
directly or indirectly, any material equity interest in any corporation, except
for equity interests held in the investment portfolios of PFC Subsidiaries,
equity interests held by PFC Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the lending activities of PFC Subsidiaries.
(c) To PFC's knowledge, 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
PFC Common Stock, except as disclosed in the PFC DISCLOSURE SCHEDULE 3.02(c).
(d) PFC has outstanding options to purchase a maximum of 296,483 shares of
PFC Common Stock.
Section 3.03 Authority; No Violation.
(a) PFC has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by PFC and the completion by PFC and First
Federal of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of PFC and First Federal and, except for
approval of the shareholders of PFC, no other corporate proceedings on the part
of PFC are necessary to complete the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by PFC, and subject
to approval by the shareholders of PFC and receipt of the required approvals of
Regulatory Authorities described in Section 4.03 hereof, constitutes the
11
valid and binding obligations of PFC, enforceable against PFC in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this Agreement by PFC, (B) subject to
receipt of approvals from the Regulatory Authorities referred to in Section 4.03
hereof and PFC's and Sound Federal Bancorp's compliance with any conditions
contained therein, the consummation of the transactions contemplated hereby, and
(C) compliance by PFC and First Federal with any of the terms or provisions
hereof will not except as set forth in PFC Disclosure Schedule 3.03(b) (i)
conflict with or result in a breach of any provision of the certificate of
incorporation or bylaws of PFC or any PFC Subsidiary or the charter and bylaws
of First Federal ; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to PFC or any PFC
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 PFC or First Federal under, any of the terms, conditions
or provisions of any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which PFC or
First Federal is a party, or by which they or any of their respective properties
or assets may be bound or affected.
Section 3.04 Consents. Except for the consents, waivers, approvals, filings
and registrations from or with the Regulatory Authorities referred to in Section
4.03 hereof and compliance with any conditions contained therein, and the
approval of this Agreement by the requisite vote of the shareholders of PFC, no
consents, waivers or approvals of, or filings or registrations with, any
governmental authority are necessary, and, to PFC's knowledge, as set forth in
PFC Disclosure Schedule 3.04 no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(a) the execution and delivery of this Agreement by PFC, and (b) the completion
by PFC and First Federal of the transactions contemplated hereby. PFC has no
reason to believe that (i) any required consents or approvals will not be
received, or that (ii) any public body or authority, the consent or approval of
which is not required or 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) PFC has previously delivered to Sound Federal Bancorp the PFC
Regulatory Reports. The PFC 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
consolidated financial position, results of operations and changes in
shareholders' equity of PFC as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
12
(b) PFC has previously delivered to Sound Federal Bancorp the PFC
Financials. The PFC Financials have been, or will be, prepared in accordance
with GAAP, and (including the related notes where applicable) fairly present, or
will fairly present, in each case in all material respects (subject in the case
of the unaudited interim statements to normal year-end adjustments), the
consolidated financial position, results of operations and cash flows of PFC and
the PFC Subsidiaries as of and for the respective periods ending on the dates
thereof, in accordance with GAAP applied on a consistent basis during the
periods involved, except as indicated in the notes thereto, or in the case of
unaudited statements, as permitted by Form 10-Q.
(c) At the date of each balance sheet included in the PFC Financials or
the PFC Regulatory Reports, PFC did not have, or will 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 PFC
Financials or PFC 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 individually or in the aggregate or 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 3.06 Taxes. PFC and the PFC Subsidiaries are members of the
same affiliated group within the meaning of IRC Section 1504(a). PFC has duly
filed all federal, state and material local tax returns required to be filed by
or with respect to PFC and all PFC Subsidiaries on or prior to the Closing Date
(all such amounts shown to be due have been paid) and has duly paid or will pay,
or made or will make, provisions for the payment of all material federal, state
and local taxes which have been incurred by or are due or claimed to be due from
PFC and any PFC Subsidiary by any taxing authority or pursuant to any written
tax sharing agreement on or prior to the Closing Date other than taxes or other
charges which (i) are not delinquent, (ii) are being contested in good faith, or
(iii) have not yet been fully determined. As of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of PFC or any of its Subsidiaries,
and no claim has been made by any authority in a jurisdiction where PFC or any
of its Subsidiaries do not file tax returns that PFC or any such Subsidiary is
subject to taxation in that jurisdiction. Except as set forth in PFC DISCLOSURE
SCHEDULE 3.06, PFC and its Subsidiaries have not executed an extension or waiver
of any statute of limitations on the assessment or collection of any material
tax due that is currently in effect. PFC and each of its Subsidiaries has
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and PFC and each of its Subsidiaries
has timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Code and similar applicable state
and local information reporting requirements.
Section 3.07 No Material Adverse Effect. PFC and the PFC Subsidiaries,
taken as a whole, have not suffered any Material Adverse Effect since September
30, 1999.
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Section 3.08 Contracts.
(a) Except as set forth in PFC DISCLOSURE SCHEDULE 3.08(a), neither PFC
nor any PFC Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or material arrangement with any past or
present officer, director or employee of PFC or any PFC Subsidiary, except for
"at will" arrangements; (ii) any plan, material arrangement or contract
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or similar material arrangements for or with any past
or present officers, directors or employees of PFC or any PFC Subsidiary; (iii)
any collective bargaining agreement with any labor union relating to employees
of PFC or any PFC Subsidiary; (iv) any agreement which by its terms limits the
payment of dividends by PFC or First Federal; (v) any instrument evidencing or
related to material 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 PFC or any PFC Subsidiary
is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers' acceptances,
advance from the FHLB of New York, 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 Sound Federal Bancorp or any Sound
Federal Bancorp Subsidiary; or (vi) any contract (other than this Agreement)
limiting the freedom, in any material respect, of PFC or First Federal to engage
in any type of banking or bank-related business which PFC or First Federal is
permitted to engage in under applicable law as of the date of this Agreement.
(b) True and correct copies of agreements, plans, contracts,
arrangements and instruments referred to in Section 3.08(a), have been provided
to Sound Federal Bancorp on or before the date hereof, are listed on PFC
DISCLOSURE SCHEDULE 3.08(a) and are in full force and effect on the date hereof
and neither PFC nor any PFC Subsidiary (nor, to the knowledge of PFC, any other
party to any such contract, plan, arrangement or instrument) has materially
breached any provision of, or is in default in any respect under any term of,
any such contract, plan, arrangement or instrument. Except as set forth in the
PFC DISCLOSURE SCHEDULE 3.08(b), 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 execution of, and the transactions contemplated by, this Agreement. Except
as set forth in PFC DISCLOSURE SCHEDULE 3.08(b), none of the employees
(including officers) of PFC or any PFC Subsidiary, possess the right to
terminate their employment and receive or be paid (or cause PFC or any PFC
Subsidiary to accrue on their behalf) benefits solely as a result of the
execution of this Agreement or the consummation of the transactions contemplated
thereby. Except as set forth in PFC DISCLOSURE SCHEDULE 3.08(b), no plan,
contract, employment agreement, termination agreement, or similar agreement or
arrangement to which PFC or any PFC Subsidiary is a party or under which PFC or
any PFC 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 PFC DISCLOSURE SCHEDULE
3.08(b), no such agreement, plan, contract, or arrangement (x) provides for
acceleration in the vesting of benefits or
14
payments due thereunder upon the occurrence of a change in ownership or control
of PFC or any PFC Subsidiary or upon the occurrence of a subsequent event; or
(y) requires PFC or any PFC Subsidiary to provide a benefit in the form of PFC
Common Stock or determined by reference to the value of PFC Common Stock. Except
as set forth in PFC Disclosure Schedule 3.08(b) no such agreement, plan or
arrangement with respect to officers or directors of PFC or to its employees,
provides for benefits which may cause an "excess parachute payment" or the
disallowance of a federal income tax deduction under IRC Section 280G.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in PFC DISCLOSURE SCHEDULE 3.09, PFC and the PFC
Subsidiaries have good and, as to real property, marketable title to all
material assets and properties owned by PFC or any PFC 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 PFC Regulatory Reports and in the PFC Financials or
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of in the ordinary course of business, since the
date of such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to FHLB of New York, inter-bank credit facilities, or
any transaction by a PFC Subsidiary acting in a fiduciary capacity, (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith, and (iii) items permitted under Article V. PFC and the PFC
Subsidiaries, as lessee, have the right under valid and subsisting leases of
real and personal properties used by PFC 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 PFC DISCLOSURE SCHEDULE 3.09, 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 PFC Financials.
(b) With respect to all material agreements pursuant to which PFC or any
PFC Subsidiary has purchased securities subject to an agreement to resell, if
any, PFC or such PFC Subsidiary, as the case may be, has a lien or security
interest (which to PFC's knowledge is a valid, perfected first lien) in the
securities or other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
(c) PFC and each PFC Subsidiary currently maintains insurance considered by
PFC to be reasonable for their respective operations, in accordance with good
business practice. PFC has not received notice from any insurance carrier that
(i) such insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no material claims pending
under such policies of insurance and no notices have been given by PFC under
such policies. All such insurance is valid and enforceable and in full force and
effect, and within the last three years PFC
15
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 3.10 Legal Proceedings. Except as disclosed in PFC DISCLOSURE
SCHEDULE 3.10, neither PFC nor any PFC Subsidiary is a party to any, and there
are no pending or, to the best of PFC'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 PFC or any PFC Subsidiary, (ii) to which PFC or any PFC 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 PFC 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
PFC and the PFC Subsidiaries, taken as a whole.
Section 3.11 Compliance With Applicable Law.
(a) PFC and PFC Subsidiaries hold all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective 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 respective businesses.
(b) Except as disclosed in PFC DISCLOSURE SCHEDULE 3.11, neither PFC nor
any PFC Subsidiary has received any notification or communication from any
Regulatory Authority (i) asserting that PFC or any PFC Subsidiary is not in
material 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 PFC or any
PFC Subsidiary; (iii) requiring or threatening to require PFC or any PFC
Subsidiary, or indicating that PFC or any PFC Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in the
insurance of bank deposits restricting or limiting, or purporting to restrict or
limit, in any material respect the operations of PFC or any PFC 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 PFC or any PFC 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 PFC nor any PFC
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement, except as set forth in PFC DISCLOSURE SCHEDULE 3.11. The most recent
regulatory rating given to First Federal as to compliance with the CRA is
satisfactory or better.
16
Section 3.12 ERISA/Employee Compensation.
