AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NIAGARA BANCORP, INC.
NIAGARA MERGER CORP
AND
CNY FINANCIAL CORPORATION
DATED AS OF DECEMBER 28, 1999
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
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....................................7
Section 2.02 Conversion of Shares........................................................7
Section 2.03 Exchange Procedures.........................................................8
Section 2.04 Stock Options and PRRP Shares..............................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CNYF
Section 3.01 Organization...............................................................11
Section 3.02 Capitalization.............................................................12
Section 3.03 Authority; No Violation....................................................12
Section 3.04 Consents...................................................................13
Section 3.05 Financial Statements.......................................................13
Section 3.06 Taxes......................................................................14
Section 3.07 No Material Adverse Effect.................................................15
Section 3.08 Contracts..................................................................15
Section 3.09 Ownership of Property; Insurance Coverage..................................16
Section 3.10 Legal Proceedings..........................................................17
Section 3.11 Compliance With Applicable Law.............................................17
Section 3.12 ERISA......................................................................18
Section 3.13 Brokers, Finders and Financial Advisors....................................19
Section 3.14 Environmental Matters......................................................19
Section 3.15 Loan Portfolio.............................................................21
Section 3.16 Securities Documents.......................................................22
Section 3.17 Related Party Transactions.................................................22
Section 3.18 Schedule of Termination Benefits...........................................22
Section 3.19 Deposits...................................................................23
Section 3.20 Antitakeover Provisions Inapplicable.......................................23
Section 3.21 Fairness Opinion...........................................................23
Section 3.22 Year 2000..................................................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIAGARA BANCORP
Section 4.01 Organization...............................................................24
Section 4.02 Capitalization.............................................................24
Section 4.03 Authority; No Violation....................................................25
Section 4.04 Consents...................................................................25
Section 4.05 Compliance with Applicable Law.............................................26
Section 4.06 Information to be Supplied.................................................26
Section 4.07 Year 2000..................................................................26
Section 4.08 Financing..................................................................27
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of CNYF's Business.................................................27
Section 5.02 Access; Confidentiality....................................................30
Section 5.03 Regulatory Matters and Consents............................................31
Section 5.04 Taking of Necessary Action.................................................32
Section 5.05 Certain Agreements.........................................................32
Section 5.06 No Other Bids and Related Matters..........................................34
Section 5.07 Duty to Advise; Duty to Update CNYF Disclosure Schedules...................35
Section 5.08 Conduct of Niagara Bancorp's Business......................................35
Section 5.09 Board and Committee Minutes................................................36
Section 5.10 Undertakings by CNYF and Niagara Bancorp...................................36
Section 5.11 Employee and Termination of Benefits; Directors and Management.............38
Section 5.12 Duty to Advise; Duty to Update Niagara Bancorp's Disclosure Schedule.......39
Section 5.13 Governance and Related Matters.............................................39
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to CNYF's Obligations under this Agreement......................40
Section 6.02 Conditions to Niagara Bancorp's Obligations under this Agreement...........41
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination................................................................42
Section 7.02 Effect of Termination......................................................43
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses...................................................................43
Section 8.02 Non-Survival of Representations and Warranties.............................44
Section 8.03 Amendment, Extension and Waiver............................................44
Section 8.04 Entire Agreement...........................................................44
Section 8.05 No Assignment..............................................................44
Section 8.06 Notices....................................................................44
Section 8.07 Captions...................................................................45
Section 8.08 Counterparts...............................................................45
Section 8.09 Severability...............................................................45
Section 8.10 Specific Performance.......................................................46
Section 8.11 Governing Law..............................................................46
EXHIBITS:
Exhibit A Stock Option Agreement
Exhibit B Form of CNYF Voting Agreement
Exhibit 6.1 Form of Opinion of Counsel for Niagara Bancorp
Exhibit 6.2 Form of Tax Opinion of Counsel for Niagara Bancorp
Exhibit 6.3 Form of Opinion of Counsel for CNYF
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
December 28, 1999, is by and among Niagara Bancorp, Inc., a Delaware corporation
("Niagara Bancorp"), Niagara Merger Corp, a wholly-owned subsidiary of Niagara
Bancorp incorporated under the laws of the State of Delaware, and CNY Financial
Corporation, a Delaware corporation ("CNYF"). Each of Niagara Bancorp, Niagara
Merger Corp and CNYF is sometimes individually referred to herein as a "party,"
and Niagara Bancorp, Niagara Merger Corp and CNYF are sometimes collectively
referred to herein as the "parties."
RECITALS
WHEREAS, Niagara Bancorp, a registered bank holding company, with
principal offices in Lockport, New York, owns all of the issued and outstanding
capital stock of Lockport Savings Bank, a New York chartered savings bank
("Lockport Savings"), with principal offices in Lockport, New York.
WHEREAS, CNYF, a registered bank holding company, with principal
offices in Cortland, New York, owns all of the issued and outstanding capital
stock of Cortland Savings Bank ("CSB"), a New York chartered savings bank, with
principal offices in Cortland, New York.
WHEREAS, the Boards of Directors of the respective parties hereto deem
it advisable and in the best interests of the respective stockholders to
consummate the business combination transaction contemplated herein in which
CNYF, subject to the terms and conditions set forth herein, shall be merged with
and into Niagara Merger Corp, with CNYF surviving the merger, to be followed by
the merger of CNYF with and into Niagara Bancorp, with Niagara Bancorp surviving
the merger (collectively referred to as the "Merger"), with the result that CSB
shall be, and shall operate as, a wholly-owned subsidiary of Niagara Bancorp;
and
WHEREAS, in connection with the execution of this Agreement, as an
inducement to Niagara Bancorp to enter into this Agreement, CNYF and Niagara
Bancorp have entered into a Stock Option Agreement dated as of even date
herewith pursuant to which CNYF will grant Niagara Bancorp the right to purchase
certain shares of CNYF 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, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls,
or is controlled by, or is under common control with, such Person and,
without limiting the generality of the foregoing, includes any
executive officer or director of such Person and any Affiliate of such
executive officer or director.
"Agreement" means this agreement, and any amendment or
supplement hereto, which constitutes a "plan of merger" between Niagara
Bancorp, Niagara Merger Corp and CNYF.
"Applications" means the applications for regulatory approval
which are required by the transactions contemplated hereby.
"BIF" means the Bank Insurance Fund administered by the FDIC.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"Closing Date" means the date determined by Niagara Bancorp,
in its sole discretion, upon five (5) days prior written notice to
CNYF, 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 Niagara Bancorp and CNYF shall mutually
agree.
"CNYF Common Stock" means the common stock of CNYF described
in Section 3.02(a).
"CNYF Disclosure Schedules" means the Disclosure Schedules
delivered by CNYF to Niagara Bancorp pursuant to Article III of this
Agreement.
"CNYF Financials" means (i) the audited consolidated financial
statements of CNYF as of December 31,1998 and1997 and for the three
years ended December 31,1998, including the notes thereto, and (ii) the
unaudited interim consolidated financial statements of CNYF as of each
calendar quarter thereafter included in Securities Documents filed by
CNYF.
"CNYF Stock Option Plan" means the CNY Financial Corporation
Stock Option Plan for Directors, Officers and Employees.
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"CNYF Regulatory Reports" means the Call Reports of CSB and
accompanying schedules, as filed with the FDIC, for each calendar
quarter beginning with the quarter ended March 31, 1998, through the
Closing Date, and all Annual Reports on Form FR Y-6, any Current Report
on Form FR Y-6A filed with the FRB by CNYF from December 31,1998
through the Closing Date.
"CNYF Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by
CNYF, except any corporation the stock of which is held in the ordinary
course of the lending activities of CNYF.
"Code" means the Internal Revenue Code of 1986, as amended.
"Merger" means the merger of CNYF with and into Niagara Merger
Corp, with CNYF surviving the merger, to be followed by the merger of
CNYF, as a wholly-owned subsidiary of Niagara Bancorp, with and into
Niagara Bancorp, with Niagara Bancorp being the surviving corporation.
"Department" means the Banking Department of the State of New
York.
"DGCL" means the Delaware General Corporation Law.
"DOL" means the U.S. Department of Labor.
"Environmental Laws" 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
relating to the presence of Hazardous Material, or (iii) exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of,
Hazardous Material, 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 Niagara Bancorp
and agreed to by CNYF, as provided in Section 2.01(b) of this
Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
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"FRB" means the Board of Governors of the Federal Reserve
System.
"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.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Loan Property" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"Lockport Savings" means Lockport Savings Bank, Lockport, New
York.
"Material Adverse Effect" shall mean, with respect to CNYF,
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 value of the assets of
CNYF resulting from a change in interest rates generally, (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 (iii) any action taken by
CNYF or any CNYF Subsidiary at the request of Niagara Bancorp.
"Merger Effective Date" means that date upon which the
certificate of merger as to the merger of CNYF with and into Niagara
Merger Corp is filed with the Delaware Office of the Secretary of
State, or as otherwise stated in the certificate of merger, in
accordance with the of the DGCL.
"Niagara Bancorp Common Stock" has the meaning given to that
term in Section 4.02(a) of this Agreement.
4
"Niagara Bancorp Disclosure Schedules" means the Disclosure
Schedules delivered by Niagara Bancorp to CNYF pursuant to Article IV
of this Agreement.
"Niagara Bancorp Financials" means (i) the audited
consolidated financial statements of Niagara Bancorp as of December 31,
1998 and 1997 and for the three years ended December 31, 1998,
including the notes thereto, and (ii) the unaudited interim
consolidated financial statements of Niagara Bancorp as of each
calendar quarter thereafter included in Securities Documents filed by
Niagara Bancorp
"Niagara Bancorp Regulatory Reports" means the Call Reports of
Lockport Savings and accompanying schedules, as filed with the FDIC,
for each calendar quarter beginning with the quarter ended March 31,
1999, through the Closing Date, and all Annual Reports on Form FR Y-6,
any Current Report of on Form FR Y-6A filed with the FRB by Niagara
Bancorp from April 17, 1998 through the Closing Date.
"Niagara Bancorp Option" means the option granted to Niagara
Bancorp to acquire shares of CNYF Common Stock pursuant to the Stock
Option Agreement.
"Niagara Bancorp Subsidiary" means any corporation, 50% or
more of the capital stock of which is owned, either directly or
indirectly, by Niagara Bancorp or Lockport Savings, except any
corporation the stock of which is held as security by Lockport Savings
in the ordinary course of its lending activities.
"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).
"PRRP" means the CNYF Personnel Recognition and Retention
Plan.
"Proxy Statement" means the proxy statement, together with any
supplements thereto, to be transmitted to holders of CNYF 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
Superintendent, the OCC, the FDIC, the FRB, the SEC or the respective
staffs thereof.
"REIT Preferred Stock" means the preferred stock of Cortland
REIT Corp., a New York corporation.
