AGREEMENT AND PLAN OF MERGER
By and Among
STERLING BANKS, INC.,
STERLING BANK
And
▇▇▇▇▇▇▇▇▇▇ BANCORP, INC.
Dated as of June 23, 2006
ARTICLE 1
THE MERGER........................................................................................................2
Section 1.1 Consummation of Merger; Closing Date............................................................2
Section 1.2 Effect of Merger................................................................................3
Section 1.3 Further Assurances..............................................................................3
Section 1.4 Directors and Officers..........................................................................3
ARTICLE 2
CONVERSION OF CONSTITUENTS' CAPITAL SHARES........................................................................3
Section 2.1 Manner of Conversion of ▇▇▇▇▇▇▇▇▇▇ Shares ......................................................3
Section 2.2 Election and Proration Procedures...............................................................4
Section 2.3 ▇▇▇▇▇▇▇▇▇▇ Stock Options........................................................................7
Section 2.4 Fractional Shares...............................................................................7
Section 2.5 Effectuating Conversion.........................................................................7
Section 2.6 Determination of Alternative Structures; Holding Company Reorganization.........................9
Section 2.7 Laws of Escheat.................................................................................9
Section 2.8 Dissenting Shares...............................................................................9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇▇▇▇.....................................................................10
Section 3.1 Corporate Organization.........................................................................10
Section 3.2 Capitalization.................................................................................11
Section 3.3 Financial Statements; Filings..................................................................12
Section 3.4 Loan Portfolio; Reserves.......................................................................12
Section 3.5 Certain Loans and Related Matters..............................................................13
Section 3.6 Authority; No Violation........................................................................13
Section 3.7 Consents and Approvals.........................................................................14
Section 3.8 Broker's Fees..................................................................................14
Section 3.9 Absence of Certain Changes or Events...........................................................14
Section 3.10 Legal Proceedings; Etc.........................................................................14
Section 3.11 Taxes and Tax Returns..........................................................................15
Section 3.12 Employee Benefit Plans.........................................................................16
Section 3.13 Title and Related Matters......................................................................18
Section 3.14 Real Estate....................................................................................19
Section 3.15 Environmental Matters..........................................................................20
Section 3.16 Commitments and Contracts......................................................................21
Section 3.17 Regulatory Matters.............................................................................22
Section 3.18 Registration Obligations.......................................................................23
Section 3.19 Antitakeover Provisions........................................................................23
Section 3.20 Insurance......................................................................................23
Section 3.21 Labor..........................................................................................23
Section 3.22 Compliance with Laws...........................................................................24
Section 3.23 Transactions with Management...................................................................25
Section 3.24 Derivative Contracts...........................................................................25
Section 3.25 Deposits.......................................................................................25
Section 3.26 Accounting Controls; Disclosure Controls.......................................................25
Section 3.27 Deposit Insurance..............................................................................26
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Section 3.28 Intellectual Property..........................................................................26
Section 3.29 Absence of Undisclosed Liabilities.............................................................26
Section 3.30 Exchange Act Reports...........................................................................27
Section 3.31 Fairness Opinion...............................................................................27
Section 3.32 Investment Securities..........................................................................27
Section 3.33 Proxy Materials................................................................................27
Section 3.34 Untrue Statements and Omissions
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF STERLING AND STERLING BANK.....................................................28
Section 4.1 Organization and Related Matters of Sterling and Sterling Bank.................................28
Section 4.2 Capitalization.................................................................................29
Section 4.3 Authorization..................................................................................29
Section 4.4 Financial Statements...........................................................................30
Section 4.5 Consents and Approvals.........................................................................30
Section 4.6 Proxy Materials................................................................................30
Section 4.7 Regulatory Matters.............................................................................31
Section 4.8 Untrue Statements and Omissions................................................................31
Section 4.9 Absence of Certain Changes or Events...........................................................31
Section 4.10 Legal Proceedings; Etc.........................................................................31
Section 4.11 Compliance with Laws...........................................................................31
Section 4.12 Antitakeover Provisions........................................................................32
Section 4.13 Accounting Controls; Disclosure Controls. .....................................................33
Section 4.14 Deposit Insurance..............................................................................33
Section 4.15 Absence of Undisclosed Liability...............................................................33
Section 4.16 Exchange Act Reports...........................................................................33
Section 4.17 Fairness Opinion...............................................................................34
ARTICLE 5
COVENANTS AND AGREEMENTS.........................................................................................34
Section 5.1 Conduct of the Business of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Sterling Bank..............................34
Section 5.2 Current Information............................................................................37
Section 5.3 Access to Properties; Personnel and Records....................................................37
Section 5.4 Approvals of Shareholders......................................................................38
Section 5.5 No Other Bids..................................................................................39
Section 5.6 Notice of Deadlines............................................................................39
Section 5.7 Maintenance of Properties......................................................................39
Section 5.8 Conforming Accounting and Reserve Policies.....................................................39
Section 5.9 Bank Merger Agreement..........................................................................40
Section 5.10 Holding Company Reorganization.................................................................40
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ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS..............................................................................41
Section 6.1 Best Efforts; Cooperation......................................................................41
Section 6.2 Regulatory Matters.............................................................................41
Section 6.3 Employment and Employee Benefits Matters.......................................................41
Section 6.4 Indemnification................................................................................43
Section 6.5 Registration Statement. .......................................................................44
Section 6.6 Press Releases.................................................................................45
Section 6.7 Nasdaq Listing.................................................................................45
Section 6.8 Board of Directors of Sterling and Sterling Bank...............................................45
Section 6.9 Notification of Certain Matters................................................................45
ARTICLE 7
MUTUAL CONDITIONS TO CLOSING.....................................................................................46
Section 7.1 Shareholder Approvals..........................................................................46
Section 7.2 Regulatory Approvals...........................................................................46
Section 7.3 Litigation.....................................................................................45
Section 7.4 Joint Proxy Statement/Prospectus and Registration Statement....................................46
Section 7.5 Tax Opinion....................................................................................46
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF STERLING AND STERLING BANK......................................................47
Section 8.1 Representations and Warranties.................................................................47
Section 8.2 Performance of Obligations.....................................................................47
Section 8.3 Certificate Representing Satisfaction of Conditions............................................47
Section 8.4 Consents Under Agreements......................................................................47
Section 8.5 Material Condition.............................................................................47
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ▇▇▇▇▇▇▇▇▇▇..........................................................................48
Section 9.1 Representations and Warranties.................................................................48
Section 9.2 Performance of Obligations.....................................................................48
Section 9.3 Certificate Representing Satisfaction of Conditions............................................48
Section 9.4 Consents Under Agreements......................................................................48
Section 9.5 Sterling Shares................................................................................49
ARTICLE 10
TERMINATION, WAIVER AND AMENDMENT................................................................................49
Section 10.1 Termination.................................................................................49
Section 10.2 Effect of Termination; Termination Fee......................................................53
Section 10.3 Amendments..................................................................................53
Section 10.4 Waivers.....................................................................................53
Section 10.5 Non-Survival of Representations, Warranties and Covenants...................................53
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ARTICLE 11
MISCELLANEOUS....................................................................................................54
Section 11.1 Definitions.................................................................................54
Section 11.2 Entire Agreement............................................................................56
Section 11.3 Notices.....................................................................................57
Section 11.4 Severability................................................................................57
Section 11.5 Costs and Expenses..........................................................................58
Section 11.6 Captions....................................................................................58
Section 11.7 Counterparts................................................................................58
Section 11.8 Persons Bound; No Assignment................................................................58
Section 11.9 Governing Law...............................................................................58
Section 11.10 Exhibits and Schedules......................................................................58
Section 11.11 Waiver......................................................................................58
Section 11.12 Construction of Terms.......................................................................59
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AGREEMENT AND PLAN OF MERGER
By and Among
STERLING BANKS, INC.
STERLING BANK
AND
▇▇▇▇▇▇▇▇▇▇ BANCORP, INC.
This AGREEMENT AND PLAN OF MERGER, dated as of the 23rd day of June,
2006 (this "Agreement"), by and among STERLING BANKS, INC., a New Jersey
corporation ("Sterling"), Sterling Bank, a New Jersey chartered commercial bank
("Sterling Bank") and ▇▇▇▇▇▇▇▇▇▇ BANCORP, INC., a New Jersey corporation
("▇▇▇▇▇▇▇▇▇▇") collectively, (the "Parties").
WITNESSETH THAT:
WHEREAS, the Boards of Directors of Sterling, Sterling Bank and
▇▇▇▇▇▇▇▇▇▇ deem it in the best interests of Sterling, Sterling Bank and
▇▇▇▇▇▇▇▇▇▇, respectively, and of their respective shareholders, that Sterling
acquire all of the outstanding stock of ▇▇▇▇▇▇▇▇▇▇ by means of a merger of
▇▇▇▇▇▇▇▇▇▇ with and into Sterling (the "Merger") pursuant to this Agreement in a
transaction that qualifies as a reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986 (as amended, the "Code");
WHEREAS, Sterling was recently formed for the purpose of becoming the
holding company for Sterling Bank upon consummation of the reorganization of
Sterling Bank into the holding company form of ownership pursuant to a Plan of
Acquisition under the New Jersey Banking Act (the "Holding Company
Reorganization") and it is anticipated that such Holding Company Reorganization
will be consummated prior to the Merger;
WHEREAS, ▇▇▇▇▇▇▇▇▇▇ owns all of the issued and outstanding capital
stock of Peoples Savings Bank, a federally chartered savings bank ("Peoples")
and, upon consummation of the Holding Company Reorganization, Sterling will own
all of the issued and outstanding capital stock of Sterling Bank, and it is
contemplated that, subsequent to the Merger and pursuant to the terms of a
certain Agreement and Plan of Bank Merger (the "Bank Merger Agreement"), Peoples
will be merged with and into Sterling Bank (the "Bank Merger");
WHEREAS, as an inducement and condition to Sterling's and Sterling Bank
entering into this Agreement, each of the directors and executive officers of
▇▇▇▇▇▇▇▇▇▇ have entered into Affiliate and Voting Agreements with Sterling and
Sterling Bank pursuant to which they have agreed to vote their ▇▇▇▇▇▇▇▇▇▇ Shares
(as defined herein) in favor of approval of the Agreement.
WHEREAS, as an inducement and condition to ▇▇▇▇▇▇▇▇▇▇'▇ entering into
this Agreement, each of the directors and executive officers of Sterling and
Sterling Bank have entered into Voting Agreements with ▇▇▇▇▇▇▇▇▇▇ pursuant to
which they have agreed to vote their Sterling Bank Shares (as defined herein) in
favor of approval of the Holding Company Reorganization and the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained and
intending to be legally bound hereby, the Parties agree that ▇▇▇▇▇▇▇▇▇▇ will be
merged with and into Sterling and that the terms and conditions of the Merger,
the mode of carrying the Merger into effect, including the manner of converting
the shares of common stock of ▇▇▇▇▇▇▇▇▇▇, $0.10 par value per share, into shares
of common stock of Sterling, $2.00 par value per share (the "Sterling Shares")
or if the Holding Company Reorganization has not occurred into shares of
Sterling Bank, $2.00 par value per share (the "Sterling Bank Shares) and/or
cash, and as further described herein, shall be as hereinafter set forth.
ARTICLE 1
THE MERGER
Section 1.1 Consummation of Merger; Closing Date.
(a) Subject to the provisions hereof, including, without limitation,
Section 2.6 hereof respecting the possible restructuring of the transaction
under certain circumstances, ▇▇▇▇▇▇▇▇▇▇ shall be merged with and into Sterling
(which has heretofore and shall hereinafter be referred to as the "Merger")
pursuant to the laws of the State of New Jersey, and Sterling shall be the
surviving corporation (sometimes hereinafter referred to as "Surviving
Corporation").
(b) The Merger shall become effective on the date and at the time
specified in the certificate of merger to be filed with the New Jersey Secretary
of State pursuant to the New Jersey Business Corporation Act ("NJBCA") (such
time is hereinafter referred to as the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise agreed upon by Sterling and ▇▇▇▇▇▇▇▇▇▇,
the Effective Time shall occur on the tenth (10th) business day following the
later to occur of (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent (as defined herein) of any
Regulatory Authority (as defined herein) having authority over the transactions
contemplated under this Agreement and the satisfaction or waiver of all of the
other terms and conditions of this Agreement (other than the filing of a
Certificate of Merger) and (ii) the date on which the shareholders of ▇▇▇▇▇▇▇▇▇▇
and Sterling Bank approve the transactions contemplated by this Agreement, or
such other time as the Parties may agree.
(c) The closing of the Merger (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, 1735 Market Street, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. local time on the day that the
Effective Time occurs, or such other date, time and place as the Parties hereto
may agree (the "Closing Date"). Subject to the provisions of this Agreement, at
the Closing there shall be delivered to each of the Parties hereto the opinions,
certificates and other documents and instruments required to be so delivered
pursuant to this Agreement.
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Section 1.2 Effect of Merger. At the Effective Time, ▇▇▇▇▇▇▇▇▇▇ shall
be merged with and into Sterling and the separate existence of ▇▇▇▇▇▇▇▇▇▇ shall
cease. The Certificate of Incorporation and Bylaws of Sterling, as in effect on
the date hereof and as otherwise amended prior to the Effective Time, shall be
the Certificate of Incorporation and the Bylaws of the Surviving Corporation
until further amended as provided therein and in accordance with applicable law.
The Surviving Corporation shall have all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a corporation
organized under the laws of the State of New Jersey and shall thereupon and
thereafter possess all other privileges, immunities and franchises of a private,
as well as of a public nature, of each of the constituent corporations. All
property (real, personal and mixed) and all debts on whatever account, including
subscriptions to shares, and all choses in action, all and every other interest,
of or belonging to or due to each of the constituent corporations so merged
shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed. The title to any real estate, or any
interest therein, vested in any of the constituent corporations shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of each of the constituent corporations so merged and any claim
existing or action or proceeding pending by or against either of the constituent
corporations may be prosecuted as if the Merger had not taken place or the
Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of any constituent corporation shall
be impaired by the Merger.
Section 1.3 Further Assurances. From and after the Effective Time, as
and when requested by the Surviving Corporation, the officers and directors of
▇▇▇▇▇▇▇▇▇▇ last in office shall execute and deliver or cause to be executed and
delivered in the name of ▇▇▇▇▇▇▇▇▇▇ such deeds and other instruments and take or
cause to be taken such further or other actions as shall be necessary in order
to vest or perfect in or confirm of record or otherwise to the Surviving
Corporation title to and possession of all of the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of ▇▇▇▇▇▇▇▇▇▇.
Section 1.4 Directors and Officers. Except as otherwise set forth
herein, from and after the Effective Time, the directors of the Surviving
Corporation and officers of the Surviving Corporation shall be those persons
serving as directors and officers of Sterling immediately prior to the Effective
Time, and such additional persons, in each case, as Sterling, at or prior to the
Effective Time, shall designate in writing.
ARTICLE 2
CONVERSION OF CONSTITUENTS' CAPITAL SHARES
Section 2.1 Manner of Conversion of ▇▇▇▇▇▇▇▇▇▇ Shares. Subject to the
provisions hereof, as of the Effective Time and by virtue of the Merger and
without any further action on the part of Sterling, ▇▇▇▇▇▇▇▇▇▇ or the holder of
any shares of any of them, the shares of the constituent corporations shall be
converted as follows:
3
(a) Each share of capital stock of Sterling and Sterling Bank
outstanding immediately prior to the Effective Time shall, after the Effective
Time, remain outstanding and unchanged.
(b) Each share of common stock of ▇▇▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇▇▇ Shares")
held by ▇▇▇▇▇▇▇▇▇▇ or by Sterling (or any of their subsidiaries), other than
such shares held in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired and no consideration shall be paid or
delivered in exchange therefor.
(c) Subject to the allocation and proration procedures set forth in
Section 2.2, each ▇▇▇▇▇▇▇▇▇▇ Share outstanding immediately prior to the
Effective Time, other than such shares the holders of which become entitled to
fair value under Section 14A:11-1 of the New Jersey Business Corporation Act
("Dissenting Shares"), shall be converted into the right to receive, at the
election of the holder thereof:
(i) 2.250 Sterling Shares (such number of Sterling Shares, as
may be adjusted as provided herein, is hereinafter referred to as the "Per
Share Stock Consideration");
(ii) a cash amount equal to $27.50 (the "Per Share Cash
Consideration"); or
(iii) a combination thereof.
Thereafter, subject to Sections 2.3, 2.5, 2.7 and 2.8, each outstanding
certificate representing a ▇▇▇▇▇▇▇▇▇▇ Share shall represent solely the right to
receive the Per Share Stock Consideration or the Per Share Cash Consideration.
(d) If Sterling (or Sterling Bank prior to consummation of the Holding
Company Reorganization) declares a change in the number of Sterling Shares (or
Sterling Bank Shares as the case may be) issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
or similar transaction with respect to such stock, and the record date therefor
(in the case of a stock dividend) or the effective date thereof (in the case of
a stock split or similar recapitalization for which a record date is not
established) shall be at or prior to the Effective Time, or announces a special
extraordinary cash dividend with a record date at or prior to the Effective
Time, the Per Share Stock Consideration shall be proportionately adjusted.
Section 2.2 Election and Proration Procedures.
(a) An election form in such form as Sterling and ▇▇▇▇▇▇▇▇▇▇ shall
mutually agree (an "Election Form") shall be mailed on the same date as the
Joint Proxy Statement/Prospectus (as defined herein) is mailed to each holder of
record of ▇▇▇▇▇▇▇▇▇▇ Shares as of the a record date which shall be the same date
as the record date for eligibility to vote on
4
the Merger. Sterling shall make available as many Election Forms as may be
reasonably requested by all persons who become holders of ▇▇▇▇▇▇▇▇▇▇ Shares
after the record date for eligibility to vote on the Merger and prior to the
Election Deadline (as defined herein), and ▇▇▇▇▇▇▇▇▇▇ shall provide to the
Exchange Agent (as defined herein) all information reasonably necessary for it
to perform its obligations as specified herein.
(b) Each Election Form shall entitle the holder of ▇▇▇▇▇▇▇▇▇▇ Shares
(or the beneficial owner through appropriate and customary documentation and
instructions) to (i) elect to receive the Per Share Stock Consideration for all
of such holder's shares (a "Stock Election"), (ii) elect to receive the Per
Share Cash Consideration for all of such holder's shares (a "Cash Election"),
(iii) elect to receive the Per Share Stock Consideration for a portion of such
holder's shares as specified by such holder and the Per Share Cash Consideration
for the remainder of such holder's shares (a "Mixed Election") or (iv) make no
election (a "Non-election"). Holders of record of ▇▇▇▇▇▇▇▇▇▇ Shares who hold
such shares as nominees, trustees or in other representative capacity (a
"Representative") may submit multiple Election Forms, provided that such
Representative certifies that each such Election Form covers all of the shares
of ▇▇▇▇▇▇▇▇▇▇ Shares held by that Representative for a particular beneficial
owner. The ▇▇▇▇▇▇▇▇▇▇ Shares as to which a Stock Election has been made
(including pursuant to a Mixed Election) are referred to herein as "Stock
Election Shares" and the aggregate number thereof is referred to herein as the
"Stock Election Number." The ▇▇▇▇▇▇▇▇▇▇ Shares as to which a Cash Election has
been made (including pursuant to a Mixed Election) are referred to herein as
"Cash Election Shares" and the aggregate number thereof is referred to as the
"Cash Election Number". Shares of ▇▇▇▇▇▇▇▇▇▇ Shares as to which no election has
been made are referred to as "Non-election Shares."
(c) To be effective, a properly completed Election Form must be
received by an independent agent appointed by Sterling (the "Exchange Agent") on
or before 4:00 p.m., eastern time on the third business day immediately
preceding ▇▇▇▇▇▇▇▇▇▇'▇ stockholders' meeting to consider the Merger or on such
other date or time as the Parties may mutually agree (the "Election Deadline").