(a) PFC DISCLOSURE SCHEDULE 3.12 contains a complete and accurate list of
all pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other benefit plans, contracts, agreements
and arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of PFC or any of its
Subsidiaries (hereinafter collectively referred to as the "PFC Employee Plans").
If the plan, contract, agreement or arrangement is funded through a trust or
third party funding vehicle, such as an insurance contract, a copy of the trust
or other funding arrangement (including all amendments thereto) and the latest
financial statements thereof.
All of the PFC Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws; there has
occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the IRC) which is likely to result in the imposition of any
penalties or taxes under Section 502(i) of ERISA or Section 4975 of the IRC upon
PFC or any of its Subsidiaries. No liability to the PBGC has been or is expected
by PFC or any of its Subsidiaries to be incurred with respect to any PFC
Employee Plan which is subject to Title IV of ERISA, or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA)(" PFC Pension
Plan") currently or formerly maintained by PFC or any entity which is considered
one employer with PFC under Section 4001(b)(1) of ERISA or Section 414 of the
IRC (an "ERISA Affiliate"). Except as set forth in PFC DISCLOSURE SCHEDULE
3.12(a), no PFC Pension Plan had an "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, as of the last day of the end
of the most recent plan year ending prior to the date hereof; the fair market
value of the assets of each PFC Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
PFC Pension Plan as of the end of the most recent plan year with respect to the
respective PFC Pension Plan ending prior to the date hereof, calculated on the
basis of the actuarial assumptions used in the most recent actuarial valuation
for such PFC Pension Plan as of the date hereof; and no notice of a "reportable
event" (as defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived has been required to be filed for any PFC
Pension Plan within the 12-month period ending on the date hereof. Neither PFC
nor any of its Subsidiaries has provided, or is required to provide, security to
any PFC Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the IRC. Neither PFC, its Subsidiaries, nor
any ERISA Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980.
(b) Each PFC Employee Plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to be qualified under
Section 401(a) of the IRC (a "PFC Qualified Plan") has received a favorable
determination letter from the Internal Revenue Service ("IRS"), and PFC and its
Subsidiaries are not aware of any circumstances likely to result in
17
revocation of any such favorable determination letter. There is no pending or,
to PFC's knowledge, threatened litigation, administrative action or proceeding
relating to any PFC Employee Plan. There has been no announcement or commitment
by PFC or any of its Subsidiaries to create an additional PFC Employee Plan, or
to amend any PFC Employee Plan, except for amendments required by applicable law
which do not materially increase the cost of such PFC Employee Plan; and, except
as specifically identified in PFC's DISCLOSURE SCHEDULE, PFC and its
Subsidiaries do not have any obligations for post-retirement or post-employment
benefits under any PFC Employee Plan that cannot be amended or terminated upon
60 days' notice or less without incurring any liability thereunder, except for
coverage required by Part 6 of Title I of ERISA or Section 4980B of the IRC, or
similar state laws, the cost of which is borne by the insured individuals. With
respect to each PFC Employee Plan, PFC has supplied to Sound Federal Bancorp a
true and correct copy of (A) the annual report on the applicable form of the
Form 5500 series filed with the IRS for the most recent three plan years, if
required to be filed, (B) such PFC Employee Plan, including amendments thereto,
(C) each trust agreement, insurance contract or other funding arrangement
relating to such PFC Employee Plan, including amendments thereto, (D) the most
recent summary plan description and summary of material modifications thereto
for such PFC Employee Plan, if the PFC Employee Plan is subject to Title I of
ERISA, (E) the most recent actuarial report or valuation if such PFC Employee
Plan is a PFC Pension Plan and any subsequent changes to the actuarial
assumptions contained therein and (F) the most recent determination letter
issued by the IRS if such Employee Plan is a Qualified Plan.
(c) Except as set forth in PFC DISCLOSURE SCHEDULE 3.12(c), no compensation
payable by PFC and any PFC Subsidiary to any of their employees under any PFC
Employee Plan (including by reason of the transactions contemplated hereby) will
be subject to disallowance under Section 162(m) of the IRC.
Section 3.13 Brokers, Finders and Financial Advisors. Except for PFC's
engagement of Capital Resources Group, Inc. in connection with transactions
contemplated by this Agreement, neither PFC nor any PFC 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, except for its commitments disclosed in PFC
DISCLOSURE SCHEDULE 3.13, incurred any liability or commitment for any fees or
commissions to any such person in connection with the transactions contemplated
by this Agreement, which has not been reflected in the PFC Financials.
Section 3.14 Environmental Matters.
(a) With respect to PFC and each of the PFC Subsidiaries, and except as set
forth in PFC DISCLOSURE SCHEDULE 3.14:
(i) Each of PFC and its Subsidiaries, the Participation
Facilities, and, to PFC's knowledge, the Loan Properties are, and have been, in
substantial compliance with, and are not liable under, any Environmental Laws;
18
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
PFC's knowledge, threatened, before any court, governmental agency or board or
other forum against it or any of the PFC Subsidiaries or any Participation
Facility (x) for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence of or
release (as defined herein) into the environment of any Hazardous Material (as
defined herein), whether or not occurring at or on a site owned, leased or
operated by it or any of the PFC Subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
PFC's knowledge threatened, before any court, governmental agency or board or
other forum relating to or against any Loan Property (or PFC or any of the PFC
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(iv) To PFC's knowledge, the properties currently owned or
operated by PFC or any of the PFC Subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(v) Neither PFC nor any of the PFC Subsidiaries has received
any notice, demand letter, executive or administrative order, directive or
request for information from any federal, state, local or foreign governmental
entity or any third party indicating that it may be in violation of, or liable
under, any Environmental Law;
(vi) To PFC's knowledge, there are no underground storage
tanks on, in or under any properties owned or operated by PFC or any of the PFC
Subsidiaries or any Participation Facility, and no underground storage tanks
have been closed or removed from any properties owned or operated by PFC or any
of the PFC Subsidiaries or any Participation Facility; and
(vii) To PFC's knowledge, during the period of (s) PFC's or
any of the PFC Subsidiaries' ownership or operation of any of their respective
current properties or (t) PFC's or any of the PFC Subsidiaries' participation in
the management of any Participation Facility, there has been no contamination by
or release of Hazardous Materials in, on, under or affecting such properties. To
PFC's knowledge, prior to the period of (x) PFC's or any of the PFC
Subsidiaries' ownership or operation of any of their respective current
properties or (y) PFC's or any of the PFC Subsidiaries' participation in the
management of any Participation Facility, there was no contamination by or
release of Hazardous Material in, on, under or affecting such properties.
(b) "Loan Property" means any property in which the applicable party
(or a Subsidiary of it) holds a security interest, and, where required by the
context, includes the owner or operator of such property, but only with respect
to such property. "Participation Facility" means any facility in
19
which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property.
Section 3.15 Loan Portfolio.
(a) With respect to each loan owned by PFC or any of the PFC Subsidiaries
in whole or in part (each, a "Loan"), to the best knowledge of PFC:
(i) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
(ii) neither PFC nor any of the PFC Subsidiaries, nor any
prior holder of a Loan, has modified the note or any of the related security
documents in any material respect or satisfied, canceled or subordinated the
note or any of the related security documents except as otherwise
disclosed by documents in the applicable Loan file;
(iii) PFC or any PFC Subsidiary is the sole holder of legal
and beneficial title to each Loan (or PFC's applicable participation interest,
as applicable), except as otherwise referenced on
the books and records of PFC;
(iv) the note and the related security documents, copies of
which are included in the Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended, modified,
canceled or otherwise changed except as otherwise disclosed by
documents in the applicable Loan file;
(v) there is no pending or threatened condemnation proceeding
or similar proceeding affecting the property that serves as security for a Loan,
except as otherwise referenced on the books
and records of PFC and its Subsidiaries;
(vi) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a Loan that
would have a Material Adverse Effect upon the related Loan, except as otherwise
disclosed by documents in the applicable Loan file; and
(vii) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable, except as otherwise disclosed by documents
in the applicable Loan file.
(b) The allowance for possible losses reflected in PFC's audited
statement of condition at September 30, 1999 was, and the allowance for possible
losses shown on the balance sheets in PFC's Securities Documents for periods
ending after September 30, 1999 have been and will be,
adequate, as of the dates thereof, under GAAP.
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(c) PFC DISCLOSURE SCHEDULE 3.15 sets forth by category the amounts of all
loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of PFC and the PFC Subsidiaries that
have been classified (whether regulatory or internal) as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import as of June 30,
1999. The other real estate owned ("OREO") included in any non-performing assets
of PFC or any of the PFC Subsidiaries is carried net of reserves at the lower of
cost or fair value, less estimated selling costs, based on current independent
appraisals or evaluations or current management appraisals or evaluations;
provided, however, that "current" shall mean within the past 12 months.
Section 3.16 Information to be Supplied. The information to be provided by
PFC for inclusion in the Proxy Statement will not, at the time the Proxy
Statement is mailed to PFC shareholders, 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 PFC for inclusion in the Applications will, at the time such documents are
filed with any Regulatory Authority, be accurate in all material aspects.
Section 3.17 Securities Documents. PFC has delivered to Sound Federal
Bancorp copies of its (i) annual reports on Form 10-K for the years ended June
30, 1999, 1998 and 1997, (ii) quarterly reports on Form 10-Q for the quarters
ended September 30, 1999 and December 31, 1999, and (iii) proxy materials used
or for use in connection with its meetings of shareholders held in 1999, 1998
and 1997. Such reports and such proxy materials complied, at the time filed with
the SEC or as the same may have been amended, in all material respects, with the
Securities Laws.
Section 3.18 Related Party Transactions. Except as disclosed in PFC
DISCLOSURE SCHEDULE 3.18, or as described in PFC's Proxy Statement distributed
in connection with the 1999 annual meeting of shareholders (which has previously
been provided to Sound Federal Bancorp), neither PFC nor any PFC Subsidiary is a
party to any transaction (including any loan or other credit accommodation) with
any Affiliate of PFC or any PFC Affiliate. Except as disclosed in PFC DISCLOSURE
SCHEDULE 3.18, 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 PFC DISCLOSURE SCHEDULE 3.18, no loan or credit accommodation to any
Affiliate of PFC or any PFC Subsidiary is presently in default or, during the
three year period prior to the date of this Agreement, has been in default or
has been restructured, modified or extended. Neither PFC nor any PFC Subsidiary
has been notified that principal and interest with respect to any such loan or
other credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by PFC is
inappropriate.