5
"Rights" means warrants, options, rights, convertible
securities and other capital stock equivalents which obligate an entity
to issue its securities.
"SBLI" means Savings Bank Life Insurance.
"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.
"Stock Option Agreement" means the Stock Option Agreement
dated as of even date herewith pursuant to which CNYF has granted
Niagara Bancorp the right to purchase certain shares of CNYF Common
Stock and which is attached to this Agreement as Exhibit A 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 Niagara Bancorp or CNYF, as the case may be, in the ordinary
course of its lending activities.
"Superintendent" means the Superintendent of Banks of the
State of New York, and where appropriate includes the State of New York
Banking Department and the Banking Board of the State of New York.
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ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
SECTION 2.01 EFFECTS OF MERGER; SURVIVING CORPORATION.
(a) (i) On the Merger Effective Date, Niagara Merger Corp shall
merge with and into CNYF; the separate existence of Niagara Merger Corp shall
cease; CNYF shall be the surviving corporation in the Merger (the "Surviving
Corporation") and a wholly-owned subsidiary of Niagara Bancorp; and all of the
property (real, personal and mixed), rights, powers and duties and obligations
of Niagara Merger Corp shall be taken and deemed to be transferred to and vested
in CNYF, as the Surviving Corporation in the Merger, without further act or
deed; all in accordance with the applicable laws of the State of Delaware.
(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 Certificate of Incorporation of Niagara Merger Corp, 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 Niagara Merger Corp, 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 Niagara
Merger Corp duly elected and holding office immediately prior to the Effective
Date shall be the directors 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 Bylaws of the Surviving
Corporation.
(iv) On the Merger Effective Date, the officers of Niagara
Merger Corp 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,
Niagara Bancorp 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, directors or officers of CNYF 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. Subject to Section 6.03, at the
Merger Effective Date, by virtue of the Merger and without any action on the
part of CNYF or the holders of shares of CNYF Common Stock:
7
(i) Each outstanding share of CNYF 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 $18.75 in cash (referred to as the "Merger
Consideration).
(ii) Any shares of CNYF 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 Niagara 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.
(iv) Each share of Niagara Bancorp Common Stock issued and outstanding
immediately before the Merger Effective Date shall remain an outstanding share
of Common Stock of Niagara Bancorp
(v) The holders of certificates representing shares of CNYF Common
Stock (any such certificate being hereinafter referred to as a "Certificate")
shall cease to have any rights as stockholders of CNYF, 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, and in any
event within five calendar days of the Merger Effective Date, an Exchange Agent
designated by Niagara Bancorp shall 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. The Exchange Agent shall
send payments within three business days after the receipt of properly submitted
documents. Approval of this Agreement by the stockholders of CNYF shall
constitute authorization for Niagara Bancorp to designate and appoint such
Exchange Agent. Neither Niagara Bancorp nor the Exchange Agent shall be
obligated to deliver the Merger Consideration to a former stockholder of CNYF
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 Niagara Bancorp. The Exchange Agent in its
agreement shall be obligated to pay the Merger Consideration in accordance with
this Agreement.
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(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
therefore 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 of 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, Niagara 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 CNYF stockholders
shall be entitled to receive on the Merger Effective Date pursuant to Section
2.02 hereof.
(d) The payment of the Merger Consideration upon the conversion of CNYF
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 CNYF Common Stock.
(e) Promptly following the date which is twelve months after the Merger
Effective Date, the Exchange Agent shall deliver to Niagara 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 CNYF
Common Stock may surrender such Certificate to Niagara Bancorp and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefore the Merger Consideration multiplied by the number of
shares of CNYF 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 CNYF of the shares of CNYF
Common Stock which are outstanding immediately prior to the Merger Effective
Date, and the stock transfer books of CNYF 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 CNYF Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall deliver (except as otherwise
provided in Section 2.02(iii)) 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 Niagara 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 Niagara Bancorp as
indemnity against any claim that may be made against CNYF, Niagara Bancorp or
any other party with respect to the certificate alleged to have been lost,
stolen or destroyed.
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(h) Niagara Bancorp is hereby authorized to adopt additional rules and
regulations with respect to the matters referred to in this Section 2.03 not
inconsistent with the provisions of this Agreement.
SECTION 2.04 STOCK OPTIONS AND PRRP SHARES. On the Merger Effective
Date, each option issued and outstanding that is unexercised pursuant to CNYF's
Stock Option Plan (options to purchase 340,690 shares, subject to reduction upon
the exercise of outstanding options) shall convert into the right to receive
cash in an amount equal to the Merger Consideration minus the exercise price of
the option, multiplied by the number of shares covered by the option. On the
Merger Effective Date, CNYF shall provide Niagara Bancorp with a schedule of all
outstanding options not exercised, the exercise price thereof, the optionee's
mailing address, and the optionees' acknowledgment that the payment pursuant to
this Section 2.04 shall be in full satisfaction of all rights under the CNYF
Stock Option Plan and any option award agreement entered into thereunder. Within
three business days after the Merger Effective Date, Niagara Bancorp shall pay
to the holders of the options, by mailing a bank check for the same to the
applicable address shown on the schedule, the amount payable with respect to the
option as set forth in this paragraph, net of any applicable withholding taxes.
Such payments shall be in full satisfaction of all the optionee's rights with
respect to the option.
All shares awarded pursuant to the PRRP which have not yet been
distributed by the PRRP trust to the beneficial owners thereof shall, on the
Merger Effective Date, convert into the right to receive the Merger
Consideration and shall be treated in the same manner as all other issued and
outstanding shares. CNYF shall take all actions necessary so that as of the
Merger Effective Date, or as soon thereafter as permitted under the PRRP trust,
all shares held by the PRRP trust which are not yet the subject of awards shall
be returned to CNYF or the Surviving Corporation and no Merger Consideration
shall be payable with respect thereto, except to the extent the Niagara Bancorp
reasonably directs CNYF to do otherwise.
CNYF hereby represents and warrants to Niagara Bancorp that the maximum
number of shares of CNYF Common Stock subject to issuance pursuant to the
exercise of stock options issued and outstanding under CNYF Stock Option Plans
is not and shall not be at or prior to the Effective Time more than 340,690 and
the maximum number of shares awarded pursuant to the PRRP is not and shall not
be at or prior to the Effective Time more than 181,278 shares.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CNYF
CNYF represents and warrants to Niagara 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 in all
material respects (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 CNYF Disclosure Schedules delivered by CNYF to Niagara
Bancorp on the date hereof. CNYF has made a good faith effort to ensure that the
disclosure on each schedule of the CNYF Disclosure Schedules corresponds to the
section reference herein. However, for purposes of the CNYF 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) CNYF 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
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). CNYF 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.
(b) CSB is a savings bank organized, validly existing and in good
standing under the laws of the State of New York. Except as set forth in CNYF
DISCLOSURE SCHEDULE 3.01(b), CSB is the only CNYF Subsidiary. The deposits of
CSB are insured by the FDIC through the BIF 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 CSB. CSB is a member in good standing of
the Federal Home Loan Bank of New York and owns the requisite amount of stock
therein. Each other CNYF Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. CNYF has heretofore made available to Niagara
Bancorp a complete and correct copy of the Certificate of Incorporation and
By-laws or comparable organizational documents, each as amended to the date
hereof, of each of its Subsidiaries.
(c) Except as disclosed in CNYF DISCLOSURE SCHEDULE 3.01(c), the
respective minute books of CNYF and each CNYF 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. The CSB SBLI Department and its employees have all licenses
required in order to conduct the business of the SBLI Department as presently
conducted. Any surplus accounts required to be maintained by the Savings Bank
Life Insurance Fund of New York are properly maintained.
(d) Prior to the date of this Agreement, CNYF has delivered to Niagara
Bancorp true and correct copies of the certificate of incorporation and bylaws
of CNYF and CSB.
11
SECTION 3.02 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 18,000,000
shares of Common Stock, $.01 par value per share ("CNYF Common Stock"), and
2,000,000 shares of Preferred Stock, par value $.01 per share ("CNYF Preferred
Stock"). There are 4,601,373 shares of CNYF Common Stock validly issued and
outstanding, all of which are fully paid and non-assessable, which shares
include 32,988 shares which the PRRP Trust owns but which have not yet awarded
to PRRP participants. No shares of CNYF Preferred Stock have been issued or are
outstanding. Neither CNYF nor any CNYF 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 CNYF Common
Stock, or any other security of CNYF or any securities representing the right to
vote, purchase or otherwise receive any shares of CNYF Common Stock or any other
security of CNYF, other than shares issuable under the Niagara Bancorp Option
and other than as set forth in reasonable detail in the CNYF DISCLOSURE SCHEDULE
3.02(a). CNYF DISCLOSURE SCHEDULE 3.02(a) sets forth: the name of each holder of
options to purchase CNYF Common Stock, the number of shares each such individual
may acquire pursuant to the exercise of such options, and the exercise price
relating to the options held; and the name of each recipient of an award under
the PRRP, the number of unvested shares subject to such award, and the vesting
schedule.
(b) CNYF owns all of the capital stock of CSB, free and clear of any
lien or encumbrance. Except for the CNYF Subsidiaries, and as set forth in CNYF
DISCLOSURE SCHEDULE 3.02(b), CNYF does not possess, directly or indirectly, any
material equity interest in any corporation, except for equity interests held in
the investment portfolios of CNYF Subsidiaries, equity interests held by CNYF
Subsidiaries in a fiduciary capacity, equity interests held in connection with
the lending activities of CNYF Subsidiaries, and equity interests held as of the
date of this Agreement by CNYF as passive investments not representing 5% or
more of any class of stock of any issuer. Except as disclosed in the CNYF
DISCLOSURE SCHEDULE 3.02(b), all the outstanding shares of capital stock of each
CNYF Subsidiary are validly issued, fully paid and non-assessable and are owned
by CNYF or by a wholly-owned subsidiary of CNYF, free and clear of any Liens.
There are no existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the sale, issuance or voting of any
shares of the issued or unissued capital stock of any CNYF Subsidiary which have
been issued, granted or entered into by CNYF or any of its Subsidiaries.
(c) To CNYF'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
CNYF Common Stock, except as disclosed in the CNYF DISCLOSURE SCHEDULE 3.02(c).
SECTION 3.03 AUTHORITY; NO VIOLATION.