An election shall have been properly made only if the Exchange Agent shall have
actually received a properly completed Election Form by the Election Deadline.
An Election Form shall be deemed properly completed only if accompanied by one
or more certificates representing all shares of ▇▇▇▇▇▇▇▇▇▇ Shares covered by
such Election Form, or the guaranteed delivery of such certificates (or
customary affidavits and, if required by Sterling, indemnification regarding the
loss or destruction of such certificates), together with duly completed
transmittal materials. Any ▇▇▇▇▇▇▇▇▇▇ stockholder may at any time prior to the
Election Deadline change his or her election by written notice received by the
Exchange Agent prior to the Election Deadline accompanied by a properly
completed and signed revised Election Form. Any ▇▇▇▇▇▇▇▇▇▇ stockholder may, at
any time prior to the Election Deadline, revoke his or her election by written
notice received by the Exchange Agent prior to the Election Deadline or by
withdrawal prior to the Election Deadline of his or her certificates, or of the
guarantee of delivery of such certificates. All elections shall be revoked
automatically if the exchange agent is notified in writing by either Party that
this Agreement has been terminated. If a stockholder either (i) does not submit
a properly completed Election Form by the Election Deadline or (ii) revokes its
Election Form prior to the Election Deadline but does not submit a new properly
executed Election Form prior to the Election Deadline, the shares of ▇▇▇▇▇▇▇▇▇▇
Shares held by such stockholder shall be designated as Non-election Shares.
Subject to the terms of this Agreement and the Election Form, the Exchange Agent
shall have reasonably discretion to
5
determine whether any election, revocation or change has been properly made and
to disregard immaterial defects in any Election Form, and any good faith
decisions of the Exchange Agent regarding such matters shall be binding and
conclusive.
(d) The number of ▇▇▇▇▇▇▇▇▇▇ Shares to be converted into the right to
receive the Per Share Cash Consideration shall be equal to 50% of the number of
▇▇▇▇▇▇▇▇▇▇ Shares outstanding immediately prior to the Effective Time less the
number of Dissenting Shares (the "Aggregate Cash Limit") and the number of
▇▇▇▇▇▇▇▇▇▇ Shares to be converted into the right to receive the Per Share Stock
Consideration shall be equal to 50% of the number of ▇▇▇▇▇▇▇▇▇▇ Shares
outstanding immediately prior to the Effective Time (the "Aggregate Stock
Limit").
(e) Within five business days after the later to occur of the Election
Deadline or the Effective Time, Sterling shall cause the Exchange Agent to
effect the allocation among holders of ▇▇▇▇▇▇▇▇▇▇ Shares of rights to receive
the Per Share Stock Consideration or the Per Share Cash Consideration and to
distribute such as follows:
(i) if the Stock Election Number exceeds the Aggregate Stock
Limit, then all Cash Election Shares and all Non-Election Shares shall
be converted into the right to receive the Per Share Cash
Consideration, and each holder of Stock Election Shares shall be
entitled to receive (A) the Per Share Stock Consideration in respect
of that number of Stock Election Shares equal to the product obtained
by multiplying (1) the number of Stock Election Shares held by such
holder by (2) a fraction, the numerator of which is the Aggregate
Stock Limit and the denominator of which is the Stock Election Number
and (B) the Per Share Cash Consideration in respect of the remaining
number of such Stock Election Shares;
(ii) if the Cash Election Number exceeds the Aggregate Cash
Limit, then all Stock Election Shares and all Non-Election Shares
shall be converted into the right to receive the Per Share Stock
Consideration, and each holder of Cash Election Shares shall be
entitled to receive (A) the Per Share Cash Consideration in respect of
that number of Cash Election Shares equal to the product obtained by
multiplying (1) the number of Cash Election Shares held by such holder
by (2) a fraction, the numerator of which is the Aggregate Cash Limit
and the denominator of which is the Cash Election Number and (B) the
Per Share Stock Consideration in respect of the remaining number of
such Cash Election Shares; and
(iii) if the Stock Election Number and the Cash Election Number
do not exceed the Aggregate Stock Limit and the Aggregate Cash Limit,
respectively, then (i) all Cash Election Shares shall be converted
into the right to receive the Per Share Cash Consideration, (ii) all
Stock Election Shares shall be converted into the right to receive the
Per Share Stock Consideration, and (iii) all Non-Election Shares shall
be converted into the right to receive either the Per Share Cash
Consideration or the Per Share Stock Consideration such that the
aggregate number of ▇▇▇▇▇▇▇▇▇▇ Shares entitled to receive the Per
Share Cash Consideration is equal to the Aggregate Cash Limit and the
aggregate number of ▇▇▇▇▇▇▇▇▇▇ Shares entitled to receive the Per
Share Stock Consideration is equal to the Aggregate Stock Limit.
6
Section 2.3 ▇▇▇▇▇▇▇▇▇▇ Stock Options.
(a) As of and immediately prior to the Effective Time, all rights with
respect to ▇▇▇▇▇▇▇▇▇▇ Shares issuable pursuant to the exercise of stock options
("▇▇▇▇▇▇▇▇▇▇ Options") granted by ▇▇▇▇▇▇▇▇▇▇ under the ▇▇▇▇▇▇▇▇▇▇ Stock Option
Plans set forth in Schedule 2.3 (the "▇▇▇▇▇▇▇▇▇▇ Stock Option Plans"), each of
which are listed and described on Schedule 2.3 and which are outstanding at the
Effective Time, shall be canceled and shall be converted into the right to
receive in cash, to be paid by ▇▇▇▇▇▇▇▇▇▇ to the optionholder at or immediately
prior to the Effective Time, subject to applicable withholding taxes, the
difference between (A) $27.50 and (B) the per share exercise price of each such
option multiplied by the number of shares that may be purchased pursuant to such
option.
(b) Prior to the Effective Time, ▇▇▇▇▇▇▇▇▇▇ shall take or cause to be
taken all actions required under the ▇▇▇▇▇▇▇▇▇▇ Stock Option Plans to provide
for the actions set forth in Section 2.3(a).
Section 2.4. Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of ▇▇▇▇▇▇▇▇▇▇ Shares converted pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a
Sterling Share (after taking into account all certificates delivered by such
holder), shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part (to the nearest thousandth) of the Per Share Cash
Consideration. No such holder will be entitled to dividends, voting rights or
any other rights as a shareholder in respect of any fractional share.
Section 2.5 Effectuating Conversion.
(a) Immediately prior to the Effective Time, Sterling will
deliver or cause to be delivered to the Exchange Agent the number of
Sterling Shares issuable and the amount of cash payable by Sterling
for ▇▇▇▇▇▇▇▇▇▇ Shares. As promptly as practicable after the Effective
Time but in no event later than five business days, the Exchange Agent
shall send or cause to be sent to each former holder of record of
▇▇▇▇▇▇▇▇▇▇ Shares who did not previously submit a properly completed
Election Form (other than holders of Dissenting Shares) transmittal
materials (the "Letter of Transmittal") for use in exchanging their
certificates formerly representing ▇▇▇▇▇▇▇▇▇▇ Shares for the
consideration provided for in this Agreement. The Letter of
Transmittal will contain instructions with respect to the surrender of
certificates representing ▇▇▇▇▇▇▇▇▇▇ Shares and the receipt of the
consideration contemplated by this Agreement and will require each
holder of ▇▇▇▇▇▇▇▇▇▇ Shares to transfer good and marketable title to
such ▇▇▇▇▇▇▇▇▇▇ Shares to Sterling, free and clear of all liens,
claims and encumbrances.
(b) At the Effective Time, the stock transfer books of
▇▇▇▇▇▇▇▇▇▇ shall be closed as to holders of ▇▇▇▇▇▇▇▇▇▇ Shares
immediately prior to the Effective Time and no transfer of ▇▇▇▇▇▇▇▇▇▇
Shares by any such holder shall thereafter be made or recognized and
each outstanding certificate formerly representing ▇▇▇▇▇▇▇▇▇▇ Shares
shall, without any action on the part of any holder thereof, no longer
represent ▇▇▇▇▇▇▇▇▇▇ Shares. If, after the Effective Time,
certificates are properly presented to the Exchange Agent, such
certificates (other than
7
Dissenting Shares) shall be exchanged for the consideration
contemplated by this Agreement into which ▇▇▇▇▇▇▇▇▇▇ Shares
represented thereby were converted in the Merger.
(c) In the event that any holder of record as of the Effective Time of
▇▇▇▇▇▇▇▇▇▇ Shares (other than Dissenting Shares) is unable to deliver the
certificate which represents such holder's ▇▇▇▇▇▇▇▇▇▇ Shares, Sterling, in the
absence of actual notice that any ▇▇▇▇▇▇▇▇▇▇ Shares theretofore represented by
any such certificate have been acquired by a bona fide purchaser shall deliver
to such holder the consideration contemplated by this Agreement and the amount
of cash representing fractional Sterling Shares to which such holder is entitled
in accordance with the provisions of this Agreement upon the presentation of all
of the following:
(i) An affidavit or other evidence to the reasonable
satisfaction of Sterling that any such certificate has been lost,
wrongfully taken or destroyed;
(ii) Such security or indemnity as may be reasonably requested by
Sterling to indemnify and hold Sterling harmless in respect of such
stock certificate(s); and
(iii) Evidence to the satisfaction of Sterling that such holder
is the owner of ▇▇▇▇▇▇▇▇▇▇ Shares theretofore represented by each
certificate claimed by such holder to be lost, wrongfully taken or
destroyed and that such holder is the person who would be entitled to
present each such certificate for exchange pursuant to this Agreement.
(d) If the delivery of the consideration contemplated by this Agreement
is to be made to a person other than the person in whose name any certificate
representing ▇▇▇▇▇▇▇▇▇▇ Shares surrendered is registered, such certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer), with the signature(s) appropriately guaranteed, and
otherwise in proper form for transfer, and the person requesting such delivery
shall pay any transfer or other taxes required by reason of the delivery to a
person other than the registered holder of such certificate surrendered or
establish to the satisfaction of Sterling that such tax has been paid or is not
applicable.
(e) No holder of ▇▇▇▇▇▇▇▇▇▇ Shares shall be entitled to receive any
dividends or distributions declared or made with respect to the Sterling Shares
with a record date before the Effective Time. Neither the consideration
contemplated by this Agreement nor any dividend or other distribution with
respect to Sterling Shares where the record date thereof is on or after the
Effective Time shall be paid to the holder of any unsurrendered certificate or
certificates representing ▇▇▇▇▇▇▇▇▇▇ Shares, and Sterling shall not be obligated
to deliver any of the consideration contemplated by this Agreement or any such
dividend or other distribution with respect to Sterling Shares until such holder
shall surrender the certificate or certificates representing ▇▇▇▇▇▇▇▇▇▇ Shares
as provided for by the Agreement. Subject to applicable laws, following
surrender of any such certificate or certificates, there shall be paid to the
holder of the certificate or certificates then representing Sterling Shares
issued in the Merger, without interest at the time of such surrender, the
consideration contemplated by this Agreement and the amount
8
of any dividends or other distributions with respect to Sterling Shares to which
such holder is entitled as a holder of Sterling Shares.
Section 2.6 Determination of Alternative Structures; Holding Company
Reorganization.
(a) ▇▇▇▇▇▇▇▇▇▇ hereby agrees that Sterling may at any time change the
method of effecting the Merger; provided, however, that no such changes shall
(i) alter or change the amount or kind of consideration to be issued to holders
of the capital stock of ▇▇▇▇▇▇▇▇▇▇ as provided for in this Agreement (the
"Merger Consideration"), or (ii) materially impede or delay consummation of the
transactions contemplated by this Agreement.
(b) The Parties acknowledge that it is anticipated that, prior to the
Merger, Sterling Bank will have reorganized into the holding company form of
ownership pursuant to a Plan of Acquisition dated April 26, 2006. In the event
the Holding Company Reorganization is abandoned by Sterling and Sterling Bank or
has not been consummated prior to the Merger, all rights and obligations of
Sterling set forth herein shall become, without further action of the Parties,
the rights and obligations of Sterling Bank. All references herein (other than
in Article IV) to Sterling Shares shall thereafter refer to Sterling Bank
Shares.
Section 2.7 Laws of Escheat. If any of the consideration due or other
payments to be paid or delivered to the holders of ▇▇▇▇▇▇▇▇▇▇ Shares is not paid
or delivered within the time period specified by any applicable laws concerning
abandoned property, escheat or similar laws, and if such failure to pay or
deliver such consideration occurs or arises out of the fact that such property
is not claimed by the proper owner thereof, Sterling or the Exchange Agent shall
be entitled to dispose of any such consideration or other payments in accordance
with applicable laws concerning abandoned property, escheat or similar laws. Any
other provision of this Agreement notwithstanding, none of Farnsworth, Sterling,
the Exchange Agent, nor any other Person acting on behalf of any of them shall
be liable to a holder of ▇▇▇▇▇▇▇▇▇▇ Shares for any amount paid or property
delivered in good faith to a public official pursuant to and in accordance with
any applicable abandoned property, escheat or similar law.
Section 2.8 Dissenting Shares.
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the
provisions of the NJBCA; provided, however, that if, in accordance with the
NJBCA, any holder of Dissenting Shares shall forfeit such right to payment of
the fair value of such shares, such shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Per Share Cash Consideration without interest
from Sterling. Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or other distributions
and shall be entitled only to such rights as are afforded in respect of
Dissenting Shares pursuant to the NJBCA.
(b) ▇▇▇▇▇▇▇▇▇▇ shall give Sterling (i) prompt notice of any written
objections to the Merger and any written demands for the payment of the fair
value of any shares,
9
withdrawals of such demands, and any other instruments served pursuant to the
NJBCA received by ▇▇▇▇▇▇▇▇▇▇ and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands under the NJBCA.
▇▇▇▇▇▇▇▇▇▇ shall not voluntarily make any payment with respect to any demands
for payment of fair value and shall not, except with the prior written consent
of Sterling, settle or offer to settle any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ hereby represents and warrants to Sterling and Sterling Bank
as follows as of the date hereof and as of all times up to and including the
Effective Time (except as otherwise provided):
Section 3.1 Corporate Organization.
(a) ▇▇▇▇▇▇▇▇▇▇ is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. ▇▇▇▇▇▇▇▇▇▇ has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as such business is now being conducted, and is
duly licensed or qualified to do business in New Jersey and in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified (or steps
necessary to cure such failure) would not have a Material Adverse Effect on
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole. ▇▇▇▇▇▇▇▇▇▇ is duly registered
as a savings and loan holding company. True and correct copies of the
Certificate of Incorporation and the Bylaws of ▇▇▇▇▇▇▇▇▇▇, each as amended to
the date hereof, have been delivered to Sterling.
(b) Peoples is a federal savings bank duly organized and validly
existing under the laws of the United States. Peoples has the corporate power
and authority to own or lease all of its assets and to carry on its business as
such business is now being conducted. True and correct copies of the Federal
Stock Charter and Bylaws of Peoples have been delivered to Sterling.
(c) Each subsidiary of ▇▇▇▇▇▇▇▇▇▇ is a corporation, limited liability
company or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization. Each
subsidiary has the corporate or requisite power and authority to own or lease
all of its properties and assets and to carry on its business as such business
is now being conducted, and is duly licensed or qualified to do business in all
such place where the nature of the business being conducted by each subsidiary
or the character or location of the properties and assets owned or leased by
each subsidiary make such qualification necessary, except where the failure to
be so licensed or qualified (or steps necessary to cure such failure) would not
have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a
whole.
10
(d) ▇▇▇▇▇▇▇▇▇▇ and each of its subsidiaries has in effect all federal,
state, local and foreign governmental, regulatory, securities brokerage, and
other authorizations, permits and licenses necessary for each of them to own or
lease its properties and assets and to carry on its business as now conducted,
the absence of which, either individually or in the aggregate, would have a
Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
True and correct copies of the charter or certificate of incorporation and
bylaws of each subsidiary have been delivered to Sterling.
(e) Schedule 3.1(e) lists all subsidiaries of ▇▇▇▇▇▇▇▇▇▇ and all
entities (whether corporations, limited liability companies, partnerships or
similar organizations), including the corresponding percentage ownership, in
which ▇▇▇▇▇▇▇▇▇▇ owns, directly or indirectly, any of the ownership interests as
of the date of this Agreement and indicates for each subsidiary or other entity
as of such date, its jurisdiction of organization and the jurisdiction(s)
wherein it is qualified to do business. All of such subsidiaries and other
entities are in compliance with all applicable laws, rules and regulations
relating to direct investment in equity ownership interests. ▇▇▇▇▇▇▇▇▇▇ owns
either directly or indirectly, all of the outstanding capital stock of each of
its subsidiaries. With the exception of Peoples, no subsidiary of ▇▇▇▇▇▇▇▇▇▇ is
an "insured depositary institution" as defined in the Federal Deposit Insurance
Act, as amended, and the applicable regulations thereunder. All of the shares of
capital stock of each of the subsidiaries of ▇▇▇▇▇▇▇▇▇▇ are duly authorized,
validly issued, fully paid and nonassessable and not subject to any preemptive
rights and are owned by ▇▇▇▇▇▇▇▇▇▇ free and clear of any claims, liens,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws), and there are no agreements or understandings with
respect to the voting or disposition of any such shares.
(f) The respective minute books of ▇▇▇▇▇▇▇▇▇▇ and each subsidiary of
▇▇▇▇▇▇▇▇▇▇ contain complete and accurate records in all material respects of all
meetings and other corporate actions held or taken by its shareholders and
Boards of Directors (including all committees thereof).
(g) Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its affiliates or subsidiaries owns
of record or beneficially any Sterling Bank Shares.
Section 3.2 Capitalization. The authorized capital stock of ▇▇▇▇▇▇▇▇▇▇
consists of 5,000,000 ▇▇▇▇▇▇▇▇▇▇ Shares, of which 650,530 are issued and
outstanding as of the date hereof (exclusive of any such shares held in the
treasury of ▇▇▇▇▇▇▇▇▇▇) and 1,000,000 shares of serial preferred stock, $0.10
par value per share of which no shares are issued and outstanding as of the date
hereof. All of the issued and outstanding ▇▇▇▇▇▇▇▇▇▇ Shares have been duly
authorized and validly issued and all such shares are fully paid and
nonassessable. As of the date hereof, there are no outstanding options,
warrants, commitments, or other rights or instruments to purchase or acquire any
shares of capital stock of ▇▇▇▇▇▇▇▇▇▇, or any securities or rights convertible
into or exchangeable for shares of capital stock of ▇▇▇▇▇▇▇▇▇▇, except for
options to purchase 66,724 ▇▇▇▇▇▇▇▇▇▇ Shares. Schedule 3.2 sets forth the name
of each holder of a ▇▇▇▇▇▇▇▇▇▇ option, the number of shares each such individual
may acquire pursuant to the exercise of such options, the grant, vesting and
expiration dates, the exercise price and whether the ▇▇▇▇▇▇▇▇▇▇ option is an
incentive stock option or a nonqualified stock option.
11
Section 3.3 Financial Statements; Filings.
(a) ▇▇▇▇▇▇▇▇▇▇ has previously delivered to Sterling copies of the
audited consolidated financial statements of ▇▇▇▇▇▇▇▇▇▇ as of and for the years
ended September 30, 2005 and September 30, 2004 and unaudited consolidated
financial statements for the quarter ended March 31, 2006, and ▇▇▇▇▇▇▇▇▇▇ shall
deliver to Sterling, as soon as practicable following the preparation of
additional consolidated financial statements for each subsequent calendar
quarter (or other reporting period) or year of ▇▇▇▇▇▇▇▇▇▇, the additional
consolidated financial statements of ▇▇▇▇▇▇▇▇▇▇ as of and for such subsequent
calendar quarter (or other reporting period) or year (such financial statements,
unless otherwise indicated, being hereinafter referred to collectively as the
"Financial Statements of ▇▇▇▇▇▇▇▇▇▇").
(b) Each of the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ (including the
related notes, where applicable) have been or will be prepared in all material
respects in accordance with generally accepted accounting principles, which
principles have been or will be consistently applied during the periods
involved, except as otherwise noted therein, and the books and records of
▇▇▇▇▇▇▇▇▇▇ have been, are being, and will be maintained in all material respects
in accordance with applicable legal and accounting requirements and reflect only
actual transactions. Each of the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ (including
the related notes, where applicable) fairly present or will fairly present the
financial position of ▇▇▇▇▇▇▇▇▇▇ on a consolidated basis, as applicable, as of
the respective dates thereof and fairly present or will fairly present the
results of operations of ▇▇▇▇▇▇▇▇▇▇ on a consolidated basis, as applicable, for
the respective periods therein set forth.
(c) Except as set forth in Schedule 3.3(c), since September 30, 2005,
none of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries has incurred any obligation or
liability (contingent or otherwise) that has or might reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇
and its subsidiaries taken as a whole. Since September 30, 2005, ▇▇▇▇▇▇▇▇▇▇ has
not incurred or paid any obligation or liability which would have a Material
Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole, except as
may have been incurred or paid in the ordinary course of business, consistent
with past practices.
Section 3.4 Loan Portfolio; Reserves. All evidences of indebtedness
reflected as assets in the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ were (or will be,
as the case may be) as of such dates in all respects the binding obligations of
the respective obligors named therein in accordance with their respective terms,
and were not subject to any defenses, setoffs, or counterclaims, except as may
be provided by bankruptcy, insolvency or similar laws or by general principles
of equity and (ii) the allowances for possible loan losses shown on the
Financial Statements of ▇▇▇▇▇▇▇▇▇▇ were, and the allowance for possible loan
losses to be shown on the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ as of any date
subsequent to the execution of this Agreement will be, as of such dates,
adequate to provide for possible losses, net of recoveries relating to loans
previously charged off, in respect of loans outstanding (including accrued
interest receivable) of ▇▇▇▇▇▇▇▇▇▇ and other extensions of credit (including
letters of credit or commitments to make loans or extend credit).
12
Section 3.5 Certain Loans and Related Matters. Except as set forth in
Schedule 3.5, neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries is a Party to any
written: (i) loan agreement, note or borrowing arrangement under the terms of
which the obligor is sixty (60) days delinquent in payment of principal or
interest or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇, in default of any other provision
as of the date hereof; (ii) loan agreement, note or borrowing arrangement which
has been classified by ▇▇▇▇▇▇▇▇▇▇ or any Regulatory Authority as "substandard,"
"doubtful," "loss," "other loans especially mentioned," "other assets especially
mentioned," "special mention," "credit risk assets," "classified," "criticized,"
"watch list," "concerned loans" or any comparable classifications by such
persons; or (iii) loan agreement, note or borrowing arrangement, including any
loan guaranty, with any director or executive officer of ▇▇▇▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇▇▇▇ subsidiary or any five percent (5%) shareholder of ▇▇▇▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇▇▇▇ subsidiary, or any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing.
Section 3.6 Authority; No Violation.
(a) ▇▇▇▇▇▇▇▇▇▇ has full corporate power and authority to execute and
deliver this Agreement and, subject to the approval of the shareholders of
▇▇▇▇▇▇▇▇▇▇ and Sterling Bank and to the receipt of the Consents of the
Regulatory Authorities, to consummate the transactions contemplated hereby. The
Board of Directors of ▇▇▇▇▇▇▇▇▇▇ has duly and validly approved this Agreement
and the transactions contemplated hereby, has authorized the execution and
delivery of this Agreement, has directed that this Agreement and the
transactions contemplated hereby be submitted to ▇▇▇▇▇▇▇▇▇▇'▇ shareholders for
approval at a meeting of such shareholders and, except for the adoption of such
Agreement by its shareholders and the shareholders of Sterling and the execution
and filing of the Certificate of Merger, no other corporate proceeding on the
part of ▇▇▇▇▇▇▇▇▇▇ is necessary to consummate the transactions so contemplated.
This Agreement (assuming due authorization, execution and delivery by Sterling),
constitutes a valid and binding obligation of ▇▇▇▇▇▇▇▇▇▇, and will be
enforceable against ▇▇▇▇▇▇▇▇▇▇ in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought.
(b) Neither the execution and delivery of this Agreement by ▇▇▇▇▇▇▇▇▇▇
nor the consummation by ▇▇▇▇▇▇▇▇▇▇ of the transactions contemplated hereby, nor
compliance by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries with any of the terms or
provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of ▇▇▇▇▇▇▇▇▇▇ or the organizational documents of its
subsidiaries, (ii) to the Knowledge of ▇▇▇▇▇▇▇▇▇▇, assuming that the Consents of
the Regulatory Authorities and approvals referred to herein are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries 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 the
creation of any lien, security interest, charge or other encumbrance upon any of
the respective properties or assets of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, deed of trust, license, permit, lease, agreement or other
instrument or obligation to which ▇▇▇▇▇▇▇▇▇▇ or
13
any of its subsidiaries is a party, or by which it or any of its properties or
assets may be bound or affected except such violations, breaches or defaults
that would not, individually or in the aggregate have a Material Adverse Effect
on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
Section 3.7 Consents and Approvals. Except for (i) the requisite
approvals of the shareholders of ▇▇▇▇▇▇▇▇▇▇ and Sterling Bank pursuant to the
joint proxy statement and Prospectus of ▇▇▇▇▇▇▇▇▇▇ and Sterling relating to the
meetings of the shareholders of ▇▇▇▇▇▇▇▇▇▇ and Sterling at which the Merger is
to be considered (the "Joint Proxy Statement/Prospectus"); (ii) the Consents of
the Regulatory Authorities; (iii) the filing of Certificate of Merger with the
State New Jersey; and (iv) as set forth in Schedule 3.7, no Consents of any
person are necessary in connection with the execution and delivery by ▇▇▇▇▇▇▇▇▇▇
of this Agreement, and the consummation of the Merger and the other transactions
contemplated hereby.
Section 3.8 Broker's Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.,
whose engagement letter is set forth in Schedule 3.8, neither ▇▇▇▇▇▇▇▇▇▇, any of
its subsidiaries nor any of their respective officers or directors, has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement.
Section 3.9 Absence of Certain Changes or Events. Except as set forth
in Schedule 3.9, since September 30, 2005, there has not been (a) any
declaration, payment or setting aside of any dividend or distribution (whether
in cash, stock or property) in respect of ▇▇▇▇▇▇▇▇▇▇ Shares or (b) any change or
any event involving a prospective change in the condition of ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries taken as a whole or a combination of any such change(s) and any
such event(s) which has had, or is reasonably likely to have, a Material Adverse
Effect on the condition of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
Section 3.10 Legal Proceedings; Etc.
(a) Schedule 3.10 sets forth a true and correct summary description as
of the date hereof of any pending, or to ▇▇▇▇▇▇▇▇▇▇'▇ Knowledge, threatened
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against ▇▇▇▇▇▇▇▇▇▇ and
its subsidiaries, including the venue, the parties thereto, the subject matter
thereof and the amount of damages claimed or other remedies sought, other than
foreclosure and other collection proceedings.
(b) Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries, is a party to any,
and there are no pending or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇ and each ▇▇▇▇▇▇▇▇▇▇
subsidiary, threatened, judicial, administrative, arbitral or other proceedings,
claims, actions, causes of action or governmental investigations against
▇▇▇▇▇▇▇▇▇▇ in which there is a reasonable probability of any material recovery
or other Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a
whole; no judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator is outstanding
against ▇▇▇▇▇▇▇▇▇▇ which has
14
had, or is reasonably likely to have, a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇
and its subsidiaries taken as a whole and there is no default by ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries under any material contract or agreement to which
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is a Party which has had or is reasonably
likely to have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries
taken as a whole.
Section 3.11 Taxes and Tax Returns.
(a) ▇▇▇▇▇▇▇▇▇▇ has previously delivered or made available to Sterling
copies of the federal, state and local income tax returns of ▇▇▇▇▇▇▇▇▇▇ and, if
consolidated returns do not exist for all periods, of each of its subsidiaries,
for the years 2004 and 2005 and all schedules and exhibits thereto, and such
returns have not been examined by the Internal Revenue Service (the "IRS") or
any other taxing authority. ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries have duly filed in
correct form all federal, state and local information returns and tax returns
required to be filed on or prior to the date hereof, and ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries have duly paid or made adequate provisions for the payment of all
taxes and other governmental charges which are owed by ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries to any federal, state or local taxing authorities, whether or not
reflected in such returns (including, without limitation, those owed in respect
of the properties, income, business, capital stock, deposits, franchises,
licenses, sales and payrolls of ▇▇▇▇▇▇▇▇▇▇ and any of its subsidiaries), other
than taxes and other charges which (i) are not yet delinquent or are being
contested in good faith, (ii) have not been finally determined, or (iii) would
not, individually or in the aggregate, result in a Material Adverse Effect on
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole. The amounts set forth as
liabilities for taxes on the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ are sufficient,
in the aggregate, for the payment of all unpaid federal, state and local taxes
(including any interest or penalties thereon), whether or not disputed, accrued
or applicable, for the periods then ended, and have been computed in accordance
with generally accepted accounting principles. Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its
subsidiaries is responsible for the taxes of any other person other than
▇▇▇▇▇▇▇▇▇▇ and any of its respective subsidiaries under Treasury Regulation
1.1502-6 or any similar provision of federal, state or foreign law.
(b) Except as disclosed in Schedule 3.11, neither of ▇▇▇▇▇▇▇▇▇▇ nor any
of its subsidiaries has executed an extension or waiver of any statute of
limitations on the assessment or collection of any federal, state or local taxes
due that is currently in effect, and deferred taxes of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries, have been adequately provided for in the Financial Statements of
▇▇▇▇▇▇▇▇▇▇.
(c) Except as set forth on Schedule 3.11, neither ▇▇▇▇▇▇▇▇▇▇ nor any of
its subsidiaries has made any payment, is obligated to make any payment or is a
Party to any contract, agreement or other arrangement that could obligate it to
make any payment that would be disallowed as a deduction under Section 280G or
162(m) of the Code.
(d) There has not been an ownership change, as defined in Section
382(g) of the Code, of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries that occurred
during or after any taxable period in which ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries incurred an operating loss that carries over to any taxable period
ending after the fiscal year of ▇▇▇▇▇▇▇▇▇▇ immediately preceding the date of
this Agreement.
15
(e) Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code, no such
adjustment has been proposed by the IRS and no pending request for permission to
change any accounting method has been submitted by ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries.
(f) To the Knowledge of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries
have withheld and paid over to taxing authorities all taxes required to be
withheld from those workers who would be treated as employees, and any deferred
compensation plans are in compliance with Section 409A of the Code.
Section 3.12 Employee Benefit Plans.
(a) Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries has or maintains any
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), except as described in
Schedule 3.12(a) (the "Employee Benefit Plans"). ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries
have, with respect to each such plan, delivered to Sterling true and complete
copies of: (i) all current plan texts and agreements and related trust
agreements or annuity contracts and any amendments thereto; (ii) all current
summary plan descriptions; (iii) the Form 5500 filed in each of the most recent
three plan years (including all schedules thereto and the opinions of
independent accountants); (iv) the most recent actuarial valuation (if any); (v)
the most recent annual and periodic accounting of plan assets; and (vi) if the
plan is intended to qualify under Section 401(a) or 403(a) of the Code, the most
recent determination letter received from the IRS, or in the case of a prototype
or volume submitter plan document, a copy of the most recent favorable opinion
letter from the IRS; and (vii) copies of any IRS or U.S. Department of Labor
notices that assert any material deficiency, penalty, or excise tax with respect
to any such plan.
(b) No Employee Benefit Plan is a defined benefit pension plan. Neither
▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries (or any pension plan maintained by any of
them) has incurred any liability to the PBGC or the IRS with respect to any
pension plan qualified under Section 401 of the Code, except liabilities to the
PBGC pursuant to Section 4007 of ERISA, all which have been fully paid. No
reportable event under Section 4043(b) of ERISA (including events waived by PBGC
regulation) has occurred with respect to any such pension plan.
(c) Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries has incurred any
liability under Section 4201 of ERISA for a complete or partial withdrawal from,
or agreed to participate in, any multi-employer plan as such term is defined in
Section 3(37) of ERISA.
(d) All Employee Benefit Plans comply in all material respects with the
applicable provisions of ERISA and the Code that are applicable, or intended to
be applicable, including, but not limited to, COBRA, HIPAA and any applicable,
similar state law. Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries has any
material liability under any such plan that is not reflected in the Financial
Statements of ▇▇▇▇▇▇▇▇▇▇. None of ▇▇▇▇▇▇▇▇▇▇, any Employee Benefit Plan or any
employee, administrator or agent thereof, is or has been in violation of the
transaction code set rules under HIPAA ▇▇.▇▇. 1172-1174 or the HIPAA privacy
rules under 45 CFR Part 160 and subparts A and E of Part 164. No penalties have
been imposed on ▇▇▇▇▇▇▇▇▇▇, any
16
Employee Benefit Plan, or any employee, administrator or agent thereof, under
HIPAA ss. 1176 or ss. 1177.
For purposes of this Agreement, "COBRA" means the provision of Section
4980B of the Code and the regulations thereunder, and Part 6 of the Subtitle B
of Title I of ERISA and any regulations thereunder, and "HIPAA" means the
provisions of the Code and ERISA as enacted by the Health Insurance Portability
and Accountability Act of 1996.
(e) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA)
has occurred with respect to any Employee Benefit Plan which would result in the
imposition, directly or indirectly, of a material excise tax under Section 4975
of the Code or a material civil penalty under Section 502(i) of ERISA; and no
actions have occurred which could result in the imposition of a material penalty
under any section or provision of ERISA.
(f) No Employee Benefit Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan terminated in accordance with all applicable legal
requirements.
(g) Except as described in Schedule 3.12(g), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment or obligation (including, without
limitation, severance, bonus, deferred compensation, retirement, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
officer or employee of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries under any Employee
Benefit Plan or otherwise, (ii) materially increase any benefits or obligations
otherwise payable under any benefit plan or (iii) result in any acceleration of
the time of payment or vesting of any such benefits or obligations.
(h) No Employee Benefit Plan is a multiemployer plan as defined in
Section 414(f) of the Code or Section 3(37) or 4001(a)(3) of ERISA. ▇▇▇▇▇▇▇▇▇▇
and its subsidiaries have never been a party to or participant in a
multiemployer plan.
(i) There are no actions, liens, suits or claims pending or, to the
Knowledge of ▇▇▇▇▇▇▇▇▇▇, threatened (other than routine claims for benefits)
with respect to any Employee Benefit Plan or against the assets of any Employee
Benefit Plan. No assets of ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries are subject to any
lien under Section 302(f) of ERISA or Section 412(n) of the Code.
(j) Each Employee Benefit Plan which is intended to qualify under
Section 401(a) or 403(a) of the Code has received a favorable determination
letter from the IRS to the effect that it so qualifies and its related trust is
exempt from taxation under Section 501(a) of the Code or a favorable opinion
letter from the IRS with respect to any Employee Benefit Plan that is set forth
in a prototype or volume submitter plan document. To the Knowledge of
▇▇▇▇▇▇▇▇▇▇,
17
no event has occurred or circumstance exists that will or could give rise to a
disqualification or loss of tax-exempt status of any such plan or trust.
(k) No Employee Benefit Plan is a multiple employer plan within the
meaning of Section 413(c) of the Code or Section 4063, 4064 or 4066 of ERISA. No
Employee Benefit Plan is a multiple employer welfare arrangement as defined in
Section 3(40) of ERISA.
(l) Each employee pension benefit plan, as defined in Section 3(2) of
ERISA, that is not qualified under Section 401(a) or 403(a) of the Code is
exempt from Part 2, 3 and 4 of Title I of ERISA as an unfunded plan that is
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, pursuant to Section
201(2), 301(a)(3) and 401(a)(1) of ERISA. No assets of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries are allocated to or held in a grantor trust or "rabbi trust" or
similar funding vehicle.
(m) Except as set forth on Schedule 3.12(m), no Employee Benefit Plan
provides benefits to any current or former employee of ▇▇▇▇▇▇▇▇▇▇ or its
subsidiaries following the retirement or other termination of service (other
than coverage mandated by COBRA, the cost of which is fully paid by the current
or former employee or his or her dependents).
(n) With respect to each Employee Benefit Plan, there are no funded
benefit obligations for which contributions have not been made or properly
accrued and there are no unfunded benefit obligations that have not been
accounted for by reserves or otherwise properly footnoted in accordance with
generally accepted accounting principles on the Financial Statements of
▇▇▇▇▇▇▇▇▇▇.
(o) No Employee Benefit Plan is under IRS or U.S. Department of Labor
examination or has received such notice that such an examination is pending nor
has any Employee Benefit Plan been submitted to a voluntary IRS or U.S.
Department of Labor correction program.
Section 3.13 Title and Related Matters.
(a) Except as set forth on Schedule 3.13(a), each of ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries has good title, and as to owned real property, has good and
marketable title in fee simple absolute, to all assets and properties, real or
personal, tangible or intangible, reflected as owned by or leased or subleased
by or carried under the name of any of them on the Financial Statements of
▇▇▇▇▇▇▇▇▇▇ or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary course of
business since September 30, 2005), free and clear of all liens, encumbrances,
mortgages, security interests, restrictions, pledges or claims, except for (i)
those liens, encumbrances, mortgages, security interests, restrictions, pledges
or claims reflected in the Financial Statements of ▇▇▇▇▇▇▇▇▇▇ or incurred in the
ordinary course of business after September 30, 2005, (ii) statutory liens for
amounts not yet delinquent or which are being contested in good faith, and (iii)
liens, encumbrances, mortgages, security interests, pledges, claims and title
imperfections that would
18
not in the aggregate have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries taken as a whole.
(b) All agreements pursuant to which ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries leases, subleases or licenses material real or material personal
properties from others are valid, binding and enforceable in accordance with
their respective terms, and there is not, under any of such leases or licenses,
any existing default or event of default, or any event with respect to
▇▇▇▇▇▇▇▇▇▇ which with notice or lapse of time, or both, would constitute a
default or force majeure, or provide the basis for any other claim of excusable
delay or nonperformance, except for defaults which individually or in the
aggregate would not have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries taken as a whole. Except as set forth on Schedule 3.13(b),
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries have all right, title and interest as a lessee
under the terms of each lease or sublease, free and clear of all liens, claims
or encumbrances (other than the rights of the lessor) as of the Effective Time,
and shall have the right to transfer each lease or sublease pursuant to this
Agreement.
(c) Except as set forth in Schedule 3.13(c), (i) all of the buildings,
structures and fixtures owned, leased or subleased by ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries are in good operating condition and repair, subject only to
ordinary wear and tear and/or minor defects which do not interfere with the
continued use thereof in the conduct of normal operations, and (ii) all of the
material personal properties owned, leased or subleased by ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries are in good operating condition and repair, subject only to
ordinary wear and tear and/or minor defects which do not interfere with the
continued use thereof in the conduct of normal operations.
Section 3.14 Real Estate.
(a) Schedule 3.14(a) identifies each parcel of real estate or interest
therein owned, leased or subleased by ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries or in which
▇▇▇▇▇▇▇▇▇▇ or its subsidiaries has any ownership or leasehold interest.
(b) Schedule 3.14(b) lists or otherwise describes each and every
written or oral lease or sublease, together with the current name, address and
telephone number of the landlord or sublandlord and the landlord's property
manager (if any), under which ▇▇▇▇▇▇▇▇▇▇ is the lessee of any real property and
which relates in any manner to the operation of the businesses of ▇▇▇▇▇▇▇▇▇▇.
(c) As to each parcel of real property owned or used by ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries, ▇▇▇▇▇▇▇▇▇▇ has not received notice of any pending or,
to the Knowledge of ▇▇▇▇▇▇▇▇▇▇, threatened condemnation proceedings, litigation
proceedings or mechanic's or materialmen's liens.
19
Section 3.15 Environmental Matters.
(a) To the Knowledge of ▇▇▇▇▇▇▇▇▇▇, each of ▇▇▇▇▇▇▇▇▇▇, its
subsidiaries, the Participation Facilities (as defined below), and the Loan
Properties (as defined below) are, and have been, in material compliance, and
there are no present circumstances that would prevent or interfere with the
continuation of such material compliance with all applicable federal, state and
local laws, rules, regulations and ordinances, and with all applicable decrees,
orders and contractual obligations relating to pollution or the protection of
the environment or the discharge of, or exposure to, Hazardous Materials (as
defined herein) in the environment or workplace except for violations which,
individually or in the aggregate, will not have a Material Adverse Effect on
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
(b) There is no litigation pending or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇
or any of its subsidiaries, threatened before any court, governmental agency or
board or other forum in which ▇▇▇▇▇▇▇▇▇▇ or any Participation Facility has been
or, with respect to threatened litigation, may be, named as defendant (i) for
alleged noncompliance (including by any predecessor), with respect to any
Environmental Law (as defined herein) or (ii) relating to the release into the
environment of any Hazardous Material (as defined herein), whether or not
occurring at, on or involving a site owned, leased or operated by ▇▇▇▇▇▇▇▇▇▇,
any of its subsidiaries, or any Participation Facility except for litigation
that would not, individually or in the aggregate have a Material Adverse Effect
on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
(c) There is no litigation pending or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇
or any of its subsidiaries, threatened before any court, governmental agency or
board or other forum in which any Loan Property (or ▇▇▇▇▇▇▇▇▇▇ in respect of
such Loan Property) has been or, with respect to threatened litigation, may be,
named as a defendant or potentially responsible Party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on or involving a Loan Property except for litigation that
would not, individually or in the aggregate have a Material Adverse Effect on
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
(d) To the Knowledge of ▇▇▇▇▇▇▇▇▇▇, there is no reasonable basis for
any litigation of a type described in Section 3.15(b) and Section 3.15(c) of
this Agreement.
(e) To the Knowledge of ▇▇▇▇▇▇▇▇▇▇, during the period of (i) ownership
or operation by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries of any of its current
properties, (ii) participation by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries in the
management of any Participation Facility, or (iii) holding by ▇▇▇▇▇▇▇▇▇▇ or any
of its subsidiaries of a security interest in any Loan Property, there have been
no releases of Hazardous Material in, on, under or affecting such properties
except for releases that would not, individually or in the aggregate have a
Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
(f) Prior to the period of (i) ownership or operation by ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries of any of its current properties, (ii) participation by
▇▇▇▇▇▇▇▇▇▇ or
20
any of its subsidiaries in the management of any Participation Facility, or
(iii) holding by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries of a security interest in
any Loan Property, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries,
there were no releases of Hazardous Material or oil in, on, under or affecting
any such property, Participation Facility or Loan Property except for releases
that would not, individually or in the aggregate have a Material Adverse Effect
on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole.
Section 3.16 Commitments and Contracts.
(a) Except for this Agreement or as set forth in Schedule 3.16, none of
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is a party or subject to any of the
following:
(i) any agreement, contract, arrangement, commitment, or
understanding (whether written or oral) that is material to the financial
condition, results of operations or business of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries when taken as a whole;
(ii) any real estate lease;
(iii) any employment, consulting or severance contract or
arrangement with any officer, director or employee, except for oral "at
will" arrangements;
(iv) any plan, arrangement or contract providing for bonuses,
pensions, options, restricted stock, deferred compensation, retirement
payments, profit sharing or similar arrangements for or with any
officers, directors or employees of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries;
(v) Any collective bargaining agreement with any labor union
relating to employees of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries;
(vi) any agreement which by its terms limits the payment of
dividends by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries;
(vii) any material instrument evidencing or related to
indebtedness for borrowed money whether directly or indirectly, by way
of purchase money obligation, conditional sale, lease purchase,
guaranty or otherwise, in respect of which ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries is an obligor to any person, which instrument evidences
or relates to indebtedness other than loans extended by ▇▇▇▇▇▇▇▇▇▇,
advances from the Federal Home Loan Bank ("FHLB"), deposits,
repurchase agreements, bankers acceptances, and "treasury tax and
loan" accounts established in the ordinary course of business and
transactions in "federal funds," or which contain financial covenants
or other restrictions (other than those relating to the payment of
principal ad interest when due) which would become applicable on or
after the Effective Time to ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries;
21
(viii) any contract limiting the freedom of ▇▇▇▇▇▇▇▇▇▇ or any of
its subsidiaries to engage in any type of bank or banking-related
business permissible under law;
(ix) any contract relating to the acquisition of any business
that has not been fully formed, including when contingent compensation
remains to be paid;
(x) any contract or agreement pursuant to which ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries is obligated to make payments in excess of
$25,000 on an annual basis that cannot be terminated by ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries without penalty upon 90 days or less notice;
and
(xi) any other contract or agreement which would be required to
be disclosed in reports filed by ▇▇▇▇▇▇▇▇▇▇ with the Securities and
Exchange Commission ("SEC") or the Office of Thrift Supervision (the
"OTS") and which has not been so disclosed.
(b) Except as set forth on Schedule 3.16(b), (i) neither the execution
of this Agreement nor the consummation of the transactions contemplated hereby
will result in termination of any of the material service contracts (including
leases, agreements or licenses) to which ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
is a party ("Service Contracts"), or modification or acceleration of any of the
terms of such Service Contracts; and (ii) no consents are required to be
obtained and no notices are required to be given in order for the Service
Contracts to remain effective, without any modification or acceleration of any
of the terms thereof, following the consummation of the transactions
contemplated by this Agreement.
(c) Schedule 3.16(c) lists the deadlines for extensions or terminations
of any material leases, agreements or licenses (including specifically data
processing agreements) to which ▇▇▇▇▇▇▇▇▇▇ is a Party.
(d) Neither ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is in default in any
material respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party,
by which its assets, business or operations may be bound or affected, or under
which it or its assets, business or operations receive benefits, and there has
not occurred any event that, with the lapse of time or the giving of notice or
both, would constitute such default.
(e) True and correct copies of material contracts, leases, agreements,
plans, arrangements and instruments referred to in Sections 3.18 (a), (b), or
(c) have been provided to Sterling or Sterling Bank on or before the date
hereof, as listed in the respective disclosure schedules and are in full force
and effect on the date hereof.
Section 3.17 Regulatory Matters. None of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries has taken or agreed to take any action or has any Knowledge of any
fact or has agreed to any
22
circumstance that would materially impede or delay receipt of any Consents of
any Regulatory Authorities referred to in this Agreement including, matters
relating to the Community Reinvestment Act and protests thereunder.
Section 3.18 Registration Obligations. ▇▇▇▇▇▇▇▇▇▇ is not under any
obligation, contingent or otherwise, which will survive the Merger to register
any of its securities under the Securities Act of 1933 or any state securities
laws.
Section 3.19 Antitakeover Provisions. ▇▇▇▇▇▇▇▇▇▇ has taken all actions
required to exempt ▇▇▇▇▇▇▇▇▇▇, this Agreement and the Merger from any provisions
of an antitakeover nature contained in their organizational documents, and the
provisions of any federal or state "antitakeover," "fair price," "moratorium,"
"control share acquisition" or similar laws or regulations, including, without
limitation, the New Jersey Shareholders Protection Act.
Section 3.20 Insurance. ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries are presently
insured as set forth on Schedule 3.20, and during each of the past three
calendar years have been insured, for such amounts against such risks as
companies or institutions engaged in a similar business and of a similar size
would, in accordance with good business practice, customarily be insured. To the
Knowledge of ▇▇▇▇▇▇▇▇▇▇, the policies of fire, theft, liability and other
insurance maintained with respect to the assets or businesses of ▇▇▇▇▇▇▇▇▇▇ and
each ▇▇▇▇▇▇▇▇▇▇ subsidiary provide adequate coverage against loss, and the
fidelity bonds in effect as to which ▇▇▇▇▇▇▇▇▇▇ is named an insured are
sufficient for their purpose. Such policies of insurance are listed and
described in Schedule 3.20 and are in full force and effect. Neither ▇▇▇▇▇▇▇▇▇▇
nor any of its subsidiaries are in material default thereunder and all claims
thereunder have been filed in due and timely fashion.
Section 3.21 Labor.
(a) No work stoppage involving ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is
pending as of the date hereof or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries, threatened. None of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is
involved in, or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries, threatened
with or affected by, any proceeding asserting that ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries has committed an unfair labor practice or any labor dispute,
arbitration, lawsuit or administrative proceeding which might reasonably be
expected to have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries,
taken as a whole. No union represents or, to the Knowledge of ▇▇▇▇▇▇▇▇▇▇, claims
to represent any employees of ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries, and, to the
Knowledge of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries, and, to the Knowledge of
▇▇▇▇▇▇▇▇▇▇, no labor union is attempting to organize employees of ▇▇▇▇▇▇▇▇▇▇ or
its subsidiaries.
(b) Except as set forth on Schedule 3.21(b), the consummation of the
transactions contemplated hereby will not cause Sterling to incur or suffer any
liability relating to, or obligation to pay, severance, termination or other
payments to any person or entity. Except as set forth on Schedule 3.16(a)
hereto, no employee of ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries has any contractual right
to continued employment by ▇▇▇▇▇▇▇▇▇▇.
23
(c) To the Knowledge of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries are
in material compliance with all applicable laws and regulations relating to
employment or the workplace, including, without limitation, provisions relating
to wages, hours, collective bargaining, safety and health, work authorization,
equal employment opportunity, immigration and the withholding of income taxes,
unemployment compensation, workers compensation, employee privacy and right to
know and social security contributions.
(d) Except as set forth on Schedule 3.21(d) hereto, there has not been,
there is not presently pending or existing and there is not threatened any
proceeding against or affecting ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries relating to the
alleged violation of any legal requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission or any comparable governmental body, organizational activity, or
other labor or employment dispute against or affecting ▇▇▇▇▇▇▇▇▇▇ or its
subsidiaries.
Section 3.22 Compliance with Laws. Each of ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries has conducted its business in accordance with all applicable
federal, state and local laws, regulations and orders, and each is in material
compliance with such laws, regulations and orders. Except as disclosed in
Schedule 3.22, ▇▇▇▇▇▇▇▇▇▇ and each of its subsidiaries:
(a) are not in violation of any laws, orders or permits applicable to
its business or the employees or agents or representatives conducting its
business (other than where such violation will not, alone or in the aggregate,
have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a
whole), and
(b) has not received a notification or communication from any agency or
department of any federal, state or local governmental authority or any
Regulatory Authority or the staff thereof (i) asserting that ▇▇▇▇▇▇▇▇▇▇ or any
of its subsidiaries are not in compliance with any laws or orders which such
governmental authority or Regulatory Authority enforces except where such
noncompliance would not have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries taken as a whole, (ii) threatening to revoke any permit or license,
(iii) requiring ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries to enter into any cease
and desist order, formal agreement, commitment or memorandum of understanding,
or to adopt any resolutions or similar undertakings, or (iv) directing,
restricting or limiting, or purporting to direct, restrict or limit in any
material manner, the operations of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries,
including, without limitation, any restrictions on the payment of dividends, or
that in any manner relates to such entity's capital adequacy, credit policies,
management or business (other than regulatory restrictions applicable to
similarly-situated companies and their subsidiaries generally).
(c) are not aware of, has not been advised of, and has no reason to
believe that any facts or circumstances exist, which would cause ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries: (i) to be deemed to be operating in violation in any
material respect of the federal Bank Secrecy Act, as amended, and its
implementing regulations (31 C.F.R. Part 103), the USA PATRIOT Act of 2001,
Public Law 107-56 (the "USA PATRIOT Act"), and the regulations promulgated
thereunder, any order issued with respect to anti-money laundering by the U.S.
Department of the Treasury's Office of Foreign Assets Control, or any other
applicable anti-money laundering
24
statute, rule or regulation; as well as the provisions of the information
security program adopted by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries pursuant to 12
C.F.R. Part 208. Furthermore, the Board of Directors of ▇▇▇▇▇▇▇▇▇▇ has adopted
and ▇▇▇▇▇▇▇▇▇▇ has implemented an anti-money laundering program that contains
adequate and appropriate customer identification verification procedures that
comply with Section 326 of the USA PATRIOT Act and such anti-money laundering
program meets the requirements in all material respects of Section 352 of the
USA PATRIOT Act and the regulations thereunder.
Section 3.23 Transactions with Management.Except for (a) deposits, all
of which are on terms and conditions comparable to those made available to other
customers of ▇▇▇▇▇▇▇▇▇▇ at the time such deposits were entered into, (b) the
loans listed on Schedule 3.5 or arm's length loans to employees entered into in
the ordinary course of business, (c) obligations under Employee Benefit Plans of
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries set forth in Schedule 3.12 and (d) any loans or
deposit agreements entered into in the ordinary course with customers of
▇▇▇▇▇▇▇▇▇▇, there are no contracts with or commitments to directors, officers or
employees involving the expenditure of more than $5,000 as to any one
individual, including, with respect to any business directly or indirectly
controlled by any such person, or $5,000 for all such contracts for commitments
in the aggregate for all such individuals.
Section 3.24 Derivative Contracts.Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its
subsidiaries is a party to and have not agreed to enter into an exchange-traded
or over-the-counter swap, forward, future, option, cap, floor or collar
financial contract or agreement, or any other contract or agreement not included
in Financial Statements of ▇▇▇▇▇▇▇▇▇▇ which is a financial derivative contract
(including various combinations thereof) ("Derivative Contracts"), except for
those Derivative Contracts set forth in Schedule 3.24.
Section 3.25 Deposits.None of the deposits of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries are "brokered" deposits as such term is defined in the Rules and
Regulations of the FDIC or are subject to any encumbrance, legal restraint or
other legal process (other than garnishments, pledges, set off rights, escrow
limitations and similar actions taken in the ordinary course of business), and
no portion of such deposits represents a deposit of any affiliate of
▇▇▇▇▇▇▇▇▇▇'▇.
Section 3.26 Accounting Controls; Disclosure Controls.
(a) ▇▇▇▇▇▇▇▇▇▇ has devised and maintained systems of internal
accounting control sufficient to provide reasonable assurances that: (i) all
material transactions are executed in accordance with general or specific
authorization of the Board of Directors and the duly authorized executive
officers of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries; (ii) all material transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles consistently applied
with respect to institutions such as ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries or any
other criteria applicable to such financial statements, and to maintain proper
accountability for items therein; (iii) access to the material properties and
assets of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries is permitted only in accordance with
general or specific authorization of the Board of Directors and the duly
authorized executive officers of ▇▇▇▇▇▇▇▇▇▇
25
and its subsidiaries; and (iv) the recorded accountability for items is compared
with the actual levels at reasonable intervals and appropriate actions taken
with respect to any differences.
(b) Since September 30, 2005 there have been no significant changes in
the internal controls utilized by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
("Internal Controls") with respect to their financial records or in other
factors that could significantly affect the Internal Controls, including any
corrective actions with regard to significant deficiencies and material
weakness. There are no significant deficiencies in the design or operation of
the Internal Controls which would adversely affect the ability of ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries to record, process, summarize and report financial data,
and there are no material weaknesses in the Internal Controls. ▇▇▇▇▇▇▇▇▇▇ is not
aware of any fraud or suspected fraud, whether or not material, which involves
management or other employees who have a significant role in preparing
▇▇▇▇▇▇▇▇▇▇'▇ consolidated financial statements.
Section 3.27 Deposit Insurance.The deposit accounts of Peoples are
insured by the FDIC in accordance with the provisions of the Federal Deposit
Insurance Act (the "Act"); ▇▇▇▇▇▇▇▇▇▇ has paid all regular premiums and special
assessments and filed all reports required under the Act.
Section 3.28 Intellectual Property. Schedule 3.28 sets forth all (i)
trademarks, tradenames, service marks or other trade rights, whether or not
registered, and all pending applications for any such registrations, (ii)
copyrights, copyrightable materials or pending applications therefore, (iii)
trade secrets, (iv) inventions, discoveries, designs and drawings, (v) computer
software, and (vi) patents and patent applications owned, licensed of otherwise
used by ▇▇▇▇▇▇▇▇▇▇ and any of its subsidiaries (collectively the "Intellectual
Property Rights"). Neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries has granted to
any Person any license, option or other rights to use in any manner any of the
Intellectual Property Rights, whether requiring the payment of royalties or not.
The Intellectual Property Rights will not cease to be the rights of ▇▇▇▇▇▇▇▇▇▇
or be impaired by reason of performance of this Agreement or the consummation of
the transactions contemplated hereby. No other Person has (i) notified
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries that such Person claims any ownership or
right of use of the Intellectual Property Rights or, (ii) to the Knowledge of
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries, is infringing upon any ▇▇▇▇▇▇▇▇▇▇ or any
of its subsidiaries. To the Knowledge of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries, the
use of the Intellectual Property Rights does not conflict with, infringe upon or
otherwise violate the valid rights of any Person. No written notice has been
received and not fully resolved and no action has been instituted or, to the
Knowledge of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries, threatened against ▇▇▇▇▇▇▇▇▇▇ or
any of its subsidiaries alleging that the use of the Intellectual Property
Rights infringes upon or otherwise violates the rights of any Person.
Section 3.29 Absence of Undisclosed Liabilities. Except for those
liabilities that are fully reflected or reserved against on the financial
statements included in the ▇▇▇▇▇▇▇▇▇▇ Form 10-QSB for the period ended March 31,
2006 and for liabilities incurred in the ordinary course of business consistent
with past practices or in connection with this Agreement or the transactions
contemplated hereby or as set forth in Schedule 3.29, since March 31, 2006
neither ▇▇▇▇▇▇▇▇▇▇ nor any of its subsidiaries has incurred any obligation or
liability (contingent or otherwise) that,
26
either alone or when combined with all similar liabilities, has had or is
reasonably expected to have a Material Adverse Effect on ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries taken as a whole.
Section 3.30 Exchange Act Reports. Since June 30, 2004, ▇▇▇▇▇▇▇▇▇▇ and
each of its subsidiaries have timely filed, and subsequent to the date of this
Agreement and prior to the Effective Time will timely file, all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were and are required to be filed with the SEC,
including, but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-K, proxy
statements and all communications mailed by ▇▇▇▇▇▇▇▇▇▇ to its shareholders
(collectively, the "▇▇▇▇▇▇▇▇▇▇ Reports"). As of the respective dates, the
▇▇▇▇▇▇▇▇▇▇ Reports complied and, with respect to filings made after the date of
this Agreement, will at the date of filing comply, in all material respects with
all of the rules and regulations of the SEC to the extent applicable thereto,
and all such reports, filings and proxy materials did not and will not, at the
time of their filing, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
Section 3.31 Fairness Opinion.Prior to the execution of this Agreement,
the ▇▇▇▇▇▇▇▇▇▇ Board has received the written opinion of ▇▇▇▇▇▇▇▇▇▇'▇ financial
advisor, ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., to the effect that as of the date
hereof, and based upon and subject to the matters set forth herein, the Merger
Consideration is fair, from a financial point of view, the shareholders of
▇▇▇▇▇▇▇▇▇▇. Such opinion has not been amended or rescinded as of the date of
this Agreement.
Section 3.32 Investment Securities. Except as set forth on Schedule
3.32, no ▇▇▇▇▇▇▇▇▇▇ investment security or mortgage backed security held by
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries, were it to be held as a loan, would be
classified as "substandard," "doubtful," "loss," "other loans especially
mentioned," "other assets especially mentioned," "special mention," "credit risk
assets," "classified," "criticized," "watch list," "concerned loans" or any
comparable classifications.
Section 3.33 Proxy Materials. None of the information relating to
▇▇▇▇▇▇▇▇▇▇ to be included in the Joint Proxy Statement/Prospectus which is to be
mailed to the shareholders of ▇▇▇▇▇▇▇▇▇▇ and Sterling in connection with the
solicitation of their approval of this Agreement will, at the time such Joint
Proxy Statement/Prospectus is mailed or at the time of the meetings of
shareholders to which such Joint Proxy Statement/Prospectus relates, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make a statement therein not false or misleading.
Section 3.34 Untrue Statements and Omissions. No representation or
warranty contained in Article 3 of this Agreement or in the Schedules of
▇▇▇▇▇▇▇▇▇▇ and its subsidiaries contain any untrue statement of a material fact
or omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
27
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF STERLING AND STERLING BANK
Sterling and Sterling Bank hereby represent and warrant to ▇▇▇▇▇▇▇▇▇▇
as follows as of the date hereof and also on the Effective Time (except as
otherwise provided):
Section 4.1 Organization and Related Matters of Sterling and Sterling
Bank.
(a) Sterling is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. Sterling has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted, or as proposed to be conducted
pursuant to this Agreement, and Sterling is licensed or qualified to do business
in each jurisdiction in which the nature of the business conducted by Sterling,
or the character or location of the properties and assets owned or leased by
Sterling makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified (or steps necessary to cure such failure)
would not have a Material Adverse Effect on Sterling and Sterling Bank taken as
a whole. Upon consummation of the Holding Company Reorganization, Sterling will
be a bank holding company duly registered with the FRB under the Bank Holding
Company Act of 1956, as amended. True and correct copies of the Certificate of
Incorporation of Sterling and the Bylaws of Sterling, each as amended to the
date hereof, have been made available to ▇▇▇▇▇▇▇▇▇▇.
(b) Sterling Bank is a commercial bank duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Sterling Bank
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted, or as proposed to be
conducted pursuant to this Agreement, and Sterling Bank is licensed or qualified
to do business in each jurisdiction in which the nature of the business
conducted by Sterling Bank, or the character or location of the properties and
assets owned or leased by Sterling Bank makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified (or steps
necessary to cure such failure) would not have a Material Adverse Effect on
Sterling and Sterling Bank taken as a whole. True and correct copies of the
Certificate of Incorporation of Sterling Bank and the Bylaws of Sterling Bank,
each as amended to the date hereof, have been made available to ▇▇▇▇▇▇▇▇▇▇.
(c) Sterling has in effect all federal, state, local and foreign
governmental, regulatory and other authorizations, permits and licenses
necessary for it to own or lease its properties and assets and to carry on its
business as now conducted, the absence of which, either individually or in the
aggregate, would have a Material Adverse Effect on Sterling and Sterling Bank
taken as a whole.
(d) Sterling Bank has no subsidiaries except for Sterling.
28
Section 4.2 Capitalization.
(a) The authorized capital stock of Sterling consists of 15,000,000
shares of common stock, $2.00 par value of which no shares are issued and
outstanding as of the date hereof, and 10,000,000 shares of preferred stock, no
par value, of which no shares are issued and outstanding as of the date hereof.
All issued and outstanding shares of Sterling are duly authorized and validly
issued and all such shares are fully paid and nonassessable and free of
preemptive rights.
(b) The authorized capital stock of Sterling Bank consists of
15,000,000 shares of common stock, $2.00 par value, 4,547,211 shares of which
are issued and outstanding (exclusive of any such shares held in the treasury of
Sterling Bank) as of the date hereof. All issued and outstanding shares of
Sterling Bank have been duly authorized and validly issued, and all such shares
are fully paid and nonassessable and free of preemptive rights.
Section 4.3 Authorization. The execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated hereby and
in any related agreements, have been duly authorized by the Boards of Directors
of Sterling and Sterling Bank, and no other corporate proceedings on the part of
Sterling or Sterling Bank are or will be necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement is the valid and
binding obligation of Sterling and Sterling Bank enforceable against each in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought. Neither the execution, delivery or performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Sterling or Sterling
Bank or, (ii) assuming that any necessary Consents are duly obtained, (A)
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 the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Sterling or Sterling Bank under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, permit, lease,
agreement or other instrument or obligation to which Sterling or Sterling Bank
is a party, or by which Sterling or Sterling Bank or any of their properties or
assets may be bound or affected, (B) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Sterling
or Sterling Bank or any of their material properties or assets, and with respect
to (B) above, such individually or in the aggregate will not have a Material
Adverse Effect on Sterling and Sterling Bank taken as a whole.
Section 4.4 Financial Statements.
(a) Sterling Bank has made available to ▇▇▇▇▇▇▇▇▇▇ copies of audited
consolidated financial statements of Sterling Bank as of and for the years ended
December 31, 2005 and 2004 and unaudited consolidated financial statements for
the quarter ended March 31, 2006, and Sterling and Sterling Bank will make
available to ▇▇▇▇▇▇▇▇▇▇, as soon as practicable
29
following the preparation of additional consolidated financial statements for
each subsequent calendar quarter or year of Sterling Bank (or Sterling
subsequent to the consummation of the Holding Company Reorganization), the
consolidated financial statements of Sterling as of and for such subsequent
calendar quarter or year (such consolidated financial statements, unless
otherwise indicated, being hereinafter referred to collectively as the
"Financial Statements of Sterling").
(b) Each of the Financial Statements of Sterling and Sterling Bank
(including the related notes) have been or will be prepared in all material
respects in accordance with generally accepted accounting principles, which
principles have been or will be consistently applied during the periods
involved, except as otherwise noted therein, and the books and records of
Sterling and Sterling Bank have been, are being, and will be maintained in all
material respects in accordance with applicable legal and accounting
requirements and reflect only actual transactions. Each of the Financial
Statements of Sterling and Sterling Bank (including the related notes) fairly
presents or will fairly present the consolidated financial position of Sterling
or Sterling Bank, as the case may be, as of the respective dates thereof and
fairly presents or will fairly present the results of operations of Sterling or
Sterling Bank, as the case may be, for the respective periods therein set forth.
(c) Since December 31, 2005, neither Sterling nor Sterling Bank has
incurred any obligation or liability (contingent or otherwise) that has or might
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Sterling and Sterling Bank taken as a whole. Since December
31, 2005, Sterling has not incurred or paid any obligation or liability which
would be material to Sterling and Sterling Bank taken as a whole, except as may
have been incurred or paid in the ordinary course of business, consistent with
past practices.
Section 4.5 Consents and Approvals. Except for (i) the Consents of the
Regulatory Authorities; (ii) approval of this Agreement by the shareholders of
▇▇▇▇▇▇▇▇▇▇ and Sterling Bank; and (iii) filing of Certificate of Merger with the
State of New Jersey. No consents or approvals by, or filings or registrations
with, any third Party or any public body, agency or authority are necessary in
connection with the execution and delivery by Sterling and Sterling Bank of this
Agreement, and the consummation of the Merger and the other transactions
contemplated hereby.
Section 4.6 Proxy Materials. None of the information relating solely to
Sterling or Sterling Bank to be included or incorporated by reference in the
Joint Proxy Statement/ Prospectus which is to be mailed to the shareholders of
▇▇▇▇▇▇▇▇▇▇ and Sterling Bank in connection with the solicitation of their
approval of this Agreement will, at the time such Joint Proxy
Statement/Prospectus is mailed or at the time of the meetings of shareholders of
▇▇▇▇▇▇▇▇▇▇ and Sterling Bank to which such Joint Proxy Statement/Prospectus
relates, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make a statement therein not false
or misleading.
Section 4.7 Regulatory Matters. Neither Sterling nor Sterling Bank has
agreed to take any action, has no Knowledge of any fact or has agreed to any
circumstance that would
30
materially impede or delay receipt of any Consent from any Regulatory Authority
referred to in this Agreement including matters relating to the Community
Reinvestment Act.
Section 4.8 Untrue Statements and Omissions. No representation or
warranty contained in Article 4 of this Agreement or in the Schedules of
Sterling and Sterling Bank contain any untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 4.9 Absence of Certain Changes or Events. Since December 31,
2005, there has not been any change or any event which has had, or is reasonably
likely to have, a Material Adverse Effect on Sterling and Sterling Bank taken as
a whole, or a combination of such changes or events which has had, or is
reasonably likely to have, a Material Adverse Effect on Sterling and Sterling
Bank taken as a whole and no fact or condition exists as of the date hereof
which might reasonably be expected to cause any such change or event in the
future.
Section 4.10 Legal Proceedings; Etc.
(a) Neither Sterling nor Sterling Bank is a party to any, and there are
no pending or, to the Knowledge of Sterling and Sterling Bank, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Sterling and Sterling Bank,
including the venue, the parties thereto, the subject matter thereof and the
amount of damages claimed or other remedies sought, other than foreclosure and
other collection proceedings.
(b) Neither Sterling nor Sterling Bank is a party to any, and there are
no pending or, to the Knowledge of Sterling and Sterling Bank, threatened,
judicial, administrative, arbitral or other proceedings, claims, actions, causes
of action or governmental investigations against Sterling or Sterling Bank in
which there is a reasonable probability of any material recovery or other
Material Adverse Effect on Sterling and Sterling Bank taken as a whole; no
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator is outstanding
against Sterling or Sterling Bank which has had, or is reasonably likely to
have, a Material Adverse Effect on Sterling and Sterling Bank taken as a whole
and there is no default by Sterling or Sterling Bank under any material contract
or agreement to which Sterling or Sterling Bank is a party which has had or is
reasonably likely to have a Material Adverse Effect on Sterling and Sterling
Bank taken as a whole.
Section 4.11 Compliance with Laws. Each of Sterling and Sterling Bank
has conducted its business in accordance with all applicable federal, state and
local laws, regulations and orders, and each is in material compliance with such
laws, regulations and orders. Neither Sterling nor Sterling Bank:
(a) is in violation of any laws, orders or permits applicable to its
business or the employees or agents or representatives conducting its business
(other than where such violation will not, alone or in the aggregate, have a
Material Adverse Effect on Sterling or Sterling Bank), and
31
(b) has received a notification or communication from any agency or
department of any federal, state or local governmental authority or any
Regulatory Authority or the staff thereof (i) asserting that Sterling or
Sterling Bank is not in compliance with any laws or orders which such
governmental authority or Regulatory Authority enforces except where such
noncompliance would not have a Material Adverse Effect on Sterling and Sterling
Bank taken as a whole, (ii) threatening to revoke any permit or license, (iii)
requiring Sterling or Sterling Bank to enter into any cease and desist order,
formal agreement, commitment or memorandum of understanding, or to adopt any
resolutions or similar undertakings, or (iv) directing, restricting or limiting,
or purporting to direct, restrict or limit in any material manner, the
operations of Sterling or Sterling Bank, including, without limitation, any
restrictions on the payment of dividends, or that in any manner relates to such
entity's capital adequacy, credit policies, management or business (other than
generally regulatory restrictions applicable to similarly-situated companies and
their subsidiaries).
(c) is not aware of, has not been advised of, and has no reason to
believe that any facts or circumstances exist, which would cause Sterling or
Sterling Bank: (i) to be deemed to be operating in violation in any material
respect of the federal Bank Secrecy Act, as amended, and its implementing
regulations (31 C.F.R. Part 103), the USA PATRIOT Act of 2001, Public Law 107-56
(the "USA PATRIOT Act"), and the regulations promulgated thereunder, any order
issued with respect to anti-money laundering by the U.S. Department of the
Treasury's Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation; as well as the provisions of the
information security program adopted by Sterling pursuant to 12 C.F.R. Part 570.
Furthermore, the Boards of Directors of Sterling and Sterling Bank have adopted
and Sterling and Sterling Bank have implemented an anti-money laundering program
that contains adequate and appropriate customer identification verification
procedures that comply with Section 326 of the USA PATRIOT Act and such
anti-money laundering program meets the requirements in all material respects of
Section 352 of the USA PATRIOT Act and the regulations thereunder.
Section 4.12 Antitakeover Provisions. Sterling and Sterling Bank have
taken all actions required to exempt Sterling and Sterling Bank, this Agreement
and the Merger from any provisions of an antitakeover nature contained in their
organizational documents, and the provisions of any federal or state
"antitakeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations, including, without limitation, the New Jersey
Shareholders' Protection Act.
Section 4.13 Accounting Controls; Disclosure Controls. (a) Sterling and
Sterling Bank have devised and maintained systems of internal accounting control
sufficient to provide reasonable assurances that: (i) all material transactions
are executed in accordance with general or specific authorization of their
respective Board of Directors and the duly authorized executive officers of
Sterling and Sterling Bank; (ii) all material transactions are recorded as
necessary to permit the preparation of financial statements in conformity with
generally accepted accounting principles consistently applied with respect to
institutions such as Sterling and Sterling Bank or any other criteria applicable
to such financial statements, and to maintain proper accountability for items
therein; (iii) access to the material properties and assets of Sterling and
Sterling Bank is permitted only in accordance with general or specific
authorization of the
32
Boards of Directors and the duly authorized executive officers of Sterling and
Sterling Bank; and (iv) the recorded accountability for items is compared with
the actual levels at reasonable intervals and appropriate actions taken with
respect to any differences.
(b) Since June 30, 2005 there have been no significant changes in the
internal controls utilized by Sterling Bank (" Sterling Internal Controls") with
respect to their financial records or in other factors that could significantly
affect the Internal Controls, including any corrective actions with regard to
significant deficiencies and material weakness. There are no significant
deficiencies in the design or operation of the Sterling Internal Controls which
would adversely affect the ability of Sterling or Sterling Bank to record,
process, summarize and report financial data, and there are no material
weaknesses in the Sterling Internal Controls. Neither Sterling nor Sterling Bank
is aware of any fraud or suspected fraud, whether or not material, which
involves management or other employees who have a significant role in preparing
Sterling Bank's consolidated financial statements.
Section 4.14 Deposit Insurance. The deposit accounts of Sterling Bank
are insured by the FDIC in accordance with the provisions of the Act; Sterling
Bank has paid all regular premiums and special assessments and filed all reports
required under the Act.
Section 4.15 Absence of Undisclosed Liabilities. Except for those
liabilities that are fully reflected or reserved against on the financial
statements included in the Sterling Bank Form 10-Q for the period ended March
31, 2006 and for liabilities incurred in the ordinary course of business
consistent with past practices or in connection with this Agreement or the
transactions contemplated hereby, since March 31, 2006 neither Sterling nor
Sterling Bank has incurred any obligation or liability (contingent or otherwise)
that, either alone or when combined with all similar liabilities, has had or is
reasonably expected to have a Material Adverse Effect on Sterling and Sterling
Bank taken as a whole.
Section 4.16 Exchange Act Reports. Since June 30, 2004, Sterling Bank
has timely filed, and subsequent to the date of this Agreement and prior to the
Effective Time will timely file, all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that were
and are required to be filed pursuant to the Exchange Act, including, but not
limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-K, proxy statements and all
communications mailed by Sterling Bank to its shareholders (collectively, the
"Sterling Bank Reports"). As of the respective dates, the Sterling Bank Reports
complied and, with respect to filings made after the date of this Agreement,
will at the date of filing comply, in all material respects with all of the
rules and regulations under the Exchange Act to the extent applicable thereto,
and all such reports, filings and proxy materials did not and will not, at the
time of their filing, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
Section 4.17 Fairness Opinion.Prior to the execution of this Agreement,
the Sterling and Sterling Bank Boards have received the oral opinion of their
financial
33
advisor to the effect that as of the date hereof, and based upon and subject to
the matters set forth herein, the financial terms of the Merger are fair, from a
financial point of view, the shareholders of Sterling Bank and such opinion has
not been amended or rescinded as of the date hereof.
ARTICLE 5
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of the Business of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and
Sterling Bank.
(a) During the period from the date of this Agreement to the Effective
Time, each of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Sterling Bank shall, and shall cause
their respective subsidiaries to, (i) conduct its business in the usual, regular
and ordinary course consistent with past practice and prudent banking principles
and in compliance in all material respects with all applicable laws and
regulations, (ii) use its best efforts to maintain and preserve intact its
business organization, employees, goodwill with customers and advantageous
business relationships and retain the services of its officers and key
employees, (iii) preserve the goodwill of its customers and its subsidiaries and
others with whom business relationships exist, (iv) except as required by law or
regulation, take no action which would adversely affect or delay the ability of
the Parties to obtain any Consent from any Regulatory Authority or other
approvals required for the consummation of the transactions contemplated hereby
or to perform its respective covenants and agreements under this Agreement, (v)
not take any action that is intended or may reasonably be expected to result in
any of the conditions to the Merger set forth in Article 7 not being satisfied,
(vi) knowingly commit any act or omission which constitutes a material breach or
default by under any agreement with any Regulatory Authority or under any
material contract to which any of them is a party or by which any of them or
their respective Parties is bound, (vii) knowingly take any action that would,
or would reasonably be expected to, prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code, (ix) enter into
any new material line of business; change its material lending, investment,
underwriting, risk and assets/liability management and other material banking
and operating policies, except as required by applicable law, regulation or
policies imposed, or (x) knowingly take any action or fail to take any action
that is intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time, or
(ii) a material violation of any provision of this Agreement, except in each
case as may be required by applicable law or regulation.
(b) During the period from the date of this Agreement to the Effective
Time, except as required by law or regulation or the terms of this Agreement,
▇▇▇▇▇▇▇▇▇▇ shall not, and it shall not permit any ▇▇▇▇▇▇▇▇▇▇ subsidiary, without
the prior written consent of Sterling and Sterling Bank (which consent shall not
be unreasonably withheld), to:
(i) change, delete or add any provision of or to the Certificate
of Incorporation or Bylaws of ▇▇▇▇▇▇▇▇▇▇ or the organizational documents of
any subsidiary;
34
(ii) except for the issuance of ▇▇▇▇▇▇▇▇▇▇ Shares pursuant to the
terms of the ▇▇▇▇▇▇▇▇▇▇ Options outstanding on the date hereof and
disclosed in Schedule 3.2, change the number of shares of the authorized,
issued or outstanding capital stock of ▇▇▇▇▇▇▇▇▇▇, including any issuance,
purchase, redemption, split, combination or reclassification thereof, or
issue, grant or modify any option, warrant, call, commitment, subscription,
right or agreement to purchase relating to the authorized or issued capital
stock of ▇▇▇▇▇▇▇▇▇▇, declare, set aside or pay any dividend or other
distribution with respect to the outstanding capital stock of ▇▇▇▇▇▇▇▇▇▇;
provided that ▇▇▇▇▇▇▇▇▇▇ may pay its semi-annual cash dividend of up to
$.05 per share on each ▇▇▇▇▇▇▇▇▇▇ Share issued and outstanding (other than
shares held in treasury and unawarded shares held in benefit plans) prior
to the Effective Time consistent with past practices.
(iii) incur any material liabilities or material obligations
(other than deposit liabilities, FHLB borrowings and short-term borrowings
in the ordinary course of business and consistent with past practice),
whether directly or by way of guaranty, including any obligation for
borrowed money, or whether evidenced by any note, bond, debenture, or
similar instrument;
(iv) make any capital expenditures in excess of $15,000
individually or $50,000 in the aggregate;
(v) sell, transfer, convey or otherwise dispose of any real
property (including "other real estate owned") or interest therein;
(vi) except as provided in Schedule 5.1(b)(vi), pay any bonuses
to any employee, officer, director other than in the ordinary course of
business consistent with past practices or grant any salary increases to
officers except for merit-based or annual salary increases in the ordinary
course of business consistent with past practices;
(vii) enter into or extend any agreement, lease or license
relating to real property, personal property, data processing or bankcard
functions relating to ▇▇▇▇▇▇▇▇▇▇;
(viii) acquire five percent (5%) or more of the assets or equity
securities of any Person or acquire direct or indirect control of any
Person;
(ix) originate, purchase, extend or grant any loan other than in
the ordinary course of business;
35
(x) file any applications or make any contract with respect to
branching by ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries (whether de novo,
purchase, sale or relocation) or acquire or construct, or enter into any
agreement to acquire or construct, any interest in real property;
(xi) form any new subsidiary or cause or permit a material change
in the activities presently conducted by any subsidiary of ▇▇▇▇▇▇▇▇▇▇ or
make additional investments in subsidiaries;
(xii) increase or decrease the rate of interest paid on time
deposits or on certificates of deposit, except in a manner and pursuant to
policies consistent with ▇▇▇▇▇▇▇▇▇▇'▇ past practices;
(xiii) change any method of accounting principles or practices
other than changes required by applicable law or GAAP or regulatory
accounting principles; or
(xiv) enter into, establish, adopt, amend, modify or terminate
(except (i) as may be required by or to make consistent with applicable
law, subject to the provision of prior written notice to and consultation
with respect thereto with Sterling and Sterling Bank, or (ii) to satisfy
contractual obligations existing as of the date hereof and set forth on
Schedule 5.2(b)(vii), any pension, retirement, supplemental executive
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any current or
former director, officer or employee of ▇▇▇▇▇▇▇▇▇▇ or its subsidiaries or
take any action to accelerate the vesting or exercisability of stock
options (other than as a result of the execution of this Agreement or
consummation of the Merger), restricted stock or other compensation or
benefits payable thereunder.
Section 5.2 Current Information. During the period from the date of
this Agreement to the Effective Time or the time of termination or abandonment
of this Agreement, to the extent permitted by law, the Parties will each cause
one or more of their designated representatives to confer on a regular and
frequent basis and to report to the other the general status of their ongoing
operations. Each of the Parties will promptly notify the others of any material
change in the normal course of its business or its operations or properties, any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), the institution of material
litigation, claims, threats or causes of action, and will keep the other fully
informed of such events. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Sterling Bank will each
furnish to the other, promptly after the preparation and/or receipt thereof,
copies of its unaudited quarterly
36
periodic financial statements for the applicable periods then ended, and such
financial statements shall, upon delivery by ▇▇▇▇▇▇▇▇▇▇ to Sterling, be treated,
for purposes of Section 3.3 hereof, as among the Financial Statements of
▇▇▇▇▇▇▇▇▇▇ and upon delivery by Sterling or Sterling Bank to ▇▇▇▇▇▇▇▇▇▇, be
treated, for purposes of Section 4.4 hereof as among the Financial Statements of
Sterling.
Section 5.3 Access to Properties; Personnel and Records.
(a) For so long as this Agreement shall remain in effect, ▇▇▇▇▇▇▇▇▇▇
and its subsidiaries shall permit Sterling, Sterling Bank or its agents
reasonable access, during normal business hours, to the properties of ▇▇▇▇▇▇▇▇▇▇
and its subsidiaries, and shall disclose and make available (together with the
right to copy) to Sterling and to its internal auditors, loan review officers,
attorneys, accountants and other representatives, all books, papers and records
relating to the assets, stock, properties, operations, obligations and
liabilities of ▇▇▇▇▇▇▇▇▇▇, including all books of account (including the general
ledger), tax records, minute books of directors' and shareholders' meetings
(other than minutes of meetings at which this Agreement or the transactions
contemplated thereby are discussed), organizational documents, bylaws, contracts
and agreements, filings with any regulatory agency, correspondence with
regulatory or taxing authorities, documents relating to assets, titles,
abstracts, appraisals, consultant's reports, plans affecting employees, and any
other assets, business activities or prospects in which Sterling or Sterling
Bank may have a reasonable interest, and ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries shall
use their reasonable best efforts to provide Sterling and Sterling Bank and
their representatives access to the work papers of ▇▇▇▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇▇▇▇▇
subsidiaries' accountants. Notwithstanding the foregoing, ▇▇▇▇▇▇▇▇▇▇ and its
subsidiaries shall not be required to provide access to or to disclose
information where such access or disclosure would contravene any law, rule,
regulation, order or judgment or would violate any confidentiality agreement
entered into by ▇▇▇▇▇▇▇▇▇▇ prior to the date hereof. The foregoing rights
granted to Sterling and Sterling Bank shall not, whether or not and regardless
of the extent to which the same are exercised, affect the representations and
warranties made in this Agreement by ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries.
(b) All information furnished by the Parties hereto pursuant to this
Agreement shall be treated as the sole property of the Party providing such
information until the consummation of the Merger contemplated hereby and, if
such transaction shall not occur, the Party receiving the information shall
return to the Party which furnished such information, all documents or other
materials containing, reflecting or referring to such information, shall use its
best efforts to keep confidential all such information, and shall not directly
or indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for two (2) years from the date the proposed transactions are abandoned but
shall not apply to (1) any information which (A) the Party receiving the
information was already in possession of prior to disclosure thereof by the
Party furnishing the information, (B) was then available to the public, or (C)
became available to the public through no fault of the Party receiving the
information; or (2) disclosures pursuant to a legal requirement or in accordance
with an order of a court of competent jurisdiction or regulatory agency;
provided, however, the Party which is the subject of any such legal requirement
or order shall use its best efforts to give the other Party at least ten (10)
business days prior notice thereof. Each Party hereto acknowledges and agrees
that a breach of any of their respective obligations
37
under this Section 5.3 would cause the other irreparable harm for which there is
no adequate remedy at law, and that, accordingly, each is entitled to injunctive
and other equitable relief for the enforcement thereof in addition to damages or
any other relief available at law. Without the consent of the other Party,
neither Party shall use information furnished to such Party other than for the
purposes of the transactions contemplated hereby.
Section 5.4 Approvals of Shareholders. ▇▇▇▇▇▇▇▇▇▇ and Sterling Bank
will take all steps necessary under applicable laws to call, give notice of,
convene and hold a meeting of their respective shareholders as soon as
reasonably practicable for the purpose of approving this Agreement (but in no
event later than 60 days after the Registration Statement has been declared
effective) and the transactions contemplated hereby and for such other purposes
consistent with the complete performance of this Agreement as may be necessary
or desirable. Upon the receipt of an updated fairness opinion dated within five
days of the date of mailing of the Joint Proxy Statement/Prospectus, the Board
of Directors of ▇▇▇▇▇▇▇▇▇▇ will recommend to its shareholders in the Joint Proxy
Statement/Prospectus the approval of this Agreement and the transactions
contemplated hereby and ▇▇▇▇▇▇▇▇▇▇ will use its best efforts to obtain the
necessary approvals by its shareholders of this Agreement and the transactions
contemplated hereby provided that nothing in this Agreement shall prevent the
Board of Directors of ▇▇▇▇▇▇▇▇▇▇ from withholding, withdrawing, amending or
modifying such recommendation if the Board of Directors of ▇▇▇▇▇▇▇▇▇▇
determines, after consultation with its outside counsel, that such action is
legally required in order for the directors to comply with their fiduciary
duties under the applicable law. Sterling Bank will use its best efforts to
obtain approval of both the Holding Company Reorganization and the Merger. In
the event the Sterling Bank shareholders do not approve the proposal to approve
the Holding Company Reorganization and the Merger, Sterling Bank will submit the
Merger to its shareholders within 75 days of the date of the original meeting as
a proposal to approve the Merger only provided that Sterling Bank shall not be
required to submit the Merger to its shareholders if (i) after an evaluation of
the results of the voting at its most recent shareholders meeting with the
advice of its proxy solicitation advisor, Sterling Bank reasonably believes in
good faith that the Merger would be disapproved, and (ii) ▇▇▇▇▇▇▇▇▇▇ consents in
writing to not submitting the Merger to Sterling Bank shareholders, which
consent shall not be unreasonably withheld.
Section 5.5 No Other Bids. (a) (a) Except with respect to this
Agreement and the transactions contemplated hereby, neither ▇▇▇▇▇▇▇▇▇▇ nor any
"Affiliate" (as defined herein) thereof, nor any investment banker, attorney,
accountant or other representative (collectively, "representative") retained by
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries shall directly or indirectly (i) solicit,
initiate or encourage (including by way of furnishing information or
assistance), or take any other action designed to facilitate or that is likely
to result in, any inquiries or the making of any proposal that constitutes, or
is reasonably likely to lead to any Acquisition Proposal, (ii) enter into any
agreement with respect to an Acquisition Proposal, (iii) participate in any
discussions or negotiations regarding an Acquisition Proposal, or (iv) make or
authorize any statement or recommendation in support of any Acquisition
Proposal. Notwithstanding the foregoing, if, and only to the extent that, (i)
▇▇▇▇▇▇▇▇▇▇'▇ Board reasonably determines in good faith, after consultation with
outside legal counsel, that such action would be required in order for the
directors of ▇▇▇▇▇▇▇▇▇▇ to comply with their respective fiduciary duties under
the applicable law in response to a bona fide written Acquisition Proposal not
solicited in violation
38
of Section 5.5(a) that the ▇▇▇▇▇▇▇▇▇▇ Board believes in good faith to be a
Superior Proposal and (ii) ▇▇▇▇▇▇▇▇▇▇ provides notice to Sterling and Sterling
Bank of its decision to take such action in accordance with the requirements of
Section 5.5(b), ▇▇▇▇▇▇▇▇▇▇ may (1) furnish information with respect to
▇▇▇▇▇▇▇▇▇▇ to any Person making such an Acquisition Proposal pursuant to a
customary confidentiality agreement (as determined by ▇▇▇▇▇▇▇▇▇▇ after
consultation with outside legal counsel) on terms substantially similar to, and
no less favorable to ▇▇▇▇▇▇▇▇▇▇ than the terms contained in any such agreement
between ▇▇▇▇▇▇▇▇▇▇ and Sterling or Sterling Bank, (2) participate in discussions
or negotiations regarding the Acquisition Proposal, (3) authorize any statement
or recommendation in support of such Acquisition Proposal or (4) enter into an
agreement in connection with such Acquisition Proposal. Consistent with the
terms of this Section 5.5(a), ▇▇▇▇▇▇▇▇▇▇ may take any action to the extent
necessary in order to comply with Rules 14d-9 and 14e-2 promulgated under the
Exchange Act.
(b) ▇▇▇▇▇▇▇▇▇▇ and each of its subsidiaries shall immediately cease and
cause to be terminated any existing discussions or negotiations with any Persons
(other than Sterling or Sterling Bank) conducted heretofore with respect to any
of the foregoing. ▇▇▇▇▇▇▇▇▇▇ shall notify Sterling and Sterling Bank promptly
(but in no event later than 24 hours) after receipt of any such Acquisition
Proposal, or any material modification or material amendment to any Acquisition
Proposal, or any request for nonpublic information relating to ▇▇▇▇▇▇▇▇▇▇ or any
of its subsidiaries or for access to the properties, books or records of
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries by any Person who informs the ▇▇▇▇▇▇▇▇▇▇
Board or a member of senior management of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
that it is considering making, or has made, an Acquisition Proposal. ▇▇▇▇▇▇▇▇▇▇
shall keep Sterling and Sterling Bank fully informed, on a current basis, of any
material changes in the status and any material changes or modifications in the
terms of any such Acquisition Proposal, indication or request. ▇▇▇▇▇▇▇▇▇▇ also
shall promptly, and in any event, within 24 hours, notify Sterling and Sterling
Bank orally and in writing, if it enters into discussions or negotiations
concerning any Acquisition Proposal in accordance with Section 5.5(a).
▇▇▇▇▇▇▇▇▇▇ shall ensure that its directors, officers, employees, agents and
representatives (including any investment bankers, financial advisors,
attorneys, accountants or other retained representatives) of ▇▇▇▇▇▇▇▇▇▇ and each
of its subsidiaries are aware of the restrictions described in this Section 5.5
as reasonably necessary to avoid violations thereof.
Section 5.6 Notice of Deadlines. Schedule 5.6 lists the deadlines for
extensions or terminations of any material leases, agreements or licenses
(including specifically real property leases and data processing agreements) to
which ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries is a party.
Section 5.7 Maintenance of Properties. ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries
will maintain their respective properties and assets in satisfactory condition
and repair for the purposes for which they are intended, ordinary wear and tear
excepted.
Section 5.8 Conforming Accounting and Reserve Policies. Upon written
confirmation from Sterling and Sterling Bank that all conditions to closing set
forth in Articles 8 and 9 have been satisfied or waived, at the request of
Sterling and Sterling Bank, ▇▇▇▇▇▇▇▇▇▇ shall immediately prior to Closing
establish and take such reserves and accruals as Sterling and
39
Sterling Bank reasonably shall request to conform ▇▇▇▇▇▇▇▇▇▇'▇ loan, accrual,
reserve and other accounting policies to the policies of Sterling Bank.
Section 5.9 Bank Merger Agreement. Prior to the Effective Time,
Sterling Bank and Peoples shall have executed and delivered the Bank Merger
Agreement substantially in the form annexed hereto as Exhibit 5.9.
Section 5.10 Holding Company Reorganization. Without the prior written
consent of ▇▇▇▇▇▇▇▇▇▇, which shall not be unreasonably withheld or delayed, the
Boards of Directors of Sterling and Sterling Bank shall not amend, in a manner
adverse to ▇▇▇▇▇▇▇▇▇▇ or its shareholders, or terminate the Plan of Acquisition
dated April 26, 2006 and approved by the New Jersey Department of Banking on May
22, 2006, which provides for the Holding Company Reorganization other than to
extend the deadline for completion of the Holding Company Reorganization to
March 31, 2007.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Best Efforts; Cooperation. Subject to the terms and
conditions herein provided, each of the Parties hereto agrees to use its best
efforts promptly to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations, or otherwise, including attempting to obtain all necessary
Consents, to consummate and make effective, as soon as practicable, the
transactions contemplated by this Agreement.
Section 6.2 Regulatory Matters.
(a) As promptly as practicable following the execution and delivery of
this Agreement, but in no event more than sixty (60) days from the date hereof,
Sterling, Sterling Bank and ▇▇▇▇▇▇▇▇▇▇ shall cause to be prepared and filed all
required applications and filings with the Regulatory Authorities which are
necessary or contemplated for the obtaining of the Consents of the Regulatory
Authorities or consummation of the Merger. Such applications and filings shall
be in such form as may be prescribed by the respective government agencies and
shall contain such information as they may require. The Parties hereto will
cooperate with each other and use their best efforts to prepare and execute all
necessary documentation, to effect all necessary or contemplated filings and to
obtain all necessary or contemplated permits, consents, approvals, rulings and
authorizations of government agencies and third parties which are necessary or
contemplated to consummate the transactions contemplated by this Agreement,
including, without limitation, those required or contemplated from the
Regulatory Authorities, and the shareholders of ▇▇▇▇▇▇▇▇▇▇ and Sterling Bank.
Each of the Parties shall have the right to review any filing, to the extent
permitted by law, made with, or written material submitted to, any government
agencies in connection with the transactions contemplated by this Agreement.
40
(b) Each Party hereto will furnish the other Party with all information
concerning itself, its Subsidiaries, directors, trustees, officers, shareholders
and depositors, as applicable, and such other matters as may be necessary or
advisable in connection with any statement or application made by or on behalf
of any such Party to any governmental body in connection with the transactions,
applications or filings contemplated by this Agreement. The Parties hereto will
promptly furnish each other with copies of written communications received by
them or their respective subsidiaries from, or delivered by any of the foregoing
to, any governmental body in respect of the transactions contemplated hereby.
Section 6.3 Employment and Employee Benefits Matters.
(a) The Parties acknowledge that nothing in this Agreement shall be
construed as constituting an employment agreement between Sterling, Sterling
Bank or any of their affiliates and any director, officer or employee of
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries or an obligation on the part of Sterling,
Sterling Bank or any of their affiliates to employ any such directors, officers
or employees.
(b) The Parties agree that appropriate steps shall be taken to
terminate all employee benefit plans of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
immediately prior to, at or as soon as administratively feasible following the
Effective Time, provided that the conditions of this Subsection (b) and of
paragraphs (i)-(ii) below are then met and provided further that all employees
of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries who were participating immediately
prior to the Merger in Employee Benefit Plans of ▇▇▇▇▇▇▇▇▇▇ or any of its
subsidiaries for which Sterling or Sterling Bank maintains a corresponding plan
shall commence participation in Sterling's or Sterling Bank's corresponding plan
upon the later of the Effective Time or the date of termination of coverage
under the Employee Benefit Plans of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
without any gap or interruption in coverage (including any gap affecting any of
▇▇▇▇▇▇▇▇▇▇ employee's dependents), whether a gap in time of coverage or in
waiting or elimination periods. Subject to Section 6.3(c) hereof and except as
otherwise specifically provided below, Sterling and Sterling Bank agree that the
officers and employees of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries who Sterling or
Sterling Bank employ shall be eligible to participate in Sterling's or Sterling
Bank's employee benefit plans, including welfare and fringe benefit plans, sick
leave, vacation, holiday pay and similar payroll practices, on the same basis as
and subject to the same conditions as are applicable to any newly-hired employee
of Sterling or Sterling Bank; provided, however, that:
(i) with respect to each Sterling Health Plan, Sterling and
Sterling Bank shall waive all waiting periods under said plans for
pre-existing conditions; and
(ii) credit for each such employee's past service with ▇▇▇▇▇▇▇▇▇▇
or any of its subsidiaries prior to the Effective Time ("Past Service
Credit") shall be given by Sterling and Sterling Bank to continuing
▇▇▇▇▇▇▇▇▇▇ employees for purposes of establishing eligibility for
41
participation in and vesting under Sterling's and Sterling Bank's
welfare and fringe benefit plans.
(c) Any employee of ▇▇▇▇▇▇▇▇▇▇ whose employment with Sterling or
Sterling Bank is involuntarily terminated by Sterling or Sterling Bank, absent
termination for cause in accordance with policies of Sterling or Sterling Bank,
shall receive severance payments in accordance with the policy and years of
service information set forth at Schedule 6.3(c).
(d) As of the Effective Time, the Peoples Savings Bank Employee Stock
Ownership Plan ("ESOP") shall be terminated on such terms and conditions as
contained in the ESOP (as of the date of this Agreement). As soon as practicable
after the receipt of a favorable determination letter from the IRS as to the tax
qualified status of the ESOP upon its termination under Section 401(a) of the
IRC (the "Final Determination Letter"), distributions of the benefits under the
ESOP shall be made to the ESOP Participants. From and after the date of this
Agreement, in anticipation of such termination and distribution, ▇▇▇▇▇▇▇▇▇▇ and
its representatives shall use their best efforts to apply for and to obtain such
favorable Final Determination Letter from the IRS. If the ESOP cannot obtain a
favorable Final Determination Letter, or that the amounts held therein cannot be
so applied, allocated or distributed without causing the ESOP to lose its
tax-qualified status, then ▇▇▇▇▇▇▇▇▇▇ before the Effective Time, and Sterling or
Sterling Bank after the Effective Time, shall take such action as they may
reasonably determine with respect to the distribution of benefits to the ESOP
Participants, provided that the assets of the ESOP shall be held or paid only
for the benefit of the ESOP Participants, as determined on the Effective Time,
and provided further that in no event shall any portion of the amounts held in
the ESOP revert, directly or indirectly, to ▇▇▇▇▇▇▇▇▇▇ or Sterling, Sterling
Bank or any affiliate thereof. At the time distribution of benefits is made
under the ESOP on or after the Effective Time, at the election of the ESOP
Participant, the amount thereof that constitutes an "eligible rollover
distribution" (as defined in Section 402(f)(2)(A) of the IRC) may be rolled over
by such ESOP Participant to any qualified Sterling or Sterling Bank benefit plan
that permits rollover distributions or to any eligible individual retirement
account.
(e) Sterling or Sterling Bank shall assume and honor all ▇▇▇▇▇▇▇▇▇▇ and
Peoples Bank's obligations under any Employment Agreement, Change in Control
Agreement or severance pay plans; provided, however, concurrent with the
execution and delivery of this Agreement, ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and any individual deemed to be a "Specified Employee" of ▇▇▇▇▇▇▇▇▇▇ or
Peoples Bank within the meaning of Section 409A of the Code and regulations
promulgated thereunder, will execute and deliver to the Sterling an agreement in
the form attached hereto as Exhibits 6.3(e)(1) and 6.3(e)(2), respectively (a
"Settlement Agreement") setting forth the manner in which his or her rights
under any Employment Agreement, Change in Control Severance Agreement or other
Compensation or Employee Benefit Plan shall be settled by ▇▇▇▇▇▇▇▇▇▇, Peoples
Bank, Sterling and Sterling Bank or assumed and honored by Sterling, as
applicable.
(f) On or before the Effective Time, ▇▇▇▇▇▇▇▇▇▇ and Peoples shall cause
its 401k Plan to be terminated and its trust assets distributed in accordance
with the plan documentation; provided, however, that no such distributions shall
occur until a favorable letter of determination upon termination of the plan has
been received from the IRS or upon the consent of Sterling Bank, which consent
shall not be unreasonably withheld.
42
Section 6.4 Indemnification.
(a) For a period of six (6) years after the Effective Time, Sterling
and Sterling Bank shall indemnify, defend and hold harmless each person entitled
to indemnification from ▇▇▇▇▇▇▇▇▇▇ (each an "Indemnified Party") against all
liability arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, transactions contemplated by this
Agreement) to the same extent and subject to the conditions set forth in
▇▇▇▇▇▇▇▇▇▇'▇ Certificate of Incorporation or Bylaws, in each case as in effect
as of the date hereof.
(b) After the Effective Time, directors, officers and employees of
▇▇▇▇▇▇▇▇▇▇, except for the indemnification rights provided for in this Section
6.4 above, shall have indemnification rights having prospective application
only. These prospective indemnification rights shall consist of such rights to
which directors, officers and employees of Sterling and Sterling Bank would be
entitled under the Certificate of Incorporation and Bylaws of Sterling, Sterling
Bank or the particular subsidiary for which they are serving as officers,
directors or employees and under such directors' and officers' liability
insurance policy as Sterling or Sterling Bank may then make available to
officers, directors and employees of Sterling and Sterling Bank.
(c) Sterling and Sterling Bank shall use their best efforts (and
▇▇▇▇▇▇▇▇▇▇ shall cooperate prior to the Effective Time) to maintain in effect
for a period of three years after the Effective Time ▇▇▇▇▇▇▇▇▇▇'▇ existing
directors' and officers' liability insurance policy (provided that Sterling and
Sterling Bank may substitute therefor (i) policies with comparable coverage and
amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of ▇▇▇▇▇▇▇▇▇▇ (given prior to the
Effective Time) any other policy with respect to claims arising from facts or
events which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; provided, that Sterling and Sterling Bank
shall not be obligated to make premium payments for such three year period in
respect of such policy (or coverage replacing such policy) which exceed, for the
portion related to ▇▇▇▇▇▇▇▇▇▇'▇ directors and officers, 175% of the annual
premium payments on ▇▇▇▇▇▇▇▇▇▇'▇ current policy, as in effect as of the date of
this Agreement (the "Maximum Amount"). If the amount of premium that is
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Sterling shall use its reasonable efforts to maintain the most
advantageous policies of director's and officer's liability insurance obtainable
for a premium equal to the Maximum Amount.
(d) If Sterling, Sterling Bank or any of their successors and assigns
shall consolidate with or merge into any other person and shall not be the
continuing or surviving person of such consolidation or merger, or shall
transfer all or substantially all of its assets to any person, then, in each
case, proper provisions shall be made so that the successors and assigns of
Sterling or Sterling Bank shall assume the obligations set forth in this Section
6.4.
43
(e) The provisions of this Section 6.4 are intended for the benefit of,
and shall be enforceable by each Indemnified Party, and each Indemnified Party's
heirs and representatives.
Section 6.5 Registration Statement.
(a) Each of Sterling and ▇▇▇▇▇▇▇▇▇▇ shall use its reasonable best
efforts to cause the Registration Statement to be filed with the SEC within
sixty (60) days of the date hereof and shall use its best efforts to cause such
Registration Statement to be declared effective under the Securities Act, which
Registration Statement, at the time it becomes effective, and at the Effective
Time, shall in all material respects conform to the requirements of the
Securities Act and the general rules and regulations of the SEC promulgated
thereunder. The Registration Statement shall include the form of Joint Proxy
Statement/Prospectus for the meetings of ▇▇▇▇▇▇▇▇▇▇'▇ and Sterling's
shareholders to be held for the purpose of having such shareholders vote upon
the approval of this Agreement. The Parties shall cooperate with each other and
use their respective reasonable best efforts to promptly supply the information
required to be included in the Registration Statement with respect to each
Party's business and affairs before it is filed with the SEC and again before
any amendments are filed. The Parties shall cooperate with each other and use
their respective best efforts to promptly request and obtain all appropriate
opinions, consents, and letters from financial advisors and independent auditors
in connection with the Registration Statement and the Joint Proxy
Statement/Prospectus of both ▇▇▇▇▇▇▇▇▇▇ and Sterling Bank. Sterling shall take
all actions required to qualify or obtain exemptions from such qualifications
for the Sterling Shares to be issued in connection with the transactions
contemplated by this Agreement under applicable state blue sky securities laws,
as appropriate.
(b) Each of Sterling and ▇▇▇▇▇▇▇▇▇▇ shall promptly advise the other of
the receipt of any comments on the Registration Statement, the time when the
Registration Statement has become or will become effective or any supplement or
amendment has been filed, of the issuance of any stop order or suspension of the
qualification of Sterling common stock for offering or sale in any jurisdiction,
of the initiation or, to the extent either Party is aware thereof, threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
Section 6.6 Press Releases. Sterling, Sterling Bank and ▇▇▇▇▇▇▇▇▇▇
agree that they will not issue any press release or other public disclosure
related to this Agreement or the transactions contemplated hereby, without first
consulting with the other Party as to the form and substance of such disclosures
which may relate to the transactions contemplated by this Agreement, provided,
however, that nothing contained herein shall prohibit either Party, following
notification to the other Party, from making any disclosure which is required by
law or regulation.
Section 6.7 Nasdaq Listing. Sterling shall use its reasonable best
efforts to cause the Sterling Shares to be issued in the Merger to be approved
for listing for quotation on the Nasdaq Capital Market, subject to official
notice of issuance, as of the Effective Time.
44
Section 6.8 Board of Directors of Sterling and Sterling Bank. At the
Effective Time, Sterling and Sterling Bank shall appoint two individuals who
were formerly serving on the Board of Directors of ▇▇▇▇▇▇▇▇▇▇ immediately prior
to the Effective Time, to the Board of Directors of Sterling and Sterling Bank.
Section 6.9 Notification of Certain Matters. Each Party shall give
prompt notice to the others of (a) any event, condition, change, occurrence, act
or omission which causes any of its representations hereunder to cease to be
true in all material respects (or, with respect to any such representation which
is qualified as to materiality, causes such representation to cease to be true
in all respects); and (b) any event, condition, change, occurrence, act or
omission which individually or in the aggregate has, or which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to have, a Material Adverse Effect on such Party. Each of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
and Sterling Bank shall give prompt notice to the other Party of any notice or
other communication from any third Party alleging that the consent of such third
Party is or may be required in connection with the transactions contemplated by
this Agreement.
ARTICLE 7
MUTUAL CONDITIONS TO CLOSING
The obligations of Sterling and Sterling Bank, on the one hand, and
▇▇▇▇▇▇▇▇▇▇, on the other hand, to consummate the transactions provided for
herein shall be subject to the satisfaction of the following conditions, unless
waived as hereinafter provided for:
Section 7.1 Shareholder Approvals. The Merger shall have been approved
by the requisite vote of the shareholders of ▇▇▇▇▇▇▇▇▇▇ and of Sterling (and/or
Sterling Bank, as necessary).
Section 7.2 Regulatory Approvals. All necessary Consents of the
Regulatory Authorities shall have been obtained and all notice and waiting
periods required by law to pass after receipt of such Consents shall have
passed, and all conditions to consummation of the Merger set forth in such
Consents shall have been satisfied.
Section 7.3 Litigation. There shall be no actual or threatened causes
of action, investigations or proceedings (i) challenging the validity or
legality of this Agreement or the consummation of the transactions contemplated
by this Agreement, or (ii) seeking damages in connection with the transactions
contemplated by this Agreement, or (iii) seeking to restrain or invalidate the
transactions contemplated by this Agreement, which, in the case of (i) through
(iii), and in the reasonable judgment of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇,
based upon advice of counsel, would have a Material Adverse Effect with respect
to the interests of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇, as the case may be.
No judgment, order, injunction or decree (whether temporary, preliminary or
permanent) issued by any court or agency of competent jurisdiction or other
legal restraints or prohibition preventing the consummation of Merger or any of
the other transactions contemplated by this Agreement shall be in effect. No
statute, rule,
45
regulation, order, injunction or decree (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by any
Regulatory Authority that prohibits, restricts, or makes illegal the
consummation of the Merger.
Section 7.4 Proxy Statement/Prospectus and Registration Statement. The
Registration Statement shall have been declared effective by the SEC, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued, no action, suit, proceeding or investigation by the SEC to suspend the
effectiveness of the Registration Statement shall have been initiated, and
Sterling shall have received all state securities laws, or "blue sky" permits or
other authorizations, or confirmations as to the availability of exemptions from
registration requirements, as may be necessary to issue the Sterling Shares
pursuant to the terms of this Agreement.
Section 7.5 Tax Opinion. ▇▇▇▇▇▇▇▇▇▇ and Sterling shall have received an
opinion of Sterling's counsel, in form and substance reasonably acceptable to
▇▇▇▇▇▇▇▇▇▇ and Sterling, to the effect that the Merger will constitute a
reorganization under Section 368 of the Code and the shareholders of ▇▇▇▇▇▇▇▇▇▇
will not recognize any gain or loss to the extent that such shareholders
exchange their ▇▇▇▇▇▇▇▇▇▇ Shares for Sterling Shares. Each of ▇▇▇▇▇▇▇▇▇▇ and
Sterling shall upon request execute and deliver to such counsel a certificate or
certificates setting forth certain factual matters necessary to for the basis
for such opinions.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF STERLING AND STERLING BANK
The obligations of Sterling and Sterling Bank to consummate the Merger
are subject to the fulfillment of each of the following conditions, unless
waived as hereinafter provided for:
Section 8.1 Representations and Warranties. The representations and
warranties of ▇▇▇▇▇▇▇▇▇▇ set forth in this Agreement and in any certificate or
document delivered pursuant hereto shall be true and correct in all material
respects as of the date of this Agreement and as of all times up to and
including the Effective Time (as though made on and as of the Effective Time
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for changes therein
contemplated by this Agreement). For purposes of this paragraph, such
representations and warranties shall be deemed to be true and correct unless the
failure of such representations and warranties to be true and correct, either
individually or in the aggregate and without giving effect to any qualification
as to materiality or Material Adverse Effect set forth in such representations
and warranties, will have or is reasonably likely to have a Material Adverse
Effect on ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as a whole. Notwithstanding the
immediate preceding sentence, the representations and warranties contained in
Section 3.2 shall be deemed untrue and incorrect if not true and correct except
to an immaterial (relative to Section 3.2 taken as a whole) extent.
Section 8.2 Performance of Obligations. ▇▇▇▇▇▇▇▇▇▇ shall have performed
in all material respects all covenants, obligations and agreements required to
be performed by it under this Agreement prior to the Effective Time.
46
Section 8.3 Certificate Representing Satisfaction of Conditions.
▇▇▇▇▇▇▇▇▇▇ shall have delivered to Sterling and Sterling Bank a certificate of
the Chief Executive Officer of ▇▇▇▇▇▇▇▇▇▇ dated as of the Closing Date as to the
satisfaction of the matters described in Section 8.1 and Section 8.2 hereof, and
such certificate shall be deemed to constitute additional representations,
warranties, covenants, and agreements of ▇▇▇▇▇▇▇▇▇▇ under Article 3 of this
Agreement.
Section 8.4 Consents Under Agreements. ▇▇▇▇▇▇▇▇▇▇ shall have obtained
the consent or approval of each Person (other than the Consents of the
Regulatory Authorities) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation to any obligation, right or
interest of ▇▇▇▇▇▇▇▇▇▇ under any loan or credit agreement, note, mortgage,
indenture, lease, license, or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not, individually or
in the aggregate, have a Material Adverse Effect on the Surviving Corporation or
upon the consummation of the transactions contemplated by this Agreement.
Section 8.5 Material Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any Regulatory Authority which, in connection with
the grant of any Consent by any Regulatory Authority, imposes, in the judgment
of Sterling and Sterling Bank, any material adverse requirement upon Sterling
and Sterling Bank or any Sterling Subsidiary, including, without limitation, any
requirement that Sterling and Sterling Bank sell or dispose of any significant
amount of the assets of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries, or any other Sterling
Subsidiary.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ▇▇▇▇▇▇▇▇▇▇
The obligation of ▇▇▇▇▇▇▇▇▇▇ to consummate the Merger as contemplated
herein is subject to each of the following conditions, unless waived as
hereinafter provided for:
Section 9.1 Representations and Warranties. The representations and
warranties of Sterling and Sterling Bank contained in this Agreement or in any
certificate or document delivered pursuant to the provisions hereof will be true
and correct, in all material respects (or where any statement in a
representation or warranty expressly contains a standard of materiality, such
statement shall be true and correct in all respects taking into consideration
the standard of materiality contained therein), as of the Effective Time (as
though made on and as of the Effective Time), except to the extent such
representations and warranties are by their express provisions made as of a
specified date and except for changes therein contemplated by this Agreement.
For purposes of this paragraph, such representations and warranties shall be
deemed to be true and correct unless the failure of such representations and
warranties to be true and correct, either individually or in the aggregate and
without giving effect to any qualification as to materiality or Material Adverse
Effect set forth in such representations and warranties, will have or is
reasonably likely to have a Material Adverse Effect on Sterling and Sterling
Bank taken as a whole. Notwithstanding the immediate preceding sentence, the
representations and warranties
47
contained in Section 4.2 shall be deemed untrue and incorrect if not true and
correct except to an immaterial (relative to Section 4.2 taken as a whole)
extent.
Section 9.2 Performance of Obligations. Sterling and Sterling Bank
shall have performed in all material respects all covenants, obligations and
agreements required to be performed by them and under this Agreement prior to
the Effective Time.
Section 9.3 Certificate Representing Satisfaction of Conditions.
Sterling and Sterling Bank shall have delivered to ▇▇▇▇▇▇▇▇▇▇ a certificate
dated as of the Effective Time as to the satisfaction of the matters described
in Section 9.1 and Section 9.2 hereof, and such certificate shall be deemed to
constitute additional representations, warranties, covenants, and agreements of
Sterling and Sterling Bank under Article 4 of this Agreement.
Section 9.4 Consents Under Agreements. Sterling and Sterling Bank shall
have obtained the consent or approval of each Person (other than the Consents of
the Regulatory Authorities) whose consent or approval is required in connection
with the transactions contemplated hereby under any loan or credit agreement,
note, mortgage, indenture, lease, license, or other agreement or instrument,
except those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Sterling,
Sterling Bank or upon the consummation of the transactions contemplated by this
Agreement.
Section 9.5 Sterling Shares. The Sterling Shares to be issued in
connection with the Merger shall be duly authorized and validly issued and fully
paid and nonassessable, issued free of preemptive rights and free and clear of
all liens and encumbrances created by or through Sterling or Sterling Bank and
shall have been approved for listing on Nasdaq Capital Market.
ARTICLE 10
TERMINATION, WAIVER AND AMENDMENT
Section 10.1 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) by the mutual consent in writing of Sterling, Sterling Bank and
▇▇▇▇▇▇▇▇▇▇; or
(b) by the Board of Directors of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇
if the Merger shall not have occurred on or prior to March 31, 2007, provided
that the failure to consummate the Merger on or before such date is not caused
by any breach of any of the representations, warranties, covenants or other
agreements contained herein by the Party electing to terminate pursuant to this
Section 10.1(b);
48
(c) by the Board of Directors of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇
(provided that the terminating Party is not then in breach of any representation
or warranty contained in this Agreement under the applicable standard set forth
in Section 8.1 of this Agreement in the case of ▇▇▇▇▇▇▇▇▇▇ and Section 9.1 in
the case of Sterling or Sterling Bank or in breach of any covenant or agreement
contained in this Agreement) in the event of an inaccuracy of any representation
or warranty of the other Party contained in this Agreement which cannot be or
has not been cured within thirty (30) days after the giving of written notice to
the breaching Party of such inaccuracy and which inaccuracy would provide the
terminating Party the ability to refuse to consummate the Merger under the
applicable standard set forth in Section 8.1 of this Agreement in the case of
▇▇▇▇▇▇▇▇▇▇ and Section 9.1 of this Agreement in the case of Sterling or Sterling
Bank; or
(d) by the Board of Directors of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇
(provided that the terminating Party is not then in breach of any representation
or warranty contained in this Agreement under the applicable standard set forth
in Section 8.1 of this Agreement in the case of ▇▇▇▇▇▇▇▇▇▇ and Section 9.1 in
the case of Sterling, Sterling Bank or in breach of any covenant or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching Party of such breach; or
(e) by the Board of Directors of Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇
in the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated hereby shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
or (ii) the shareholders of ▇▇▇▇▇▇▇▇▇▇ or Sterling (or Sterling Bank as
necessary) fail to vote their approval of this Agreement and the Merger and the
transactions contemplated hereby as required by applicable law at ▇▇▇▇▇▇▇▇▇▇'▇
shareholders' meeting or the Sterling shareholders' meeting (or Sterling Bank as
necessary) as the case may be where the transactions were presented to such
shareholders for approval and voted upon; or
(f) by the Boards of Directors of Sterling, Sterling Bank or
▇▇▇▇▇▇▇▇▇▇, (i) if the other Party fails to hold its shareholder meeting to vote
on the Agreement within the time frame set forth in Section 5.4 hereof, or (ii)
in the case of Sterling or Sterling Bank only, if ▇▇▇▇▇▇▇▇▇▇'▇ Board of
Directors either (A) fails to recommend, or fails to continue its
recommendation, that the shareholders of ▇▇▇▇▇▇▇▇▇▇ vote in favor of the
adoption of this Agreement, or (B) modifies, withdraws or changes in any manner
adverse to Sterling or Sterling Bank its recommendation that the shareholders of
▇▇▇▇▇▇▇▇▇▇ vote in favor of the adoption of this Agreement; or
(g) By ▇▇▇▇▇▇▇▇▇▇ if it determines by a vote of the majority of the
members of its Board of Directors, and notifies Sterling, at any time during the
five (5) day period commencing two (2) business days after the Determination
Date and if both of the following conditions are satisfied:
49
(i) The Average Closing Price of the Sterling Shares is less
than $9.90 (adjusted as set forth in the last sentence of this Section
10.1(g)); and
(ii) (x) the number obtained by dividing the Average Closing
Price on the Determination Date by the Starting Price (such number
being referred to herein as the "Sterling Ratio") shall be less than
(y) the number obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date and
subtracting (0.175) from the quotient in this clause (ii)(y) (such
number being referred to herein as the "Index Ratio");
If ▇▇▇▇▇▇▇▇▇▇ elects to terminate this Agreement pursuant to this
Section 10.1(g), it shall give notice to Sterling within the aforementioned five
(5) day period, provided such notice may be withdrawn at any time. During the
five (5) day period commencing with its receipt of such notice, Sterling shall
have the option of adjusting the Per Share Stock Consideration to equal the
lesser of (i) a number equal to a quotient (rounded to the nearest
one-thousandth), the numerator of which is the product of $9.90 multiplied by
the Per Share Stock Consideration (as then in effect) and the denominator of
which is the Average Closing Price, and (ii) a number equal to a quotient
(rounded to the nearest one-thousandth), the numerator of which is the Index
Ratio multiplied by the Per Share Stock Consideration (as then in effect) and
the denominator of which is the Sterling Ratio. If Sterling makes an election
contemplated by the preceding sentence, within such five-day period, it shall
give prompt written notice to ▇▇▇▇▇▇▇▇▇▇ of such election and the revised Per
Share Stock Consideration, whereupon no termination shall have occurred pursuant
to this Section and this Agreement shall remain in effect in accordance with its
terms (except as the Per Share Stock Consideration shall have been so modified),
and any reference in this Agreement to "Per Share Stock Consideration" shall
thereafter be deemed to refer to the Per Share Stock Consideration as adjusted
pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have
the meaning indicated:
"Average Closing Price" shall mean the average of the per share closing
prices of the Sterling Common Stock as reported on the NASDAQ for the
20 consecutive trading days ending on the Determination Date as
reported by The Wall Street Journal, expressed in decimal figures
carried to five figures.
"Determination Date" means the tenth (10th) trading day prior to the
Closing Date.
"Index Group" means the twenty (20) financial institution companies
listed below, the common stock of all of which shall be publicly traded
and as to which there shall not have been a publicly announced proposal
since the Starting Date and before the Determination Date for any such
company to be acquired or for such company to acquire another company
or companies in transactions with a value exceeding 25% of the
acquiror's market capitalization. In the event that any such company is
removed from the Index Group, the weights (which shall be determined
based upon the market capitalization of the outstanding shares of
common stock) shall be redistributed
50
proportionately for purposes of determining the Index Price. The
twenty (20) financial institution companies and the weights attributed
to them are as follows:
Financial Institution Holding Company Market Market
------------------------------------- Value ($M) Weighting
---------- ---------
Company Name Ticker
Bryn Mawr Bank Corp. BMTC 191.1 12.54%
TF Financial Corp. THRD 81.7 5.36%
Pamrapo Bancorp Inc. PBCI 95.5 6.27%
Unity Bancorp Inc. UNTY 113.0 7.41%
First Star Bancorp Inc. FSSB 20.5 1.34%
QNB Corp. QNBC 82.4 5.40%
First ▇▇▇▇▇▇ Bank & Trust FMJE 69.8 4.58%
PSB Bancorp Inc. PSBI 56.5 3.71%
First Keystone Financial FKFS 37.9 2.49%
American Bancorp of NJ ABNJ 163.7 10.74%
Central Jersey Bancorp CJBK 70.8 4.64%
DNB Financial Corp. DNBF 50.9 3.34%
BCB Bancorp Inc BCBP 75.8 4.97%
Stewardship Financial Corp. SSFN 64.3 4.22%
Boardwalk Bank BORD 52.9 3.47%
East Penn Financial Corp. EPEN 54.1 3.55%
1st Constitution Bancorp FCCY 64.9 4.26%
Sussex Bancorp SBB 45.8 3.01%
▇▇▇▇▇ Bancorp Inc. PKBK 56.9 3.73%
Community Partners Bncp CPBC 75.9 4.98%
"Index Price" on a given date, means the weighted average (weighted in
accordance with the Weighting Factors above, which were calculated with
reference to the market capitalizations of the outstanding shares of
common stock of the Companies listed above) based upon the closing
prices on such date of the common stock of the companies comprising the
Index Group.
"Starting Date" means June 22, 2006.
"Starting Price" means $12.00 per share.
If Sterling or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 10.1(g).
(h) By the Board of Directors of ▇▇▇▇▇▇▇▇▇▇, if, after it has received
a Superior Proposal in compliance with Section 5.5 and otherwise complied with
all of its obligations under Section 5.5, ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries
enter into a definitive agreement with respect to, or consummates a transaction
which is the subject of, an Acquisition Proposal; provided further, however,
that this Agreement may only be terminated in accordance with this Section
10.1(h) and a new definitive agreement entered into by ▇▇▇▇▇▇▇▇▇▇ with a third
51
party not earlier than 72 hours following written notice to Sterling advising
Sterling that the Board of Directors of ▇▇▇▇▇▇▇▇▇▇ is prepared to accept such
Superior Proposal.
Section 10.2 Effect of Termination; Termination Fee.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 10.1 of this Agreement, the Agreement shall terminate and
have no effect, except as otherwise provided herein and except that the
provisions of this Section 10.2, Section 10.5 and Article 11 of this Agreement
shall survive any such termination and abandonment.
(b) If, after the date of this Agreement, (i) ▇▇▇▇▇▇▇▇▇▇ terminates
this Agreement in accordance with Section 10.1(h), or (ii)(A) an Acquisition
Proposal (as defined below) is offered, presented or proposed to ▇▇▇▇▇▇▇▇▇▇ or
its shareholders, and thereafter this Agreement and the Merger are disapproved
by ▇▇▇▇▇▇▇▇▇▇ or by the shareholders of ▇▇▇▇▇▇▇▇▇▇, or (B) Sterling terminates
this Agreement pursuant to Section 10.1(f)(ii) hereof, and, in the case of both
(A) and (B), an Acquisition Proposal is consummated or a definitive agreement is
entered into by ▇▇▇▇▇▇▇▇▇▇ relating to an Acquisition Proposal within 12 months
of the date thereof (each of (i) and (ii) being a "Trigger Event"), then
immediately upon the occurrence of a Trigger Event ▇▇▇▇▇▇▇▇▇▇ shall pay Sterling
or Sterling Bank a cash amount of $900,000 as an agreed-upon termination fee to
Sterling or Sterling Bank (the "Termination Fee") in lieu of any other damages
or reimbursement for its expenses incurred in negotiation and pursuit of the
Agreement and the related transactions contemplated thereunder (including but
not limited to fees and expenses of its legal counselors, investment advisors,
accountants and related professionals and costs associated with such transaction
and process).
(c) ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Sterling Bank agree that the Termination
Fee is fair and reasonable in the circumstances. If a court of competent
jurisdiction shall nonetheless, by a final, nonappealable judgment, determine
that the amount of any such Termination Fee exceeds the maximum amount permitted
by law, then the amount of such Termination Fee shall be reduced to the maximum
amount permitted by law in the circumstances, as determined by such court of
competent jurisdiction.
Section 10.3 Amendments. To the extent permitted by law, this Agreement
may be amended by a subsequent writing signed by each of Sterling, Sterling Bank
and ▇▇▇▇▇▇▇▇▇▇.
Section 10.4 Waivers. Subject to Section 11.11 hereof, prior to or at
the Effective Time, Sterling and Sterling Bank, on the one hand, and ▇▇▇▇▇▇▇▇▇▇,
on the other hand, shall have the right to waive any default in the performance
of any term of this Agreement by the other, to waive or extend the time for the
compliance or fulfillment by the other of any and all of the other's obligations
under this Agreement and to waive any or all of the conditions to its
obligations under this Agreement, except any condition, which, if not satisfied,
would result in the violation of any law or any applicable governmental
regulation.
52
Section 10.5 Non-Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants or agreements in this Agreement or in
any instrument delivered by Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇ shall not
survive the Effective Time of Merger, except that Section 5.3(b) and Section
6.3(b) shall survive the Effective Time, and any representation, warranty or
agreement in any agreement, contract, report, opinion, undertaking or other
document or instrument delivered hereunder in whole or in part by any person
other than Sterling, Sterling Bank, ▇▇▇▇▇▇▇▇▇▇ (or directors and officers
thereof in their capacities as such) shall survive the Effective Time of Merger;
provided that no representation or warranty of Sterling, Sterling Bank or
▇▇▇▇▇▇▇▇▇▇ contained herein shall be deemed to be terminated or extinguished so
as to deprive Sterling or Sterling Bank, on the one hand, and ▇▇▇▇▇▇▇▇▇▇, on the
other hand, of any defense at law or in equity which any of them otherwise would
have to any claim against them by any person, including, without limitation, any
shareholder or former shareholder of either Party. No representation or warranty
in this Agreement shall be affected or deemed waived by reason of the fact that
Sterling, Sterling Bank or ▇▇▇▇▇▇▇▇▇▇ and/or its representatives knew or should
have known that any such representation or warranty was, is, might be or might
have been inaccurate in any respect.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Definitions. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"Acquisition Proposal" means any proposal or offer by any
Person or group of Persons with respect to any of the following: (i) any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation or dissolution or other similar transaction involving ▇▇▇▇▇▇▇▇▇▇ or
any subsidiary of ▇▇▇▇▇▇▇▇▇▇ whose assets, individually or in the aggregate
constitute more than 10% of the consolidated assets of ▇▇▇▇▇▇▇▇▇▇; (ii) any
sale, lease, exchange, mortgage, pledge (except in the ordinary course of
business consistent with past practice), transfer or other disposition of assets
(including for this purpose the outstanding capital stock of any subsidiary of
▇▇▇▇▇▇▇▇▇▇ and the capital stock of any entity surviving any merger or business
combination involving any subsidiary of ▇▇▇▇▇▇▇▇▇▇) and/or liabilities that
constitute 10% or more of the assets of ▇▇▇▇▇▇▇▇▇▇ and its subsidiaries taken as
a whole in a single transaction or series of transactions; (iii) any purchase or
other acquisition of or tender offer or exchange offer that if consummated would
result in such Person(s) beneficially owning 25% or more of the outstanding
stock of ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries whose assets, individually or in
the aggregate, constitute more than 10% of the consolidated assets of
▇▇▇▇▇▇▇▇▇▇; or (iv) any public announcement by any Person (which shall include
any regulatory application or notice, whether in draft or final form) of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing, in each case other than (x) the transactions
contemplated by this Agreement and (y) any transaction referred to in clause (i)
or (ii) involving only ▇▇▇▇▇▇▇▇▇▇ and one of its subsidiaries, or involving two
or more of its subsidiaries, provided that such transactions is not entered into
in violation of the terms of this Agreement.
53
"Affiliate" of a person shall mean (i) any other person
directly or indirectly through one or more intermediaries controlling,
controlled by or under common control of such person, (ii) any officer,
director, partner, employer or direct or indirect beneficial owner of any 10% or
greater equity of voting interest of such person or (iii) any other persons for
which a person described in clause (ii) acts in any such capacity.
"Consent" shall mean a consent, approval or authorization,
waiver, clearance, exemption or similar affirmation by any person pursuant to
any lease, contract, permit, law, regulation or order.
"Environmental Law" means any applicable federal, state or
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree or injunction relating
to (i) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of any substance presently listed, defined, designated or classified
as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether
by type or by substance as a component.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Knowledge" means, with respect to any Person, those facts
that are known by the officers and directors of such Person and includes any
facts, matters, or circumstances set forth in any written notice received by an
executive officer or director of that Person.
"Loan Property" means any property owned by ▇▇▇▇▇▇▇▇▇▇ or any
of its subsidiaries, or in which ▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries 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.
"Hazardous Material" means any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., or any
similar federal, state or local law. Hazardous Material shall include, but not
be limited to, (i) any hazardous substance, hazardous material, hazardous waste,
regulated substance, or toxic substance (as those terms are defined by any
applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants,
petroleum, petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
"Material Adverse Effect" with respect to any Party, shall
mean any event, change or occurrence which, individually or together with any
other event, change or occurrence, has a material adverse impact on (i) the
financial condition, business or results of operation, financial performance or
prospects of such Party and their respective subsidiaries, taken as a whole, or
(ii) the ability of such Party to perform its obligations under this Agreement
or to consummate the
54
Merger and the other transactions contemplated by this Agreement; provided,
however, that "Material Adverse Effect" shall not be deemed to include (i) the
impact of actions or omissions of a Party taken with the prior written consent
of the other in contemplation of the transactions contemplated by this
Agreement, (ii) changes in laws and regulations or interpretations thereof that
are generally applicable to the banking or savings institutions industries,
(iii) changes in generally accepted accounting principles, (iv) expenses
incurred in connection with this Agreement and the Merger including payments to
be made pursuant to employment and severance agreements and the termination of
other benefit plans, or (v) changes attributable to or resulting from changes in
general economic conditions generally affecting financial institutions including
changes in interest rates.
"Participation Facility" means any facility in which
▇▇▇▇▇▇▇▇▇▇ or any of its subsidiaries has engaged in Participation in the
Management of such facility, and, where required by the context, includes the
owner or operator of such facility, but only with respect to such facility.
"Participation in the Management" of a facility has the
meaning set forth in 40 C.F.R. ss. 300.1100(c).
"Regulatory Authorities" shall mean, collectively, the Federal
Trade Commission, the United States Department of Justice, the Board of
Governors of the Federal Reserve System (the "FRB"), the OTS, the FDIC and all
state regulatory agencies having jurisdiction over the Parties (including the
New Jersey Department of Banking and Insurance), the National Association of
Securities Dealers, Inc., all national securities exchanges and the Securities
and Exchange Commission (the "SEC").
"Superior Proposal" means any bona fide written proposal made
by a third party to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of ▇▇▇▇▇▇▇▇▇▇ common stock then outstanding
or all or substantially all of the assets of ▇▇▇▇▇▇▇▇▇▇ and otherwise (i) on the
terms which the ▇▇▇▇▇▇▇▇▇▇ Board determines in good faith, after consultation
with its financial advisor(s), to be more favorable from a financial point of
view to ▇▇▇▇▇▇▇▇▇▇'▇ shareholders than the Merger, (ii) that constitutes a
transaction that, in the good faith judgment of the ▇▇▇▇▇▇▇▇▇▇ Board is
reasonably likely to be consummated on the terms set forth, taking into account
all legal, financial, regulatory and other aspects of such proposal, and (iii)
for which financing, to the extent required, is then committed or which in the
good faith judgment of the ▇▇▇▇▇▇▇▇▇▇ Board based on written advice from its
financial advisor is likely to be obtained by such third party.
Section 11.2 Entire Agreement. This Agreement and the documents
referred to herein contain the entire agreement among Sterling, Sterling Bank
and ▇▇▇▇▇▇▇▇▇▇ with respect to the transactions contemplated hereunder and this
Agreement supersedes all prior arrangements or understandings with respect
thereto, whether 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. Nothing in this Agreement, expressed or implied, is
intended to confer
55
upon any person, firm, corporation or entity, other than the Parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
Section 11.3 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by first class or registered or certified mail, postage
prepaid, telegram or telex or other facsimile transmission addressed as follows:
If to Sterling or Sterling Bank:
STERLING BANK
▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Jr., Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇▇▇▇, then to:
▇▇▇▇▇▇▇▇▇▇ BANCORP, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ Spidi & ▇▇▇▇▇, PC
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Spidi, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices or other communications shall be deemed to have been delivered
(i) upon receipt when delivery is made by hand, (ii) on the third (3rd) business
day after deposit in the United States mail when delivery is made by first
class, registered or certified mail, and (iii) upon transmission when made by
telegram, telex or other facsimile transmission if evidenced by a sender
transmission completed confirmation.
56
Section 11.4 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other competent authority to be invalid, void or unenforceable
or against public or regulatory policy, the remainder of the terms, provisions,
covenants and restrictions contained in this Agreement shall remain in full
force and effect and in no way shall be affected, impaired or invalidated, if,
but only if, pursuant to such remaining terms, provisions, covenants and
restrictions the Merger may be consummated in substantially the same manner as
set forth in this Agreement as of the later of the date this Agreement was
executed or last amended.
Section 11.5 Costs and Expenses. Expenses incurred by ▇▇▇▇▇▇▇▇▇▇ on the
one hand and Sterling and Sterling Bank on the other hand, in connection with or
related to the authorization, preparation and execution of this Agreement, the
solicitation of shareholder approval and all other matters related to the
closing of the transactions contemplated hereby, including all fees and expenses
of agents, representatives, counsel and accountants employed by either such
Party or its affiliates, shall be borne solely and entirely by the Party which
has incurred same.
Section 11.6 Captions. The captions as to contents of particular
articles, sections or paragraphs contained in this Agreement and the table of
contents hereto are inserted only for convenience and are in no way to be
construed as part of this Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document with the same force and
effect as though all Parties had executed the same document.
Section 11.8 Persons Bound; No Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto and their
respective successors, distributees, and assigns, but notwithstanding the
foregoing, this Agreement may not be assigned by any Party hereto unless the
prior written consent of the other Parties is first obtained (other than by
Sterling or Sterling Bank to a subsidiary of Sterling or Sterling Bank).
Section 11.9 Governing Law. This Agreement is made and shall be
governed by and construed in accordance with the laws of the State of New Jersey
(without respect to its conflicts of laws principles) except to the extent
federal law may apply.
Section 11.10 Exhibits and Schedules. Each of the exhibits and
schedules attached hereto is an integral part of this Agreement and shall be
applicable as if set forth in full at the point in the Agreement where reference
to it is made.
Section 11.11 Waiver. The waiver by any Party of the performance of any
agreement, covenant, condition or warranty contained herein shall not invalidate
this Agreement, nor shall it be considered a waiver of any other agreement,
covenant, condition or warranty contained in this
57
Agreement. A waiver by any Party of the time for performing any act shall not be
deemed a waiver of the time for performing any other act or an act required to
be performed at a later time. The exercise of any remedy provided by law, equity
or otherwise and the provisions in this Agreement for any remedy shall not
exclude any other remedy unless it is expressly excluded. The waiver of any
provision of this Agreement must be signed by the Party or Parties against whom
enforcement of the waiver is sought. This Agreement and any exhibit, memorandum
or schedule hereto or delivered in connection herewith may be amended only by a
writing signed on behalf of each Party hereto.
Section 11.12 Construction of Terms. Whenever used in this Agreement,
the singular number shall include the plural and the plural the singular.
Pronouns of one gender shall include all genders. Accounting terms used and not
otherwise defined in this Agreement have the meanings determined by, and all
calculations with respect to accounting or financial matters unless otherwise
provided for herein, shall be computed in accordance with generally accepted
accounting principles, consistently applied. References herein to articles,
sections, paragraphs, subparagraphs or the like shall refer to the corresponding
articles, sections, paragraphs, subparagraphs or the like of this Agreement. The
words "hereof", "herein", and terms of similar import shall refer to this entire
Agreement. Unless the context clearly requires otherwise, the use of the terms
"including", "included", "such as", or terms of similar meaning, shall not be
construed to imply the exclusion of any other particular elements.
58
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered, and their respective seals hereunto affixed, by their
officers thereunto duly authorized, and have caused this Agreement to be dated
as of the date and year first above written.
[CORPORATE SEAL]
STERLING BANKS, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Its President and Chief Executive Officer
ATTEST:
/s/R. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its Secretary
[CORPORATE SEAL]
STERLING BANK
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Its President and Chief Executive Officer
ATTEST:
/s/R. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its Secretary
[CORPORATE SEAL]
▇▇▇▇▇▇▇▇▇▇ BANCORP, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its President and Chief Executive Officer
ATTEST:
/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Its Secretary