Section 3.19 Schedule of Termination Benefits. PFC DISCLOSURE SCHEDULE 3.19
includes a schedule of all termination benefits and related payments that would
be payable to the individuals identified thereon, excluding any options to
acquire PFC Common Stock granted to such individuals, under any and all
employment agreements, special termination agreements,
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supplemental executive retirement plans, deferred bonus plans, deferred
compensation plans, salary continuation plans, or any compensation arrangement,
or other pension benefit or welfare benefit plan maintained by PFC or any PFC
Subsidiary for the benefit of officers or directors of PFC or any PFC Subsidiary
(the "Benefits Schedule"), assuming their employment or service is terminated as
of July 31, 2000 and the Closing Date occurs prior to such termination. No other
individuals are entitled to benefits under any such plans.
Section 3.20 Deposits. None of the deposits of PFC or any PFC Subsidiary is
a "brokered" deposit as defined in 12 U.S. Code Section 1831f(g).
Section 3.21 Antitakeover Provisions Inapplicable. Except as set forth on
PFC DISCLOSURE SCHEDULE 3.21, the transactions contemplated by this Agreement
are not subject to any applicable state takeover law.
Section 3.22 Fairness Opinion. PFC has received a written opinion from
Capital Resources Group, Inc. to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof, the
Merger Consideration to be received by the stockholders of PFC pursuant to this
Agreement is fair to such stockholders from a financial point of view. Such
opinion has not been amended or rescinded as of the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SOUND FEDERAL BANCORP
Sound Federal Bancorp represents and warrants to PFC that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV), except as set forth in the Sound Federal
Bancorp Disclosure Schedules delivered by Sound Federal Bancorp to PFC prior to
the date hereof. Sound Federal Bancorp has made a good faith effort to ensure
that the disclosure on each schedule of the Sound Federal Bancorp Disclosure
Schedules corresponds to the section reference herein. However, for purposes of
the Sound Federal Bancorp Disclosure Schedules, any item disclosed on any
schedule therein is deemed to be fully disclosed with respect to all schedules
under which such item may be relevant.
Section 4.01 Organization.
(a) Sound Federal Bancorp is a corporation duly organized and validly
existing under the laws of the United States, and is duly registered as a
savings and loan holding company under the HOLA. Sound Federal Bancorp has full
corporate power and authority to carry on its business as now conducted and is
duly licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on Sound Federal
Bancorp.
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(b) Sound Federal is a stock savings bank duly organized and validly
existing under the laws of the United States. The deposits of Sound Federal are
insured by the FDIC through the SAIF to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid when due by Sound Federal. Each other Sound Federal Bancorp Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization.
(c) Sound Federal is a member in good standing of the Federal Home Loan
Bank of New York and owns the requisite amount of stock therein.
(d) Prior to the date of this Agreement, Sound Federal Bancorp has
delivered to PFC true and correct copies of the charter and bylaws of Sound
Federal Bancorp.
Section 4.02 Authority; No Violation.
(a) Sound Federal Bancorp and Sound Federal have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Sound Federal Bancorp and Sound Federal and the completion by Sound Federal
Bancorp and Sound Federal of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Sound Federal Bancorp and
Sound Federal and, no other corporate proceedings on the part of Sound Federal
Bancorp or Sound Federal other than the incorporation of Interim are necessary
to complete the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Sound Federal Bancorp and Sound Federal
and, subject to receipt of the required approvals of Regulatory Authorities
described in Section 4.03 hereof, constitutes the valid and binding obligation
of Sound Federal Bancorp and Sound Federal enforceable against Sound Federal
Bancorp and Sound Federal in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally.
(b) (A) The execution and delivery of this Agreement by Sound Federal
Bancorp and Sound Federal, (B) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 4.03 hereof and PFC's and Sound
Federal Bancorp's and Sound Federal's compliance with any conditions contained
therein, the consummation of the transactions contemplated hereby, and (C)
compliance by Sound Federal Bancorp and Sound Federal with any of the terms or
provisions hereof will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or bylaws of Sound Federal Bancorp
or any Sound Federal Bancorp Subsidiary or the charter and bylaws of Sound
Federal; (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Sound Federal Bancorp or any
Sound Federal Bancorp 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 Sound Federal Bancorp
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or Sound Federal 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 Sound Federal Bancorp or Sound Federal 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 Sound Federal Bancorp.
Section 4.03 Consents. Except for consents, approvals, filings and
registrations from or with the FDIC, SEC, OTS and state "blue sky" authorities,
and compliance with any conditions contained therein, and the approval of this
Agreement by the shareholders of PFC, the filing of a certificate of merger with
the OTS, and the certificate of merger with the Secretary of State of the State
of Delaware, 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 Sound Federal Bancorp and Sound Federal, and
(b) the completion by Sound Federal Bancorp and Sound Federal of the
transactions contemplated hereby. Sound Federal Bancorp 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 Sound Federal Bancorp'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 4.04 Compliance With Applicable Law.
(a) Sound Federal Bancorp and the Sound Federal Bancorp 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 Sound Federal Bancorp and its Subsidiaries taken as a
whole.
(b) Except as set forth in Sound Federal Bancorp DISCLOSURE SCHEDULE
4.04(b), neither Sound Federal Bancorp nor any Sound Federal Bancorp Subsidiary
has received any notification or communication from any Regulatory Authority (i)
asserting that Sound Federal Bancorp or any Sound Federal Bancorp 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 Sound
Federal Bancorp or any Sound Federal Bancorp Subsidiary; (iii) requiring or
threatening to require Sound Federal Bancorp or any Sound Federal Bancorp
Subsidiary, or indicating that Sound Federal Bancorp or any Sound Federal
Bancorp 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
Sound Federal Bancorp or any Sound Federal
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Bancorp 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 Sound Federal Bancorp
or any Sound Federal Bancorp 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 Sound Federal Bancorp nor any
Sound Federal Bancorp Subsidiary is a party to, nor has consented to any
Regulatory Agreement. The most recent regulatory rating given to Sound Federal
as to compliance with the CRA is satisfactory or better.
Section 4.05 Information to be Supplied. The information to be supplied by
Sound Federal Bancorp for inclusion in the Proxy Statement will not, at the time
the Proxy Statement is mailed to PFC shareholders, 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 Sound Federal Bancorp for inclusion in the Applications will, at
the time such documents are filed with any Regulatory Authority, be accurate in
all material aspects.
Section 4.06 Financing. As of the date hereof Sound Federal has, and at the
Merger Effective Date, Sound Federal will have funds which are sufficient and
available to meet its obligations under this Agreement and to consummate in a
timely manner the transactions contemplated hereby and thereby.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of PFC's Business.
(a) From the date of this Agreement to the Closing Date, PFC and each PFC
Subsidiary will conduct their 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 or contemplated by this
Agreement or with the written consent of Sound Federal Bancorp. PFC, First
Federal , and each of the PFC Subsidiaries will use its reasonable good faith
efforts, to (i) preserve their business organizations intact, (ii) maintain good
relationships with employees, and (iii) preserve for themselves the good will of
their customers and others with whom business relationships exist. From the date
hereof to the Closing Date, except as otherwise consented to or approved by
Sound Federal Bancorp in writing or as contemplated or required by this
Agreement, PFC will not, and PFC will not permit any PFC Subsidiary to:
(i) amend or change any p rovision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any 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
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capital stock, or declare, set aside or pay any dividend or other distribution
in respect of capital stock, other than the quarterly cash dividend of $.09 per
share payable by PFC (with payment and record dates consistent with past
practice), or redeem or otherwise acquire any shares of capital stock, except
that (A) PFC may issue shares of PFC Common Stock upon the valid exercise, in
accordance with the information set forth in PFC DISCLOSURE SCHEDULE 3.02, of
presently outstanding options to acquire PFC Common Stock under the PFC Stock
Option Plans;
(iii) grant or agree to pay any bonus, severance or
termination to, or enter into or amend any employment agreement, severance
agreement, supplemental executive agreement, or similar agreement or arrangement
with any of its directors, officers or employees, or increase in any manner the
compensation or fringe benefits of any employee, officer or director, except as
may be required pursuant to legally binding commitments existing on the date
hereof and set forth on PFC DISCLOSURE SCHEDULES 3.08 and 3.12;
(iv) enter into or, except as may be required by law, modify
any pension, retirement, stock option, stock purchase, stock appreciation right,
stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees
(other than to create and fund a rabbi trust for the benefit of PFC's President
for amounts previously accrued pursuant to the PFC President's Supplemental
Employee Retirement Agreement); or make any contributions to any defined
contribution or defined benefit plan not in the ordinary course of business
consistent with past practice; or materially amend any PFC Employee Plan except
to the extent such modifications or amendments do not result in an increase in
cost;
(v) merge or consolidate PFC or any PFC Subsidiary with any
other corporation; sell or lease all or any substantial portion of the assets or
business of PFC or any PFC 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
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between PFC,
or any PFC 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 PFC 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;
(vi) sell or otherwise dispose of the capital stock of PFC or
sell or otherwise dispose of any asset of PFC or of any PFC Subsidiary other
than in the ordinary course of business consistent with past practice; subject
any asset of PFC or of any PFC Subsidiary to a lien, pledge, security interest
or other encumbrance (other than in connection with deposits, repurchase
agreements, bankers acceptances, FHLB of New York advances, "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
26
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;
(vii) take any action which would result in any of the
representations and warranties of PFC 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 VI hereof not being satisfied, except in each case as
may be required by applicable law;
(viii) 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 PFC;
(ix) waive, release, grant or transfer any material rights of
value or modify or change in any material respect any existing material
agreement or indebtedness to which PFC or any PFC Subsidiary is a party, other
than in the ordinary course of business, consistent with past practice;
(x) purchase any security for its investment portfolio not
rated "A" or higher by either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investor
Services, Inc. or otherwise alter, in any material respect, the mix, maturity,
credit or interest rate risk profile of its portfolio of investment securities
or its portfolio of mortgage-backed securities;
(xi) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit) to any
borrower or group of affiliated borrowers in excess of $250,000 in the
aggregate, or increase, compromise, extend, renew or modify any existing loan or
commitment outstanding in excess of $250,000, except for any commitment
disclosed on the PFC DISCLOSURE SCHEDULE 5.01(xi).