(a) CNYF 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 CNYF and the completion by CNYF of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of CNYF and, except for approval of the shareholders of CNYF,
12
no other corporate proceedings on the part of CNYF are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by CNYF and, subject to approval by the shareholders of
CNYF and receipt of the required approvals of Regulatory Authorities described
in Section 4.04 hereof, constitutes the valid and binding obligation of CNYF,
enforceable against CNYF in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
and as to CSB, the conservatorship or receivership provisions of the FDIA, and
subject, as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by CNYF, (B)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 4.04 hereof and CNYF's and Niagara Bancorp's compliance with any
conditions contained therein, the consummation of the transactions contemplated
hereby, and (C) compliance by CNYF or CSB 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 CNYF or any CNYF Subsidiary or the
charter and bylaws of CSB; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to CNYF or
any CNYF 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 CNYF or CSB 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 CNYF or CSB
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, and
filings from or with the Regulatory Authorities referred to in Section 4.04
hereof and compliance with any conditions contained therein, and the approval of
this Agreement by the requisite vote of the shareholders of CNYF, no consents,
waivers or approvals of, or filings or registrations with, any governmental
authority are necessary, and, to CNYF's knowledge, 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 CNYF, and (b) the completion by CNYF or CSB of the transactions contemplated
hereby. CNYF 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) CNYF has previously delivered to Niagara Bancorp the CNYF
Regulatory Reports. The CNYF 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
13
shareholders' equity of CNYF as of and for the periods ended on the dates
thereof, in accordance with applicable regulatory accounting principles applied
on a consistent basis.
(b) CNYF has previously delivered to Niagara Bancorp the CNYF
Financials. The CNYF 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 CNYF
and the CNYF 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 CNYF Financials
or the CNYF Regulatory Reports, CNYF 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
CNYF Financials or CNYF 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 and which are incurred in the
ordinary course of business, consistent with past practice and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
SECTION 3.06 TAXES. CNYF and the CNYF Subsidiaries are members of the
same affiliated group within the meaning of IRC Section 1504(a). CNYF has duly
filed all federal, state and material local tax returns required to be filed by
or with respect to CNYF and all CNYF Subsidiaries on or prior to the Closing
Date (all such returns being accurate and correct in all material respects) and
has duly paid or will pay, or made or will make, provisions for the payment of
all material federal, state and local taxes which have been incurred by or are
due or claimed to be due from CNYF and any CNYF 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 CNYF or any of its Subsidiaries, and no claim has been made by any
authority in a jurisdiction where CNYF or any of its Subsidiaries do not file
tax returns that CNYF or any such Subsidiary is subject to taxation in that
jurisdiction. Except as set forth in CNYF DISCLOSURE SCHEDULE 3.06, CNYF 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. CNYF 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 CNYF 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 in all material respects.
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SECTION 3.07 NO MATERIAL ADVERSE EFFECT. CNYF and the CNYF
Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect
since December 31, 1998.
SECTION 3.08 CONTRACTS.
(a) Except as set forth in CNYF DISCLOSURE SCHEDULE 3.08(a), neither
CNYF nor any CNYF 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 CNYF or any CNYF 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 CNYF or any CNYF Subsidiary;
(iii) any collective bargaining agreement with any labor union relating to
employees of CNYF or any CNYF Subsidiary; (iv) any agreement which by its terms
limits the payment of dividends by CNYF; (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 CNYF or any CNYF Subsidiary
is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, Federal Home Loan Bank
of New York advances, bankers' acceptances, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to Niagara Bancorp or any Niagara
Bancorp Subsidiary; or (vi) any contract (other than this Agreement) limiting
the freedom, in any material respect, of CNYF or CSB to engage in any type of
banking or bank-related business which CNYF 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 Niagara Bancorp on or before the date hereof, are listed on CNYF DISCLOSURE
SCHEDULE 3.08(a) and are in full force and effect on the date hereof and neither
CNYF nor any CNYF Subsidiary (nor, to the knowledge of CNYF, 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 CNYF
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 CNYF DISCLOSURE SCHEDULE 3.08(b), none of the employees
(including officers) of CNYF, possess the right to terminate their employment as
a result of the execution of this Agreement. Except as set forth in CNYF
DISCLOSURE SCHEDULE 3.08(b), no plan, contract, employment agreement,
termination agreement, or similar agreement or arrangement to which CNYF or any
CNYF Subsidiary is a party or under which CNYF or any CNYF 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 CNYF DISCLOSURE SCHEDULE 3.08(b), no such agreement,
plan, contract, or arrangement (x) provides for acceleration in the vesting of
15
benefits or payments due thereunder upon the occurrence of a change in ownership
or control of CNYF or any CNYF Subsidiary absent the occurrence of a subsequent
event; or (y) requires CNYF or any CNYF Subsidiary to provide a benefit in the
form of CNYF Common Stock or determined by reference to the value of CNYF Common
Stock. Except as set forth in CNYF DISCLOSURE SCHEDULE 3.08(b), no such
agreement, plan or arrangement with respect to officers or directors of CNYF, or
to CNYF's knowledge, to its employees, provides for benefits which will 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 CNYF DISCLOSURE SCHEDULE 3.09, CNYF and the
CNYF Subsidiaries have good and, as to real property, marketable title to all
material assets and properties owned by CNYF or any CNYF 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 CNYF Regulatory Reports and in the CNYF
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 any Federal Home Loan Bank, inter-bank credit
facilities, or any transaction by a CNYF 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. CNYF and the
CNYF Subsidiaries, as lessee, have the right under valid and subsisting leases
of real and material personal properties used by CNYF and its Subsidiaries in
the conduct of their businesses to occupy or use all such leased properties as
presently occupied and used by each of them. Except as disclosed in CNYF
DISCLOSURE SCHEDULE 3.09(a), 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 CNYF Financials.
(b) With respect to all material agreements pursuant to which CNYF or
any CNYF Subsidiary has purchased securities subject to an agreement to resell,
if any, CNYF or such CNYF Subsidiary, as the case may be, has a lien or security
interest (which to CNYF'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) CNYF and each CNYF Subsidiary currently maintains insurance
considered by CNYF to be reasonable for their respective operations and similar
in scope and coverage to that customarily maintained by other businesses
similarly engaged in a similar location, in accordance with good business
practice. CNYF 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. Except as disclosed in CNYF DISCLOSURE SCHEDULE
3.09(c), there are presently no material claims pending under such policies of
insurance and no notices have been given by CNYF under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
16
last three years CNYF 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 CNYF DISCLOSURE
SCHEDULE 3.10, neither CNYF nor any CNYF Subsidiary is a party to any, and there
are no pending or, to the best of CNYF'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 CNYF or any CNYF Subsidiary, (ii) to which CNYF or any CNYF
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 CNYF 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 CNYF and the CNYF Subsidiaries, taken as a whole.
SECTION 3.11 COMPLIANCE WITH APPLICABLE LAW.
(a) CNYF and the CNYF 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 nor otherwise have a
Material Adverse Effect on CNYF and the CNYF Subsidiaries, taken as a whole.
CNYF and its Subsidiaries, directly or indirectly, own, or are licensed or
otherwise possess legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
technology, know-how and tangible or intangible proprietary information or
material that are material to the business of CNYF and its Subsidiaries.
(b) Except as disclosed in CNYF DISCLOSURE SCHEDULE 3.11(b), neither
CNYF nor any CNYF Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that CNYF or any CNYF 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 CNYF or any
CNYF Subsidiary; (iii) requiring or threatening to require CNYF or any CNYF
Subsidiary, or indicating that CNYF or any CNYF 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 CNYF or any CNYF 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 CNYF or any CNYF Subsidiary, including
17
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 CNYF nor any CNYF
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement, except as set forth in CNYF DISCLOSURE SCHEDULE 3.11. The most recent
regulatory rating given to CSB as to compliance with the CRA is satisfactory or
better.
SECTION 3.12 ERISA.
(a) CNYF 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 CNYF
or any of its Subsidiaries (hereinafter collectively referred to as the "CNYF
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 have been provided to
Niagara Bancorp.
All of the CNYF 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
CNYF or any of its Subsidiaries. No liability to the PBGC has been or is
expected by CNYF or any of its Subsidiaries to be incurred with respect to any
CNYF 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)(" CNYF Pension
Plan") currently or formerly maintained by CNYF or any entity which is
considered one employer with CNYF under Section 4001(b)(1) of ERISA or Section
414 of the IRC (an "ERISA Affiliate"). No CNYF 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 CNYF Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such CNYF Pension Plan as of the end of the most
recent plan year with respect to the respective CNYF 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 CNYF 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 CNYF Pension Plan within the 12-month period ending
on the date hereof. Neither CNYF nor any of its Subsidiaries has provided, or is
required to provide, security to any CNYF Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the IRC. Neither
CNYF, 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.
18
(b) Each CNYF 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 "CNYF Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service ("IRS"), and
CNYF and its Subsidiaries are not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to CNYF's knowledge, threatened litigation, administrative action or proceeding
relating to any CNYF Employee Plan. There has been no announcement or commitment
by CNYF or any of its Subsidiaries to create an additional CNYF Employee Plan,
or to amend any CNYF Employee Plan, except for amendments required by applicable
law which do not materially increase the cost of such CNYF Employee Plan; and,
except as specifically identified in CNYF DISCLOSURE SCHEDULES, CNYF and its
Subsidiaries do not have any obligations for post-retirement or post-employment
benefits under any CNYF 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 CNYF Employee Plan, CNYF has supplied to Niagara 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 CNYF Employee Plan, including amendments thereto, (C) each
trust agreement, insurance contract or other funding arrangement relating to
such CNYF Employee Plan, including amendments thereto, (D) the most recent
summary plan description and summary of material modifications thereto for such
CNYF Employee Plan, if the CNYF Employee Plan is subject to Title I of ERISA,
(E) the most recent actuarial report or valuation if such CNYF Employee Plan is
a CNYF 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) No compensation payable by CNYF and any CNYF Subsidiary to any of
their employees under any CNYF 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 CNYF's
engagement of CIBC World Markets ("CIBC") in connection with transactions
contemplated by this Agreement, neither CNYF nor any CNYF 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 CNYF
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 CNYF Financials.
SECTION 3.14 ENVIRONMENTAL MATTERS.
(a) With respect to CNYF and each of its Subsidiaries, and except as
set forth in CNYF DISCLOSURE SCHEDULE 3.14:
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(i) Each of CNYF and its Subsidiaries, the Participation
Facilities, and, to CNYF's knowledge, the Loan Properties are, and have been, in
substantial compliance with, and are not liable under, any Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
CNYF's knowledge, threatened, before any court, governmental agency or board or
other forum against it or any of its 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 its Subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
CNYF's knowledge threatened, before any court, governmental agency or board or
other forum relating to or against any Loan Property (or CNYF or any of its
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 CNYF's knowledge, the properties currently owned or
operated by CNYF or any of its 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 CNYF nor any of its 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 CNYF's knowledge, there are no underground storage
tanks on, in or under any properties owned or operated by CNYF or any of its
Subsidiaries or any Participation Facility, and no underground storage tanks
have been closed or removed from any properties owned or operated by CNYF or any
of its Subsidiaries or any Participation Facility; and
(vii) To CNYF's knowledge, during the period of (s) CNYF's or
any of its Subsidiaries' ownership or operation of any of their respective
current properties or (t) CNYF's or any of its 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
CNYF's knowledge, prior to the period of (x) CNYF's or any of its Subsidiaries'
ownership or operation of any of their respective current properties or (y)
CNYF's or any of its 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.
20
(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 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 CNYF or its Subsidiaries in
whole or in part (each, a "Loan"), to the best knowledge of CNYF:
(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 CNYF nor any of its 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) CNYF or a Subsidiary is the sole holder of legal and
beneficial title to each Loan (or CNYF's applicable participation interest, as
applicable), except as otherwise referenced on the books and records of CNYF;
(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 CNYF;
(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; and
(vii) with respect to a Loan held in the form of a participation,
the participation documentation is legal, valid, binding and enforceable.
(b) The allowance for possible losses reflected in CNYF's audited
statement of condition at December 31, 1998 was, and the allowance for possible
losses shown on the balance sheets in CNYF's Securities Documents for periods
ending after December 31, 1998 have been and will be, adequate, as of the dates
thereof, under GAAP.
21
(c) CNYF 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 CNYF and its Subsidiaries that have
been classified (whether regulatory or internal) as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import, and CNYF and its
Subsidiaries shall promptly after the end of any month inform Niagara Bancorp of
any such classification arrived at any time after the date hereof. The other
real estate owned ("OREO") included in any non-performing assets of CNYF or any
of its 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 SECURITIES DOCUMENTS. CNYF has delivered to Niagara
Bancorp copies of its (i) annual reports on Form 10-K for the years ended
December 31, 1997 and 1998, (ii) quarterly reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1999, and (iii) proxy materials used
or for use in connection with its meetings of shareholders held in 1999. Such
reports and such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Securities Laws.
SECTION 3.17 RELATED PARTY TRANSACTIONS. Except as disclosed in CNYF
DISCLOSURE SCHEDULE 3.17, or as described in CNYF's Proxy Statement distributed
in connection with the 1999 annual meeting of shareholders (which has previously
been provided to Niagara Bancorp), CNYF is not a party to any transaction
(including any loan or other credit accommodation) with any Affiliate of CNYF
(except a CNYF Subsidiary). Except as disclosed in CNYF DISCLOSURE SCHEDULE
3.17, 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
CNYF DISCLOSURE SCHEDULE 3.17, no loan or credit accommodation to any Affiliate
of CNYF 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. CNYF has not 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 CNYF
is inappropriate.
SECTION 3.18 SCHEDULE OF TERMINATION BENEFITS. CNYF DISCLOSURE SCHEDULE
3.18 includes a schedule of all termination benefits and related payments that
would be payable to the individuals identified thereon, excluding any options to
acquire CNYF Common Stock, and awards under the PRRP, granted to such
individuals, under any and all employment agreements, special termination
agreements, supplemental executive retirement plans, deferred bonus plans,
deferred compensation plans, salary continuation plans, or any compensation
arrangement, or other pension benefit or welfare benefit plan maintained by CNYF
solely for the benefit of officers or directors of CNYF or CNYF Subsidiaries
(the "Benefits Schedule"), assuming their employment or service is terminated as
of December 31, 1999 and the Closing Date occurs prior to such termination. No
other individuals are entitled to benefits under any such plans.
22
SECTION 3.19 DEPOSITS. None of the deposits of CNYF or any of its
Subsidiaries is a "brokered" deposit.
SECTION 3.20 ANTITAKEOVER PROVISIONS INAPPLICABLE. Except as set forth
on CNYF DISCLOSURE SCHEDULE 3.20, and except for approvals required under the
federal and state banking laws, the transactions contemplated by this Agreement
are not subject to any applicable state takeover law.
Section 3.21 FAIRNESS OPINION. CNYF has received a written opinion from
CIBC 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 CNYF 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.
Section 3.22 YEAR 2000.
(a) Each of CNYF and each CNYF Subsidiary has adopted a plan (in each
case, a "YEAR 2000 PLAN") requiring testing, information-gathering and other
procedures to conform to the deadlines and material requirements and guidelines
applicable to it as a provider of services using Information Technology and
imposed by any Bank Regulator or the Federal Financial Institutions Examination
Council ("FFIEC"), to cause such Information Technology to be Year 2000
Compliant (such deadlines, material requirements and guidelines, as they may be
in effect from time to time, being referred to in this Agreement as the "YEAR
2000 REGULATORY Requirements").
(b) Each of CNYF and each CNYF Subsidiary has taken appropriate actions
and has committed the resources reasonably necessary or otherwise appropriate to
comply with its Year 2000 Plan in a timely manner. Such actions (including the
testing and information-gathering procedures) have not produced any preliminary
findings or other results which would indicate that the Information Technology
will not be Year 2000 Compliant in any material respects or that it will not be
in compliance with the Year 2000 Regulatory Requirements in any material
respects; and it has not received any written notice or preliminary oral notice
from a Regulatory Authority to one of its officers or senior executive employees
with respect to any adverse action against it relating to Year 2000 Compliance.
(c) Each of CNYF and CSB has taken appropriate actions to assure that
CSB has, and will continue to have at all relevant points in time, adequate
funds to meet anticipated loan and deposit customer demand in connection with
the Year 2000 date change and related circumstances.
23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIAGARA BANCORP
Niagara Bancorp represents and warrants to CNYF 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 Niagara
Bancorp Disclosure Schedules delivered by Niagara Bancorp to CNYF on the date
hereof. Niagara Bancorp has made a good faith effort to ensure that the
disclosure on each schedule of the Niagara Bancorp Disclosure Schedules
corresponds to the section reference herein. However, for purposes of the
Niagara 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) Niagara Bancorp 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 bank holding company under the BHCA. Niagara Merger Corp is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Niagara 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.
(b) Lockport Savings is a stock savings bank duly organized, validly
existing and in good standing under the laws of the State of New York. The
deposits of Lockport Savings are insured by the FDIC through the BIF 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 Lockport Savings.
(c) Prior to the date of this Agreement, Niagara Bancorp has delivered
to CNYF true and correct copies of the certificate of incorporation and bylaws
of Niagara Bancorp
SECTION 4.02 CAPITALIZATION.
(a) The authorized capital stock of Niagara Bancorp consists of (a)
45,000,000 shares of common stock, par value $0.01 per share (the "Niagara
Bancorp Common Stock"), of which, at the date of this Agreement, 29,756,250
shares are validly issued, fully paid and nonassessable (including shares are
held by Niagara Bancorp as treasury stock), and (b) 5,000,000 shares of
preferred stock, par value $0.01 per share, of which, at the date of this
Agreement, no shares of were issued and outstanding.
(b) Niagara Bancorp owns all of the capital stock of Lockport Savings,
free and clear of any lien or encumbrance.
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SECTION 4.03 AUTHORITY; NO VIOLATION.
(a) Niagara Bancorp and Niagara Merger Corp each 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 Niagara Bancorp and Niagara Merger Corp and the completion by Niagara Bancorp
and Niagara Merger Corp of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Niagara Bancorp and Niagara
Merger Corp, and no other corporate proceedings on the part of Niagara Bancorp
or Niagara Merger Corp are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Niagara Bancorp and Niagara Merger Corp and, subject to receipt of the required
approvals of Regulatory Authorities described in Section 4.04 hereof,
constitutes the valid and binding obligation of Niagara Bancorp and Niagara
Merger Corp, enforceable against them 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 Niagara Bancorp
and Niagara Merger Corp, (B) subject to receipt of approvals from the Regulatory
Authorities referred to in Section 4.04 hereof and CNYF's and Niagara Bancorp's
compliance with any conditions contained therein, the consummation of the
transactions contemplated hereby, and (C) compliance by Niagara Bancorp or
Lockport Savings 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 Niagara Bancorp or any Niagara Bancorp Subsidiary or
the charter and bylaws of Lockport Savings; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Niagara Bancorp or any Niagara 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 Niagara
Bancorp or Lockport Savings 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 Niagara Bancorp or Lockport Savings 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.
SECTION 4.04 CONSENTS. Except for consents, approvals, filings and
registrations from or with the Superintendent, FDIC, FRB, and SEC, and
compliance with any conditions contained therein, and the approval of this
Agreement by the shareholders of CNYF, 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 Niagara
Bancorp and Niagara Merger Corp, and (b) the completion by Niagara Bancorp and
Niagara Merger Corp of the transactions contemplated hereby. Niagara 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 Niagara Bancorp's ability to
25
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 4.05 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Niagara Bancorp DISCLOSURE SCHEDULE 4.05, neither Niagara Bancorp nor any
Niagara Bancorp Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that Niagara Bancorp or any Niagara
Bancorp Subsidiary is not in compliance in any material manner 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 Niagara Bancorp or any Niagara Bancorp
Subsidiary; (iii) requiring or threatening to require Niagara Bancorp or any
Niagara Bancorp Subsidiary, or indicating that Niagara Bancorp or any Niagara
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
Niagara Bancorp or any Niagara Bancorp Subsidiary; or (iv) directing,
restricting or limiting, or purporting to direct, restrict or limit, in any
manner the operations of Niagara Bancorp or any Niagara 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
Niagara Bancorp nor any Niagara Bancorp Subsidiary is a party to, nor has
consented to any Regulatory Agreement. The most recent regulatory rating given
to Lockport Savings as to compliance with the CRA is satisfactory or better.
SECTION 4.06 INFORMATION TO BE SUPPLIED. The information to be supplied
by Niagara Bancorp for inclusion in the Proxy Statement will not, at the time
the Proxy Statement is mailed pursuant to the Exchange Act, 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 Niagara 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 4.07 YEAR 2000..
(a) Each of Niagara Bancorp and each Niagara Bancorp Subsidiary has
adopted a plan (in each case, a "YEAR 2000 PLAN") requiring testing,
information-gathering and other procedures to conform to the deadlines and
material requirements and guidelines applicable to it as a provider of services
using Information Technology and imposed by any Bank Regulator or the FFIEC, to
cause such Information Technology to be Year 2000 compliant (such deadlines,
material requirements and guidelines, as they may be in effect from time to
time, being referred to in this Agreement as the "YEAR 2000 REGULATORY
REQUIREMENTS").
(b) Each of Niagara Bancorp and each Niagara Bancorp Subsidiary has
taken appropriate actions and has committed the resources reasonably necessary
or otherwise appropriate to comply with its Year 2000 Plan in a timely manner.
Such actions (including the testing and information-gathering procedures) have
not produced any preliminary findings or other results which would indicate that
the Information Technology will not be Year 2000 Compliant in any material
26
respect or that it will not be in compliance with the Year 2000 Regulatory
Requirements in any material respect; and it has not received any written notice
or preliminary oral notice from a Regulatory Authority to one of its officers or
senior executive employees with respect to any adverse action against it
relating to Year 2000 compliance.