(xii) except as set forth on the PFC DISCLOSURE SCHEDULE
5.01(a)(xii), enter into, renew, extend or modify any other transaction with any
Affiliate;
(xiii) enter into any futures contract, option, interest rate
caps, interest rate floors, interest rate exchange agreement or other agreement
or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xiv) except for the execution of this Agreement and the
documents related to this Agreement take any action that would give rise to a
right of payment to any individual under any employment agreement, or take any
action that would give rise to a right of payment to any
individual under any PFC Employee Plan;
(xv) make any change in policies with regard to the extension
of credit, the establishment of reserves with respect to the possible loss
thereon or the charge off of losses incurred
27
thereon, investment, asset/liability management or other material banking
policies in any material respect except as may be required by changes in
applicable law or regulations or in GAAP;
(xvi) except as set forth in PFC DISCLOSURE SCHEDULE
5.01(xix), make any capital expenditures in excess of $15,000 individually or
$40,000 in the aggregate, other than pursuant to binding commitments existing on
the date hereof and other than expenditures necessary
to maintain existing assets in good repair;
(xvii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the ordinary
course of business consistent with past practices and policies;
(xviii) sell any REO or loan; or
(xix) agree to do any of the foregoing.
For purposes of this Section 5.01, unless provided for in a business plan,
budget or similar document delivered to Sound Federal Bancorp prior to the date
of this Agreement, it shall not be considered in the ordinary course of business
for PFC or any PFC Subsidiary to do any of the following: (i) except as set
forth in PFC DISCLOSURE SCHEDULE 5.01, 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 $15,000, other than
pledges of assets to secure government deposits, to exercise trust powers, sales
of assets received in satisfaction of debts previously contracted in the normal
course of business, issuance of loans, sales of previously purchased government
guaranteed loans, or transactions in the investment securities portfolio by PFC
or a PFC Subsidiary or repurchase agreements made, in each case, in the ordinary
course of business; or (ii) 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 PFC or any
PFC Subsidiary of more than $10,000 annually, or containing a material financial
commitment and extending beyond 12 months from the date hereof.
Section 5.02 Access; Confidentiality.
(a) Each of PFC and the PFC Subsidiaries shall permit Sound Federal Bancorp
and its representatives reasonable access to its properties, and shall disclose
and make available to them all books, papers and records relating to the assets,
properties, operations, obligations and liabilities of PFC and its subsidiaries,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of meetings of boards of directors (and any
committees thereof)(other than minutes of any confidential discussion of this
Agreement and the transactions contemplated hereby), and stockholders,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files,
except as necessary to preserve any attorney/client privilege, plans affecting
employees, and any other business activities or prospects in which Sound Federal
Bancorp may have a reasonable interest.
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PFC and First Federal shall make their respective officers, employees and agents
and authorized representatives (including counsel and independent public
accountants) available to confer with Sound Federal Bancorp and its
representatives. PFC and First Federal shall permit a representative of Sound
Federal Bancorp to attend any meeting of PFC and/or First Federal's Board of
Directors or the Executive Committees thereof (provided that neither PFC nor
First Federal shall be required to permit the Sound Federal Bancorp
representative to remain present during any confidential discussion of the
Agreement and the transactions contemplated thereby). The parties will hold all
such information delivered in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement, dated January
11, 2000, among PFC and Sound Federal Bancorp (the "Confidentiality Agreement").
(b) Sound Federal Bancorp agrees to conduct such investigations 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, PFC and each PFC Subsidiary
shall permit employees of Sound Federal Bancorp reasonable access to information
relating to problem loans, loan restructurings and loan work-outs of PFC and
First Federal.
(d) If the transactions contemplated by this Agreement shall not be
consummated, PFC and Sound Federal Bancorp will each destroy or return all
documents and records obtained from the other party or its representatives
during the course of its investigation and will cause all information with
respect to the other party obtained pursuant to this Agreement or preliminarily
thereto to be kept confidential, except to the extent such information becomes
public through no fault of the party to whom the information was provided or any
of its representatives or agents and except to the extent disclosure of any such
information is legally required. PFC and Sound Federal Bancorp shall each give
prompt written notice to the other party of any contemplated disclosure where
such disclosure is so legally required.
Section 5.03 Regulatory Matters and Consents.
(a) Sound Federal Bancorp and Sound Federal will prepare all Applications
and make all filings for, and use their 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.
(b) PFC will furnish Sound Federal Bancorp with all information concerning
PFC and PFC Subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Sound Federal Bancorp to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement.
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(c) Sound Federal Bancorp and PFC will promptly furnish each other with
copies of all material written communications to, or received by them from any
Regulatory Authority in respect of the transactions contemplated hereby, except
information which is filed by either party which is designated as confidential.
(d) The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Sound Federal Bancorp will
furnish PFC with (i) copies of all Applications prior to filing with any
Regulatory Authority and provide PFC a reasonable opportunity to provide changes
to such Applications and (ii) copies of all Applications filed by Sound Federal
Bancorp.
(e) PFC and Sound Federal Bancorp will cooperate with each other in the
foregoing matters and will furnish the responsible party with all information
concerning it and its subsidiaries as may be necessary or advisable in
connection with any Application or filing (including the Proxy Statement and any
report filed with the SEC) made by or on behalf of Sound Federal Bancorp or PFC
to any Regulatory Authority in connection with the transactions contemplated by
this Agreement, and such information will be accurate and complete in all
material respects. In connection therewith, each party will provide certificates
and other documents reasonably requested by the other.
Section 5.04 Taking of Necessary Action.
(a) Sound Federal Bancorp and PFC shall each use its best efforts in good
faith, and each of them shall cause its Subsidiaries to use their best efforts
in good faith, to (i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 5.03 of this
Agreement, and (ii) take or cause to be taken all action necessary or desirable
on its part using its best efforts so as to permit completion of the Merger and
the transactions contemplated by this Agreement, 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 PFC nor any PFC Subsidiary shall agree to make any
payments or modifications to agreements in connection therewith without the
prior written consent of Sound Federal Bancorp, 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 pursuant to this Agreement; provided that nothing herein
contained shall preclude Sound Federal Bancorp or PFC from exercising its rights
under this Agreement or the Option Agreement.
(b) PFC shall prepare, subject to the review, and consent of Sound Federal
Bancorp with respect to matters relating to Sound Federal Bancorp, a Proxy
Statement to be filed by PFC with the SEC and to be mailed to the shareholders
of PFC in connection with the meetings of its shareholders and transactions
contemplated hereby, which Proxy statement shall conform to all applicable legal
30
requirements. The parties shall cooperate with each other with respect to the
preparation of the Proxy Statement. PFC shall, as promptly as practicable
following the preparation thereof, file the Proxy Statement with the SEC and PFC
shall use all reasonable efforts to have the Proxy Statement mailed to
stockholders as promptly as practicable after such filing. PFC will promptly
advise Sound Federal Bancorp of the time when the Proxy Statement has been filed
and mailed, or of any comments from the SEC or any request by the SEC for
additional information.
Section 5.05 Certain Agreements.
(a) Sound Federal Bancorp shall use its reasonable best efforts to maintain
in effect for three years from the Effective Time, if available, the current
directors' and officers' liability insurance policy maintained by PFC (provided
that Sound Federal Bancorp may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Closing Date;
provided, however, that in no event shall Sound Federal Bancorp be required to
expend pursuant to this Section 5.05 more than the amount equal to 150% of the
current annual amount expended by PFC to maintain or procure insurance coverage
pursuant hereto. In connection with the foregoing, PFC and First Federal each
agrees to provide such insurer or substitute insurer with such representations
as such insurer may request with respect to the reporting of any prior claims.
(b) In addition, Sound Federal Bancorp acknowledges that the obligations of
PFC to indemnify its directors and officers (who are made a party or threatened
to be made a party or otherwise involved with respect to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she was a director of PFC at or prior to the Closing
Date) under its Certificate of Incorporation and Bylaws, as they exist as of the
date of this Agreement, including the obligation to advance expenses, shall be
assumed by Sound Federal by reason of the Merger.
(c) The provisions of this Section 5.05 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
Section 5.06 No Other Bids and Related Matters. From and after the date
hereof until the termination of this Agreement, neither PFC, First Federal or
any PFC Subsidiary, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by PFC or any of its
Subsidiaries), will, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal,
or authorize or permit any of its officers, directors, or employees or any of
its subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by any of its subsidiaries to take
any such action, and PFC shall notify Sound Federal
31
Bancorp orally (within one business day) and in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries and
proposals which it or any of its Subsidiaries or any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
representative may receive relating to any of such matters, provided, however,
that nothing contained in this Section 5.06 shall prohibit the Board of
Directors of PFC from (i) furnishing information to, or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide proposal to acquire PFC or First Federal pursuant to a
merger, consolidation, share exchange, business combination, tender or exchange
offer or other similar transaction, if, and only to the extent that, (A) the
Board of Directors of PFC receives an opinion from its independent financial
advisor that such proposal may be superior to the Merger from a financial
point-of-view to PFC's stockholders, (B) the Board of Directors of PFC, after
consultation with and after considering the advice of independent legal counsel,
determines in good faith that failure to take such action may cause the Board of
Directors of PFC to breach its fiduciary duties to stockholders under applicable
law (such proposal that satisfies (A) and (B) being referred to herein as a
"Superior Proposal"); (C) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or entity, PFC (x) provides
reasonable notice to Sound Federal Bancorp to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
or entity and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form; and (D) the PFC Special
Meeting of Stockholders convened to approve this Agreement has not occurred,
(ii) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a tender or exchange offer or (iii) prior to the PFC Special meeting of
Stockholders convened to approve the Agreement, failing to make or withdrawing
or modifying its recommendation and entering into a Superior Proposal if there
exists a Superior Proposal and the Board of Directors of PFC, after consultation
with and after considering the advice of independent legal counsel, determined
in good faith that failure to take such action may cause such Board of Directors
to breach its fiduciary duties to stockholders under applicable law. For
purposes of this Agreement, "Acquisition Proposal" shall mean any of the
following (other than the transactions contemplated hereunder) involving PFC or
any of its subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transactions; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets of
PFC or First Federal , taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of PFC or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
Section 5.07 Duty to Advise; Duty to Update PFC's Disclosure Schedules. PFC
shall promptly advise Sound Federal Bancorp of any change or event having a
Material Adverse Effect on it or on any PFC Subsidiary 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. PFC shall
update PFC's DISCLOSURE SCHEDULES 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 the PFC DISCLOSURE
SCHEDULES. The delivery of
32
such updated Schedule shall not relieve PFC from any breach or violation of this
Agreement and shall not have any effect for the purposes of determining the
satisfaction of the condition set forth
in Sections 6.02(c) hereof.