(c) Each of Niagara Bancorp and Lockport Savings has taken appropriate
actions to assure that the Lockport Savings has, and will continue to have at
all relevant points in time, adequate funds to meet anticipated loan and deposit
customer demand in connection with the Year 2000 date change and related
circumstances.
SECTION 4.08 FINANCING. As of the date hereof Niagara Bancorp has, and
at the Merger Effective Date, Niagara Bancorp will have funds which are
sufficient and available under applicable regulatory capital standards 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 CNYF'S BUSINESS.
(a) From the date of this Agreement to the Closing Date, CNYF and CSB
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 Niagara Bancorp. CNYF and CSB will use their 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 Niagara Bancorp in writing or as contemplated or required by
this Agreement, CNYF will not, and CNYF will not permit any CNYF Subsidiary to:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any Right or agreement of any character relating
to its authorized or issued capital stock or any securities convertible into
shares of such stock, or split, combine or reclassify any shares of capital
stock, or declare, set aside or pay any dividend or other distribution in
respect of capital stock, or redeem or otherwise acquire any shares of capital
stock, except that (A) CNYF may issue shares of CNYF Common Stock upon the valid
exercise, in accordance with the information set forth in CNYF DISCLOSURE
SCHEDULE 3.02(a), of presently outstanding options to acquire CNYF Common Stock
under the CNYF Stock Option Plans, and (B) CNYF many continue to pay its regular
quarterly cash dividend of $0.10 per share with payment and record dates
consistent with past practice. Notwithstanding the foregoing, the following
dividends are also permitted: a dividend by a CNYF Subsidiary to its parent(s);
and the dividends on the REIT Preferred Stock that are paid in accordance with
its terms;
27
(iii) grant or agree to pay any bonus, severance or termination to,
or enter into, renew or amend any employment agreement, severance agreement
and/or supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or employees,
except: for salary increases for calendar 2000 approved in December 1999 (in a
manner consistent with past practice); and as may be required pursuant to
legally binding commitments existing on the date hereof and set forth on CNYF
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; 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 CNYF Employee Plan except to the extent such modifications or
amendments do not result in an increase in cost;
(v) merge or consolidate CNYF or any CNYF Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of CNYF or any CNYF 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 CNYF,
or any CNYF 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 CNYF 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 CNYF or sell
or otherwise dispose of any asset of CNYF or of any CNYF Subsidiary other than
in the ordinary course of business consistent with past practice; subject any
asset of CNYF or of any CNYF Subsidiary to a lien, pledge, security interest or
other encumbrance (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other than
in the ordinary course of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any indebtedness for borrowed
money), except in the ordinary course of business consistent with past practice;
(vii) take any action which would result in any of the
representations and warranties of CNYF 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;
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(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 CNYF or CSB;
(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 CNYF or any CNYF Subsidiary is a party, other than in the
ordinary course of business, consistent with past practice;
(x) purchase any equity securities, or 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) except for commitments issued prior to the date of this
Agreement which have not yet expired and have disclosed on the CNYF DISCLOSURE
SCHEDULE 5.01(a)(xi), and the renewal of existing lines of credit, 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 for unsecured loans and $750,000 in the
aggregate for secured loans. In addition, the following require the prior
consent of Niagara: a residential loan of $350,000 or greater; an unsecured loan
of $100,000 or greater; and a commercial real estate loan of $500,000 or
greater;
(xii) except as set forth on the CNYF 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 actions taken
in accordance with this Agreement, take any action that would give rise to a
right of payment to any individual under any employment agreement;
(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 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;
(xvi) except for the execution of this Agreement, or resulting
therefrom, take any action that would give rise to a right of payment to any
individual under any CNYF Employee Plan;
(xvii) except as set forth in CNYF DISCLOSURE SCHEDULE
5.01(a)(xvii), make any capital expenditures in excess of $50,000 individually
or $100,000 in the aggregate, other than pursuant to binding commitments
29
existing on the date hereof and other than expenditures necessary to maintain
existing assets in good repair;
(xviii) 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;
(xix) sell any loan (other than sales of loans secured by one- to
four-family real estate that are consistent with past practice) or OREO
properties (other than sales of OREO which generate a net book loss of not more
than $10,000 per property); or
(xxii) agree to do any of the foregoing.
(b) For purposes of this Section 5.01, unless provided for in a
business plan, budget or similar document delivered to Niagara Bancorp prior to
the date of this Agreement, it shall not be considered in the ordinary course of
business for CNYF or any CNYF Subsidiary to do any of the following: (i) except
as set forth in CNYF DISCLOSURE SCHEDULE 5.01(b), 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 $100,000,
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 CNYF or a CNYF 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 CNYF or any CNYF Subsidiary of more than $50,000
annually, or containing a material financial commitment and extending beyond 12
months from the date hereof.
SECTION 5.02 ACCESS; CONFIDENTIALITY.
(a) Each of CNYF and the CNYF Subsidiaries shall permit Niagara 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,
stock ownership, properties, operations, obligations and liabilities of CNYF 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, plans affecting employees, and any other business activities
or prospects in which Niagara Bancorp may have a reasonable interest. CNYF and
CSB shall make their respective officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with Niagara Bancorp and its representatives. CNYF and CSB shall
permit a representative of Niagara Bancorp to attend any meeting of CNYF and/or
CSB's Board of Directors or the Executive Committees thereof (provided that
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neither CNYF nor CSB shall be required to permit the Niagara 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 November
22, 1999, among CNYF and Niagara Bancorp (the "Confidentiality Agreement").
(b) Niagara 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, CNYF shall permit employees
of Niagara Bancorp reasonable access to information relating to problem loans,
loan restructurings and loan work-outs of CNYF.
(d) If the transactions contemplated by this Agreement shall not be
consummated, CNYF and Niagara 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. CNYF and Niagara 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) Niagara Bancorp and Lockport Savings 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) CNYF will furnish Niagara Bancorp with all information concerning
CNYF and CNYF Subsidiaries as may be necessary or advisable in connection with
any Application or filing made by or on behalf of Niagara Bancorp to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement.
(c) Niagara Bancorp and CNYF 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. Niagara Bancorp
will furnish CNYF with (i) copies of all Applications prior to filing with any
Regulatory Authority and provide CNYF a reasonable opportunity to provide
changes to such Applications, and (ii) copies of all Applications filed by
Niagara Bancorp.
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(e) CNYF and Niagara 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 Niagara Bancorp or CNYF 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) Niagara Bancorp and CNYF 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
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 CNYF nor any CNYF
Subsidiary shall agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of Niagara 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 Niagara Bancorp
or CNYF from exercising its rights under this Agreement or the Option Agreement.
(b) CNYF shall prepare, subject to the review and consent of Niagara
Bancorp with respect to matters relating to Niagara Bancorp and the transactions
contemplated by this Agreement, a Proxy Statement to be filed by CNYF with the
SEC and to be mailed to the shareholders of CNYF in connection with the meeting
of its shareholders and transactions contemplated hereby, which Proxy Statement
shall conform to all applicable legal requirements. The parties shall cooperate
with each other with respect to the preparation of the Proxy Statement.
SECTION 5.05 CERTAIN AGREEMENTS.
(a) From and after the Merger Effective Date through the sixth
anniversary thereof, Niagara Bancorp agrees to indemnify, defend and hold
harmless each present and former director and officer of CNYF and its
Subsidiaries determined as of the Closing Date (the "INDEMNIFIED PARTIES")
against all losses, claims, damages, costs, expenses (including reasonable
attorneys' fees and expenses), liabilities, judgments or amounts paid in
settlement (with the approval of Niagara Bancorp, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit, proceeding
or investigation arising out of matters existing or occurring at or prior to the
Merger Effective Date (a "CLAIM") in which an Indemnified Party is, or is
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threatened to be made, a party or a witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of CNYF or any of its subsidiaries, regardless of whether
such Claim is asserted or claimed prior to, at or after the Closing Date, to the
fullest extent to which directors and officers of CNYF are entitled under the
DGCL, CNYF's certificate of incorporation and bylaws, or other applicable law as
in effect on the date hereof (and Niagara Bancorp shall pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the extent permissible to a Delaware corporation under the DGCL and
CNYF's certificate of incorporation and bylaws as in effect on the date hereof;
PROVIDED, that the person to whom expenses are advanced provides an undertaking
to repay such expenses if it is ultimately determined that such person is not
entitled to indemnification). All rights to indemnification in respect of a
Claim asserted or made within the period described in the preceding sentence
shall continue until the final disposition of such Claim.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.05(a), upon learning of any Claim, shall promptly notify Niagara
Bancorp, but the failure to so notify shall not relieve Niagara Bancorp of any
liability it may have to such Indemnified Party except to the extent that such
failure materially prejudices Niagara Bancorp In the event of any Claim, (1)
Niagara Bancorp shall have the right to assume the defense thereof (with counsel
reasonably satisfactory to the Indemnified Party) and shall not be liable to
such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that, if Niagara Bancorp elects not to assume such
defense or counsel for the Indemnified Parties advises that there are issues
which raise conflicts of interest between Niagara Bancorp and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Niagara Bancorp shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received, provided
further that Niagara Bancorp shall in all cases be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties, (2)
the Indemnified Parties will cooperate in the defense of any such Claim and (3)
Niagara Bancorp shall not be liable for any settlement effected without its
prior written consent (which consent shall not unreasonably be withheld).
(c) In the event Niagara Bancorp or any of is successors or assigns (1)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (2) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Niagara Bancorp assume the obligations set forth in
this Section 5.05.
(d) Niagara Bancorp shall maintain in effect for three years from the
Closing Date, if available, the current directors' and officers' liability
insurance policy maintained by CNYF (PROVIDED that Niagara 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 at or prior to the Closing Date. In connection with the foregoing,
CNYF and CSB each agrees to provide such insurer or substitute insurer with such
representations as such insurer may reasonably request with respect to the
reporting of any prior claims.
(e) 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.
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SECTION 5.06 NO OTHER BIDS AND RELATED MATTERS. From and after the date
hereof until the termination of this Agreement, neither CNYF, CSB or any CNYF
Subsidiary, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by CNYF 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 CNYF shall notify Niagara 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 and if such inquiry or proposal promptly,
PROVIDED, HOWEVER, that nothing contained in this Section 5.06 shall prohibit
the Board of Directors of CNYF 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 CNYF or CSB 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 CNYF receives a written opinion from its independent
financial advisor that such proposal may be superior to the Merger from a
financial point-of-view to CNYF's stockholders, (B) the Board of Directors of
CNYF, after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is necessary for the Board of
Directors of CNYF to comply with 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, CNYF
(x) provides reasonable notice to Niagara 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 form and substance identical in all material
respects to the Confidentiality Agreement, and (D) the CNYF 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 CNYF Special Meeting of Stockholders
convened to approve this Agreement, failing to make or withdrawing or modifying
its recommendation to stockholders, and entering into a Superior Proposal if
there exists a Superior Proposal and the Board of Directors of CNYF, after
consultation with and based upon the advice of independent legal counsel,
determined in good faith that such action is necessary for such Board of
Directors to comply with 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
CNYF 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 20% or more of the
assets of CNYF or CSB, taken as a whole, in a single transaction or series of
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transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of CNYF 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 THE CNYF DISCLOSURE
SCHEDULES. CNYF shall promptly advise Niagara Bancorp of any change or event
having a Material Adverse Effect on it or on any CNYF 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.
CNYF shall update the CNYF 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 CNYF
DISCLOSURE SCHEDULES. The delivery of such updated Schedule shall not relieve
CNYF 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 NIAGARA BANCORP'S BUSINESS. From the date of
this Agreement to the Closing Date, Niagara 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
Lockport Savings and its other Subsidiaries. From the date of this Agreement to
the Closing Date, neither Niagara Bancorp 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 Niagara Bancorp or Lockport Savings 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, (iii) take any action which would or is reasonably
likely to adversely effect or materially delay the receipt of the necessary
approvals from the Regulatory Authorities; (iv) take action which would or is
reasonably likely to materially and adversely affect Niagara Bancorp's ability
to perform its covenants and agreements under this Agreement; (v) take any
action that would result in any of the conditions to the Merger not being
satisfied; or (vi) agree to do any of the foregoing.
SECTION 5.09 BOARD AND COMMITTEE MINUTES. CNYF and CSB shall each
provide to Niagara Bancorp, within thirty (30) days after any meeting of their
respective Board of Directors, or any committee thereof, a copy of the minutes
of such meeting, 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 CNYF AND NIAGARA BANCORP
(a) From and after the date of this Agreement:
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(i) VOTING BY DIRECTORS. Simultaneously with the execution of this
Agreement, or within five days thereof, each Director of CNYF and CSB shall
enter into the agreement set forth as Exhibit B to this Agreement;
(ii) PROXY SOLICITOR. CNYF shall retain a proxy solicitor in
connection with the solicitation of shareholder approval of this Agreement;
(iii) TIMELY REVIEW. If requested by Niagara Bancorp at Niagara
Bancorp's sole expense, CNYF 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
Niagara Bancorp, CNYF shall use its best efforts to obtain an extension of, or
termination of, any contract with an outside service bureau or other vendor of
services to CNYF, on terms and conditions mutually acceptable to CNYF and
Niagara Bancorp;
(v) BOARD MEETINGS. CNYF and CSB shall permit a representative of
Niagara Bancorp to attend any meeting of CNYF and/or CSB's Board of Directors or
the Executive Committees thereof (provided that neither CNYF nor CSB shall be
required to permit the Niagara Bancorp representative to remain present during
any confidential discussion of the Agreement and the transactions contemplated
thereby). CNYF and CSB shall effect such changes to the Restated Organization
Certificate and the Bylaws of CSB, such amendments to be effective as of the
Merger Effective Date, as Niagara Bancorp may reasonably request in order to
facilitate the operation of CSB as a wholly-owned subsidiary of Niagara Bancorp.
(vi) LIST OF NONPERFORMING ASSETS. CNYF shall provide Niagara
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
(vii) RESERVES AND MERGER-RELATED COSTS. On or before the Effective
Date, CNYF 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 CNYF to those of Niagara Bancorp (as such
practices and methods are to be applied to CNYF from and after the Closing Date)
and Niagara Bancorp's plans with respect to the conduct of the business of CNYF
following the Merger and otherwise to reflect Merger-related expenses and costs
incurred by CNYF, provided, however, that CNYF shall not be required to take
such action unless Niagara 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 Niagara
Bancorp of the writing referred to in the preceding clause,
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CNYF shall provide Niagara Bancorp a written statement, certified without
personal liability by the chief executive officer of CNYF and dated the date of
such writing, that the representation made in Section 3.15(b) 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 CNYF or any CNYF 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. No
action shall be required to be taken by CNYF pursuant to this Section 5.10(vii)
if, in the opinion of CNYF's independent auditors, such action would contravene
GAAP;
(viii) SHAREHOLDERS MEETING. CNYF shall submit this Agreement to
its shareholders for approval at a meeting to be held as soon as practicable,
and, subject to the next sentence, its Boards of Director shall recommend
approval of this Agreement to the CNYF shareholders. The Board of Directors of
CNYF may fail to make such a recommendation, or withdraw, modify or change any
such recommendation only in connection with a Superior Proposal, as set forth in
Section 5.06 of this Agreement, and only if such Board of Directors, after
having consulted with and considered the advice of outside counsel to such
Board, has determined that the making of such recommendation, or the failure so
to withdraw, modify or change its recommendation, would constitute a breach of
the fiduciary duties of such directors under Delaware law. CNYF shall take all
steps necessary in order to hold a special meeting of stockholders for the
purpose of approving this Agreement within four months of the date of this
Agreement, or as soon thereafter as is practicable. CNYF shall promptly inform
Niagara Bancorp of any shareholder who makes a written demand upon CNYF for an
appraisal of his shares of CNYF Common Stock in connection with the Merger.
(ix) SYSTEMS CONVERSIONS. CNYF and Niagara Bancorp shall meet on a
regular basis to discuss and plan for the conversion of CNYF and its
Subsidiaries' data processing and related electronic informational systems to
those used by Niagara Bancorp and its subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by CNYF
and CSB of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by CNYF or any of its Subsidiaries in connection with its
systems operations, retention of outside consultants and additional employees to
assist with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that CNYF shall not be
obligated to take any such action prior to the Effective Time and, unless CNYF
otherwise agrees, no conversion shall take place prior to the Effective Time. In
the event that CNYF or any of its Subsidiaries takes, at the request of Niagara
Bancorp, any action relative to third parties to facilitate the conversion that
results in the imposition of any termination fees, expenses or charges, Niagara
Bancorp shall indemnify CNYF and its Subsidiaries for any such fees, expenses
and charges, and the costs of reversing the conversion process, if for any
reason the Merger is not consummated in accordance with the terms of this
Agreement.
(b) From and after the date of this Agreement, Niagara Bancorp and CNYF
shall each:
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(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 necessary to obtain any other approvals
and consents required to effect the completion of the Merger, and (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;
(iii) MAINTENANCE OF INSURANCE. Maintain, and cause their
respective Subsidiaries to maintain, insurance in such amounts as are reasonable
to cover such risks as are customary in relation to the character and location
of its properties and the nature of its business;
(iv) MAINTENANCE OF BOOKS AND RECORDS. Maintain, and cause their
respective Subsidiaries to maintain, books of account and records in accordance
with generally accepted accounting principles applied on a basis consistent with
those principles used in preparing the financial statements heretofore
delivered;
(v) DELIVERY OF SECURITIES DOCUMENTS. Deliver to the other, copies
of all Securities Documents simultaneously with the filing thereof; or
(vi) TAXES. File all federal, state, and local tax returns required
to be filed by them or their respective Subsidiaries on or before the date such
returns are due (including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due.
SECTION 5.11 EMPLOYEE AND TERMINATION BENEFITS; DIRECTORS AND
MANAGEMENT.
(a) The CNYF Employee Stock Ownership Plan (the "CNYF ESOP") shall be
terminated as of, or prior to, the Merger Effective Date (all shares held by the
ESOP shall be converted into the right to receive the Merger Consideration), all
outstanding CNYF ESOP indebtedness shall be repaid, and the balance shall be
allocated and distributed to CNYF employees (subject to the receipt of a
determination letter from the IRS), as provided for in the CNYF ESOP and unless
otherwise required by applicable law. Niagara Bancorp will review other CNYF or
CSB employee plans to determine whether to maintain, terminate or continue such
plans. If any CNYF or CSB employee plans are consolidated with any Niagara
Bancorp (or subsidiary thereof) employee plan, credit will be given for prior
service with CNYF or CSB for determining eligibility and vesting, but not for
benefit accrual purposes.
(b) After the Merger Effective Date, any former employees of CNYF or
any CNYF Subsidiary whose employment is terminated, other than for cause, within
twelve months of the Closing Date shall be provided with severance benefits in
38
accordance with the severance policy described on CNYF DISCLOSURE SCHEDULE
5.11(b). In addition, it is anticipated that in order for Niagara Bancorp to
effectuate a smooth transition of the back office operations and data processing
systems of CSB, it may be necessary to retain the services of certain CSB
back-office personnel for up to one and one-half years after the Closing Date.
Niagara Bancorp agrees that notwithstanding that such persons will not be
terminated within twelve months after the Closing Date, they will still be
entitled to receive severance payments pursuant to CSB's employee severance plan
for service with CSB prior to termination.
SECTION 5.12 DUTY TO ADVISE; DUTY TO UPDATE NIAGARA BANCORP'S
DISCLOSURE SCHEDULES. Niagara Bancorp shall promptly advise CNYF of any change
or event 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. Niagara Bancorp shall update Niagara 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 Niagara Bancorp DISCLOSURE SCHEDULE.
The delivery of such updated Schedule shall not relieve Niagara 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 GOVERNANCE AND RELATED MATTERS.
(a) Following the Merger Effective Date, and subject to paragraph (c)
below, the Board of Directors of CSB shall consist of the seven current
directors listed on CNYF DISCLOSURE SCHEDULE 5.13. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall remain
chairman of the board of directors of CSB. One additional person designated by
the CSB board, and reasonably acceptable to Niagara Bancorp, may be appointed to
the CSB board. The directors of CSB shall be entitled to receive attendance and
retainer fees in the same amounts as in effect on the date of this Agreement.
The retirement age for service on the CSB board shall be 70 years. Niagara
Bancorp shall have appropriate representation on the CSB board.
(b) Niagara Bancorp shall honor all obligations of the CNYF and CSB
with respect to their existing Directors Deferred Compensation Plans and shall
provide post-retirement health insurance benefits to existing retirees and
employees of CSB upon the same terms and conditions as presently exist in the
Post-Retirement Health Insurance Plan of CSB.
(c) Niagara Bancorp will honor the employment contract termination
provisions for executive officers of CNYF and CSB, except for the existing
employment contract with the President of CSB, who will retire on or before the
consummation of the Merger without further obligation under any employment or
severance agreement (and will execute an acknowledgment to this effect), except
that he shall not forfeit benefits under the ESOP, PRRP and the Stock Option
Plan. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ will be elected as the chief executive officer of CSB
effective as of the Merger Effective Date, and will be appointed to the CSB
board of directors. He will be offered a one year evergreen employment
agreement.
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(d) Niagara Bancorp hereby affirms that it is its present intention to
operate CSB as a separate subsidiary for at least the next two years with the
same board of directors as constituted pursuant to Section 5.13(a).