Section 5.08 Conduct of Sound Federal Bancorp's Business. From the date of
this Agreement to the Closing Date, Sound Federal Bancorp 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 Sound Federal. From the date of this Agreement to the Closing Date,
neither Sound Federal Bancorp nor Sound Federal will (i) amend its certificate
of incorporation, charter or bylaws in any manner inconsistent with the prompt
and timely consummation of the transactions contemplated by this Agreement, (ii)
take any action which would result in any of the representations and warranties
of Sound Federal Bancorp or Sound Federal 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 VI hereof not being satisfied, except in each case as may be
required by applicable law; or (iii) agree to do any of the foregoing.
Section 5.09 Board and Committee Minutes. PFC and First Federal shall each
provide to Sound Federal Bancorp, within thirty (30) days after any meeting of
their respective Board of Directors, or any committee thereof, or any senior
management committee, a copy of the minutes of such meeting, excluding any
matters related to this Agreement or the transactions contemplated hereby,
except that with respect to any meeting held within thirty (30) days of the
Closing Date, such minutes shall be provided to each party prior to the Closing
Date.
Section 5.10 Undertakings by PFC and Sound Federal Bancorp.
(a) From and after the date of this Agreement:
(i) Voting by Directors. Each member of the Board of Directors
of PFC shall vote all shares of PFC Common Stock over which each such director
has voting control, in favor of this Agreement. Concurrent with the execution of
this Agreement, PFC's Directors shall each enter into the agreement set forth as
Exhibit D to this Agreement;
(ii) Proxy Solicitor. PFC shall retain a proxy solicitor
in connection with the solicitation of shareholder approval of this Agreement;
(iii) Timely Review. If requested by Sound Federal Bancorp at
Sound Federal Bancorp's sole expense, PFC shall 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 their report on such financial
statements as soon as is practicable thereafter;
(iv) Outside Service Bureau Contracts. If requested to do so
by Sound Federal Bancorp, PFC shall use its best efforts to obtain an extension
of any contract with an outside service
33
bureau or other vendor of services to PFC, on terms and conditions mutually
acceptable to PFC and Sound Federal Bancorp;
(v) List of Nonperforming Assets. PFC shall provide Sound
Federal Bancorp, within ten (10) days of the end of each calendar month, a
written list of nonperforming assets (the term "nonperforming assets," for
purposes of this subsection, means (i) loans that are "troubled debt
restructuring" as defined in Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructuring," (ii)
loans on nonaccrual, (iii) real estate owned, (iv) all loans ninety (90) days or
more past due) as of the end of such month and (iv) and impaired loans; and
(vi) Reserves and Merger-Related Costs. On or before the
Effective Date, and at the request of Sound Federal Bancorp and to the extent
not inconsistent with GAAP, PFC shall establish such additional accruals and
reserves as may be necessary to conform the accounting reserve practices and
methods (including credit loss practices and methods) of PFC to those of Sound
Federal Bancorp (as such practices and methods are to be applied to PFC from and
after the Closing Date) and Sound Federal Bancorp's plans with respect to the
conduct of the business of PFC following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by PFC, provided, however, that PFC
shall not be required to take such action unless Sound Federal Bancorp agrees in
writing that all conditions to closing set forth in Section 6.02 have been
satisfied or waived (except for the expiration of any applicable waiting
periods); prior to the delivery by Sound Federal Bancorp of the writing referred
to in the preceding clause, PFC shall provide Sound Federal Bancorp a written
statement, certified without personal liability by the chief executive officer
of PFC and dated the date of such writing, that the representation made in
Section 3.15 hereof is true as of such date or, alternatively, setting forth in
detail the circumstances that prevent such representation from being true as of
such date; and no accrual or reserve made by PFC or any PFC 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 7.01(b) hereof.
(vii) Shareholders Meeting. Subject to Section 5.06, PFC shall
submit this Agreement to its shareholders for approval at a meeting to be held
within 90 days of the date of this Agreement or as soon thereafter as is
practicable, and its Board of Directors shall recommend approval of this
Agreement to the PFC shareholders. PFC shall promptly inform Sound Federal
Bancorp of any shareholder who makes a written demand upon PFC for an appraisal
of his shares of PFC Common Stock in connection with the Merger.
(b) From and after the date of this Agreement, Sound Federal Bancorp and
PFC shall each:
(i) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the Applications, (B) the
Proxy Statement, (C) all other documents
34
necessary to obtain any other approvals and consents required to effect the
completion of the Merger, and the transactions contemplated by this Agreement,
(D) all other documents contemplated by this
Agreement;
(ii) Public Announcements. Cooperate and cause their
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 shareholders, internal announcements and customer disclosures,
but nothing contained herein shall prohibit either party from making any
disclosure which its counsel deems necessary, provided that the disclosing party
notifies the other party reasonably in advance of the timing and contents of
such disclosure;
(iv) 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;
(v) Maintenance of Books and Records. Maintain, and cause
their respective Subsidiaries to maintain, books of account and records in
accordance with generally accepted accounting principles applied on a basis
consistent with those principles used in preparing the financial statements
heretofore delivered;
(vi) Delivery of Securities Documents. Deliver to the other,
copies of all Securities Documents simultaneously with the filing thereof;
(vii) 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; or
Section 5.11 Employee and Termination Benefits; Directors and Management.
(a) Employee Benefits. Except as set forth below, as of or after the Merger
Effective Date, and at Sound Federal Bancorp's election and subject to the
requirements of the IRC, the PFC Employee Plans may continue to be maintained
separately, or consolidated, or terminated. In the event of a consolidation of
any or all of such plans or in the event of termination of any PFC Employee
Plan, PFC employees who continue employment with Sound Federal Bancorp or any
Sound Federal Bancorp Subsidiary ("Continuing Employees") shall receive credit
for service with PFC (for purposes of eligibility and vesting determination but
not for benefit accrual purposes) under any existing Sound Federal Bancorp
benefit plan, or new Sound Federal Bancorp benefit plan in which such employees
would be eligible to enroll. In the event of any termination or consolidation of
any PFC health plan with any Sound Federal Bancorp health plan, Sound Federal
Bancorp and/or Sound Federal shall make available employer-provided health
coverage on the same basis as it provides such coverage to Sound Federal Bancorp
or Sound Federal employees. In the event of a
35
termination or consolidation of any PFC health plan, terminated PFC employees
and qualified beneficiaries will have the right to continue coverage under group
health plans of Sound Federal Bancorp and/or Sound Federal Bancorp subsidiaries
in accordance with IRC Section 4980B(f). In the event of any termination or
consolidation of any PFC health plan with any Sound Federal Bancorp health plan,
any pre-existing condition, eligibility waiting period, limitation or exclusion
in the Sound Federal Bancorp health plans shall not apply to Continuing
Employees or their covered dependents who are covered under a PFC health Plan on
the Merger Effective Date and who then change that coverage to Sound Federal
Bancorp's health plan at the time such Continuing Employee is first given the
option to enroll in such Sound Federal Bancorp health plan. During calendar year
2000, Sound Federal Bancorp shall credit employees of PFC or any PFC Subsidiary
at the Merger Effective Date with amounts paid as deductibles under the PFC
health plan.
(b) At the Merger Effective Date, any terminated employees of PFC or any
PFC Subsidiary whose employment is terminated, other than for cause, shall be
provided with severance benefits equal to two (2) weeks for every year of
service with PFC or any PFC Subsidiary up to 26 weeks.
(c) Sound Federal Bancorp shall establish a First Federal Advisory Board of
Directors to consist of those persons who currently serve on the PFC Board, and
such persons shall commence service on the Advisory Board of Directors
immediately following the Merger Effective Date. The Advisory Board shall be
maintained for at least one year following the Merger Effective Date and shall
be compensated at a rate of $500 per meeting. Such meetings will be held
monthly.
(d) The Peekskill Financial Corporation Employee Stock Ownership Plan (the
"PFC ESOP") shall be terminated as of the Merger Effective Date (all shares held
by the ESOP shall be converted into the right to receive the Merger
Consideration), all outstanding PFC ESOP indebtedness shall be repaid, and the
balance shall be allocated to PFC employees, as provided for in the PFC ESOP,
subject to the Code and ERISA, and rules and regulations promulgated thereunder.
In connection with the termination of the PFC ESOP, PFC shall promptly apply to
the IRS for a favorable determination letter on the tax-qualified status of the
PFC ESOP on termination and any amendments made to the PFC ESOP in connection
with its termination or otherwise, if such amendments have not previously
received a favorable determination letter from the IRS with respect to their
qualification under Code Section 401(a). Any and all distributions from the PFC
ESOP after its termination shall be made consistent with the aforementioned
determination letter.
(e) PFC's Chairman of the Board at the Merger Effective Date shall be named
a director of Sound Federal Bancorp. The PFC Chairman of the Board's prior
service on PFC's and First Federal's Board of Directors will be used to
determine credited service under the Sound Federal Director Emeritus Plan.
(f) Notwithstanding anything contained in an existing employment or
severance agreement between PFC, First Federal and PFC's Chairman of the Board,
President, and two Vice Presidents, respectively, such persons shall, in lieu of
certain payments due under their employment
36
and severance agreements, be entitled to receive payments set forth in the PFC
DISCLOSURE SCHEDULE 5.11.
(g) Concurrent with the Merger Effective Date Sound Federal shall appoint
PFC's President as Regional Vice President for a period of one year and at an
annual salary of $80,000.
(h) Concurrent with the Merger Effective Date PFC's Vice President -
Finance shall be offered a position with Sound Federal with a title to be
determined. Such position shall report directly to Sound Federal's Chief
Financial Officer. This position shall become effective at the Merger Effective
Date. In consideration thereof Sound Federal agrees to pay the PFC Vice
President-Finance a bonus of $60,000 to be paid in six equal monthly payments
plus a salary not less than the PFC's Vice President--Finance's current base
salary. Sound Federal agrees to keep this position available to PFC's Vice
President--Finance for a sufficient time for such individual to receive the full
$60,000 bonus payment.
Section 5.12 Duty to Advise; Duty to Update Sound Federal Bancorp's
Disclosure Schedules. Sound Federal Bancorp shall promptly advise PFC of any
change or event having a Material Adverse Effect on it or on any Sound Federal
Bancorp Subsidiary 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. Sound Federal Bancorp shall update Sound Federal
Bancorp's DISCLOSURE SCHEDULES 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 the Sound Federal Bancorp
DISCLOSURE SCHEDULE. The delivery of such updated Schedules shall not relieve
Sound Federal Bancorp from any breach or violation of this Agreement and shall
not have any effect for the purposes of determining the satisfaction of the
condition set forth in Sections 6.01(c) hereof.
Section 5.13 Amendment of First Federal's Federal Stock Charter. PFC and
First Federal shall take all action necessary to amend First Federal's charter
in order to delete Section 8 thereof. PFC and First Federal shall ensure that
such amendment is effective at the Merger Effective Date.
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to PFC's Obligations under this Agreement. The
obligations of PFC hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by PFC pursuant
to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Sound Federal Bancorp and Sound Federal to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated by this Agreement, shall have been duly and validly
taken by Sound Federal Bancorp and Sound Federal; and PFC shall have received
certified copies of the resolutions evidencing such authorizations;
37
(b) Covenants. The obligations and covenants of Sound Federal Bancorp and
Sound Federal required by this Agreement to be performed by Sound Federal
Bancorp and Sound Federal at or prior to the Closing Date shall have been duly
performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Sound Federal Bancorp and Sound Federal set forth in this
Agreement which is qualified as to materiality shall be true and correct and
each such representational warranty that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement,
and as of the Closing Date as though made on and as of the Closing Date (except
as to any representation or warranty which specifically relates to an earlier
date);
(d) Approvals of Regulatory Authorities. Sound Federal Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger and
delivered copies thereof to PFC; 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. Sound Federal Bancorp shall have delivered to
PFC 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 (f) of this Section 6.01 have
been satisfied, to the best knowledge of the officer executing the same; and
(g) Approval of PFC's Shareholders. This Agreement shall have been approved
by the shareholders of PFC by such vote as is required under applicable Delaware
law, PFC's certificate of incorporation and bylaws, and under Nasdaq
requirements applicable to it.
Section 6.02 Conditions to Sound Federal Bancorp's Obligations under this
Agreement. The obligations of Sound Federal Bancorp hereunder shall be subject
to satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Sound Federal Bancorp pursuant to Section 8.03
hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, PFC to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by PFC; and Sound Federal
Bancorp shall have received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of PFC and each PFC Subsidiary
required by this Agreement to be performed at or prior to the Closing Date shall
have been duly performed and complied with in all material respects;
38
(c) Representations and Warranties. Each of the representations and
warranties of PFC and each PFC Subsidiary set forth in this Agreement which is
qualified as to materiality shall be true and correct and each such
representation and warranty that is not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement, and as
of the Closing Date as though made on and as of the Closing Date (except as to
any representation or warranty which specifically relates to an earlier date);
(d) Approvals of Regulatory Authorities. Sound Federal Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger (without
the imposition of any conditions that are in Sound Federal Bancorp's reasonable
judgement unduly burdensome) and delivered copies thereof to PFC; and all notice
and waiting periods required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1999, there shall not
have occurred any Material Adverse Effect with respect to PFC; and
(g) Officer's Certificate. PFC shall have delivered to Sound Federal
Bancorp 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 (f) of this Section 6.02 have
been satisfied, to the best knowledge of the officer executing the same.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 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 either Sound Federal Bancorp or PFC acting individually:
(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other party, and
such breach cannot be, or shall not have been, remedied within 30 days after
receipt by such other party of notice in writing specifying the nature
of such breach and requesting that it be remedied;
(ii) if the Closing Date shall not have occurred on or before
September 30, 2000, unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this
39
Agreement to perform or observe its obligations set forth in this Agreement
required to be performed or observed by such party on or before the Closing
Date;
(iii) if either party has been informed in writing by a
Regulatory Authority whose approval or consent has been requested that such
approval or consent is unlikely to be granted, unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements set forth herein required to be
performed or observed by such party on or before the Closing Date;
(iv) if the approval of the shareholders of PFC required for
the consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of shareholders or at
any adjournment or postponement thereof; or
(c) By Sound Federal Bancorp if (i) as provided in Section 5.10(a)(vii),
the Board of Directors of PFC withdraws its recommendation of this Agreement,
fails to make such recommendation or modifies or qualifies its recommendation in
a manner adverse to Sound Federal Bancorp, or (ii) as provided in Section 5.06,
the Board of Directors of PFC enters into an agreement involving a Superior
Proposal; provided, however, that a termination pursuant to this Section 7.01(c)
shall not effect the right of Sound Federal Bancorp to exercise the Sound
Federal Bancorp Option pursuant to the Stock Option Agreement.
Section 7.02 Effect of Termination. Except as otherwise provided in this
Agreement, if this Agreement is terminated pursuant to Section 7.01 hereof, this
Agreement shall forthwith become void (other than Section 5.02(a) and (d) and
Section 8.01 hereof, which shall remain in full force and effect), and there
shall be no further liability on the part of Sound Federal Bancorp or PFC to the
other, except that no party shall be relieved or released from any liabilities
or damages arising out of its willful breach of any provision of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses. (a) Except as provided herein, 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.
(b) In the event of any termination of this Agreement pursuant to Section
7.01(b)(i) hereof because of a breach of this Agreement by one of the parties,
and in addition to any other damages and remedies that may be available to the
non-breaching party, the non-breaching party shall be entitled to payment of,
and the breaching party shall pay to the non-breaching party, all out-of-pocket
costs and expenses, including, without limitation, reasonable legal, accounting
and investment banking fees and expenses, incurred by the non-breaching party in
connection with entering into this Agreement and carrying out of any and all
acts contemplated hereunder; provided,
40
however, that this clause shall not be construed to relieve or release a
breaching party from any additional liabilities or damages arising out of its
willful breach of any provision of this Agreement.
Section 8.02 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 set forth
in Sections 5.05, and 5.11(a), (b), (c), (e), (f), (g) and (h) which will
survive the Merger, shall terminate on the Closing Date.
Section 8.03 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 V and VI hereof or otherwise.
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 8.04 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 2.02(a)(i), 2.03 and
5.05 and Section 5.11(c), (e), (f), (g) and (h).
Section 8.05 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.
41
Section 8.06 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 Sound Federal Bancorp to:
Sound Federal Bancorp
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, PC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇, Esq.
(b) If to PFC, to:
Peekskill Financial Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
with a copy to: Silver ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Section 8.07 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 8.08 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
42
Section 8.09 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 8.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic internal law (including the law of
conflicts of law) of the State of New York.
43
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.
SOUND FEDERAL BANCORP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
SOUND FEDERAL SAVINGS AND LOAN
ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
PEEKSKILL FINANCIAL CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
44
EXHIBIT A
AGREEMENT OF COMPANY MERGER
AGREEMENT OF COMPANY MERGER
AGREEMENT OF COMPANY MERGER, dated as of _______________, 2000, by and
among Sound Federal Savings and Loan Association ("Sound Federal"), a
federally-chartered savings bank, Sound Federal Acquisition Corp. ("Interim"), a
Delaware corporation formed by Sound Federal solely to facilitate the
transactions contemplated by the Merger Agreement, defined below, and Peekskill
Financial Corp. ("Company"), a Delaware corporation. Interim and the Company are
hereinafter sometimes collectively referred to as the "Merging Corporations".
This Agreement of Company Merger is being entered into pursuant to an
Agreement and Plan of Merger, dated as of February ___, 2000 (the "Merger
Agreement") by and among Sound Federal and the Company.
In consideration of the premises, and the mutual covenants and agreements
contained herein and in the Merger Agreement, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
1.1 "Effective Time" shall mean the date at which the Merger contemplated
by this Agreement of Merger becomes effective as provided in Section 2.2 hereof.
1.2 "Interim Common Stock" shall mean the common stock, par value $.01 per
share, of Interim owned by Sound Federal.
1.3 "Company Common Stock" shall mean the common stock par value $.01 per
share, of the Company.
1.4 The "Merger" shall refer to the merger of Interim with and into the
Company as provided in Section 2.1 of this Agreement of Company Merger.
1.5 "Stockholder Meeting" shall mean the meeting of the stockholders of the
Company held pursuant to Section 7.1.
1.6 "Surviving Corporation" shall refer to the Company as the surviving
corporation of the Merger.
1
ARTICLE II
TERMS OF THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in the Merger
Agreement, on the Effective Time, Interim shall be merged with and into the
Company pursuant and subject to Section 251 of the General Corporation Law of
the State of Delaware ( "DGCL"). The Company shall be the Surviving Corporation
of the Merger and shall continue to be governed by the laws of the State of
Delaware. On the Effective Time, the Surviving Corporation shall be considered
the same business and corporate entity as each of the Merging Corporations and
thereupon and thereafter, all the property, rights, powers, and franchises of a
public as well as a private nature of each of the Merging Corporations shall
vest in the Surviving Corporation and the Surviving Corporation shall be subject
to and be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of the Merging Corporations and shall have succeeded to all of
each of their relationships, fiduciary or otherwise, as fully and to the same
extent as if such property, right, privileges, powers, franchises, debts,
obligations, duties and relationships had been originally acquired, incurred or
entered into by the Surviving Corporation. In addition, any reference to either
of the Merging Corporations in any contract, will or document, whether executed
or taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Corporation if not inconsistent with the other
provisions of the contract, will or document; and any pending action or other
judicial proceeding to which either of the Merging Corporations is a party,
shall not be deemed to have abated or to have discontinued by reason of the
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Merging Corporations if the Merger had not occurred.
2.2 Effective Time. The Merger shall become effective on the date and at
the time that a Certificate of Merger pursuant to Section 251 of the DGCL is
executed and filed with the Secretary of State of the State of Delaware pursuant
to Section 103 of the DGCL, unless a later date and time is specified as the
Effective Time in the Certificate of Merger.
2.3 Name of the Surviving Corporation. The name of the Surviving
Corporation shall be "Peekskill Financial Corp."
2.4 Certificate of Incorporation. The Certificate of Incorporation of the
Company as in effect on the Effective Time, shall continue in full force and
effect following the Effective Time as the Certificate of Incorporation of the
Surviving Corporation.
2.5 Bylaws. The Bylaws of the Company, as in effect on the Effective Time,
shall continue in full force and effect as the Bylaws of the Surviving
Corporation until amended in accordance with applicable law
2
2.6 Directors and Officers of the Surviving Corporation. The directors and
officers of Interim shall become the directors and officers of the Surviving
Corporation as of the Effective Time, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
changed in accordance therewith.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of The Company Common Stock and Options to Purchase Common
Stock.