(e) The board of directors of CSB may form an outplacement committee to
oversee outplacement of those employees who will not be retained. However, it is
understood that CSB will only provide nominal funding for an outplacement
program. The chief financial officer of CSB as of the date of this Agreement
will be permitted to continue to use an office and a telephone, facsimile
machine and personal computer at the main offices of CSB for outplacement
purposes for six months after the Closing Date.
(f) Niagara Bancorp shall cause its Board of Directors to be expanded
to include ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the current chairman of the board of CNYF and, and he
shall commence service on the Niagara Bancorp Board of Directors immediately
following the Merger Effective Date.
ARTICLE VI
CONDITIONS
SECTION 6.01 CONDITIONS TO CNYF'S OBLIGATIONS UNDER THIS AGREEMENT. The
obligations of CNYF hereunder shall be subject to satisfaction at or prior to
the Closing Date of each of the following conditions, unless waived by CNYF
pursuant to Section 8.03 hereof:
(a) CORPORATE PROCEEDINGS. All action required to be taken by, or on
the part of, Niagara Bancorp and Niagara Merger Corp 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 Niagara Bancorp and Niagara Merger Corp; and CNYF shall have received
certified copies of the resolutions evidencing such authorizations;
(b) COVENANTS. The obligations and covenants of Niagara Bancorp
required by this Agreement to be performed by Niagara Bancorp at or prior to the
Closing Date shall have been duly performed and complied with in all material
respects;
(c) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Niagara Bancorp set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement, and as of the Closing Date
as though made on and as of the Closing Date (except as to any representation or
warranty which specifically relates to an earlier date);
(d) APPROVALS OF REGULATORY AUTHORITIES. Niagara Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger, and all
notice and waiting periods required thereunder shall have expired or been
terminated;
(e) NO INJUNCTION. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
40
(f) OFFICER'S CERTIFICATE. Niagara Bancorp shall have delivered to CNYF
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 (e) and (i) of this Section 6.01 have been
satisfied, to the best knowledge of the officer executing the same;
(g) OPINION OF NIAGARA BANCORP'S COUNSEL. CNYF shall have received an
opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to Niagara
Bancorp, dated the Closing Date, in form and substance reasonably satisfactory
to CNYF and its counsel to the effect set forth on Exhibit 6.1 attached hereto;
(h) APPROVAL OF CNYF'S SHAREHOLDERS. This Agreement shall have been
approved by the shareholders of CNYF by such vote as is required under
applicable Delaware law, and CNYF's certificate of incorporation and bylaws; and
(i) FUNDS DEPOSITED WITH THE EXCHANGE AGENT. Niagara Bancorp shall have
deposited or caused to be deposited, in trust with the Exchange Agent, an amount
of cash equal to the aggregate Merger Consideration that the CNYF stockholders
shall be entitled to receive on the Merger Effective Date pursuant to Section
2.02 of this Agreement.
SECTION 6.02 CONDITIONS TO NIAGARA BANCORP'S OBLIGATIONS UNDER THIS
AGREEMENT. The obligations of Niagara Bancorp hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Niagara Bancorp pursuant to Section 8.03 hereof:
(a) CORPORATE PROCEEDINGS. All action required to be taken by, or on
the part of, CNYF 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 CNYF; and Niagara Bancorp
shall have received certified copies of the resolutions evidencing such
authorizations;
(b) COVENANTS. The obligations and covenants of CNYF required by this
Agreement to be performed by it at or prior to the Closing Date shall have been
duly performed and complied with in all material respects;
(c) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of CNYF set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement, and as of the Closing Date as though
made on and as of the Closing Date (except as to any representation or warranty
which specifically relates to an earlier date);
(d) APPROVALS OF REGULATORY AUTHORITIES. Niagara Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger (without
the imposition of any conditions that are in Niagara Bancorp's reasonable
judgment unduly burdensome); and all notice and waiting periods required
thereunder shall have expired or been terminated;
41
(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 December 31, 1998, there shall
not have occurred any Material Adverse Effect with respect to CNYF;
(g) APPROVAL OF CNYF'S SHAREHOLDERS. This Agreement shall have been
approved by the shareholders of CNYF by such vote as is required under
applicable Delaware law, and CNYF's certificate of incorporation and bylaws;
(h) OFFICER'S CERTIFICATE. CNYF shall have delivered to Niagara 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 (g) and (k) of this Section 6.02 have been
satisfied, to the best knowledge of the officer executing the same;
(i) OPINIONS OF CNYF'S COUNSEL. Niagara Bancorp shall have received an
opinion of ▇▇▇▇▇▇▇ & Zelermyer, LLP, counsel to CNYF, dated the Closing Date, in
form and substance reasonably satisfactory to Niagara Bancorp and its counsel to
the effect set forth on Exhibit 6.3 attached hereto;
(j) TAX OPINION. Niagara Bancorp shall have received an opinion of ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., its counsel, substantially to the effect
set forth on Exhibit 6.2 attached hereto.
(k) EQUITY. The stockholders' equity of CNYF shall not decline below
the level set forth in the September 30, 1999 CNYF Financials, except as a
result of actions taken at the request of Niagara Bancorp pursuant to this
Agreement or due to any change in the net unrealized gain or loss in securities
available for sale or as a result of stock repurchases completed in October,
1999.
SECTION 6.03 ENVIRIONMENTAL CONDITION.
(a) With respect to a CSB-owned property located at ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ in the Village of ▇▇▇▇▇ ("▇▇▇▇▇ Site"), a Phase II environmental
inspection has been conducted regarding underground oil tanks and a dry well. If
the cost of remediation, if any, necessary to obtain a letter from the New York
State Department of Environmental Conservation that no further action with
respect to the ▇▇▇▇▇ Site is required is $100,000 or less, then the
environmental conditions at the ▇▇▇▇▇ Site shall have no effect on this
Agreement and the transactions contemplated hereby. If the cost of such
remediation exceeds $100,000, then for each $50,000 that the cost exceeds
$100,000, the Merger Consideration payable hereunder shall be reduced by $0.01
per share. If the aggregate reduction in the Merger consideration pursuant to
the preceding sentence would be more than $0.10 per share, then CNYF shall have
the right to terminate this Agreement and the Niagara Option and the parties
shall have no further liability to each other hereunder.
42
(b) CNYF shall have the right to purchase insurance against remediation
expenses in excess of a level specified in such insurance policy. CNYF shall use
it reasonable best efforts to obtain a letter from the New York State Department
of Environmental Conservation that no further action with respect to the ▇▇▇▇▇
Site is required prior to purchasing insurance. CNYF shall further consult with
Niagara Bancorp in connection with the purchase of any such insurance. Niagara
Bancorp agrees to accept such policy in satisfaction of any obligation to obtain
a letter from the DEC. For the purposes of the preceding paragraph, in
calculating whether the environment conditions have any effect on this
Agreement, whether there is any adjustment in the Merger Consideration, or
whether CNYF has the right to terminate this Agreement and the Option, the
premium for such insurance shall be added to any remediation expenses actually
paid by CNYF or which remains payable by CNYF in order to trigger the insurance.
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 Niagara Bancorp or CNYF:
(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other party, and
the breach cannot be, or shall not have been, cured within 30 days after receipt
by such other party of notice in writing specifying the nature of such breach
and requesting that it be cured;
(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 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 there has been no Superior Proposal but the approval of the
shareholders of CNYF 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;
(c) by CNYF if, as provided in Section 5.06, it receives a Superior
Proposal and the CNYF Board of Directors determines that it would be in
accordance with its fiduciary duties, based upon the advice of its outside legal
43
counsel, to accept the third party proposal; PROVIDED, HOWEVER, that such
termination shall not effect the right of Niagara Bancorp to exercise the Stock
Option Agreement; or
(d) by Niagara Bancorp if (i) as provided in Section 5.06, the Board of
Directors of CNYF withdraws its recommendation of this Agreement, fails to make
such recommendation or modifies or qualifies its recommendation in a manner
adverse to Niagara Bancorp, or (ii) CNYF enters into an agreement to be acquired
by, or merge or combine with, a third party in connection with a Superior
Proposal. PROVIDED, HOWEVER, that such termination shall not effect the right of
Niagara Bancorp to exercise the Stock Option Agreement
SECTION 7.02 EFFECT OF TERMINATION. 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 any of Niagara Bancorp, Niagara Merger Corp or CNYF, or their respective
officers, directors and employees.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 EXPENSES.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, except as
this Agreement otherwise expressly provides.
(b) In the event of a willful breach of any representation, warranty,
covenant or agreement contained in this Agreement, the breaching party shall
remain liable for any and all damages, costs and expenses, including all
reasonable attorneys' fees, sustained or incurred by the non-breaching party as
a result thereof or in connection therewith or with the enforcement of its
rights hereunder.
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 Article II, and Section 5.02(d), the last sentence of Section 5.02(d),
Sections 5.05, and 5.13(b), (e) and (f), 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
44
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, 2.03, 2.04 and
5.05.
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.
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 Niagara Bancorp, Inc. to:
Niagara Bancorp
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, PC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇, Esq.
45
(b) If to CNYF, to:
CNY Financial Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board
with a copy to: ▇▇▇ Hack, Esq.
▇▇▇▇▇▇▇ & Zelermyer, LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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.
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 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
SECTION 8.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic internal law (including the law of
conflicts of law) of the State of Delaware.
46
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.
NIAGARA BANCORP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
NIAGARA MERGER CORP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
CNY FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board
47
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated December 28, 1999, between CNY Financial
Corporation., a Delaward corporation ("Issuer") and Niagara Bancorp, Inc., a
Delaware 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 December 28, 1999 (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 919,814
fully paid and nonassessable shares of its common stock, par value $0.01 per
share ("Common Stock"), at a price of $16.75 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 $16.75 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.
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;
2
(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 CNYF
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,
3
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(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 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
4
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
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
5
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, 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.
(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.
6
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 7 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.
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.
(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
7
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 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.
8
9. 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 or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
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 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.
10. 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
9
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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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
10
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. 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.
18. 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.
19. 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. Notwithstanding anything to the contrary contained herein or in the
Merger Agreement, in the event a Subsequent Triggering Event shall occur prior
to an Exercise Termination Event, Issuer shall pay to Grantee upon demand the
amount of the expenses incurred by Grantee in connection with this Agreement and
the Merger Agreement and the transactions contemplated hereby and thereby.
20. 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.
21. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
11
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.
CNY FINANCIAL CORPORATION.
BY:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board
NIAGARA BANCORP, INC.
BY:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
12
EXHIBIT B
December ___, 1999
Niagara Bancorp, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Niagara Bancorp, Inc. ("Niagara Bancorp"), Niagara Bancorp Corp
("Merger Corp"), and CNY Financial Corporation ("CNYF") have entered into an
Agreement and Plan of Merger dated as of December 28, 1999 (the "Merger
Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) CNYF will merge with and into Merger Corp with CNYF surviving the
merger, to be followed by the merger of CNYF with and into Niagara Bancorp, with
Niagara Bancorp surviving the merger (collectively referred to as the "Merger");
and (b) shareholders of CNYF will receive $18.75 in cash in exchange for each
share of common stock of CNYF outstanding on the closing date.
Niagara Bancorp has requested, as a condition to its execution and
delivery to CNYF of the Merger Agreement, that the undersigned, being directors
and executive officers of CNYF, execute and deliver to Niagara Bancorp this
Letter Agreement.
Each of the undersigned, in order to induce Niagara Bancorp to execute
and deliver to CNYF the Merger Agreement, and intending to be legally bound,
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of CNYF called to vote for approval of the Merger so that all
shares of common stock of CNYF over which the undersigned or a member of the
undersigned's immediate family now has sole or shared voting power 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 CNYF),
and (ii) against approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving CNYF;
(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 CNYF,
to approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any common
stock of CNYF on or prior to the date of the meeting of CNYF shareholders to
vote on the Merger Agreement, except for transfers to a lineal descendant or a
spouse of the undersigned, or to a trust for the benefit of one or more of the
foregoing persons, providing that the transferee agrees in writing to be bound
by the terms of this letter 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
Title
EXHIBIT 6.1
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO CNYF PURSUANT TO
SECTION 6.01(G) OF THE AGREEMENT]
(a) Each of Niagara Bancorp and Niagara Merger Corp ("Merger Corp"), is
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted. All eligible accounts of depositors in Lockport are insured by the
BIF administered by the FDIC to the fullest extent permitted by law.
(b) Each of Niagara Bancorp and Merger Corp has the corporate power and
authority to adopt or execute and deliver the Agreement and the Bank Merger
Agreement included as Exhibit A thereto, as the case may be, and to consummate
the corporate transactions contemplated thereby and to carry out their
respective obligations thereunder, as applicable. The adoption or execution and
delivery of the Agreement and the Stock Option Agreement included as Exhibit A
thereto and the consummation of the transactions contemplated thereby, as
applicable, have been duly authorized by the board of directors of Niagara
Bancorp and Merger Corp, as the case may be, and no other corporate proceedings
on the part of such entities are necessary to consummate the transactions so
contemplated. The Agreement has been duly and validly executed and delivered by
Niagara Bancorp and Merger Corp, and in each case such instruments constitute
valid and legally binding obligations of Niagara Bancorp and Merger Corp,
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(c) None of the adoption or execution and delivery of the Agreement and
the Stock Option Agreement included as Exhibit A thereto by Niagara Bancorp and
Merger Corp, or the consummation by such entities of the transactions
contemplated thereby in accordance with their respective terms, as applicable,
nor compliance by such entities with any of their respective terms, as
applicable, will (i) violate any provision of their respective Organization
Certificate, organization certificate or other chartering instrument or bylaws,
nor (ii) violate any federal or New York State banking statute, code, rule or
regulation or, to the knowledge of such counsel, any judgment, order, writ,
decree or injunction applicable to any of such entities or any of their
respective properties or assets, except, with respect to clauses (ii) above,
such as individually or in the aggregate will not have a material adverse effect
on the business, operations, assets or financial condition of Niagara Bancorp
and its subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated by the Agreement.
(d) All regulatory or governmental approvals and consents which are
necessary to be obtained by Niagara Bancorp and Merger Corp to permit the
execution, delivery and performance of the Agreement and the Stock Option
Agreement have been obtained.
(e) Assuming due authorization of the Merger by all necessary corporate
and governmental proceedings on the part of CNYF and CSB and that CNYF and CSB
have taken all action required to be taken by them prior to the Effective Time,
upon the filing of a Certificate of Merger pursuant to Section 251 of the DGCL,
the Merger will be validly consummated in accordance with the Agreement and
applicable laws and regulations and each outstanding share of Common Stock will
be converted into the right to receive a cash payment in the manner specified in
the Agreement.
(f) To the knowledge of such counsel, there are no judicial,
administrative, arbitral or other actions, suits, proceedings or investigations
pending or threatened which (i) if adversely determined, would have a material
adverse effect on the ability of Niagara Bancorp to consummate the transactions
contemplated by the Agreement or (ii) seek to restrain or prohibit the Merger or
the Bank Merger or to obtain monetary damages in connection therewith.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials and, as to matters of fact, certificates of any officer
or officers of Niagara Bancorp. The opinion of such counsel may include such
qualifications and explanations of the basis thereof as may be reasonably
acceptable to CNYF.
EXHIBIT 6.2
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO NIAGARA BANCORP
PURSUANT TO SECTION 6.02(J) OF THE AGREEMENT]
1. The formation of Niagara Merger Corp and its merger with and into CNYF
will be disregarded for federal income tax purposes, and the
transaction will be treated as a purchase by Niagara Bancorp of the
outstanding shares of CNYF. See 90-95, 1990-2 C.B. 67; Rev. Rul. 73~27,
1973-2 C.B. 301. The purchase will be treated as a qualified stock
purchase within the meaning of Section 338(d)(3) of the IRC.
2. For federal income tax purposes, no gain or loss will be recognized by
Niagara Bancorp, Niagara Merger Corp or CNYF as a result of the Merger.
3. For federal income tax purposes, the statutory merger of CNYF into
Niagara Bancorp pursuant to applicable law (the "Merger") will be
treated as a distribution by CNYF in complete liquidation within the
meaning of Section 332 of the IRC. See Section 1.332-2(d) of the
Treasury Regulations.
4. For federal income tax purposes, no gain or loss will be recognized by
Niagara Bancorp on its receipt of the assets of CNYF distributed in the
Merger. See Section 332(a) of the IRC.
5. For federal income tax purposes, no gain or loss will be recognized by
CNYF on the distribution of its assets to Niagara Bancorp in the
Merger. See Section 337(a) of the IRC.
6. For federal income tax purposes, the basis of the assets of CNYF in the
hands of Niagara Bancorp will be the same as the basis of those assets
in the hands of CNYF immediately preceding the Merger. See Section
334(b)(1) of the IRC.
7. The holding period of the assets received by Niagara Bancorp in the
Merger will include the period during which such property was held by
CNYF. See Section 1223(2) of the IRC.
8. As provided in Section 381(c)(2) of the IRC and Section 1.381(c)(2)-1
of the Treasury Regulations, Niagara Bancorp will succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of CNYF as of the date of the Merger, subject to the
limitations of Sections 382 and 383 of the IRC.
EXHIBIT 6.3
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO NIAGARA BANCORP
PURSUANT TO SECTION 6.02(I) OF THE AGREEMENT]
(a) Each of CNYF and CSB is incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each such entity
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted. CSB is a
member of the Federal Home Loan Bank of New York and all eligible accounts of
depositors in CSB are insured by the BIF administered by the FDIC to the fullest
extent permitted by law. CNYF is duly registered as a bank holding company under
the BHCA and the regulations of the FRB thereunder.
(b) The authorized capital stock of CNYF consists of shares of Common
Stock, $0.01 par value per share, and shares of preferred stock, $0.01 par value
per share ("Preferred Stock"). As of the date of this opinion, there were shares
of Common Stock issued and outstanding and shares of Preferred Stock issued and
outstanding. All issued and outstanding shares of Common Stock and Preferred
Stock, and all issued and outstanding shares of capital stock of each CSB
Subsidiary, have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. To the best of our knowledge, all
of the outstanding shares of CSB are owned, directly or indirectly, by CNYF free
and clear of any adverse claims, and, neither CNYF nor any of its subsidiaries
is a party to any subscription, option, warrant, call, commitment or similar
agreement providing for the transfer, purchase or issuance of any shares of
capital stock of CNYF or any of its subsidiaries or any securities representing
the right to purchase or otherwise acquire any shares of such capital stock or
any securities convertible into or representing the right to purchase or
otherwise acquire any such stock.
(c) CNYF has the corporate power and authority to execute and deliver
the Agreement and the Stock Option Agreement included as Exhibit A thereto, as
applicable, and to consummate the Merger and to carry out all of its obligations
thereunder. The execution and delivery of the Agreement and the Stock Option
Agreement included as Exhibit A thereto and the consummation of the Merger by
CNYF have been duly authorized by the boards of directors and stockholders of
each of CNYF and CSB and no other corporate proceedings on the part of CNYF or
CSB are necessary to consummate the transactions so contemplated. Each of the
Agreement and the Stock Option Agreement included as Exhibit A thereto has been
duly and validly executed and delivered by CNYF, and constitute valid and
legally binding obligations of CNYF enforceable in accordance with their terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity (regardless of whether said
Agreement or Stock Option Agreement are considered in a proceeding in equity or
at law).
(d) None of the execution and delivery of the Agreement and the
agreement included as Exhibit A thereto by CNYF, nor the consummation by CNYF of
the transactions contemplated thereby in accordance with their respective terms,
as applicable, nor compliance by CNYF or CSB with any of their respective terms,
as applicable, will (i) violate any provision of CNYF's or CSB's Certificate of
Incorporation, charter or other chartering instrument or bylaws, nor (ii)
violate any federal statute, code, rule or regulation, or, to the knowledge of
such counsel, any judgment, order, writ, decree or injunction applicable to
CNYF, CSB, or any of their respective properties or assets, except, with respect
to clauses (ii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of CNYF and its subsidiaries taken as a whole and which will not
prevent or delay the consummation of the transactions contemplated by the
Agreement.
(e) All regulatory or governmental approvals and consents which are
necessary to be obtained by CNYF to permit the execution, delivery and
performance of the Agreement and the Stock Option Agreement included as Exhibit
A thereto have been obtained.
(f) The Agreement, including consummation of the transactions
contemplated thereby, has been approved by the requisite vote of stockholders of
CNYF.
(g) Assuming due authorization of the Merger by all necessary corporate
and governmental proceedings on the part of parties other than CNYF and CSB and
that such other parties have taken all action required to be taken by them prior
to the Effective Time, upon the proper filing of a [REGULATORY FILINGS,] the
Merger will be validly consummated in accordance with the Agreement and
applicable laws and regulations and each outstanding share of Common Stock will
be converted into the right to receive a cash payment in the manner specified in
Agreement.
(h) To the knowledge of such counsel, there are no judicial,
administrative, arbitral or other actions, suits, proceedings or investigations
pending or threatened, which (i) if adversely determined, would result in any
material adverse change in the business, operations, assets or financial
condition of CNYF and its subsidiaries taken as a whole or (ii) seek to restrain
or prohibit the Merger or to obtain monetary damages in connection therewith.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials and, as to matters of fact, certificates of any officer
or officers of CNYF and its subsidiaries. The opinion of such counsel may
include such qualifications and explanations of the basis thereof as may be
reasonably acceptable to Niagara Bancorp.