(a) At the Effective Time, each share of Company Common Stock, issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares as hereinafter defined) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
$22 in cash (such amount hereinafter referred to as the "Purchase Price").
(b) At or immediately prior to the Effective Time, each outstanding option
to purchase Company Common Stock issued pursuant to the Company's Stock Option
Plans shall be canceled, and each holder of any such option, whether or not then
vested or exercisable, shall be entitled to receive from Sound Federal at the
Effective Time for each option an amount determined by multiplying (i) the
excess, if any, of the Purchase Price over the applicable exercise price per
share of such option by (ii) the number of shares of Company Common Stock
subject to such option.
3.2 Exchange of Shares.
(a) Immediately following the Effective Time and the consummation of the
transaction provided for in the Plan of Complete Liquidation and Dissolution
included as Exhibit C to the Merger Agreement, Sound Federal shall make
available in its role as exchange agent ("Exchange Agent") cash in an amount
equal to the aggregate Purchase Price.
(b) As soon as practicable after the Effective Time, the Exchange Agent
will send to each holder of record of a certificate or certificates (other than
holders of Dissenting Shares) which, immediately prior to the Effective Time
represented outstanding shares of Company Common Stock ("Certificates"), a
letter of transmittal for use in exchanging such Certificates for the Purchase
Price. The letter of transmittal shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent. Upon surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
promptly receive in exchange therefor the Purchase Price as provided in Section
3.1 hereof and the Certificates so surrendered shall be canceled. The Exchange
Agent shall not be obligated to deliver or cause to be delivered to any holder
of Company Common Stock the Purchase Price to which such holder of Company
Common Stock would otherwise be entitled until such holder surrenders the
Certificate
3
for exchange or, in default thereof, an appropriate Affidavit of Loss and
Indemnity Agreement and/or a bond as may be required in each case by the
Surviving Corporation. Neither the Exchange Agent nor any party hereto shall be
liable to any holder of Certificates for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law. Except as
required by law, no interest shall be payable with respect to the Purchase Price
payable for the outstanding shares of Company Common Stock
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time and, if any Certificates
representing such shares are presented for transfer to the Company, they shall
be canceled and exchanged for the Purchase Price provided for in Section 3.1
hereof.
(d) If payment of the Purchase Price pursuant to Section 3.1 hereof for
shares of Company Common Stock is to be made in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such payment shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the payment to a person other than that of the registered holder of
the Certificate surrendered or required for any other reason or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
3.3 Dissenting Shares. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time, the holder of which has not
voted in favor of the Merger Agreement and this Agreement of Company Merger and
who has properly perfected his dissenters' rights of appraisal by satisfying all
of the applicable requirements of Section 262 of the DGCL, is referred to herein
as a "Dissenting Share." Dissenting Shares owned by each holder thereof who has
not exchanged his Certificates for the Purchase Price or otherwise has not
effectively withdrawn or lost his dissenter's rights, shall not be converted
into or represent the right to receive the Purchase Price pursuant to Section
3.1 hereof and shall be entitled only to such rights as are available to such
holder pursuant to the applicable provisions of the DGCL. Each holder of
Dissenting Shares shall be entitled to receive the value of such Dissenting
Shares held by him in accordance with the applicable provisions of the DGCL,
provided such holder complies with the procedures contemplated by and set forth
in the applicable provisions of the DGCL. If any holder of Dissenting Shares
shall have failed to perfect or shall have effectively withdrawn or lost his
dissenter's rights under the applicable provisions of the DGCL, such Dissenting
Shares shall be converted into the right to receive the Purchase Price at the
Effective Time in accordance with the provisions of Section 3.1 hereof. Sound
Federal agrees to make, or cause to he made, payment in cash for any Dissenting
Shares.
4
3.4 Interim Common Stock. Each share of Interim Common Stock which is
issued and outstanding immediately prior to the Effective Time shall be
converted automatically and without any action on the part of the holder thereof
into an issued and outstanding share of Common Stock of the Surviving
Corporation.
ARTICLE IV
MISCELLANEOUS
4.1 Conditions Precedent. The respective obligations of each party under
this Plan of Company Merger shall be subject to the satisfaction, or waiver by
the party permitted to do so, of the conditions set forth in Articles V and VI
of the Merger Agreement.
4.2 Stockholder Approval. By executing this Agreement of Company Merger,
Sound Federal shall be deemed to have approved this Agreement of Company Merger
in its capacity as sole stockholder of Interim.
4.3 Termination. This Agreement of Company Merger shall be terminated upon
the termination of the Merger Agreement in accordance with Article VIII thereof;
provided, that any such termination of this Agreement of Company Merger shall
not relieve any party hereto from liability on account of a breach by such party
of any of the terms hereof or thereof.
4.4 Amendments. To the extent permitted by law, this Agreement of Merger
may be amended by a subsequent writing signed by all of the parties hereto upon
the approval of the Board of Directors of each of the parties hereto; provided,
however, that the provisions of Article III of this Agreement of Company Merger
relating to the consideration to be paid for the shares of Company Common Stock
shall not be amended after the approval of the stockholders of the Company
referred to in Section 5.04 of the Merger Agreement so as to decrease the amount
or change the form of such consideration without the approval of the
stockholders of the Company.
4.5 Successors. This Agreement of Company Merger shall be binding on the
successors of Sound Federal, Interim and the Company.
5
IN WITNESS WHEREOF, Sound Federal, Interim and the Company have caused this
Agreement of Company Merger to be executed by their duly authorized officers and
their corporate seals to be hereunto affixed as of the date first above written.
Attest: SOUND FEDERAL SAVINGS
AND LOAN ASSOCIATION
________________________________ By: ________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
SOUND FEDERAL ACQUISITION
CORP.
Attest:
________________________________ By:________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Attest: PEEKSKILL FINANCIAL CORP.
_______________________________ By:________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
6
EXHIBIT B
PLAN OF BANK MERGER
PLAN OF MERGER
BETWEEN
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
AND
FIRST FEDERAL SAVINGS BANK
DATED AS OF ________________, 2000
This Plan of Merger dated as of __________________, 2000 (the "Merger
Plan") is entered into by and among: (i) SOUND FEDERAL SAVINGS AND LOAN
ASSOCIATION, a savings association and a wholly owned subsidiary of Sound
Federal Bancorp ("Sound Federal"); and (ii) FIRST FEDERAL SAVINGS BANK, a
federally chartered savings bank, a wholly owned Subsidiary of Peekskill
Financial Corp. ("PFC") which is wholly owned by Sound Federal. This Merger Plan
is being entered into in connection with the Agreement and Plan of Merger by and
among Sound Federal Bancorp, Sound Federal and PFC. The Merger Agreement has
been approved by at least a majority vote of the Boards of Directors of Sound
Federal and First Federal. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Merger Agreement.
In consideration of the mutual covenants and agreements set forth herein
and subject to the terms and conditions of the Merger Agreement, the parties
hereto agree as follows:
Section 1. Definition. Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
1.1 "Effective Time" shall mean the date at which the Merger contemplated
by this Merger Plan becomes effective as provided in Section 2 hereof.
1.2 "First Federal Common Stock" shall mean the common stock, par value
$.01 per share, of First Federal.
1.3 "Merger" shall refer to the merger of First Federal with and into Sound
Federal as provided in Section 2 of this Merger Plan.
1.4 "Surviving Institution" shall refer to Sound Federal as the surviving
institution of the Merger.
Section 2. The Merger. At the Effective Time, First Federal will be merged
with and into Sound Federal with Sound Federal as the Surviving Institution (the
"Merger"). The separate corporate existence of First Federal shall thereupon
cease. Sound Federal as the Surviving Institution shall continue to be governed
by the laws of the United States, and its existence with all of its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
Section 3. Name of Surviving Institution. The name of the Surviving
Institution shall be Sound Federal Savings and Loan Association.
Section 4. Location of Main Office and Branch Officers. At the Effective
Time, the main office of Sound Federal, and each of its branches, including
branches acquired from First Federal, shall remain open. The main office and
branch locations of Sound Federal following consummation of the Merger shall be:
1
Main Office: Branch Office: Branch Office:
Branch Office: Branch Office:
Section 5. Assets and Liabilities. At the Effective Time, all assets and
property (real, personal, and mixed, tangible and intangible, chooses in action,
rights, and credits), then owned by First Federal shall immediately become the
property of the Surviving Institution. The Surviving Institution shall be deemed
to be a continuation of First Federal, the rights and obligations of which shall
succeed to such rights and obligations and the duties and liabilities connected
therewith.
2
Section 6. Directors of Surviving Institution. At the Effective Time, the
directors of Sound Federal shall remain as the directors of the Surviving
Institution. The names and addresses, and terms of such directors are set forth
below.
Name Address Term Expires
Section 7. Articles of Incorporation and Bylaws. At the Effective Time, the
articles of incorporation and bylaws of Sound Federal shall remain in effect and
shall become the articles of incorporation and bylaws of the Surviving
Institution.
Section 8. Counterparts. This Merger Plan may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one instrument.
Section 9. Amendments. This Merger Plan may be amended by the parties
hereto, by or pursuant to action taken by their respective boards of directors.
This Merger Plan may not be amended except by an instrument in writing
specifically referring to this Section 9 and signed on behalf of each of the
parties hereto.
Section 10. Severability. Any provision of this Merger Plan which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 11. Governing Law. This Merger Plan shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles.
Section 12. Captions and References. The captions contained in this Merger
Plan are for convenience of reference only and do not form a part of this Merger
Plan.
3
IN WITNESS WHEREOF, the parties hereto have caused this Merger Plan to be
duly executed as of the date first above written.
SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION
By: _________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
FIRST FEDERAL SAVINGS BANK
By: _________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
4
EXHIBIT C
PLAN OF COMPLETE LIQUIDATION
AND DISSOLUTION
CERTIFICATE OF DISSOLUTION
OF
PEEKSKILL FINANCIAL CORP.
****
Peekskill Financial Corp. a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That dissolution was authorized on __________, 2000.
SECOND: That dissolution has been authorized by the Board of Directors and
stockholders of the corporation in accordance with the provisions of
subsections (a) and (b) of section 275 of the General Corporation Law
of the State of Delaware.
THIRD: That the names and addresses of the directors and officers of Peekskill
Financial Corp. are as follows:
DIRECTORS
---------
NAMES ADDRESSES
OFFICERS
--------
NAMES ADDRESSES
EXHIBIT D
PFC VOTING AGREEMENT
February 16, 2000
Sound Federal Bancorp
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Sound Federal Bancorp, Sound Federal Savings and Loan Association ("Sound
Federal"), and Peekskill Financial Corp. ("PFC") have entered into an Agreement
and Plan of Merger dated as of February 16, 2000 (the "Merger Agreement"),
pursuant to which, subject to the terms and conditions set forth therein, (a)
PFC will merge with and into Interim with PFC surviving the merger (referred to
as the "Merger") and PFC shall be liquidated into Sound Federal, with Sound
Federal; and (b) shareholders of PFC will receive $22.00 in cash in exchange for
each share of common stock of PFC outstanding on the closing date.
Sound Federal Bancorp and Sound Federal have requested, as a condition to
its execution and delivery to PFC of the Merger Agreement, that the undersigned,
being directors and executive officers of PFC, execute and deliver to Sound
Federal Bancorp this Letter Agreement.
Each of the undersigned, in order to induce Sound Federal Bancorp and Sound
Federal to execute and deliver to PFC the Merger Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of PFC called to vote for approval of the Merger so that all shares
of common stock of PFC then beneficially owned by the undersigned will be
counted for the purpose of determining the presence of a quorum at such meetings
and to vote all such shares (i) in favor of approval and adoption of the Merger
Agreement and the transactions contemplated thereby (including any amendments or
modifications of the terms thereof approved by the Board of Directors of PFC),
and (ii) against approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving PFC;
(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 PFC, to
approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any common stock
of PFC on or prior to the date of the meeting of PFC shareholders to vote on the
Merger Agreement; and
(d) 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.
The obligations set forth herein shall terminate concurrently with any
termination of the Merger Agreement.
----------------------------
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.
----------------------------
The undersigned intend to be legally bound hereby.
Sincerely,
Name
EXHIBIT E
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated February 16, 2000, between Peekskill
Financial Corporation., a Delaware corporation ("Issuer") and Sound Federal
Bancorp, a federally-chartered corporation ("Grantee"). Capitalized terms used
herein without definition have the meanings specified in the Merger Agreement
(as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated February 16, 2000 (the "Merger Agreement"), which agreement has
been executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 350,684 fully
paid and nonassessable shares of its common stock, par value $0.01 per share
("Common Stock"), at a price of $12.25 per share (such price, as adjusted if
applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $12.25 per share, such Option
Price shall be equal to such lesser price. The number of shares of Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.99% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
(c) If this Option is exercised by Grantee, in accordance with the terms
hereof, Grantee may become an "interested stockholder" of Issuer for purposes of
Section 203 of the DGCL. Execution of this Option constitutes and evidences
Issuer's approval of the transaction pursuant to which Grantee becomes, through
an exercise of this Option, an "interested stockholder" of Issuer for purposes
of Section 203 of the DGCL.
2. (a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") may exercise the Option, in whole or
part, if, but only if, both an Initial Triggering Event (as hereinafter defined)
and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
180 days following the first such Subsequent Triggering Event. Each of the
following shall be an Exercise Termination Event: (i) the Merger Effective Date
(as defined in the Merger Agreement); (ii) termination of the Merger Agreement
in accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; or (iii) the passage of eighteen
months after termination of the Merger Agreement if such termination follows or
occurs at the same time as the occurrence of an Initial Triggering Event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer participates (or authorizes participation in)
negotiations regarding a Superior Proposal, as contemplated in Sections
5.06 and 7.01(c) of the Merger Agreement.
(ii) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
and the rules and regulations thereunder (the "1934 Act")) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary"). For
purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer
or any Significant Subsidiary (as defined in Rule 1-02 of Regulation
S-X promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of beneficial ownership of securities representing 15% or
more of the voting power of Issuer or any Significant Subsidiary of
Issuer, provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only Issuer
and/or Issuer Subsidiaries;
(iii) (A) Any person other than Grantee, or any Grantee
Subsidiary, or any Issuer Subsidiary acting in a fiduciary capacity
(collectively, "Excluded Persons"), alone or together with such
person's affiliates and associates (as such terms are defined in Rule
12b-2 under the ▇▇▇▇ ▇▇▇) shall have acquired beneficial ownership or
the right to acquire beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the term "beneficial ownership" for
purposes of this Option Agreement having the meaning assigned thereto
in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder) or (B) any group (as such term is defined in Section
13(d)(3) of the 1934 Act), other than a group of which only Excluded
Persons are members, shall have been formed that beneficially owns15%
or more of the shares of Common Stock then outstanding;
(iv) The Board of Directors of Issuer shall have failed to
recommend to its stockholders the adoption of the Merger Agreement or
shall have withdrawn, modified or changed its recommendation in a
manner adverse to Grantee;
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(v) After a proposal is made by a third party (other than an
Excluded Person) to Issuer to engage in an Acquisition Transaction:
Issuer shall have intentionally and knowingly breached any
representation, warranty, covenant or agreement contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement pursuant to Section 7.01(b)(i) therein (without regard
to any grace period provided for therein) and (y) shall not have been
cured prior to the Notice Date (as defined below); or the PFC
stockholders shall fail to approve the Merger Agreement.
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with any federal or state bank regulatory authority ("Regulatory
Authority"), for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded
Person of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in subparagraph (ii) of
subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
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(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Change in Bank Control
Act of 1978, as amended, or any state banking law, prior approval of or notice
to any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the any Regulatory Authority as they
may require) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall
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constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive, upon
exercise of the Option (at the aggregate exercise price calculated in accordance
with Section 1 of this Agreement), the number and class of shares or other
securities or property that Holder would have received in respect of the Common
Stock if the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable.
6. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power with
respect of the election of directors (or other persons similarly
responsible for direction of the business and affairs) of the issuer of
the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with
Issuer,
5
or (iii) in the event of a sale of all or substantially all of Issuer's
assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by
a nationally recognized investment banking firm selected by the Holder,
divided by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the six months immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of Common Stock issued
by the person merging into Issuer or by any company which controls or
is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option cannot,
for legal reasons, be the same as the Option, such term or condition shall be as
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to (i) the product of (A) the Assigned Value
and (B) the number of shares of Common Stock for which the Option is then
exercisable, divided by (ii) the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable. Notwithstanding anything
to the contrary in this Section 6, the Substitute Option shall be subject to the
limitation set forth in Section 9 of this Agreement, as if the Substitute Option
is the Option.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 6 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
7. The 180-day period for exercise of certain rights under Section 2
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
6
8. Repurchase at the Option of Holder. (a) At the request of Holder at any
time commencing upon the first occurrence of a Repurchase Event (as defined in
Section 8(d)) and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Common Stock over (y) the Option Price (subject
to adjustment pursuant to Sections 1 and 5), 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 Sections 1 and 5) paid (or, in
the case of Option Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by Holder for each share of
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the number
of such shares.
Notwithstanding anything in this Section 8 to the contrary, the payment of
the Repurchase Consideration to the Holder shall be subject to the limitation
set forth in Section 9 of this Agreement.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder 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. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any federal or state
regulatory authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval). If any federal or state regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If any federal or state regulatory
authority prohibits the repurchase in part but not in whole, then Holder shall
have the right (i) to revoke the repurchase request or (ii) to the extent
permitted by such regulatory authority, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and Holder
shall thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at
7
the Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the preceding
sentence within five (5) business days of receipt of notice of disapproval of
the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(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 8(d)(i), (ii) the
price per share of Common Stock received by holders of Common Stock in
connection with any merger or other business combination transaction described
in Section 6(a)(i), 6(a)(ii) or 6(a)(iii), or (iii) the highest closing bid
price per share of Issuer Common Stock quoted on the Nasdaq System (or if Issuer
Common Stock is not quoted on the Nasdaq System, the highest bid price per share
as quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by Holder) during
the 40 business days preceding the Request Date; provided, however, that in the
event of a sale of less than all of Issuer's assets, the Applicable Price shall
be the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder, divided by the number of shares of
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if, prior
to an Exercise Termination Event, (i) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership of (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to
acquire beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the then outstanding
shares of Issuer Common Stock, or (ii) any of the transactions described in
Section 6(a)(i), 6(a)(ii) or 6(a)(iii) shall be consummated.
9. Limitation on Value of Option. (a) Notwithstanding any other
provision of this Agreement, this Option may not be exercised (nor Repurchase
Consideration paid to a Holder) for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below) of more than
$2,350,000; provided that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date, as long as the Notional
Total Profit from all such exercises (and Repurchase Consideration paid) does
not exceed $2,350,000.
(b) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit (as
8
defined below) determined as of the date of such proposed exercise assuming that
this Option were exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by Grantee and its
affiliates as of such date, were sold for cash at the closing market price for
the Issuer Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares (or any portion thereof) pursuant to
Section 8, less (y) the Grantee's purchase price for such Option Shares, (iii)
the net cash amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party, and (v) any amount
equivalent to the foregoing with respect to the Substitute Option.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and
the transactions contemplated hereby and thereby from, and this Agreement and
the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting the
voting rights of stockholders and (iii) any provision in its certificate of
incorporation, or bylaws restricting or limiting stock ownership or the voting
rights of stockholders.
(d) The execution, delivery and performance of this Agreement does not
or will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of, or a default under, its certificate of incorporation or bylaws, or
9
the comparable governing instruments of any of its subsidiaries, or (ii) a
breach or violation of, or a default under, any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or nongovernmental permit or license to which it or any of
its subsidiaries is subject, that would, in any case referred to in this clause
(ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws
and regulations.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except (i)
to any wholly-owned Subsidiary or (ii) that in the event a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event, Grantee,
subject to the express provisions hereof, may assign in whole or in part its
rights and obligations hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its 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 Agreement.
14. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transactions contemplated
by the Merger Agreement), then in the case of a Holder or any Related Person
thereof, the Option held by it shall immediately terminate and be of no further
force or effect. A Related Person of a Holder means any Affiliate (as defined in
Rule 12b-2 of the rules and regulations under the ▇▇▇▇ ▇▇▇) of the Holder and
any person that is the beneficial owner of 20% or more of the voting power of
the Holder.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
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16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles
of conflicts of laws thereof.
19. This 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.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein, or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and, as
permitted herein, assignees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above written.
PEEKSKILL FINANCIAL CORPORATION
BY: ------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board and Chief
Executive Officer
SOUND FEDERAL BANCORP
BY: ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer