AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST NIAGARA FINANCIAL GROUP, MHC,
FIRST NIAGARA FINANCIAL GROUP, INC.,
NEW FIRST NIAGARA FINANCIAL GROUP, INC.,
FIRST NIAGARA BANK
AND
FINGER LAKES BANCORP, INC. AND
SAVINGS BANK OF THE FINGER LAKES, FSB
JULY 21, 2002
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS..................................................1
1.1. Certain Definitions..........................................1
ARTICLE II THE MERGER..........................................................9
2.1. Merger.......................................................9
2.2. Effective Time...............................................9
2.3. Certificate of Incorporation and Bylaws......................9
2.4. Directors and Officers of Surviving Corporation..............9
2.5. Additional Director of FNFG..................................9
2.6. Effects of the Merger.......................................10
2.7. Tax Consequences............................................10
2.8. Possible Alternative Structures.............................10
2.9. The Conversion..............................................10
ARTICLE III CONVERSION OF SHARES..............................................11
3.1. Conversion of FLBC Common Stock; Merger Consideration.......11
3.2. Election Procedures.........................................12
3.3. Procedures for Exchange of FLBC Common Stock................15
3.4. Treatment of FLBC Options...................................17
3.5. Reservation of Shares.......................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FLBC.............................18
4.1. Organization................................................18
4.2. Capitalization..............................................19
4.3. Authority; No Violation.....................................19
4.4. Consents....................................................20
4.5. Financial Statements........................................21
4.6. Taxes.......................................................21
4.7. No Material Adverse Effect..................................22
4.8. Material Contracts; Leases; Defaults........................22
4.9. Ownership of Property; Insurance Coverage...................23
4.10. Legal Proceedings...........................................24
4.11. Compliance With Applicable Law..............................24
4.12. Employee Benefit Plans......................................25
4.13. Brokers, Finders and Financial Advisors.....................28
4.14. Environmental Matters.......................................28
4.15. Loan Portfolio..............................................29
4.16. Securities Documents........................................30
4.17. Related Party Transactions..................................30
4.18. Schedule of Termination Benefits............................31
4.19. Deposits....................................................31
4.20. Antitakeover Provisions Inapplicable........................31
4.21. Registration Obligations....................................31
4.22. Risk Management Instruments.................................32
4.23. Fairness Opinion............................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FIRST NIAGARA FINANCIAL GROUP.....32
5.1. Organization................................................33
(i)
5.2. Capitalization..............................................33
5.3. Authority; No Violation.....................................34
5.4. Consents....................................................35
5.5. Financial Statements........................................35
5.6. Taxes.......................................................36
5.7. No Material Adverse Effect..................................36
5.8. Ownership of Property; Insurance Coverage...................37
5.9. Legal Proceedings...........................................37
5.10. Compliance With Applicable Law..............................37
5.11. Employee Benefit Plans......................................38
5.12. Environmental Matters.......................................39
5.13. Loan Portfolio..............................................40
5.14. Securities Documents........................................41
5.15. Deposits....................................................41
5.16. Antitakeover Provisions Inapplicable........................41
5.17. Risk Management Instruments.................................41
5.18. Brokers, Finders and Financial Advisors.....................41
ARTICLE VI COVENANTS OF FLBC..................................................42
6.1. Conduct of Business.........................................42
6.2. Current Information.........................................45
6.3. Access to Properties and Records............................46
6.4. Financial and Other Statements..............................46
6.5. Maintenance of Insurance....................................47
6.6. Disclosure Supplements......................................47
6.7. Consents and Approvals of Third Parties.....................47
6.8. All Reasonable Efforts......................................47
6.9. Failure to Fulfill Conditions...............................48
6.10. No Solicitation.............................................48
6.11. Reserves and Merger-Related Costs...........................49
6.12. Board of Directors and Committee Meetings...................49
ARTICLE VII COVENANTS OF FIRST NIAGARA FINANCIAL..............................49
7.1. Conduct of Business.........................................49
7.2. Current Information.........................................50
7.3. Financial and Other Statements..............................50
7.4. Disclosure Supplements......................................50
7.5. Consents and Approvals of Third Parties.....................51
7.6. All Reasonable Efforts......................................51
7.7. Failure to Fulfill Conditions...............................51
7.8. Employee Benefits...........................................51
7.9. Directors and Officers Indemnification and Insurance........53
7.10. Stock Listing...............................................54
7.11. Stock and Cash Reserve......................................55
ARTICLE VIII REGULATORY AND OTHER MATTERS.....................................55
8.1. FLBC and First Niagara Financial Special Meetings...........55
8.2. Proxy Statement-Prospectus..................................55
8.3. The Mutual Company Conversion from Mutual to Stock Form.....57
(ii)
8.4. Regulatory Approvals........................................58
8.5. Affiliates..................................................59
ARTICLE IX CLOSING CONDITIONS.................................................59
9.1. Conditions to Each Party's Obligations under this Agreement.59
9.2. Conditions to the Obligations of First Niagara Financial
under this Agreement.......................................61
9.3. Conditions to the Obligations of FLBC under this Agreement..62
ARTICLE X THE CLOSING.........................................................63
10.1. Time and Place..............................................63
10.2. Deliveries at the Pre-Closing and the Closing...............63
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER..................................63
11.1. Termination.................................................63
11.2. Effect of Termination.......................................65
11.3. Amendment, Extension and Waiver.............................66
ARTICLE XII MISCELLANEOUS.....................................................67
12.1. Confidentiality.............................................67
12.2. Public Announcements........................................67
12.3. Survival....................................................67
12.4. Notices.....................................................68
12.5. Parties in Interest.........................................68
12.6. Complete Agreement..........................................69
12.7. Counterparts................................................69
12.8. Severability................................................69
12.9. Governing Law...............................................69
12.10. Interpretation..............................................69
12.11. Specific Performance........................................70
(iii)
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is dated
as of July 21, 2002, by and between FIRST NIAGARA FINANCIAL GROUP, MHC, a mutual
holding company (the "Mutual Company"), its majority-owned subsidiary, FIRST
NIAGARA FINANCIAL GROUP, INC., ("First Niagara Financial"), FIRST NIAGARA BANK,
a stock savings bank ("First Niagara Bank"), NEW FIRST NIAGARA FINANCIAL GROUP,
INC., a Delaware corporation ("FNFG"), FINGER LAKES BANCORP, INC., a Delaware
corporation ("FLBC"), and its wholly-owned subsidiary, SAVINGS BANK OF THE
FINGER LAKES, FSB, a stock savings bank ("SBFL").
WHEREAS, the parties believe that it is in the best long-term interests
of each party's respective shareholders to expand the financial services and
banking activities of First Niagara Financial and First Niagara Bank through a
merger with FLBC and SBFL.
WHEREAS, in connection with the transactions described in this
Agreement, it is intended that the Mutual Company will convert from the mutual
form of organization to the capital stock form of organization, and that in
connection with such Conversion FNFG will conduct a subscription offering of its
common stock, and if necessary a community and/or syndicated community offering,
and an exchange offering to the existing public shareholders of First Niagara
Financial;
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms have the following
meanings (unless the context otherwise requires, both here and throughout this
Agreement, references to Articles and Sections refer to Articles and Sections of
this Agreement).
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Affiliate" shall mean Cortland Savings Bank, a New York chartered
savings bank that is a wholly owned subsidiary of First Niagara Financial, and
Cayuga Bank, a New York chartered bank that is a wholly owned subsidiary of
First Niagara Financial, each of which is to be merged with and into First
Niagara Bank immediately following completion of the Bank Charter Conversion.
"Bank Charter Conversion" shall mean the conversion of First Niagara
Bank from a New York chartered savings bank to a federally chartered savings
bank.
"Bank Merger" shall mean the merger of SBFL with and into First Niagara
Bank, with First Niagara Bank as the surviving institution, which merger shall
occur following the Merger.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the FDIC, the OTS, and the FRB, which regulates
First Niagara Bank or SBFL, or any of their respective holding companies or
subsidiaries, as the case may be.
"Certificate" shall mean certificates evidencing shares of FLBC Common
Stock.
"Charter Conversions" shall mean (i) the conversion of the charter of
First Niagara Bank to a federal savings bank, (ii) the conversion of the charter
of the Mutual Company to a federal mutual holding company, and (iii) the
conversion of the charter of First Niagara Financial to a federal corporation.
The Charter Conversions set forth in (i) and (ii) are expected to occur in
October or November, 2002. The Charter Conversion set forth in (iii) will occur
either at the same time as (i) and (ii), or immediately prior to completion of
the Conversion.
"Charter Conversion Bank Mergers" means the merger of Cortland Savings
Bank with and into First Niagara Bank as part of the Charter Conversions, and
the merger of Cayuga Bank with and into the First Niagara Bank as part of the
Charter Conversions, in each case with First Niagara Bank as the surviving
institution. The Charter Conversion Bank Mergers will occur following the
completion of the conversion of First Niagara Bank to a federal savings bank
charter.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean the confidentiality agreement
referred to in Section 12.1 of this Agreement.
"Conversion" shall mean the conversion from mutual to stock form of the
Mutual Company, pursuant to the Plan of Conversion to be adopted by the Mutual
Company.
"Conversion Offering" shall mean the offering, in connection with the
Conversion, of shares of FNFG Common Stock in a subscription offering and, if
necessary, a community offering and/or a syndicated community offering.
"Conversion Price Per Share" shall have the meaning set forth in
Section 2.9.
"Conversion Prospectus" shall mean a prospectus issued by FNFG in
connection with the Offering, that meets all of the requirements of the
Securities Act, applicable state securities laws and banking laws and
regulations. The Conversion Prospectus may be combined with (i) the Proxy
Statement-Prospectus delivered to shareholders of FLBC in connection with the
solicitation of their approval of this Agreement and the transactions
contemplated hereby and the
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offering of the FNFG Common Stock to them as Merger Consideration, and (ii) the
proxy statement delivered to First Niagara Financial stockholders in connection
with the solicitation of their approval of the Conversion and the Plan of
Conversion.
"Conversion Registration Statement" shall mean the registration
statement, together with all amendments, filed with the SEC under the Securities
Act for the purpose of registering shares of FNFG Common Stock to be offered and
issued in connection with the Offering. The Merger Registration Statement and
the Conversion Registration Statement may be separate registration statements or
may be combined in one registration statement that shall register shares of FNFG
Common Stock to be offered and issued in connection with the Offering and to be
offered to holders of FLBC Common Stock in connection with the Merger.
"DGCL" shall mean the Delaware General Corporation Law.
"Depositors" shall mean former or current depositors of First Niagara
Bank and its Bank Affiliates that under the Plan of Conversion are given, as
indicated by the context, the opportunity to purchase FNFG Common Stock in the
Conversion or the opportunity to vote on the Plan of Conversion.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Laws" means any Federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) 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 (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
3
"Exchange Agent" shall mean a bank or trust company designated by First
Niagara Financial, reasonably acceptable to FLBC, which shall act as agent for
FNFG in connection with the exchange procedures for converting Certificates into
the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.3.1.
"Exchange Offering" shall mean the offer and issuance of FNFG Common
Stock, in connection with the Conversion, to the existing public shareholders of
First Niagara Financial.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of New York.
"First Niagara Bank" shall mean First Niagara Bank, either as a New
York chartered stock savings bank or as a Federally chartered stock savings
bank, with its principal offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, P.O. Box
514, Lockport, New York, which is a wholly owned subsidiary of First Niagara
Financial.
"First Niagara Financial" shall mean First Niagara Financial Group,
Inc., either as a Delaware corporation or as a federal corporation, in either
case prior to consummation of the Conversion, with its principal executive
offices located at 6950 ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇.
"First Niagara Financial Group" shall mean the Mutual Company, FNFG,
First Niagara Financial and/or any direct or indirect Subsidiary of First
Niagara Financial.
"First Niagara Financial Common Stock" shall mean the common stock, par
value $.01 per share, of First Niagara Financial.
"FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE" shall mean a
written disclosure schedule delivered by First Niagara Financial to FLBC
specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein.
"First Niagara Financial Option Plans" shall mean the First Niagara
Financial Group, Inc. 1999 Stock Option Plan, the First Niagara Financial Group,
Inc. 1999 Recognition and Retention Plan, and the First Niagara Financial Group,
Inc. 2002 Long-Term Incentive Stock Benefit Plan.
"First Niagara Financial Statements" shall mean the (i) unaudited
balance sheet of the Mutual Company as of December 31, 2001 and the unaudited
income statement of the Mutual Company for the year ended December 31, 2001, and
(ii) the audited consolidated statements of financial condition (including
related notes and schedules) of First Niagara Financial as of December 31, 2001
and 2000 and the consolidated statements of income, stockholders' equity and
cash flows (including related notes and schedules, if any) of First Niagara
Financial for each of the three years ended December 31, 2001, 2000 and 1999, as
set forth in First Niagara Financial's annual report for the year ended December
31, 2001, and the unaudited interim
4
consolidated financial statements of First Niagara Financial as of the end of
each quarter following December 31, 2001, as filed by First Niagara Financial in
its Securities Documents.
"First Niagara Financial Subsidiary" means any corporation, 50% or more
of the capital stock of which is owned, either directly or indirectly, by First
Niagara Financial, First Niagara Bank or any Bank Affiliate, except any
corporation the stock of which is held in the ordinary course of the lending
activities of First Niagara Bank or any Bank Affiliate.
"FLBC" shall mean Finger Lakes Bancorp, Inc., a Delaware corporation,
with its principal offices located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇. As
appropriate in the context, FLBC shall include Finger Lakes Financial Corp., the
predecessor in interest to FLBC.
"FLBC Common Stock" shall mean the common stock, par value $0.01 per
share, of FLBC.
"FLBC DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by FLBC to First Niagara Financial specifically referring to the
appropriate section of this Agreement and describing in reasonable detail the
matters described therein.
"FLBC Employee Plan(s)" shall mean all stock option, employee stock
purchase, stock bonus and any other stock-based plans, qualified pension or
profit-sharing plans, any deferred compensation, non-qualified plan or
arrangement, supplemental retirement, consultant, bonus or group insurance
contract or any other incentive, health and welfare or employee benefit plan or
agreement maintained for the benefit of any of the employees or former employees
or directors of FLBC or any FLBC Subsidiary, whether written or oral.
"FLBC ESOP" shall have the meaning set forth in Section 7.8.1.
"FLBC Financial Statements" shall mean (i) the audited consolidated
statements of financial condition (including related notes and schedules, if
any) of FLBC as of December 31, 2001 and 2000 and the consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) of FLBC for each of the three years ended December 31, 2001,
2001 and 1999, as filed by FLBC in its Securities Documents, and (ii) the
unaudited interim consolidated financial statements of FLBC as of the end of
each calendar quarter following December 31, 2001 as filed by FLBC in its
Securities Documents.
"FLBC Option Plans" shall mean the FLBC 1996 Stock Option Plan, the
FLBC 1996 Management Recognition Plan, the FLBC 2001 Stock Option Plan, and the
FLBC 2001 Recognition and Retention Plan and any amendments thereto.
"FLBC Options" shall mean options to purchase shares of FLBC Common
Stock granted pursuant to the FLBC Option Plans or as otherwise set forth in
Section 4.01 of the FLBC DISCLOSURE SCHEDULE.
"FLBC Regulatory Reports" means the Thrift Financial Reports of SBFL
and accompanying schedules, as filed with the OTS, for each calendar quarter
beginning with the quarter ended March 31, 2001, through the Closing Date, and
all Annual Reports and any Current Report filed with the OTS by FLBC from
December 31, 2000 through the Closing Date.
5
"FLBC Stockholders Meeting" means the meeting of stockholders of FLBC
to be held for the purpose of considering and approving this Agreement and the
Merger.
"FLBC Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by FLBC or SBFL, except
any corporation the stock of which is held in the ordinary course of the lending
activities of SBFL.
"FNFG" shall mean New First Niagara Financial Group, Inc., a Delaware
corporation with its principal executive offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, which was organized in connection
with the Conversion and which will be the successor to First Niagara Financial.
"FNFG Common Stock" shall mean the common stock, par value $.01 per
share, of FNFG that will be issued and sold in the Offering and the Merger.
"FRB" shall mean the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" shall mean Generally Accepted Accounting Principles,
consistently applied.
"Governmental Entity" shall mean any Federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Independent Valuation" shall mean the appraised pro forma market value
of the FNFG Common Stock issued in the Conversion and the Merger, and any
updates, as determined by an independent valuation.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) means those facts that are
known, or should have been known (in the ordinary performance of their duties
without additional inquiry specific to this Agreement), by the executive
officers and directors of such Person, and includes any facts, matters or
circumstances set forth in any written notice from any Bank Regulator or any
other material written notice received by that Person.
"Material Adverse Effect" shall mean, with respect to First Niagara
Financial or FLBC, respectively, any effect that (i) is material and adverse to
the financial condition, results of operations or business of the Mutual Company
and First Niagara Financial and its Subsidiaries taken as a whole, or FLBC and
its Subsidiaries taken as a whole, respectively, or (ii) materially impairs the
ability of either FLBC, on the one hand, or First Niagara Financial, on the
other hand, to consummate the transactions contemplated by this Agreement;
provided that "Material Adverse Effect" shall not be deemed to include the
impact of (a) changes in laws and regulations affecting banks or thrift
institutions generally, (b) changes in GAAP or regulatory accounting principles
generally applicable to financial institutions and their holding companies, (c)
actions and omissions of a party (or any of its Subsidiaries) taken with the
prior written consent of the other party, and (d) the direct effects of
compliance with this Agreement on the operating performance of the parties
including expenses incurred by the parties hereto in consummating
6
the transactions contemplated by this Agreement, including without limitation
the expenses associated with the termination of any of the FLBC Employee Plans
as and to the extent contemplated herein.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of FLBC with and into FNFG (or a
subsidiary thereof) pursuant to the terms hereof.
"Merger Consideration" shall mean the cash or FNFG Common Stock, or
combination thereof, in a per share amount to be paid by FNFG for each share of
FLBC Common Stock, equal to $20.00, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of FNFG Common Stock to be offered to holders
of FLBC Common Stock in connection with the Merger. The Merger Registration
Statement and the Conversion Registration Statement may be separate registration
statements or may be combined in one registration statement that shall register
shares of FNFG Common Stock to be offered and sold in connection with the
Offering and to be offered to holders of FLBC Common Stock in connection with
the Merger.
"Mid-Tier Holding Company Charter Conversion" shall mean the conversion
of First Niagara Financial from a Delaware corporation to a federally chartered
corporation.
"Mutual Company" shall mean First Niagara Financial Group, MHC, a
mutual holding company that owns a majority of the First Niagara Financial Group
Common Stock.
"Mutual Company Charter Conversion" shall mean the conversion of the
Mutual Company from a New York chartered mutual holding company to a federally
chartered mutual holding company.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Offering" shall mean the Conversion Offering and the Exchange
Offering.
"OTS" shall mean the Office of Thrift Supervision.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Plan of Conversion" shall mean the Plan of Conversion and
Reorganization pursuant to which the Mutual Company will convert from the mutual
form of organization to the capital stock form of organization.
7
"Pre-Closing" shall have the meaning set forth in Section 10.1 hereof.
"Pre-Closing Date" shall be the date on which the Pre-Closing occurs.
"Proxy Statement-Prospectus" shall mean the proxy statement/prospectus,
as amended or supplemented, to be delivered to shareholders of FLBC in
connection with the solicitation of their approval of this Agreement and the
transactions contemplated hereby and the offering of the FNFG Common Stock to
them as Merger Consideration. The Proxy Statement-Prospectus may be combined
with (i) the Conversion Prospectus delivered to offerees in the Conversion
Offering and Exchange Offering, and (ii) the proxy statement delivered to First
Niagara Financial stockholders in connection with the solicitation of their
approval of the Conversion and the Plan of Conversion.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Stock Exchange" shall mean the Nasdaq National Market.
"Subsidiary" shall have the meanings set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination Date" shall mean June 30, 2003.
"SBFL" shall mean Savings Bank of the Finger Lakes, FSB, a Federal
savings bank, with its principal offices located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇, which is a wholly-owned subsidiary of FLBC.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
8
ARTICLE II
THE MERGER
2.1. Merger.
As promptly as practicable following the satisfaction or waiver of the
conditions to each party's respective obligations hereunder, and subject to the
terms and conditions of this Agreement, at the Effective Time: (a) FLBC shall
merge with and into FNFG, or a to-be-formed subsidiary of FNFG, with FNFG (or
the subsidiary) as the resulting or surviving corporation (the "Surviving
Corporation"); and (b) the separate existence of FLBC shall cease and all of the
rights, privileges, powers, franchises, properties, assets, liabilities and
obligations of FLBC shall be vested in and assumed by FNFG. As part of the
Merger, each share of FLBC Common Stock will be converted into the right to
receive the Merger Consideration pursuant to the terms of Article III hereof.
Immediately after the Merger, SBFL shall merge with and into First Niagara Bank,
with First Niagara Bank as the resulting institution.
2.2. Effective Time.
The Merger shall be effected by the filing of a certificate of merger
with the Delaware Office of the Secretary of State on the day of the closing
("Closing Date") provided for in Article X hereof (the "Closing"), in accordance
with the DGCL. The "Effective Time" means the date and time upon which the
certificate of merger is filed with the Delaware Office of the Secretary of
State, or as otherwise stated in the certificate of merger, in accordance with
the DGCL. The Closing of the Merger shall immediately follow the closing of the
Offering.
2.3. Certificate of Incorporation and Bylaws.
The Certificate of Incorporation and Bylaws of FNFG shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation as in
effect immediately prior to the Effective Time, until thereafter amended as
provided therein and by applicable law.
2.4. Directors and Officers of Surviving Corporation.
Except as provided in Section 2.5, the directors of FNFG immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of FNFG
immediately prior to the Effective Time shall be the initial officers of
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2.5. Additional Director of FNFG.
Effective as of the Effective Time, the number of persons constituting
the Board of Directors of FNFG shall be increased by one, and G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
shall be appointed and elected to the FNFG Board to serve for a term expiring at
the annual meeting of directors of FNFG following the year ending December 31,
2005.
9
2.6. Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects as
set forth in the DGCL.
2.7. Tax Consequences.
It is intended that the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" as that term is used in Sections 354 and
361 of the Code. From and after the date of this Agreement and until the
Closing, each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to
be taken, fail to take any action or cause any action to fail to be taken which
action or failure to act could prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code. Following the Closing, neither
FNFG, First Niagara Financial, nor any of their affiliates shall knowingly take
any action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken, which action or failure to act could cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
FNFG and FLBC each hereby agrees to deliver certificates substantially in
compliance with IRS published advance ruling guidelines, with customary
exceptions and modifications thereto, to enable counsel to deliver the legal
opinion contemplated by Section 9.1.6, which certificates shall be effective as
of the date of such opinion. This Section 2.7 shall not apply in the event
circumstances occur resulting in the Merger Consideration becoming the "All Cash
Consideration" as set forth in Section 2.9. In such a case, it is intended that
the Merger shall constitute a taxable sale of the FLBC Common Stock held by the
holders of such stock to FNFG.
2.8. Possible Alternative Structures.
Notwithstanding anything to the contrary contained in this Agreement,
prior to the Effective Time First Niagara Financial or FNFG shall be entitled to
revise the structure of the Merger described in Section 2.1 hereof, provided
that (i) there are no adverse Federal or state income tax consequences to FLBC
stockholders as a result of the modification; (ii) the consideration to be paid
to the holders of FLBC Common Stock under this Agreement is not thereby changed
in kind, value or reduced in amount; and (iii) such modification will not delay
materially or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the Merger. The Mutual
Company, First Niagara Financial, FNFG, First Niagara Bank, FLBC and SBFL agree
to appropriately amend this Agreement and any related documents in order to
reflect any such revised structure.
2.9. The Conversion
Contemporaneous with the adoption of this Agreement, the Board of
Directors of the Mutual Company is adopting a Plan of Conversion to convert into
the capital stock form of organization. FNFG is being organized to succeed to
the rights and obligations of the Mutual Company and First Niagara Financial and
to offer for sale shares of common stock to depositors in the Conversion, based
on the Independent Valuation. The price per share of the shares of FNFG Common
Stock to be issued in the Conversion is referred to as the "Conversion Price Per
10
Share." The Conversion Price Per Share is expected to be $10.00. The shares of
FNFG Common Stock to be issued in connection with the Merger will be either
shares unsubcribed for in the Conversion subscription and/or community offering,
or if such shares are unavailable, authorized but unissued shares of FNFG Common
Stock, which shares shall be issued immediately following completion of the
Conversion. If the Conversion is terminated, or if the Merger is postponed by
First Niagara Financial Group such that for any reason whatsoever, it is not
consummated prior to March 31, 2003, this Agreement shall be deemed to provide,
without further action of the parties hereto, that the Merger Consideration
shall be $20.00 in cash (the "All Cash Consideration"). Unless the payment of
the All Cash Consideration has been approved by the FLBC shareholders, FLBC
shall as promptly as practicable hold another meeting of its stockholders to
approve the All Cash Consideration.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of FLBC Common Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger and without any action
on the part of FNFG, FLBC or the holders of any of the shares of FLBC Common
Stock, the Merger shall be effected in accordance with the following terms:
3.1.1. All shares of FLBC Common Stock held in the treasury of
FLBC and each share of FLBC Common Stock owned by First Niagara Financial or any
direct or indirect wholly owned subsidiary of First Niagara Financial or FNG or
of FLBC immediately prior to the Effective Time (other than shares held in a
fiduciary capacity or in connection with debts previously contracted) shall, at
the Effective Time, cease to exist, and the certificates for such shares shall
be canceled as promptly as practicable thereafter, and no payment or
distribution shall be made in consideration therefor.
3.1.2. Each outstanding share of FLBC Common Stock that under
the terms of Section 3.2 is to be converted into the right to receive shares of
FNFG Common Stock shall, subject to Section 3.3, be converted into and become
the right to receive that number of shares of FNFG Common Stock as shall equal
$20.00 divided by the Conversion Price Per Share. For example, if the Conversion
Price Per Share is $10.00, then each outstanding share of FLBC Common Stock that
under the terms of Section 3.2 is to be converted into the right to receive
shares of FNFG Common Stock shall, subject to Section 3.3, be converted into and
become the right to receive two (2) shares of FNFG Common Stock.
3.1.3. Each outstanding share of FLBC Common Stock that under
the terms of Section 3.2 is to be converted into the right to receive cash shall
be converted into the right to receive a cash payment of $20.00 (the "Cash
Election Price").
3.1.4. Each outstanding share of FLBC Common Stock the holder
of which has perfected his right to dissent under the DGCL and has not
effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
shares of FNFG Common Stock or cash hereunder, and the holder thereof shall be
entitled only to such rights as are granted by the DGCL. FLBC shall give FNFG
prompt
11
notice upon receipt by FLBC of any such demands for payment of the fair value of
such shares of FLBC Common Stock and of withdrawals of such notice and any other
instruments provided pursuant to applicable law (any shareholder duly making
such demand being hereinafter called a "Dissenting Shareholder"), and FNFG shall
have the right to participate in all negotiations and proceedings with respect
to any such demands. FLBC shall not, except with the prior written consent of
FNFG, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment, or waive any failure to timely deliver a
written demand for appraisal or the taking of any other action by such
Dissenting Shareholder as may be necessary to perfect appraisal rights under the
DGCL. Any payments made in respect of Dissenting Shares shall be made by the
Surviving Company.
3.1.5. If any Dissenting Shareholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at or prior to the Effective Time, such holder's shares of FLBC Common
Stock shall be converted into a right to receive cash or FNFG Common Stock in
accordance with the applicable provisions of this Agreement. If such holder
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to such payment after the Effective Time, each share of FLBC Common Stock
of such holder shall be converted on a share by share basis into either the
right to receive the Cash Election Price or FNFG Common Stock as FNFG shall
determine in its sole discretion.
3.1.6. After the Effective Time, shares of FLBC Common Stock
shall be no longer outstanding and shall automatically be canceled and shall
cease to exist, and shall thereafter by operation of this section be the right
to receive the Merger Consideration.
3.2. Election Procedures.
Holders of FLBC Common Stock may elect to receive shares of FNFG Common
Stock or the Cash Election Price in exchange for their shares of FLBC Common
Stock in accordance with the following procedures.
3.2.1. An election form as FNFG and FLBC shall mutually agree
("Election Form") will be sent no later than 15 business days prior to the
expected Effective Time (provided that it need not be sent until the requisite
approvals from the Bank Regulators (as defined in Section 8.4) have been
obtained) to each holder of record of FLBC Common Stock permitting such holder
(or in the case of nominee record holders, the beneficial owner through proper
instructions and documentation) (i) to elect to receive FNFG Common Stock with
respect to each share of such holder's FLBC Common Stock as provided herein (the
"FLBC Stock Election Shares") or (ii) to elect to receive cash with respect to
each share of such holder's FLBC Common Stock as provided herein (the "FLBC Cash
Election Shares"). Any shares of FLBC Common Stock with respect to which the
holder thereof shall not, as of the Election Deadline, have made such an
election by submission to the Exchange Agent on an effective, properly completed
Election Form shall be deemed converted on a share by share basis into either
the right to receive the Cash Election Price or FNFG Common Stock as FNFG shall
determine in its sole discretion. Any Dissenting Shares shall be deemed to be
FLBC Cash Election Shares, and with respect to such shares the holders thereof
shall in no event receive consideration comprised of FNFG Common Stock.
12
3.2.2. The term "Election Deadline", as used below, shall mean
5:00 p.m., Eastern time, on the 20th business day following but not including
the date of mailing of the Election Form or such other date as FLBC and FNFG
shall mutually agree upon. Any election to receive FNFG Common Stock or cash
shall have been properly made only if the Exchange Agent shall have actually
received a properly completed Election Form by the Election Deadline. Any
Election Form may be revoked or changed by the person submitting such Election
Form to the Exchange Agent by written notice to the Exchange Agent only if such
notice is actually received by the Exchange Agent at or prior to the Election
Deadline. The Certificate or Certificates relating to any revoked Election Form
shall be promptly returned without charge to the person submitting the Election
Form to the Exchange Agent. The Exchange Agent shall have discretion to
determine when any election, modification or revocation is received and whether
any such election, modification or revocation has been properly made. Within
five business days after the Election Deadline, the Exchange Agent shall
calculate the allocation among holders of FLBC Common Stock of rights to receive
FNFG Common Stock or the Cash Election Price in the Merger in accordance with
the Election Forms as follows:
(i) If the number of FLBC Cash Election Shares is greater
than the quotient of (x) $31,358,550 divided by (y)
the Cash Election Price (the "Cash Conversion
Shares"), then:
(1) all FLBC Stock Election Shares will be
converted into the right to receive FNFG
Common Stock, and
(2) each FLBC Cash Election Share will be
converted into the right to receive FNFG
Common Stock and cash in the following
manner:
(A) a proration factor (the "Cash
Proration Factor") shall be
determined by dividing (x)
$31,358,550, by (y) the product of
the number of FLBC Cash Election
Shares multiplied by the Cash
Election Price;
(B) the number of FLBC Cash Election
Shares held by each holder of shares
of FLBC Common Stock that will be
converted into the right to receive
cash pursuant to the terms of
Section 3.1.3 shall be determined by
multiplying the Cash Proration
Factor by the number of FLBC Cash
Election Shares held by such holder;
and
(C) all FLBC Cash Election Shares other
than those shares converted into the
right to receive cash in accordance
with the preceding subparagraph (B)
shall be converted into the right to
receive FNFG Common Stock in
accordance with the terms of Section
3.1.2; or
(ii) If the number of FLBC Cash Election Shares is less
than the Cash Conversion Shares, then:
13
(1) all FLBC Cash Election Shares (subject to
the provisions of Section 3.1.4 with respect
to any Dissenting Shares) will be converted
into the right to receive cash, and
(2) each FLBC Stock Election Share will be
converted into the right to receive FNFG
Common Stock and cash in the following
manner:
(A) a proration factor (the "Stock
Proration Factor") shall be
determined by dividing the Stock
Conversion Shares (as defined below)
by the number of FLBC Stock Election
Shares. The "Stock Conversion
Shares" shall mean the difference
between (x) the total number of
shares of FLBC Common Stock
outstanding immediately prior to the
Effective Time minus (y) the Cash
Conversion Shares;
(B) the number of FLBC Stock Election
Shares held by each holder of shares
of FLBC Common Stock that will be
converted into the right to receive
shares of FNFG Common Stock pursuant
to the terms of Section 3.1.2 shall
be determined by multiplying the
Stock Proration Factor by the number
of FLBC Stock Election Shares held
by such holder; and
(C) all FLBC Stock Election Shares other
than those shares converted into the
right to receive FNFG Common Stock
in accordance with the preceding
subparagraph (B) shall be converted
into the right to receive cash in
accordance with the terms of Section
3.1.3; or
(iii) If the number of FLBC Stock Election Shares is equal
to the number of Stock Conversion Shares and the
number of FLBC Cash Election Shares is equal to the
number of Cash Conversion Shares, then subparagraphs
(i) and (ii) above shall not apply and all FLBC Stock
Election Shares will be converted into the right to
receive FNFG Common Stock and all FLBC Cash Election
Shares (subject to the provisions of Section 3.1.4)
will be converted into the right to receive cash.
3.2.3. No Fractional Shares. Notwithstanding anything to the
contrary contained herein, no certificates or scrip representing fractional
shares of FNFG Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to FNFG Common Stock
shall be payable on or with respect to any fractional share interest, and such
fractional share interests shall not entitle the owner thereof to vote or to any
other rights of a stockholder of FNFG. In lieu of the issuance of any such
fractional share, FNFG shall pay to each former holder of FLBC Common Stock who
otherwise would be entitled to receive a fractional share of FNFG Common Stock,
an amount in cash determined by multiplying the price for which the FNFG Common
Stock is sold in the Offering by the fraction of a share of FNFG Common Stock
which such holder would otherwise be entitled to receive
14
pursuant to Section 3.1.3 hereof. No interest will be paid on the cash that the
holders of such fractional shares shall be entitled to receive upon such
delivery. For purposes of determining any fractional share interest, all shares
of FLBC Common Stock owned by a FLBC shareholder shall be combined so as to
calculate the maximum number of whole shares of FNFG Common Stock issuable to
such FLBC shareholder.
3.3. Procedures for Exchange of FLBC Common Stock.
3.3.1. FNFG to Make Merger Consideration Available. At or
promptly after the Election Deadline (but in no event prior to the Effective
Time), FNFG shall deposit, or shall cause to be deposited, with the Exchange
Agent for the benefit of the holders of FLBC Common Stock, for exchange in
accordance with this Section 3.3, certificates representing the shares of FNFG
Common Stock and an estimated amount of cash sufficient to pay the aggregate
Cash Election Price payable hereunder and any cash that may be payable in lieu
of any fractional shares (such cash and certificates for shares of FNFG Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
3.3.2. Exchange of Certificates. Within five (5) business days
after the Effective Time, FNFG shall take all steps necessary to cause the
Exchange Agent to mail to each holder of a Certificate or Certificates, a form
letter of transmittal for return to the Exchange Agent and instructions for use
in effecting the surrender of the Certificates for certificates representing, as
the case may be, the shares of FNFG Common Stock, cash in respect of the Cash
Election Price, and cash in lieu of fractional shares into which the FLBC Common
Stock represented by such Certificates shall have been converted as a result of
the Merger. The letter of transmittal (which shall be subject to the reasonable
approval of FLBC) shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent. Upon proper surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with a properly
completed letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor, as applicable, (i) a
certificate representing that number of shares of FNFG Common Stock (if any) to
which such former holder of FLBC Common Stock shall have become entitled
pursuant to the provisions of Section 3.1.2 hereof, (ii) a check representing
that amount of cash (if any) to which such former holder of FLBC Common Stock
shall have become entitled in respect of the Cash Election Price pursuant to the
provisions of Section 3.2 hereof and (iii) a check representing the amount of
cash (if any) payable in lieu of fractional shares of FNFG Common Stock, which
such former holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Section 3, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash payable in lieu of fractional shares. Certificates surrendered for
exchange by any person who is an "affiliate" of FLBC for purposes of Rule 145(c)
under the Securities Act shall not be exchanged for certificates representing
shares of FNFG Common Stock until FNFG or First Niagara Financial has received
the written agreement of such person contemplated by Section 8.5 hereof.
3.3.3. Rights of Certificate Holders after the Effective Time.
The holder of a Certificate that prior to the Merger represented issued and
outstanding FLBC Common Stock shall have no rights, after the Effective Time,
with respect to such FLBC Common Stock except
15
to surrender the Certificate in exchange for the Merger Consideration as
provided in this Agreement. No dividends or other distributions declared after
the Effective Time with respect to FNFG Common Stock shall be paid to the holder
of any unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 3.3. After the surrender of a
Certificate in accordance with this Section 3.3, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
FNFG Common Stock represented by such Certificate.
3.3.4. Surrender by Persons Other than Record Holders. If the
Person surrendering a Certificate and signing the accompanying letter of
transmittal is not the record holder thereof, then it shall be a condition of
the payment of the Merger Consideration that: (i) such Certificate is properly
endorsed to such Person or is accompanied by appropriate stock powers, in either
case signed exactly as the name of the record holder appears on such
Certificate, and is otherwise in proper form for transfer, or is accompanied by
appropriate evidence of the authority of the Person surrendering such
Certificate and signing the letter of transmittal to do so on behalf of the
record holder; and (ii) the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
3.3.5. Closing of Transfer Books. From and after the Effective
Time, there shall be no transfers on the stock transfer books of FLBC of the
FLBC Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be exchanged for the
Merger Consideration and canceled as provided in this Section 3.3.
3.3.6. Return of Exchange Fund. At any time following the
twelve (12) month period after the Effective Time, FNFG shall be entitled to
require the Exchange Agent to deliver to it any portions of the Exchange Fund
which had been made available to the Exchange Agent and not disbursed to holders
of Certificates (including, without limitation, all interest and other income
received by the Exchange Agent in respect of all funds made available to it),
and thereafter such holders shall be entitled to look to FNFG (subject to
abandoned property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither FNFG nor the Exchange Agent shall
be liable to any holder of a Certificate for any Merger Consideration delivered
in respect of such Certificate to a public official pursuant to any abandoned
property, escheat or other similar law.
3.3.7. Lost, Stolen or Destroyed Certificates. In the event
any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by FNFG, the posting by such person of a
bond in such amount as FNFG may reasonably direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof.
16
3.3.8. Withholding. FNFG or the Exchange Agent will be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement or the transactions contemplated hereby to any holder
of FLBC Common Stock such amounts as FNFG (or any Affiliate thereof) or the
Exchange Agent are required to deduct and withhold with respect to the making of
such payment under the Code, or any applicable provision of U.S. federal, state,
local or non-U.S. tax law. To the extent that such amounts are properly withheld
by FNFG or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the FLBC Common
Stock in respect of whom such deduction and withholding were made by FNFG or the
Exchange Agent.
3.4. Treatment of FLBC Options.
Holders of FLBC Options may elect to receive FNFG Common Stock or Cash
in exchange for their FLBC Options in accordance with the following procedures
set forth in this Section 3.4.
3.4.1. Stock Election. Each holder of an outstanding FLBC
Option that is to be converted into FNFG Common Stock, shall receive shares of
FNFG Common Stock in an amount equal to the quotient of (x) $20.00 minus the
exercise price of the option, multiplied by the number of shares covered by the
option, divided by (y) the Conversion Price Per Share. For example, assuming a
Conversion Price Per Share of $10.00, a stock election as to an FLBC option for
100 shares with an exercise price of $5.00 per share shall result in the receipt
of 150 shares of FNFG Common Stock (subject to Section 3.4.3).
3.4.2. Cash Election. Each holder of an outstanding FLBC
Option that is to be converted into the right to receive cash ("FLBC Cash
Election Options") shall receive cash in an amount equal to $20.00, minus the
exercise price of the option, multiplied by the number of shares covered by the
option.
3.4.3. Election Procedures. If the option election process
creates a distribution, among all option holders in the aggregate , other than
the right to receive 50% stock and 50% cash then:
(A) a proration factor shall be determined by
dividing (x) 165,195 (50% of options outstanding), by (y) the number of FLBC
Options electing to receive cash;
(B) the number of FLBC Cash Election Options held by
each holder of shares of FLBC Options that will be converted into the right to
receive cash pursuant to the terms of Section 3.4.2 shall be determined by
multiplying the Proration Factor by the number of FLBC Cash Election Options
held by such holder; and
(C) all FLBC Cash Election Options other than those
options converted into the right to receive cash in accordance with the
preceding subparagraph (B) shall be converted into the right to receive FNFG
Common Stock in accordance with 3.4.1.
17
3.5. Reservation of Shares.
FNFG shall reserve for issuance a sufficient number of shares of the
FNFG Common Stock for the purpose of issuing shares of FNFG Common Stock to the
FLBC shareholders and option holders in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FLBC
FLBC and SBFL represent and warrant to First Niagara Financial, FNFG
and First Niagara Bank that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article
IV), except as set forth in the FLBC DISCLOSURE SCHEDULE delivered by FLBC to
First Niagara Financial on the date hereof, and except as to any representation
or warranty which specifically relates to an earlier date. FLBC and SBFL have
made a good faith effort to ensure that the disclosure on each schedule of the
FLBC DISCLOSURE SCHEDULE corresponds to the section referenced herein. However,
for purposes of the FLBC DISCLOSURE SCHEDULE, any item disclosed on any schedule
therein is deemed to be fully disclosed with respect to all schedules under
which such item may be relevant. References to the Knowledge of FLBC shall
include the Knowledge of SBFL.
4.1. Organization.
4.1.1. FLBC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
registered as a savings and loan holding company under the HOLA. FLBC has full
corporate power and authority to carry on its business as now conducted and is
duly licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on FLBC.
4.1.2. SBFL is a savings bank organized, validly existing and
in good standing under federal law. SBFL is the only direct FLBC Subsidiary. The
deposits of SBFL are insured by the FDIC through the SAIF to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid by SBFL when due. Each other FLBC Subsidiary
is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization.
4.1.3. SBFL is a member in good standing of the FHLB and owns
the requisite amount of stock therein.
4.1.4. The respective minute books of FLBC and each FLBC
Subsidiary accurately records, in all material respects, all material corporate
actions of their respective shareholders and boards of directors (including
committees) through July 1, 2002.
18
4.1.5. Prior to the date of this Agreement, FLBC has made
available to First Niagara Financial true and correct copies of the certificate
of incorporation or charter and bylaws of FLBC and SBFL.
4.2. Capitalization.
4.2.1. The authorized capital stock of FLBC consists of
5,000,000 shares of common stock, $0.01 par value per share, of which 3,173,807
shares are outstanding, validly issued, fully paid and nonassessable and free of
preemptive rights, and 1,000,000 shares of preferred stock, $0.01 par value
("FLBC Preferred Stock"), none of which are outstanding. There are 277,450
shares of FLBC Common Stock held by FLBC as treasury stock. Neither FLBC nor any
FLBC Subsidiary has or is bound by any Rights of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of FLBC Common Stock, or any other security of FLBC
or any securities representing the right to vote, purchase or otherwise receive
any shares of FLBC Common Stock or any other security of FLBC, other than shares
issuable under the FLBC Stock Option Plans. FLBC DISCLOSURE SCHEDULE 4.2.1 sets
forth the name of each holder of options to purchase FLBC Common Stock, the
number of shares each such individual may acquire pursuant to the exercise of
such options, the vesting dates, and the exercise price relating to the options
held, as well as the names of each holder of an outstanding restricted stock
award, the number of shares subject to each award, and the vesting dates.
4.2.2. FLBC owns all of the capital stock of SBFL, free and
clear of any lien or encumbrance. Except for the FLBC Subsidiaries, FLBC does
not possess, directly or indirectly, any material equity interest in any
corporate entity, except for equity interests held in the investment portfolios
of FLBC Subsidiaries, equity interests held by FLBC Subsidiaries in a fiduciary
capacity, and equity interests held in connection with the lending activities of
FLBC Subsidiaries, including stock in the FHLB.
4.2.3. Except as disclosed in FLBC DISCLOSURE SCHEDULE 4.2.3,
to FLBC's Knowledge, no Person or "group" (as that term is used in Section
13(d)(3) of the Exchange Act), is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding shares of FLBC
Common Stock.
4.3. Authority; No Violation.
4.3.1. FLBC and SBFL each has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by FLBC and SBFL and the completion by FLBC and SBFL of the transactions
contemplated hereby, up to and including the Merger, have been duly and validly
approved by the Board of Directors of FLBC and SBFL, respectively, and, except
for approval of the shareholders of FLBC, no other corporate proceedings on the
part of FLBC or SBFL are necessary to complete the transactions contemplated
hereby, up to and including the Merger. This Agreement has been duly and validly
executed and delivered by FLBC and SBFL, and the Bank Merger has been duly and
validly approved by the Board of Directors of SBFL, and by FLBC in its capacity
as sole stockholder of SBFL, and subject to approval by the shareholders of FLBC
and receipt of the required approvals of the Bank
19
Regulators described in Section 8.4 hereof, constitutes the valid and binding
obligations of FLBC and SBFL, enforceable against FLBC and SBFL in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and as to SBFL, the conservatorship or
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.
4.3.2. (A) The execution and delivery of this Agreement by
FLBC and SBFL, (B) subject to receipt of approvals from the Bank Regulators
referred to in Section 8.4 hereof, and FLBC's and First Niagara Financial
Group's compliance with any conditions contained therein, and subject to the
receipt of the approval of FLBC's stockholders, the consummation of the
transactions contemplated hereby, and (C) compliance by FLBC and SBFL with any
of the terms or provisions hereof will not (i) conflict with or result in a
breach of any provision of the certificate of incorporation or bylaws of FLBC or
any FLBC Subsidiary or the charter and bylaws of SBFL; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to FLBC or any FLBC Subsidiary or any of their respective properties
or assets; or (iii) except as set forth in FLBC DISCLOSURE SCHEDULE 4.3.2,
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default), under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of FLBC or SBFL under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which FLBC or
SBFL is a party, or by which they or any of their respective properties or
assets may be bound or affected, except for such violations, conflicts, breaches
or defaults under clause (ii) or (iii) hereof which, either individually or in
the aggregate, will not have a Material Adverse Effect on FLBC and the FLBC
Subsidiaries taken as a whole.
4.4. Consents.
Except for the consents, waivers, approvals, filings and registrations
from or with the Bank Regulators referred to in Section 8.4 hereof and
compliance with any conditions contained therein, and the approval of this
Agreement by the requisite vote of the shareholders of FLBC, no consents,
waivers or approvals of, or filings or registrations with, any Bank Regulator
are necessary, and, to FLBC's Knowledge and except as disclosed in the FLBC
DISCLOSURE SCHEDULE 4.4, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(a) the execution and delivery of this Agreement by FLBC and SBFL, and (b) the
completion by FLBC and SBFL of the Merger and the Bank Merger. FLBC and SBFL
have no reason to believe that (i) any required approvals from a Bank Regulator
or other required consents or approvals will not be received, or that (ii) any
public body or authority, the consent or approval of which is not required or to
which a filing is not required, will object to the completion of the
transactions contemplated by this Agreement.
20
4.5. Financial Statements.
4.5.1. FLBC has previously made available to First Niagara
Financial the FLBC Regulatory Reports. The FLBC Regulatory Reports have been
prepared in all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods covered by such
statements, and fairly present in all material respects, the consolidated
financial position, results of operations and changes in shareholders' equity of
FLBC as of and for the periods ended on the dates thereof, in accordance with
applicable regulatory accounting principles applied on a consistent basis.
4.5.2. FLBC has previously made available to First Niagara
Financial the FLBC Financial Statements. The FLBC Financial Statements have been
prepared in accordance with GAAP, and (including the related notes where
applicable) fairly present in each case in all material respects (subject in the
case of the unaudited interim statements to normal year-end adjustments), the
consolidated financial position, results of operations and cash flows of FLBC
and the FLBC Subsidiaries on a consolidated basis as of and for the respective
periods ending on the dates thereof, in accordance with GAAP during the periods
involved, except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
4.5.3. At the date of each balance sheet included in the FLBC
Financial Statements or the FLBC Regulatory Reports, FLBC did not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
FLBC Financial Statements or FLBC Regulatory Reports or in the footnotes thereto
which are not fully reflected or reserved against therein or fully disclosed in
a footnote thereto, except for liabilities, obligations and loss contingencies
which are not material individually or in the aggregate or which are incurred in
the ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
4.6. Taxes.
FLBC and the FLBC Subsidiaries are members of the same affiliated group
within the meaning of Code Section 1504(a). FLBC has duly filed all federal,
state and material local tax returns required to be filed by or with respect to
FLBC and every FLBC Subsidiary on or prior to the Closing Date (all such
returns, to FLBC's Knowledge, being accurate and correct in all material
respects) and has duly paid or made provisions for the payment of all material
federal, state and local taxes which have been incurred by or are due or claimed
to be due from FLBC and any FLBC Subsidiary by any taxing authority or pursuant
to any written tax sharing agreement on or prior to the Closing Date other than
taxes or other charges which (i) are not delinquent, (ii) are being contested in
good faith, or (iii) have not yet been fully determined. As of the date of this
Agreement, FLBC has received no written notice of, and to FLBC's Knowledge there
is no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of FLBC or any of its Subsidiaries, and no
claim has been made by any authority in a jurisdiction where FLBC or any of its
Subsidiaries do not file tax returns that FLBC or any such Subsidiary is subject
to taxation in that jurisdiction. Except as set
21
forth in FLBC DISCLOSURE SCHEDULE 4.6, FLBC and its Subsidiaries have not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect. FLBC and each
of its Subsidiaries has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and FLBC and
each of its Subsidiaries, to FLBC's Knowledge, has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements.
4.7. No Material Adverse Effect.
FLBC and the FLBC Subsidiaries, taken as a whole, have not suffered any
Material Adverse Effect since December 31, 2001.
4.8. Material Contracts; Leases; Defaults.
4.8.1. Except for this Agreement, and those agreements and
other documents which have been filed as exhibits to FLBC's Securities Documents
or set forth in the FLBC DISCLOSURE SCHEDULE 4.8.1, neither FLBC nor any FLBC
Subsidiary is a party to, bound by or subject to (i) any agreement, contract,
arrangement, commitment or understanding (whether written or oral) that is a
"material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K (ii) any collective bargaining agreement with any labor union
relating to employees of FLBC or any FLBC Subsidiary; (iii) any agreement which
by its terms limits the payment of dividends by FLBC or SBFL; (iv) any
instrument evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by way of purchase money obligation, conditional
sale, lease purchase, guaranty or otherwise, in respect of which FLBC or any
FLBC Subsidiary is an obligor to any person, which instrument evidences or
relates to indebtedness other than deposits, repurchase agreements, FHLB
advances, bankers' acceptances, and "treasury tax and loan" accounts established
in the ordinary course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to FNFG or any FNFG Subsidiary; (v) any contract (other
than this Agreement) limiting the freedom, in any material respect, of FLBC or
SBFL to engage in any type of banking or bank-related business which FLBC or
SBFL is permitted to engage in under applicable law as of the date of this
Agreement or (vi) any agreement, contract, arrangement, commitment or
understanding (whether written or oral) that restricts or limits in any material
way the conduct of business by FLBC or any FLBC Subsidiary (it being understood
that any non-compete or similar provision shall be deemed material).
4.8.2. Each real estate lease that may require the consent of
the lessor or its agent resulting from the Merger or the merger of SBFL into
First Niagara Bank by virtue of a prohibition or restriction relating to
assignment, by operation of law or otherwise, or change in control, is listed in
FLBC DISCLOSURE SCHEDULE 4.8.2 identifying the section of the lease that
contains such prohibition or restriction. Subject to any consents that may be
required as a result of the transactions contemplated by this Agreement, to its
Knowledge, neither FLBC nor any FLBC Subsidiary 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
22
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 a default.
4.8.3. True and correct copies of agreements, contracts,
arrangements and instruments referred to in Section 4.8.1 and 4.8.2 have been
made available to First Niagara Financial on or before the date hereof, are
listed on FLBC DISCLOSURE SCHEDULE 4.8.3 and are in full force and effect on the
date hereof and neither FLBC nor any FLBC Subsidiary (nor, to the Knowledge of
FLBC, any other party to any such contract, arrangement or instrument) has
materially breached any provision of, or is in default in any respect under any
term of, any such contract, arrangement or instrument. Subject to obtaining any
consents that may be required as a result of the transactions contemplated in
this Agreement, except as listed on FLBC DISCLOSURE SCHEDULE 4.8.3, no party to
any material contract, arrangement or instrument will have the right to
terminate any or all of the provisions of any such contract, arrangement or
instrument as a result of the execution of, and the transactions contemplated
by, this Agreement. No contract, or similar agreement or arrangement to which
FLBC or any FLBC Subsidiary is a party or under which FLBC or any FLBC
Subsidiary may be liable contains provisions which permit an independent
contractor to terminate it without cause and continue to accrue future benefits
thereunder.
4.9. Ownership of Property; Insurance Coverage.
4.9.1. FLBC and each FLBC Subsidiary has good and, as to real
property, marketable title to all material assets and properties owned by FLBC
or each FLBC Subsidiary in the conduct of its businesses, whether such assets
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the FLBC Regulatory
Reports and in the FLBC Financial Statements or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of in
the ordinary course of business, since the date of such balance sheets), subject
to no material encumbrances, liens, mortgages, security interests or pledges,
except as listed on FLBC DISCLOSURE SCHEDULE 4.9 (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to FHLB, inter-bank credit facilities, or any
transaction by an FLBC Subsidiary acting in a fiduciary capacity, and (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith. FLBC and the FLBC Subsidiaries, as lessee, have the right under
valid and existing leases of real and personal properties used by FLBC and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Such existing leases
and commitments to lease constitute or will constitute operating leases for both
tax and financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in all material respects in the notes to the FLBC Financial Statements.
4.9.2. With respect to all material agreements pursuant to
which FLBC or any FLBC Subsidiary has purchased securities subject to an
agreement to resell, if any, FLBC or such FLBC Subsidiary, as the case may be,
has a lien or security interest (which to FLBC's Knowledge is a valid, perfected
first lien) in the securities or other collateral securing the
23
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
4.9.3. FLBC and each FLBC Subsidiary currently maintain
insurance considered by each of them to be reasonable for their respective
operations. Neither FLBC nor any FLBC Subsidiary, except as disclosed in FLBC
DISCLOSURE SCHEDULE 4.9.3, has received notice from any insurance carrier that
(i) such insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no material claims pending
under such policies of insurance and no notices have been given by FLBC or any
FLBC Subsidiary under such policies. All such insurance is valid and enforceable
and in full force and effect, and within the last three years FLBC and each FLBC
Subsidiary has received each type of insurance coverage for which it has applied
and during such periods has not been denied indemnification for any material
claims submitted under any of its insurance policies. FLBC DISCLOSURE SCHEDULE
4.9.3 identifies all policies of insurance maintained by FLBC and each FLBC
Subsidiary as well as the other matters required to be disclosed under this
Section.
4.10. Legal Proceedings.
Except as set forth in FLBC DISCLOSURE SCHEDULE 4.10, neither FLBC nor
any FLBC Subsidiary is a party to any, and there are no pending or, to FLBC's
Knowledge, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature (i) against FLBC or any FLBC Subsidiary (other than
routine bank regulatory examinations), (ii) to which FLBC or any FLBC
Subsidiary's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of FLBC or SBFL to perform under this
Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on FLBC and the FLBC Subsidiaries, taken as a whole.
4.11. Compliance With Applicable Law.
4.11.1. To FLBC's knowledge, each of FLBC and each FLBC
Subsidiary is in compliance in all material respects with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable to it, its properties, assets and
deposits, its business, and its conduct of business and its relationship with
its employees, including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act of 1977, the Home Mortgage
Disclosure Act, and all other applicable fair lending laws and other laws
relating to discriminatory business practices and neither FLBC nor any FLBC
Subsidiary has received any written notice to the contrary.
4.11.2. Each of FLBC and each FLBC Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Knowledge
24
of FLBC, no suspension or cancellation of any such permit, license, certificate,
order or approval is threatened or will result from the consummation of the
transactions contemplated by this Agreement, subject to obtaining the approvals
set forth in Section 8.4.
4.11.3. For the period beginning January 1, 1997, neither FLBC
nor any FLBC Subsidiary has received any written notification or to FLBC's
Knowledge any other communication from any Bank Regulator (i) asserting that
FLBC or any FLBC Subsidiary is not in material compliance with any of the
statutes, regulations or ordinances which such Bank Regulator enforces; (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to FLBC or any FLBC Subsidiary; (iii) requiring
or threatening to require FLBC or any FLBC Subsidiary, or indicating that FLBC
or any FLBC Subsidiary may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement with any federal
or state governmental agency or authority which is charged with the supervision
or regulation of banks or engages in the insurance of bank deposits restricting
or limiting, or purporting to restrict or limit, in any material respect the
operations of FLBC or any FLBC Subsidiary, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of FLBC or any FLBC Subsidiary, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither FLBC nor any FLBC Subsidiary
has consented to or entered into any currently effective Regulatory Agreement.
The most recent regulatory rating given to SBFL as to compliance with the
Community Reinvestment Act ("CRA") is satisfactory or better.
4.12. Employee Benefit Plans.
4.12.1. FLBC DISCLOSURE SCHEDULE 4.12.1 includes a list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare and fringe benefit plans, employment, severance and change in
control agreements and all other material benefit practices, policies and
arrangements maintained by FLBC or any FLBC Subsidiary in which any employee or
former employee, consultant or former consultant or director or former director
of FLBC or any FLBC Subsidiary participates or to which any such employee,
consultant or director is a party or is otherwise entitled to receive benefits
(the "Compensation and Benefit Plans"). Neither FLBC nor any of its Subsidiaries
has any commitment to create any additional Compensation and Benefit Plan or to
materially modify, change or renew any existing Compensation and Benefit Plan
(any modification or change that increases the cost of such plans would be
deemed material), except as required to maintain the qualified status thereof,
FLBC has made available to First Niagara Financial true and correct copies of
the Compensation and Benefit Plans.
4.12.2. To the Knowledge of FLBC or FLBC Subsidiary and except
as disclosed in FLBC DISCLOSURE SCHEDULE 4.12.2, each Compensation and Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and with applicable law, including, but not limited to, ERISA,
the Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act, COBRA, the Health Insurance Portability and Accountability Act
and any regulations or rules promulgated thereunder, and all material filings,
25
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other applicable
law have been timely made or any interest, fines, penalties or other impositions
for late filings have been paid in full. Each Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and FLBC is not aware of any circumstances which are reasonably likely to result
in revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of FLBC, threatened action, suit or claim relating
to any of the Compensation and Benefit Plans (other than routine claims for
benefits). Neither FLBC nor any FLBC Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit Plan
that would reasonably be expected to subject FLBC or any FLBC Subsidiary to an
unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502
of ERISA.
4.12.3. No liability, other than PBGC premiums arising in the
ordinary course of business, has been or is expected by FLBC or any of its
Subsidiaries to be incurred with respect to any FLBC Compensation and Benefit
Plan which is a defined benefit plan subject to Title IV of ERISA ("FLBC Defined
Benefit Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a) of ERISA) currently or formerly maintained by FLBC or any entity
which is considered one employer with FLBC under Section 4001(b)(1) of ERISA or
Section 414 of the Code (an "ERISA Affiliate") (such plan hereinafter referred
to as an "ERISA Affiliate Plan"). To the Knowledge of FLBC and any FLBC
Subsidiary, except as set forth in FLBC DISCLOSURE SCHEDULE 4.12.3, no FLBC
Defined Benefit Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, as of the last day of the end of
the most recent plan year ending prior to the date hereof. Except as set forth
in FLBC DISCLOSURE SCHEDULE 4.12.3, the fair market value of the assets of each
FLBC Defined Benefit Plan exceeds the present value of the "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA) under such FLBC Defined Benefit
Plan as of the end of the most recent plan year with respect to the respective
FLBC Defined Benefit Plan ending prior to the date hereof, calculated on the
basis of the actuarial assumptions used in the most recent actuarial valuation
for such FLBC Defined Benefit Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
FLBC Defined Benefit Plan within the 12-month period ending on the date hereof.
Neither FLBC nor any of its Subsidiaries has provided, or is required to
provide, security to any FLBC Defined Benefit Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code or has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA. Neither FLBC, its Subsidiaries, nor any
ERISA Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after January 1, 1998. To the Knowledge of FLBC,
there is no pending investigation or enforcement action by any Bank Regulator
with respect to any Compensation and Benefit Plan or any ERISA Affiliate Plan.
4.12.4. All material contributions required to be made under
the terms of any Compensation and Benefit Plan or ERISA Affiliate Plan or any
employee benefit arrangements to which FLBC or any FLBC Subsidiary is a party or
a sponsor have been timely made, and all anticipated contributions and funding
obligations are accrued on FLBC's consolidated financial
26
statements to the extent required by GAAP. FLBC and its Subsidiaries have
expensed and accrued as a liability the present value of future benefits under
each applicable Compensation and Benefit Plan for financial reporting purposes
as required by GAAP.
4.12.5. Except as set forth in FLBC DISCLOSURE SCHEDULE
4.12.5, neither FLBC nor any FLBC Subsidiary has any obligations to provide
retiree health, life insurance, disability insurance, or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits mandated
by Section 4980B of the Code. Except as set forth in FLBC DISCLOSURE SCHEDULE
4.12.5, there has been no communication to employees by FLBC or any FLBC
Subsidiary that would reasonably be expected to promise or guarantee such
employees retiree health, life insurance, disability insurance, or other retiree
death benefits.
4.12.6. FLBC and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering employees who are not United States
residents.
4.12.7. With respect to each Compensation and Benefit Plan, if
applicable, FLBC has provided or made available to First Niagara Financial
copies of the: (A) trust instruments and insurance contracts; (B) two most
recent Forms 5500 filed with the IRS; (C) most recent actuarial report and
financial statement; (D) most recent summary plan description; (E) most recent
determination letter issued by the IRS; (F) any Form 5310 or Form 5330 filed
with the IRS within the last two years; and (G) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
4.12.8. Except as disclosed in FLBC DISCLOSURE SCHEDULE
4.12.8, the consummation of the Merger will not, directly or indirectly
(including, without limitation, as a result of any termination of employment or
service at any time prior to or following the Effective Time) (A) entitle any
employee, consultant or director to any payment or benefit (including severance
pay, change in control benefit, or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits under
any Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
4.12.9. Except as disclosed in FLBC DISCLOSURE SCHEDULE
4.12.9, neither FLBC nor any FLBC Subsidiary maintains any compensation plans,
programs or arrangements under which any payment is reasonably likely to become
non-deductible, in whole or in part, for tax reporting purposes as a result of
the limitations under Section 162(m) of the Code and the regulations issued
thereunder.
4.12.10. To the Knowledge of FLBC, the consummation of the
Mergers will not, directly or indirectly (including without limitation, as a
result of any termination of employment or service at any time prior to or
following the Effective Time), entitle any current or former employee, director
or independent contractor of FLBC or any FLBC Subsidiary to any actual or deemed
payment (or benefit) which could constitute a "parachute payment" (as such term
is defined in Section 280G of the Code), except as set forth in FLBC DISCLOSURE
SCHEDULE 4.12.10.
27
4.12.11. Except as disclosed in FLBC DISCLOSURE SCHEDULE
4.12.11, there are no stock appreciation or similar rights, earned dividends or
dividend equivalents, or shares of restricted stock, outstanding under any of
the Compensation and Benefit Plans or otherwise as of the date hereof and none
will be granted, awarded, or credited after the date hereof.
4.13. Brokers, Finders and Financial Advisors.
Neither FLBC nor any FLBC Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or, except for its commitments including to those it has
professionally engaged and disclosed in FLBC DISCLOSURE SCHEDULE 4.13, incurred
any liability or commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement, which has not
been reflected in the FLBC Financial Statements.
4.14. Environmental Matters.
4.14.1. Except as may be set forth in FLBC DISCLOSURE SCHEDULE
4.14 and any Phase I Environmental Report identified therein, with respect to
FLBC and each FLBC Subsidiary:
(A) ,Each of FLBC and the FLBC Subsidiaries, the
Participation Facilities, and, to FLBC's Knowledge, the Loan Properties are, and
have been, in substantial compliance with, and are not liable under, any
Environmental Laws;
(B) FLBC has received no written notice that there is
any suit, claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FLBC's Knowledge, no such action is
threatened, before any court, governmental agency or other forum against it or
any of the FLBC Subsidiaries or any Participation Facility (x) for alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release (as defined
herein) into the environment of any Materials of Environmental Concern (as
defined herein), whether or not occurring at or on a site owned, leased or
operated by it or any of the FLBC Subsidiaries or any Participation Facility;
(C) FLBC has received no written notice that there is
any suit, claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FLBC's Knowledge no such action is
threatened, before any court, governmental agency or other forum relating to or
against any Loan Property (or FLBC or any of the FLBC Subsidiaries in respect of
such Loan Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release into the environment of any Materials of
Environmental Concern, whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To FLBC's Knowledge, the properties currently
owned or operated by FLBC or any FLBC Subsidiary (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with
28
and do not otherwise contain any Materials of Environmental Concern other than
as permitted under applicable Environmental Law;
(E) Neither FLBC nor any FLBC Subsidiary has received
any written notice, demand letter, executive or administrative order, directive
or request for information from any federal, state, local or foreign
governmental entity or any third party indicating that it may be in violation
of, or liable under, any Environmental Law;
(F) To FLBC's Knowledge, there are no underground
storage tanks on, in or under any properties owned or operated by FLBC or any of
the FLBC Subsidiaries or any Participation Facility, and no underground storage
tanks have been closed or removed from any properties owned or operated by FLBC
or any of the FLBC Subsidiaries or any Participation Facility; and
(G) To FLBC's Knowledge, during the period of (s)
FLBC's or any of the FLBC Subsidiaries' ownership or operation of any of their
respective current properties or (t) FLBC's or any of the FLBC Subsidiaries'
participation in the management of any Participation Facility, there has been no
contamination by or release of Materials of Environmental Concerns in, on, under
or affecting such properties. To FLBC's Knowledge, prior to the period of (x)
FLBC's or any of the FLBC Subsidiaries' ownership or operation of any of their
respective current properties or (y) FLBC's or any of the FLBC Subsidiaries'
participation in the management of any Participation Facility, there was no
contamination by or release of Materials of Environmental Concern in, on, under
or affecting such properties.
4.14.2. "Loan Property" means any property in which the
applicable party (or a Subsidiary of it) holds a security interest, and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property. "Participation Facility" means any facility
in which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property.
4.15. Loan Portfolio.
4.15.1. The allowance for possible losses reflected in FLBC's
audited consolidated statement of financial condition at December 31, 2001 was,
and the allowance for possible losses shown on the balance sheets in FLBC's
Securities Documents for periods ending after December 31, 2001 will be,
adequate, as of the dates thereof, under GAAP.
4.15.2. FLBC DISCLOSURE SCHEDULE 4.15.2 sets forth a listing,
as of the last business day prior to the date of this Agreement, by account, of:
(A) all loans, (1) that are contractually past due 90 days or more in the
payment of principal and/or interest, (2) that are on non-accrual status, (3)
that as of the date of this Agreement are classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Watch list" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and the
identity of the obligor thereunder, (4) where a reasonable doubt exists as to
the timely future collectibility of principal and/or interest,
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whether or not interest is still accruing or the loans are less than 90 days
past due, (5) where the interest rate terms have been reduced and/or the
maturity dates have been extended subsequent to the agreement under which the
loan was originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, or (6) where a specific reserve
allocation exists in connection therewith, and (B) all assets classified by FLBC
or any FLBC Subsidiary as real estate acquired through foreclosure or in lieu of
foreclosure, including in-substance foreclosures, and all other assets currently
held that were acquired through foreclosure or in lieu of foreclosure.
DISCLOSURE SCHEDULE 4.15.2 may exclude any individual loan with a principal
outstanding balance of less than $20,000.
4.15.3. All loans receivable (including discounts) and accrued
interest entered on the books of FLBC and the FLBC Subsidiaries arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of FLBC's or the appropriate FLBC
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be, except as set forth in FLBC DISCLOSURE
SCHEDULE 4.15.3. To the Knowledge of FLBC, the loans, discounts and the accrued
interest reflected on the books of FLBC and the FLBC Subsidiaries are subject to
no defenses, set-offs or counterclaims (including, without limitation, those
afforded by usury or truth-in-lending laws), except as may be provided by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity. Except as set forth in FLBC DISCLOSURE SCHEDULE
4.15.3, all such loans are owned by FLBC or the appropriate FLBC Subsidiary free
and clear of any liens.
4.15.4. The notes and other evidences of indebtedness
evidencing the loans described above, and all pledges, mortgages, deeds of trust
and other collateral documents or security instruments relating thereto are, in
all material respects, valid, true and genuine, and what they purport to be.
4.16. Securities Documents.
FLBC has made available to First Niagara Financial copies of its (i)
annual reports on Form 10-K for the years ended December 31, 2001, 2000 and
1999, (ii) quarterly reports on Form 10-Q for the quarter ended ▇▇▇▇▇ ▇▇, ▇▇▇▇,
(▇▇▇) its prospectus dated September 29, 2000 as filed with the SEC, and (iv)
proxy materials used or for use in connection with its meetings of shareholders
held in 2002, 2001 and 2000. Such reports, prospectus and proxy materials
complied, at the time filed with the SEC, in all material respects, with the
Securities Laws.
4.17. Related Party Transactions.
Except as described in FLBC's Proxy Statement distributed in connection
with the 2002 annual meeting of shareholders (which has previously been provided
to First Niagara Financial), or as set forth in FLBC DISCLOSURE SCHEDULE 4.17,
neither FLBC nor any FLBC Subsidiary is a party to any transaction (including
any loan or other credit accommodation) with any Affiliate of FLBC or any FLBC
Affiliate. All such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other
30
Persons, and (c) did not involve more than the normal risk of collectability or
present other unfavorable features. No loan or credit accommodation to any
Affiliate of FLBC or any FLBC Subsidiary is presently in default or, during the
three year period prior to the date of this Agreement, has been in default or
has been restructured, modified or extended. Neither FLBC nor any FLBC
Subsidiary has been notified that principal and interest with respect to any
such loan or other credit accommodation will not be paid when due or that the
loan grade classification accorded such loan or credit accommodation by FLBC is
inappropriate.
4.18. Schedule of Termination Benefits.
Excluding any options to acquire FLBC Common Stock granted to such
individuals and any payments related to the termination of the FLBC ESOP, FLBC
DISCLOSURE SCHEDULE 4.18 includes a schedule of all termination benefits and
related payments that would be payable to the individuals identified thereon,
under any and all employment agreements, special termination agreements, change
in control agreements, supplemental executive retirement plans, deferred bonus
plans, deferred compensation plans, salary continuation plans, or any
compensation arrangement, or other pension benefit or welfare benefit plan
maintained by FLBC or any FLBC Subsidiary for the benefit of officers or
directors of FLBC or any FLBC Subsidiary (the "Benefits Schedule"), assuming
their employment or service is terminated as of December 31, 2002 and the
Closing Date occurs on such date. No other individuals are entitled to benefits
under any such plans.
4.19. Deposits.
Except as set forth in FLBC DISCLOSURE SCHEDULE 4.19, none of the
deposits of FLBC or any FLBC Subsidiary is a "brokered deposit" as defined in 12
CFR Section 337.6(a)(2).
4.20. Antitakeover Provisions Inapplicable.
The transactions contemplated by this Agreement are not subject to the
requirements of any "moratorium," "control share," "fair price," "affiliate
transactions," "business combination" or other antitakeover laws and regulations
of any state, including the provisions of Section 203 of the DGCL ("Takeover
Laws") applicable to FLBC or any FLBC Subsidiary. The 80% voting requirement for
a Business Combination set forth in Section A of Article Eighth of FLBC's
certificate of incorporation do not apply to the Merger. The affirmative vote of
a majority of the issued and outstanding shares of FLBC Common Stock is required
to approve this Agreement under FLBC's certificate of incorporation and the
DGCL.
4.21. Registration Obligations.
Neither FLBC nor any FLBC Subsidiary is under any obligation,
contingent or otherwise, which will survive the Effective Time by reason of any
agreement to register any transaction involving any of its securities under the
Securities Act.
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4.22. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for FLBC's own account, or for the account of one or more
of FLBC's Subsidiaries or their customers (all of which are set forth in FLBC
DISCLOSURE SCHEDULE 4.22), were entered into in accordance with commercially
reasonable business practices and in all material respects in compliance with
all applicable laws, rules, regulations and regulatory policies, and to the
Knowledge of FLBC and each FLBC Subsidiary, with counterparties believed to be
financially responsible at the time; and to FLBC's and FLBC Subsidiary's
Knowledge each of them constitutes the valid and legally binding obligation of
FLBC or one of its Subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. Neither FLBC nor any FLBC
Subsidiary, nor to the Knowledge of FLBC any other party thereto, is in breach
of any of its obligations under any such agreement or arrangement in any
material respect.
4.23. Fairness Opinion.
FLBC has received a written opinion from ▇▇▇▇▇▇▇▇ Financial Advisors,
LLC to the effect that, subject to the terms, conditions and qualifications set
forth therein, as of the date thereof, the Merger Consideration to be received
by the stockholders of FLBC pursuant to this Agreement is fair to such
stockholders from a financial point of view. Such opinion has not been amended
or rescinded as of the date of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FIRST NIAGARA FINANCIAL GROUP
First Niagara Financial, FNFG, the Mutual Company and First Niagara
Bank represent and warrant to FLBC and SBFL that the statements contained in
this Article V are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article V), except as set forth in the FIRST NIAGARA FINANCIAL
GROUP DISCLOSURE SCHEDULE delivered by First Niagara Financial to FLBC on the
date hereof. Unless otherwise specified, any reference to First Niagara
Financial Group in this Article V shall include the Mutual Company, First
Niagara Financial, FNFG and any First Niagara Financial Subsidiary. First
Niagara Financial, FNFG and First Niagara Bank have made a good faith effort to
ensure that the disclosure on each schedule of the FIRST NIAGARA FINANCIAL GROUP
DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for
purposes of the FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE, any item
disclosed on any schedule therein is deemed to be fully disclosed with respect
to all schedules under which such item may be relevant.
32
5.1. Organization.
5.1.1. First Niagara Financial is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly registered as a bank holding company under the BHCA. Upon
completion of the Bank Charter Conversion, First Niagara Financial will be duly
registered as a savings and loan holding company under the HOLA. Upon completion
of its Charter Conversion, First Niagara Financial will be a corporation duly
organized, validly existing and in good standing under federal law. Each of
Mutual Company and First Niagara Financial has full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on the Mutual Company or
First Niagara Financial.
5.1.2. First Niagara Bank is a savings bank organized, validly
existing and in good standing under New York law. Upon completion of the Bank
Charter Conversion, First Niagara Bank will be a savings bank organized, validly
existing and in good standing under federal law. The deposits of First Niagara
Bank, and each Bank Affiliate, are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Each Bank Affiliate is duly
organized, validly existing and in good standing under New York law.
5.1.3. First Niagara Bank and each Bank Affiliate is a member
in good standing of the FHLB and own the requisite amount of stock therein.
5.1.4. The respective minute books of FNFG and First Niagara
Financial and each First Niagara Financial Subsidiary accurately records, in all
material respects, all material corporate actions of their respective
shareholders and boards of directors (including committees) through July 1,
2002.
5.1.5. Prior to the date of this Agreement, First Niagara
Financial has made available to FLBC true and correct copies of the articles or
certificate of incorporation and bylaws of FNFG and First Niagara Financial and
First Niagara Bank.
5.2. Capitalization.
5.2.1. The authorized capital stock of First Niagara Financial
consists of 55,000,000 shares of common stock, $0.01 par value, of which
25,978,553 shares are outstanding, validly issued, fully paid and nonassessable
and free of preemptive rights, and 5,000,000 shares of preferred stock, $0.01
par value ("FNFG and First Niagara Financial Preferred Stock"), none of which
are outstanding. There are 3,975,992 shares of First Niagara Financial Common
33
Stock held by First Niagara Financial as treasury stock. Neither First Niagara
Financial nor any First Niagara Financial Subsidiary has or is bound by any
Rights of any character relating to the purchase, sale or issuance or voting of,
or right to receive dividends or other distributions on any shares of FNFG and
First Niagara Financial Common Stock, or any other security of FNFG and First
Niagara Financial or any securities representing the right to vote, purchase or
otherwise receive any shares of FNFG and First Niagara Financial Common Stock or
any other security of FNFG and First Niagara Financial, other than shares
issuable under the First Niagara Financial Group Stock Option Plans, and as to
FNFG other than subscription rights issuable in connection with the Conversion.
5.2.2. First Niagara Financial owns all of the capital stock
of First Niagara Bank, and each Bank Affiliate, free and clear of any lien or
encumbrance. The Bank Affiliates will be merged with and into First Niagara Bank
in connection with the Charter Conversions without the imposition of any lien or
emcumbrance. Following completion of the Conversion, FNFG will own all of the
capital stock of First Niagara Bank free and clear of any lien or encumbrance.
5.2.3. To the Knowledge of First Niagara Financial Group, no
Person or "group" (as that term is used in Section 13(d)(3) of the Exchange
Act), is the beneficial owner (as defined in Section 13(d) of the Exchange Act)
of 5% or more of the outstanding shares of FNFG and First Niagara Financial
Common Stock, other than the Mutual Company.
5.3. Authority; No Violation.
5.3.1. FNFG, the Mutual Company, First Niagara Financial and
First Niagara Bank each has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by FNFG, Mutual Company, First
Niagara Financial and First Niagara Bank and the completion by FNFG, Mutual
Company, First Niagara Financial and First Niagara Bank of the transactions
contemplated hereby, up to and including the Merger, have been duly and validly
approved by the Board of Directors of FNFG, the Mutual Company, First Niagara
Financial and First Niagara Bank, respectively, and, except for approval of the
shareholders of First Niagara Financial and the depositors of First Niagara Bank
(and the Bank Affiliates - collectively referred to as the "Depositors"), no
other corporate proceedings on the part of FNFG, Mutual Company, First Niagara
Financial or First Niagara Bank are necessary to complete the transactions
contemplated hereby, up to and including the Merger. This Agreement has been
duly and validly executed and delivered by FNFG, the Mutual Company, First
Niagara Financial and First Niagara Bank, and the Bank Merger has been duly and
validly approved by the Board of Directors of First Niagara Bank, and by FNFG
and First Niagara Financial in their capacity as sole stockholder of First
Niagara Bank, and subject to approval by the shareholders of First Niagara
Financial and the Depositors and receipt of the required approvals of Bank
Regulators described in Section 8.4 hereof, constitutes the valid and binding
obligations of FNFG, the Mutual Company, First Niagara Financial and First
Niagara Bank, enforceable against FNFG, the Mutual Company, First Niagara
Financial and First Niagara Bank in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally, and as to First Niagara Bank, the conservatorship or receivership
provisions of the FDIA, and subject, as to enforceability, to general principles
of equity.
5.3.2. (A) The execution and delivery of this Agreement by
FNFG, Mutual Company, First Niagara Financial and First Niagara Bank, (B)
subject to receipt of approvals from the Bank Regulators referred to in Section
8.4 hereof, and compliance by FNFG, Mutual Company, First Niagara Financial and
First Niagara Bank with any conditions contained therein, and subject to the
receipt of the approval of the Depositors and the stockholders of First Niagara
34
Financial, the consummation of the transactions contemplated hereby, and (C)
compliance by FNFG, Mutual Company, First Niagara Financial and First Niagara
Bank with any of the terms or provisions hereof will not (i) conflict with or
result in a breach of any provision of the certificate of incorporation or
bylaws of FNFG, Mutual Company, First Niagara Financial or any First Niagara
Financial Subsidiary or the charter and bylaws of First Niagara Bank; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to First Niagara Financial, Mutual Company or
any First Niagara Financial Subsidiary or any of their respective properties or
assets; or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of First Niagara Financial,
Mutual Company, First Niagara Bank or any First Niagara Financial Subsidiary
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other investment or
obligation to which any of them is a party, or by which they or any of their
respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof
which, either individually or in the aggregate, will not have a Material Adverse
Effect on First Niagara Financial Group taken as a whole.
5.4. Consents.
Except for the consents, waivers, approvals, filings and registrations
from or with the Bank Regulators referred to in Section 8.4 hereof and
compliance with any conditions contained therein, and the requisite vote of the
shareholders of First Niagara Financial and the Depositors, no consents, waivers
or approvals of, or filings or registrations with, any Bank Regulator are
necessary, and, to the Knowledge of First Niagara Financial Group, no consents,
waivers or approvals of, or filings or registrations with, any other third
parties are necessary, in connection with (a) the execution and delivery of this
Agreement by FNFG, the Mutual Company, First Niagara Financial and First Niagara
Bank, and (b) the completion by FNFG, the Mutual Company, First Niagara
Financial and First Niagara Bank of the Merger and the Bank Merger. First
Niagara Financial Group has no reason to believe that (i) any required approvals
from a Bank Regulator or other required consents or approvals will not be
received, or that (ii) any public body or authority, the consent or approval of
which is not required or to which a filing is not required, will object to the
completion of the transactions contemplated by this Agreement.
5.5. Financial Statements.
5.5.1. First Niagara Financial has previously made available
to FLBC the FNFG and First Niagara Financial Statements. The First Niagara
Financial Statements have been prepared in accordance with GAAP, and (including
the related notes where applicable) fairly present in each case in all material
respects (subject in the case of the unaudited interim statements to normal
year-end adjustments) the consolidated financial position, results of operations
and cash flows of First Niagara Financial and the First Niagara Financial
Subsidiaries on a consolidated basis as of and for the respective periods ending
on the dates thereof, in accordance with GAAP during the periods involved,
except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
35
5.5.2. At the date of each balance sheet included in the First
Niagara Financial Statements, First Niagara Financial did not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
First Niagara Financial Statements or in the footnotes thereto which are not
fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material individually or in the aggregate or which are incurred in the
ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
5.6. Taxes.
First Niagara Financial and the First Niagara Financial Subsidiaries
are members of the same affiliated group within the meaning of Code Section
1505(a). First Niagara Financial has duly filed all federal, state and material
local tax returns required to be filed by or with respect to First Niagara
Financial and each First Niagara Financial Subsidiary on or prior to the Closing
Date (all such returns, to the Knowledge of First Niagara Financial Group, being
accurate and correct in all material respects) and has duly paid or made
provisions for the payment of all material federal, state and local taxes which
have been incurred by or are due or claimed to be due from First Niagara
Financial and any First Niagara Financial Subsidiary by any taxing authority or
pursuant to any written tax sharing agreement on or prior to the Closing Date
other than taxes or other charges which (i) are not delinquent, (ii) are being
contested in good faith, or (iii) have not yet been fully determined. As of the
date of this Agreement, First Niagara Financial has received no notice of, and
to the Knowledge of First Niagara Financial Group, there is no audit
examination, deficiency assessment, tax investigation or refund litigation with
respect to any taxes of First Niagara Financial or any of its Subsidiaries, and
no claim has been made by any authority in a jurisdiction where First Niagara
Financial or any of its Subsidiaries do not file tax returns that First Niagara
Financial or any such Subsidiary is subject to taxation in that jurisdiction.
Except as set forth in FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE 5.6,
First Niagara Financial and its Subsidiaries have not executed an extension or
waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. First Niagara Financial and each
of its Subsidiaries has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and FNFG and
First Niagara Financial and each of its Subsidiaries, to the Knowledge of First
Niagara Financial Group, has timely complied with all applicable information
reporting requirements under Part III, Subchapter A of Chapter 61 of the Code
and similar applicable state and local information reporting requirements.
5.7. No Material Adverse Effect.
First Niagara Financial Group, taken as a whole, has not suffered any
Material Adverse Effect since December 31, 2001.
36
5.8. Ownership of Property; Insurance Coverage.
5.8.1. First Niagara Financial and each First Niagara
Financial Subsidiary has good and, as to real property, marketable title to all
material assets and properties owned by First Niagara Financial or each First
Niagara Financial Subsidiary in the conduct of their businesses, whether such
assets and properties are real or personal, tangible or intangible, including
assets and property reflected in the balance sheets contained in the First
Niagara Financial Statements or acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of in the ordinary
course of business, since the date of such balance sheets), subject to no
material encumbrances, liens, mortgages, security interests or pledges, except
(i) those items which secure liabilities for public or statutory obligations or
any discount with, borrowing from or other obligations to FHLB, inter-bank
credit facilities, or any transaction by a First Niagara Financial Subsidiary
acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith. First Niagara Financial
and the First Niagara Financial Subsidiaries, as lessee, have the right under
valid and subsisting leases of real and personal properties used by First
Niagara Financial and its Subsidiaries in the conduct of their businesses to
occupy or use all such properties as presently occupied and used by each of
them.
5.8.2. First Niagara Financial and each First Niagara
Financial Subsidiary currently maintain insurance considered by First Niagara
Financial to be reasonable for their respective operations.
5.9. Legal Proceedings.
Except as disclosed in FIRST NIAGARA FINANCIAL GROUP DISCLOSURE
SCHEDULE 5.9, as of the date of this Agreement, neither First Niagara Financial
nor any First Niagara Financial Subsidiary is a party to any, and there are no
pending or, to the Knowledge of First Niagara Financial Group, threatened legal,
administrative, arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries of any nature
(i) against FNFG and First Niagara Financial or any First Niagara Financial
Subsidiary, (ii) to which FNFG and First Niagara Financial or any First Niagara
Financial Subsidiary's assets are or may be subject, (iii) challenging the
validity or propriety of any of the transactions contemplated by this Agreement,
or (iv) which could adversely affect the ability of First Niagara Financial
Group to perform under this Agreement, except for any proceedings, claims,
actions, investigations or inquiries referred to in clauses (i) or (ii) which,
if adversely determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on First Niagara Financial
Group, taken as a whole.
5.10. Compliance With Applicable Law.
5.10.1. To the Knowledge of First Niagara Financial Group,
each of First Niagara Financial and each First Niagara Financial Subsidiary is
in compliance in all material respects with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to it, its properties, assets and deposits, its business, and
its conduct of business and its relationship with its employees, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community
37
Reinvestment Act of 1977, the Home Mortgage Disclosure Act, and all other
applicable fair lending laws and other laws relating to discriminatory business
practices, and neither First Niagara Financial nor any First Niagara Financial
Subsidiary has received any written notice to the contrary.
5.10.2. Each of FNFG and First Niagara Financial and each
First Niagara Financial Subsidiary has all material permits, licenses,
authorizations, orders and approvals of, and has made all filings, applications
and registrations with, all Bank Regulators that are required in order to permit
it to own or lease its properties and to conduct its business as presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the Knowledge of First Niagara
Financial Group, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.4.
5.10.3. For the period beginning January 1, 1997, neither
FNFG, First Niagara Financial nor any First Niagara Financial Subsidiary has
received any written notification or, to the Knowledge of First Niagara
Financial Group, any other communication from any Bank Regulator (i) asserting
that FNFG, First Niagara Financial or any First Niagara Financial Subsidiary is
not in material compliance with any of the statutes, regulations or ordinances
which such Bank Regulator enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to First
Niagara Financial Group; (iii) requiring or threatening to require FNFG, First
Niagara Financial or any First Niagara Financial Subsidiary, or indicating that
FNFG, First Niagara Financial or any First Niagara Financial Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of FNFG,
First Niagara Financial or any First Niagara Financial Subsidiary, including
without limitation any restriction on the payment of dividends; or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of FNFG, First Niagara Financial or any First
Niagara Financial Subsidiary, including without limitation any restriction on
the payment of dividends (any such notice, communication, memorandum, agreement
or order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither FNFG, First Niagara Financial nor any First Niagara
Financial Subsidiary has consented to or entered into any currently effective
Regulatory Agreement. The most recent regulatory rating given to First Niagara
Bank and each Bank Affiliate as to compliance with the Community Reinvestment
Act CRA is satisfactory or better.
5.11. Employee Benefit Plans.
5.11.1. First Niagara Financial DISCLOSURE SCHEDULE 5.11
includes a list of all existing bonus, incentive, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, stock appreciation,
phantom stock, severance, welfare and fringe benefit plans, employment,
severance and change in control agreements and all other benefit practices,
policies and arrangements maintained by First Niagara Financial or any First
Niagara Financial
38
Subsidiary and in which employees in general may participate (the "First Niagara
Financial Compensation and Benefit Plans"). Each First Niagara Financial
Compensation and Benefit Plan has been administered in form and in operation, in
all material respects with its terms and all applicable requirements of law and
no notice has been issued by any Governmental Authority questioning or
challenging such compliance.
5.11.2. First Niagara Financial and its Subsidiaries and ERISA
Affiliates have not incurred any liability under, arising out of or by operation
of Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course of business). No Pension
Plan maintained, contributed to or sponsored by First Niagara Financial or its
Subsidiaries or ERISA Affiliates has an accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 or ERISA. None of First
Niagara Financial or its Subsidiaries or ERISA Affiliates (x) has provided, or
would reasonably be expected to be required to provide, security to any Pension
Plan pursuant to Section 401(a)(29) of the Code, or (y) has taken any action, or
omitted to take any action, that has resulted, or would reasonably be expected
to result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA. First Niagara Financial and its Subsidiaries have expensed
and accrued as a liability the present value of future benefits under each
applicable Compensation and Benefit Plan for financial reporting purposes as
required by GAAP.
5.11.3. Each Compensation and Benefit Plan which is a Pension
Plan and which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS, and First Niagara
Financial is not aware of any circumstances which are reasonably likely to
result in revocation of any such favorable determination letter. There is no
material pending or, to the Knowledge of First Niagara Financial Group,
threatened action, suit or claim relating to any of the Compensation and Benefit
Plans (other than routine claims for benefits).
5.12. Environmental Matters.
5.12.1. To the Knowledge of First Niagara Financial Group,
neither the conduct nor operation of their business nor any condition of any
property currently or previously owned or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a lien, results or resulted in a violation of any Environmental Laws that
is reasonably likely to impose a material liability (including a material
remediation obligation) upon First Niagara Financial or any of First Niagara
Financial Subsidiary. To the Knowledge of First Niagara Financial Group, no
condition has existed or event has occurred with respect to any of them or any
such property that, with notice or the passage of time, or both, is reasonably
likely to result in any material liability to First Niagara Financial or any
First Niagara Financial Subsidiary by reason of any Environmental Laws. Neither
First Niagara Financial nor any First Niagara Financial Subsidiary has received
any written notice from any Person that First Niagara Financial or any First
Niagara Financial Subsidiary or the operation or condition of any property ever
owned, operated, or held as collateral or in a fiduciary capacity by any of them
are currently in violation of or otherwise are alleged to have financial
exposure under any Environmental Laws or relating to Materials of Environmental
Concern (including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any Materials of
Environmental Concern at, on, beneath,
39
or originating from any such property) for which a material liability is
reasonably likely to be imposed upon First Niagara Financial or any First
Niagara Financial Subsidiary.
5.12.2. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
First Niagara Financial Group's Knowledge, threatened, before any court,
governmental agency or other forum against First Niagara Financial or any FNFG
Subsidiary (x) for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence of or
release (defined herein) into the environment of any Materials of Environmental
Concern (as defined herein), whether or not occurring at or on a site owned,
leased or operated by any of the First Niagara Financial Group.
5.13. Loan Portfolio.
5.13.1. The allowance for possible losses reflected in First
Niagara Financial's audited statement of condition at December 31, 2001 was, and
the allowance for possible losses shown on the balance sheets in First Niagara
Financial's Securities Documents for periods ending after December 31, 2001 will
be, adequate, as of the dates thereof, under GAAP.
5.13.2. FIRST NIAGARA FINANCIAL DISCLOSURE SCHEDULE 5.13 sets
forth a listing, as of the last business day prior to the date of this
Agreement, all loans of First Niagara Financial and any First Niagara Financial
Subsidiary, (1) that are contractually past due 90 days or more in the payment
of principal and/or interest, (2) that are on non-accrual status, (3) that as of
the date of this Agreement are classified as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Watch list" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and the
identity of the obligor thereunder, (4) where a reasonable doubt exists as to
the timely future collectibility of principal and/or interest, whether or not
interest is still accruing or the loans are less than 90 days past due, (5)
where the interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in accordance
with such initial terms, or (6) where a specific reserve allocation exists in
connection therewith; and all assets classified by of First Niagara Financial
and any First Niagara Financial Subsidiary as real estate acquired through
foreclosure or in lieu of foreclosure, including in-substance foreclosures, and
all other assets currently held that were acquired through foreclosure or in
lieu of foreclosure. DISCLOSURE SCHEDULE 5.13 may exclude any individual loan
with a principal outstanding balance of less than $50,000.
5.13.3. All loans receivable (including discounts) and accrued
interest entered on the books of First Niagara Financial and the each First
Niagara Financial Subsidiary arose out of bona fide arm's-length transactions,
were made for good and valuable consideration in the ordinary course of
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are true and genuine and are what they purport to
be.
5.13.4. The notes and other evidences of indebtedness
evidencing the loans described above, and all pledges, mortgages, deeds of trust
and other collateral documents or
40
security instruments relating thereto are, in all material respects, valid, true
and genuine, and what they purport to be.
5.14. Securities Documents.
First Niagara Financial has made available to FLBC copies of its (i)
annual reports on Form 10-K for the years ended December 31, 2001, 2000 and
1999, (ii) quarterly report on Form 10-Q for the quarter ended March 31, 2002
and (iii) proxy materials used or for use in connection with its meetings of
shareholders held in 2002, 2001 and 2000. Such reports and such proxy materials
complied, at the time filed with the SEC, in all material respects, with the
Securities Laws.
5.15. Deposits.
None of the deposits of any First Niagara Financial Subsidiary is a
"brokered deposit" as defined in 12 CFR Section 337.6(a)(2).
5.16. Antitakeover Provisions Inapplicable.
The transactions contemplated by this Agreement are not subject to the
requirements of any "moratorium," "control share," "fair price," "affiliate
transactions," "business combination" or other antitakeover laws and regulations
of any state, including the provisions of Section 203 of the DGCL applicable to
FNFG and First Niagara Financial or any FNFG and First Niagara Financial
Subsidiary. The affirmative vote of a majority of the issued and outstanding
shares of First Niagara Financial Common Stock is required to approve the
transactions contemplated by this Agreement.
5.17. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for First Niagara Financial's own account, or for the
account of one or more of First Niagara Financial's Subsidiaries or their
customers, were entered into in accordance with prudent business practices and
in all material respects in compliance with all applicable laws, rules,
regulations and regulatory policies, and to the Knowledge of First Niagara
Financial Group, with counterparties believed to be financially responsible at
the time; and each of them constitutes the valid and legally binding obligation
of First Niagara Financial or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither First
Niagara Financial nor any of its Subsidiaries, nor to the Knowledge of First
Niagara Financial Group any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement in any material respect.
5.18. Brokers, Finders and Financial Advisors.
Neither First Niagara Financial nor any First Niagara Financial
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or
41
financial advisor in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person in connection with the transactions contemplated by this
Agreement, except for the retention of ▇▇▇▇, ▇▇▇▇ & Co. by First Niagara
Financial and the fee payable pursuant thereto.
ARTICLE VI
COVENANTS OF FLBC
6.1. Conduct of Business.
6.1.1. Affirmative Covenants. During the period from the date
of this Agreement to the Effective Time, except with the written consent of
First Niagara Financial, which consent will not be unreasonably withheld,
conditioned or delayed, FLBC will operate its business, and it will cause each
of the FLBC Subsidiaries to operate its business, only in the usual, regular and
ordinary course of business; use reasonable efforts to preserve intact its
business organization and assets and maintain its rights and franchises; and
voluntarily take no action which would (i) adversely affect the ability of First
Niagara Financial or FLBC to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby or materially
increase the period of time necessary to obtain such approvals, or (ii)
adversely affect its ability to perform its covenants and agreements under this
Agreement.
6.1.2. Negative Covenants. FLBC agrees that from the date of
this Agreement to the Effective Time, except as otherwise specifically permitted
or required by this Agreement, or consented to by First Niagara Financial in
writing (which consent shall not be unreasonably withheld, conditioned or
delayed), FLBC will not, and will cause each of the FLBC Subsidiaries not to:
(A) change or waive any provision of its Certificate
of Incorporation, Charter or Bylaws, except as required by law;
(B) change the number of authorized or issued shares
of its capital stock or issue or grant any Right or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of such stock, or split, combine or reclassify any shares of capital
stock, or declare, set aside or pay any dividend or other distribution in
respect of capital stock, or redeem or otherwise acquire any shares of capital
stock, except that (A) FLBC may issue shares of FLBC Common Stock upon the valid
exercise, in accordance with the information set forth in FLBC DISCLOSURE
SCHEDULE 4.2.1, of presently outstanding FLBC Options issued under the FLBC
Stock Option Plans, and (B) FLBC may continue to pay its regular quarterly cash
dividend of $0.06 per share with payment and record dates consistent with past
practice (provided the declaration of the last quarterly dividend by FLBC prior
to the Effective Time and the payment thereof shall be coordinated with FNFG so
that holders of FLBC Common Stock do not receive dividends on both FLBC Common
Stock and FNFG Common Stock received in the Merger in respect of such quarter or
fail to receive a dividend on at least one of the FLBC Common Stock or FNFG
Common Stock received in the Merger in respect of such quarter). Notwithstanding
the foregoing, a dividend paid by SBFL to FLBC remains subject to regulatory
limitations under the OTS regulations;
42
(C) enter into, amend in any material respect or
terminate any contract or agreement (including without limitation any settlement
agreement with respect to litigation) except in the ordinary course of business;
(D) other than as set forth in Section 6.1.2(D) of
the FLBC DISCLOSURE SCHEDULE, make application for the opening or closing of
any, or open or close any, branch or automated banking facility;
(E) grant or agree to pay any bonus, severance or
termination to, or enter into, renew or amend any employment agreement,
severance agreement and/or supplemental executive agreement with, or increase in
any manner the compensation or fringe benefits of, any of its directors,
officers or employees, except (i) as may be required pursuant to commitments
existing on the date hereof and set forth on FLBC DISCLOSURE SCHEDULES 4.8.1 and
4.12.1 or (ii) as to non-executive employees, merit pay increases or bonuses
consistent with past practice; and (iii) the payment of bonuses with respect to
the calendar year ending December 31, 2002 in accordance with the terms and
provisions of the Formula Bonus Plan and consistent with past practice, the
expenses of which have been and will continue to be accrued in accordance with
GAAP, (iv) SBFL may hire at-will employees to fill vacancies that may from time
to time arise in the ordinary course of business. In addition, FLBC may agree to
pay employees of FLBC or SBFL, who are identified by FLBC and agreed to by First
Niagara Financial, a retention bonus in an individual amount to be agreed to by
FLBC and First Niagara Financial and in an aggregate amount as to all retention
bonuses not in excess of $75,000 or such other amount as the parties may agree.
A retention bonuses would be paid in the event that the agreed upon employee
remains in the employ of FLBC or SBFL through the Effective Time and as an
employee of First Niagara Bank for a period not to exceed 90 days thereafter (or
is terminated prior to such date but after the Effective Time);
(F) enter into or, except as may be required by law,
materially modify any pension, retirement, stock option, stock purchase, stock
appreciation right, stock grant, savings, profit sharing, deferred compensation,
supplemental retirement, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
employees; or make any contributions to any defined contribution or defined
benefit plan not in the ordinary course of business consistent with past
practice;
(G) merge or consolidate FLBC or any FLBC Subsidiary
with any other corporation; sell or lease all or any substantial portion of the
assets or business of FLBC or any FLBC Subsidiary; make any acquisition of all
or any substantial portion of the business or assets of any other person, firm,
association, corporation or business organization other than in connection with
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between FLBC,
or any FLBC Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any FLBC Subsidiary of its certificate of authority
to maintain, or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to establish a new
branch office;
43
(H) except for transactions with the FHLB, sell or
otherwise dispose of the capital stock of FLBC or sell or otherwise dispose of
any asset of FLBC or of any FLBC Subsidiary other than in the ordinary course of
business consistent with past practice; subject any asset of FLBC or of any FLBC
Subsidiary to a lien, pledge, security interest or other encumbrance (other than
in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business
and transactions in "federal funds" and the satisfaction of legal requirements
in the exercise of trust powers) other than in the ordinary course of business
consistent with past practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in the ordinary course of
business consistent with past practice;
(I) take any action which would result in any of the
representations and warranties of FLBC set forth in this Agreement becoming
untrue as of any date after the date hereof or in any of the conditions set
forth in Article IX hereof not being satisfied, except in each case as may be
required by applicable law;
(J) change any method, practice or principle of
accounting, except as may be required from time to time by GAAP (without regard
to any optional early adoption date) or any Bank Regulator responsible for
regulating FLBC or SBFL;
(K) waive, release, grant or transfer any material
rights of value or modify or change in any material respect any existing
material agreement or indebtedness to which FLBC or any FLBC Subsidiary is a
party, other than in the ordinary course of business, consistent with past
practice;
(L) purchase any equity securities, or purchase any
security for its investment portfolio inconsistent with FLBC's or any FLBC
Subsidiary's current investment policy, or otherwise alter, in any material
respect, the mix, maturity, credit or interest rate risk profile of its
portfolio of investment securities or its portfolio of mortgage-backed
securities;
(M) except for commitments issued prior to the date
of this Agreement which have not yet expired and which have been disclosed on
the FLBC DISCLOSURE SCHEDULE 6.12(M), and the renewal of existing lines of
credit, make any new loan or other credit facility commitment (including without
limitation, lines of credit and letters of credit) to any borrower or group of
affiliated borrowers in excess of $350,000 in the aggregate for unsecured loans
and $3,000,000 without approval or consent in the aggregate for secured and
unsecured loans. In addition, the following require the prior consent of First
Niagara Financial: a residential loan of $350,000 or greater; an unsecured loan
of $250,000 or greater; a secured commercial business loan of $500,000 or
greater; and a commercial real estate loan of $750,000 or greater;
(N) except as set forth on the FLBC DISCLOSURE
SCHEDULE 6.12(N), enter into, renew, extend or modify any other transaction with
any Affiliate;
(O) enter into any futures contract, option, interest
rate caps, interest rate floors, interest rate exchange agreement or other
agreement or take any other action for
44
purposes of hedging the exposure of its interest-earning assets and
interest-bearing liabilities to changes in market rates of interest;
(P) except for the execution of this Agreement, and
actions taken or which will be taken in accordance with this Agreement and
performance thereunder, take any action that would give rise to a right of
payment to any individual under any employment agreement;
(Q) make any change in policies in existence on the
date of this Agreement with regard to: the extension of credit, or the
establishment of reserves with respect to the possible loss thereon or the
charge off of losses incurred thereon; investments; asset/liability management;
or other material banking policies in any material respect except as may be
required by changes in applicable law or regulations or by a Bank Regulator;
(R) except for the execution of this Agreement, and
the transactions contemplated therein, take any action that would give rise to
an acceleration of the right to payment to any individual under any FLBC
Employee Plan;
(S) except as set forth in FLBC DISCLOSURE SCHEDULE
6.12(S), make any capital expenditures in excess of $25,000 individually or
$50,000 in the aggregate, other than pursuant to binding commitments existing on
the date hereof and other than expenditures necessary to maintain existing
assets in good repair;
(T) except as set forth in FLBC DISCLOSURE SCHEDULE
6.12(T), purchase or otherwise acquire, or sell or otherwise dispose of, any
assets or incur any liabilities other than in the ordinary course of business
consistent with past practices and policies;
(U) without prior consent sell any participation
interest in any loan in excess of $3.0 million or any other loan (other than
sales of loans secured by one- to four-family real estate that are consistent
with past practice) (and provided that First Niagara Bank will be given the
first opportunity to purchase any loan participation being sold) or OREO
properties (other than sales of OREO which generate a net book loss of not more
than $20,000 per property); or
(V) agree to do any of the foregoing.
6.2. Current Information.
During the period from the date of this Agreement to the Effective
Time, FLBC will cause one or more of its representatives to confer with
representatives of First Niagara Financial and report the general status of its
ongoing operations at such times as First Niagara Financial may reasonably
request, which shall include, but not be limited to, discussion of the possible
termination by FLBC and SBFL of third-party service provider arrangements
effective at the Effective Time or at a date thereafter, non-renewal of personal
property leases and software licenses used by FLBC or any of its Subsidiaries in
connection with its systems operations, retention of outside consultants and
additional employees to assist with the conversion, and outsourcing, as
appropriate, of proprietary or self-provided system services, it being
understood that FLBC shall not be obligated to take any such action prior to the
Effective Time and, unless
45
FLBC otherwise agrees, no conversion shall take place prior to the Effective
Time. In the event that FLBC or any of its Subsidiaries takes, at the request of
First Niagara Financial, any action relative to third parties to facilitate the
conversion that results in the imposition of any termination fees, expenses or
charges, First Niagara Financial shall indemnify FLBC and its Subsidiaries for
any such fees, expenses and charges, and the costs of reversing the conversion
process, if for any reason the Merger is not consummated in accordance with the
terms of this Agreement. FLBC will promptly notify First Niagara Financial of
any material change in the normal course of its business or in the operation of
its properties and, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving FLBC or any FLBC Subsidiary. FLBC will also
provide First Niagara Financial such information with respect to such events as
First Niagara Financial may reasonably request from time to time.
6.3. Access to Properties and Records.
Subject to Section 12.1 hereof, FLBC shall permit First Niagara
Financial reasonable access upon reasonable notice to its properties and those
of the FLBC Subsidiaries, and shall disclose and make available to First Niagara
Financial during normal business hours all of its books, papers and records
relating to the assets, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' (other than minutes that
discuss any of the transactions contemplated by this Agreement or other
strategic alternatives) and stockholders' meetings, organizational documents,
Bylaws, material contracts and agreements, filings with any regulatory
authority, litigation files, plans affecting employees, and any other business
activities or prospects in which First Niagara Financial may have a reasonable
interest; provided, however, that FLBC shall not be required to take any action
that would provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights or business interests or
confidences of any customer or other person or would result in the waiver by it
of the privilege protecting communications between it and any of its counsel.
FLBC shall provide and shall request its auditors to provide First Niagara
Financial with such historical financial information regarding it (and related
audit reports and consents) as First Niagara Financial may reasonably request
for securities disclosure purposes. First Niagara Financial shall use
commercially reasonable efforts to minimize any interference with FLBC's regular
business operations during any such access to FLBC's property, books and
records. FLBC and each FLBC Subsidiary shall permit First Niagara Financial, at
its expense, to cause a "phase I environmental audit" and a "phase II
environmental audit" to be performed at any physical location owned or occupied
by FLBC or any FLBC Subsidiary.
6.4. Financial and Other Statements.
6.4.1. Promptly upon receipt thereof, FLBC will furnish to
First Niagara Financial copies of each annual, interim or special audit of the
books of FLBC and the FLBC Subsidiaries made by its independent accountants and
copies of all internal control reports submitted to FLBC by such accountants in
connection with each annual, interim or special audit of the books of FLBC and
the FLBC Subsidiaries made by such accountants.
46
6.4.2. As soon as reasonably available, but in no event later
than the date such documents are filed with the SEC, FLBC will deliver to First
Niagara Financial the Securities Documents filed by it with the SEC under the
Securities Laws. FLBC will furnish to First Niagara Financial copies of all
documents, statements and reports as it or any FLBC Subsidiary shall send to its
stockholders, the FDIC, the OTS or any other regulatory authority, except as
legally prohibited thereby. Within 25 days after the end of each month, FLBC
will deliver to First Niagara Financial a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with current financial reporting practices.
6.4.3. FLBC will advise First Niagara Financial promptly of
the receipt of any examination report of any Bank Regulator with respect to the
condition or activities of FLBC or any of the FLBC Subsidiaries.
6.4.4. With reasonable promptness, FLBC will furnish to First
Niagara Financial such additional financial data as First Niagara Financial may
reasonably request, including without limitation, detailed monthly financial
statements and loan reports.
6.5. Maintenance of Insurance.
FLBC and SBFL shall maintain, and cause their respective Subsidiaries
to maintain, insurance in such amounts as are reasonable to cover such risks as
are customary in relation to the character and location of its properties and
the nature of its business
6.6. Disclosure Supplements.
From time to time prior to the Effective Time, FLBC and SBFL will
promptly supplement or amend the FLBC DISCLOSURE SCHEDULE delivered in
connection herewith with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such FLBC DISCLOSURE SCHEDULE or which
is necessary to correct any information in such FLBC DISCLOSURE SCHEDULE which
has been rendered materially inaccurate thereby. No supplement or amendment to
such FLBC DISCLOSURE SCHEDULE shall have any effect for the purpose of
determining satisfaction of the conditions set forth in Article IX.
6.7. Consents and Approvals of Third Parties.
FLBC and SBFL shall use all commercially reasonable efforts to obtain
as soon as practicable all consents and approvals of any other persons necessary
or desirable for the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, FLBC shall utilize
the services of a professional proxy soliciting firm to help obtain the
shareholder vote required to be obtained by it hereunder.
6.8. All Reasonable Efforts.
Subject to the terms and conditions herein provided, FLBC and SBFL
agree to use all commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be
47
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
6.9. Failure to Fulfill Conditions.
In the event that FLBC determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify First Niagara Financial.
6.10. No Solicitation.
From and after the date hereof until the termination of this Agreement,
neither FLBC, nor any FLBC Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by FLBC or
any of its Subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain an Acquisition Proposal
or agree to or endorse any Acquisition Proposal, or authorize or permit any of
its officers, directors, or employees or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any of its subsidiaries to take any such action, and
FLBC shall notify First Niagara Financial orally (within one business day) and
in writing (as promptly as practicable) of all of the relevant details relating
to all inquiries and proposals which it or any of its Subsidiaries or any such
officer, director, employee, investment banker, financial advisor, attorney,
accountant or other representative may receive relating to any of such matters,
provided, however, that nothing contained in this Section 6.10 shall prohibit
the Board of Directors of FLBC from furnishing information to, or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written proposal to acquire FLBC pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of FLBC
receives an opinion from its independent financial advisor that such proposal
may be or could be superior to the Merger from a financial point-of-view to
FLBC's stockholders, (B) the Board of Directors of FLBC, after consultation with
and after considering the advice of independent legal counsel, determines in
good faith that the failure to furnish information to or enter into discussions
with such person may cause the Board of Directors of FLBC to breach its
fiduciary duties to stockholders under applicable law (such proposal that
satisfies (A) and (B) being referred to herein as a "Superior Proposal"); (C)
FLBC promptly notifies First Niagara Financial of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with FLBC or any of its
representatives indicating, in connection with such notice, the name of such
person and the material terms and conditions of any inquiries, proposals or
offers, and (D) the FLBC Stockholders Meeting has not occurred. For purposes of
this Agreement, "Acquisition Proposal" shall mean any proposal or offer as to
any of the following (other than the transactions contemplated hereunder)
involving FLBC or any of its subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transactions; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of the
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assets of FLBC, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or more of the
outstanding shares of capital stock of FLBC or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
6.11. Reserves and Merger-Related Costs.
On or before the Effective Time, FLBC shall establish such additional
accruals and reserves as may be necessary to conform the accounting reserve
practices and methods (including credit loss practices and methods) of FLBC to
those of First Niagara Financial (as such practices and methods are to be
applied to FLBC from and after the Closing Date) and First Niagara Financial's
plans with respect to the conduct of the business of FLBC following the Merger
and otherwise to reflect Merger-related expenses and costs incurred by FLBC,
provided, however, that FLBC shall not be required to take such action unless
First Niagara Financial agrees in writing that all conditions to closing set
forth in Article IX have been satisfied or waived (except for the expiration of
any applicable waiting periods); prior to the delivery by First Niagara
Financial of the writing referred to in the preceding clause, FLBC shall provide
First Niagara Financial a written statement, certified without personal
liability by the chief executive officer of FLBC and dated the date of such
writing, that the representation made in Section 4.15.1 hereof is true as of
such date or, alternatively, setting forth in detail the circumstances that
prevent such representation from being true as of such date; and no accrual or
reserve made by FLBC or any FLBC Subsidiary pursuant to this subsection, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 11.1.2 hereof. No
action shall be required to be taken by FLBC pursuant to this Section 6.11 if,
in the opinion of FLBC's independent auditors, such action would contravene
GAAP.
6.12. Board of Directors and Committee Meetings.
FLBC and SBFL shall permit a representative of First Niagara Financial
to attend any meeting of the Board of Directors of FLBC and/or SBFL or the
Executive Committees thereof as an observer (the "Observer") (provided that
neither FLBC nor SBFL shall be required to permit the First Niagara Financial
representative to remain present during any confidential discussion of this
Agreement and the transactions contemplated hereby or any third party proposal
to acquire control of FLBC or SBFL or during any other matter that the
respective Board of Directors has been advised of by counsel that such
attendance by the Observer would violate a confidentiality obligation or
fiduciary duty.
ARTICLE VII
COVENANTS OF FIRST NIAGARA FINANCIAL
7.1. Conduct of Business.
During the period from the date of this Agreement to the Effective
Time, except with the written consent of FLBC, which consent will not be
unreasonably withheld, conditioned or
49
delayed, none of the Mutual Company, FNFG, First Niagara Financial or First
Niagara Bank will conduct its business in the ordinary course consistent with
past practices and will not take any action that would: (i) adversely affect the
ability of any party to obtain the approvals from the Bank Regulators required
for the transactions contemplated hereby or materially increase the period of
time necessary to obtain such approvals; (ii) adversely affect its ability to
perform its covenants and agreements under this Agreement; or (iii) result in
the representations and warranties contained in Article V of this Agreement not
being true and correct on the date of this Agreement or at any future date on or
prior to the Closing Date, Provided that the Conversion and related transactions
shall be considered in the ordinary course of business hereunder; and Provided
further, that nothing herein shall preclude the Mutual Company, First Niagara
Financial and First Niagara Bank from completing the Charter Conversions, and
the related Charter Conversion Bank Mergers, subject to applicable law and
regulation and the consent of FLBC.
7.2. Current Information.
During the period from the date of this Agreement to the Effective
Time, First Niagara Financial will cause one or more of its representatives to
confer with representatives of FLBC and report the general status of its ongoing
operations, including the progress of the Conversion, at such times as FLBC may
reasonably request. First Niagara Financial will promptly notify FLBC, to the
extent permitted by applicable law, of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation involving
First Niagara Financial and any First Niagara Financial Subsidiary.
7.3. Financial and Other Statements.
As soon as reasonably available, but in no event later than the date
such documents are filed with the SEC, First Niagara Financial will deliver to
FLBC the Securities Documents filed by it with the SEC under the Securities
Laws. First Niagara Financial will furnish to FLBC copies of all documents,
statements and reports as it or FNFG file with the OTS or any other regulatory
authority with respect to the Merger and the Conversion.
7.4. Disclosure Supplements.
From time to time prior to the Effective Time, the Mutual Company,
FNFG, First Niagara Financial and First Niagara Bank will promptly supplement or
amend the FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE delivered in
connection herewith with respect to any material matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such FIRST NIAGARA FINANCIAL GROUP
DISCLOSURE SCHEDULE or which is necessary to correct any information in such
FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE which has been rendered
inaccurate thereby. No supplement or amendment to such FIRST NIAGARA FINANCIAL
GROUP DISCLOSURE SCHEDULE shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
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7.5. Consents and Approvals of Third Parties.
The Mutual Company, FNFG, First Niagara Financial and First Niagara
Bank shall use all commercially reasonable efforts to obtain as soon as
practicable all consents and approvals of any other Persons, including the
Depositors and stockholders of First Niagara Financial necessary or desirable
for the consummation of the transactions contemplated by this Agreement,
including the Conversion.
7.6. All Reasonable Efforts.
Subject to the terms and conditions herein provided, the Mutual
Company, FNFG, First Niagara Financial and First Niagara Bank agree to use all
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including the Conversion.
7.7. Failure to Fulfill Conditions.
In the event that the Mutual Company, FNFG, First Niagara Financial or
First Niagara Bank determine that a condition to its obligation to complete the
Merger or Conversion cannot be fulfilled and that it will not waive that
condition, it will promptly notify FLBC.
7.8. Employee Benefits.
7.8.1. The FLBC Employee Stock Ownership Plan (the "FLBC
ESOP") shall be terminated as of, or prior to, the Effective Time (all shares
held by the ESOP shall be converted into the right to receive the Merger
Consideration, as elected by the ESOP participants), all outstanding FLBC ESOP
indebtedness shall be repaid, and the balance shall be allocated and distributed
to FLBC ESOP participants (subject to the receipt of a determination letter from
the IRS), as provided for in the FLBC ESOP and unless otherwise required by
applicable law. First Niagara Financial will review all other FLBC Compensation
and Benefit Plans to determine whether to maintain, terminate or continue such
plans. All FLBC Employees who become participants in a First Niagara Financial
Compensation and Benefit Plan shall, for purposes of determining eligibility for
and for any applicable vesting periods of such employee benefits only (and not
for pension benefit accrual purposes) be given credit for meeting eligibility
and vesting requirements in such plans for service as an employee of FLBC or an
FLBC Subsidiary or any predecessor thereto prior to the Effective Time, provided
that credit for prior service under the First Niagara Financial ESOP is limited
to a maximum of two years.
7.8.2. FNFG and/or First Niagara Financial shall honor all
employment and severance agreements with officers or employees of FLBC and/or
SBFL which are set forth in FLBC DISCLOSURE SCHEDULE 4.12.1, in the manner set
forth in FIRST NIAGARA FINANCIAL GROUP DISCLOSURE SCHEDULE 7.8.2. If requested
by First Niagara Financial no earlier than December 1, 2002, FLBC shall take
such action under its 2001 Recognition and Retention Plan to accelerate the
vesting of such outstanding awards and to such individuals as specified in the
First Niagara Financial request, to a date that is on or prior to December 31,
2002.
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7.8.3. At and for a period of six months following the
Effective Time, any terminated employees of FLBC or SBFL whose employment is
terminated, other than voluntary termination and termination for nonperformance,
negligence, misconduct or other such cause, shall be provided with severance
benefits equal to two (2) weeks pay for every year of service with FLBC or SBFL,
with a minimum of two (2) weeks severance for any terminated employee, and a
maximum of twenty-six (26) weeks of severance. The benefit set forth in this
section 7.8.3 shall be payable to any person who is an employee of FLBC or SBFL
five business days prior to the Effective Time (other than an employee who is a
party to an employment or change in control agreement) and whose employment is
terminated (other than voluntary termination and termination for nonperformance,
negligence, misconduct or other such cause) during the period ending six months
after the Effective Time. The severance payment shall be made within 14 days of
the date of termination of employment and subject to withholding and other
applicable taxes. While FNFG and First Niagara Financial intend to provide
Continuing Employees (as defined below) with compensation and benefits
comparable to those currently provided by FLBC, this Agreement shall not be
construed to limit the ability of FNFG or First Niagara Bank to terminate the
employment of any employee or to review employee benefits programs from time to
time and to make such changes as they deem appropriate.
7.8.4. First Niagara Financial agrees to pay for outplacement
services for all employees (excluding any officer who is a party to an
employment or severance agreement) who are terminated within six months of the
date of the Effective Time. Such services shall be commensurate with the
position and seniority of a terminated employee and shall include, for example,
for executive management services such as professional counseling, training,
interviewing skills and similar assistance commensurate with the customary needs
of displaced senior management officials. Other officers and non-officer
employees shall receive comparable services commensurate with their seniority
and specific needs and as customary for the positions held. In no event,
however, shall the aggregate cost of such outplacement for all employees exceed
$25,000 or such other amount as the parties may agree. The actual services and
the employees to receive such services shall be as mutually agreed upon between
First Niagara Financial and FLBC.
7.8.5. In the event of any termination or consolidation of any
FLBC health plan with any FNFG health plan, FNFG shall make available to
employees of FLBC or an FLBC Subsidiary who continue employment with FNFG or a
FNFG Subsidiary ("Continuing Employees") and their dependents employer-provided
health coverage on the same basis as it provides such coverage to FNFG
employees. Unless a Continuing Employee affirmatively terminates coverage under
a FLBC health plan prior to the time that such Continuing Employee becomes
eligible to participate in the FNFG health plan, no coverage of any of the
Continuing Employees or their dependents shall terminate under any of the FLBC
health plans prior to the time such Continuing Employees and their dependents
become eligible to participate in the health plans, programs and benefits common
to all employees of FNFG and their dependents. In the event of a termination or
consolidation of any FLBC health plan, terminated FLBC employees and qualified
beneficiaries will have the right to continued coverage under group health plans
of FNFG in accordance with Code Section 4980B(f), consistent with the provisions
below. In the event of any termination, or consolidation of any FLBC health plan
with any FNFG health plan, any pre-existing condition limitation or exclusion in
the FNFG health plan shall not apply to Continuing Employees or their covered
dependents who have satisfied such
52
pre-existing condition limitation or exclusion waiting period under a FLBC
health plan with respect to such pre-existing condition on the Effective Time
and who then change that coverage to FNFG's health plan at the time such
Continuing Employee is first given the option to enroll in such FNFG health
plan. All FLBC Employees who cease participating in an FLBC health plan and
become participants in a comparable FNFG health plan shall receive credit for
any co-payment and deductibles paid under FLBC's health plan for purposes of
satisfying any applicable deductible or out-of-pocket requirements under the
FNFG health plan, upon substantiation, in a form satisfactory to FNFG that such
co-payment and/or deductible has been satisfied.
7.8.6. First Niagara Bank currently intends to consolidate the
Auburn branch office of SBFL with the existing branch office maintained by a
Bank Affiliate.
7.9. Directors and Officers Indemnification and Insurance.
7.9.1. FNFG shall maintain, or shall cause First Niagara Bank
to maintain, in effect for three years following the Effective Time, the current
directors' and officers' liability insurance policies maintained by FLBC and the
FLBC Subsidiaries (provided, that FNFG may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall FNFG be required to expend pursuant to
this Section 7.9.1 more than 135% of the annual cost currently expended by FLBC
with respect to such insurance. In connection with the foregoing, FLBC agrees in
order for FNFG to fulfill its agreement to provide directors and officers
liability insurance policies for three years to provide such insurer or
substitute insurer with such representations as such insurer may request with
respect to the reporting of any prior claims.
7.9.2. In addition to 7.9.1, for a period of six years after
the Effective Time, FNFG and First Niagara Financial shall indemnify, defend and
hold harmless each person who is now, or who has been at any time before the
date hereof or who becomes before the Effective Time, an officer or director of
FLBC or a FLBC Subsidiary (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorney's fees), liabilities or
judgments or amounts that are paid in settlement (which settlement shall require
the prior written consent of FNFG, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each a "Claim"), in
which an Indemnified Party is, or is threatened to be made, a party or witness
in whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of FLBC or a FLBC Subsidiary if
such Claim pertains to any matter of fact arising, existing or occurring before
the Effective Time (including, without limitation, the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is asserted
or claimed before, or after, the Effective Time (the "Indemnified Liabilities"),
to the fullest extent permitted under applicable state or Federal law, FNFG's
Certificate of Incorporation and Bylaws, and under FLBC's Certificate of
Incorporation or Charter and Bylaws. FNFG shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by applicable state or Federal law upon receipt of an
undertaking to repay such advance payments if he shall be adjudicated or
determined to be not entitled to indemnification in the manner set forth below.
Any Indemnified
53
Party wishing to claim indemnification under this Section 7.9.2 upon learning of
any Claim, shall notify FNFG (but the failure so to notify FNFG shall not
relieve it from any liability which it may have under this Section 7.9.2, except
to the extent such failure materially prejudices FNFG) and shall deliver to FNFG
the undertaking referred to in the previous sentence. In the event of any such
Claim (whether arising before or after the Effective Time) (1) FNFG shall have
the right to assume the defense thereof (in which event the Indemnified Parties
will cooperate in the defense of any such matter) and upon such assumption FNFG
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if FNFG elects not to assume
such defense, or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between FNFG and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them, and FNFG shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) except to the extent otherwise
required due to conflicts of interest, FNFG shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties whose
reasonable fees and expenses shall be paid promptly as statements are received
unless there is a conflict of interest that necessitates more than one law firm,
(3) FNFG shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld, conditioned
or delayed), and (4) no Indemnified Party shall be entitled to indemnification
hereunder with respect to a matter as to which (x) he shall have been
adjudicated in any proceeding not to have acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of FLBC or
any FLBC Subsidiary, or (y) in the event that a proceeding is compromised or
settled so as to impose any liability or obligation upon an Indemnified Party,
if there is a determination that with respect to said matter said Indemnified
Party did not act in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of FLBC or any FLBC Subsidiary. The
determination shall be made by a majority vote of a quorum consisting of the
Directors of FNFG who are not involved in such proceeding.
7.9.3. In the event that either FNFG or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving bank or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of FNFG shall assume the obligations set forth in this
Section 7.9.
7.9.4. The obligations of FNFG provided under this Section 7.9
are intended to be enforceable against FNFG directly by the Indemnified Parties
and shall be binding on all respective successors and permitted assigns of FNFG.
7.10. Stock Listing.
FNFG agrees to list on the Stock Exchange (or such other national
securities exchange on which the shares of the FNFG Common Stock shall be listed
as of the date of consummation of the Merger), subject to official notice of
issuance, the shares of FNFG Common Stock to be issued in the Merger.
54
7.11. Stock and Cash Reserve.
FNFG agrees at all times from the date of this Agreement until the
Merger Consideration has been paid in full to reserve a sufficient number of
shares of its common stock and to maintain sufficient liquid accounts or
borrowing capacity to fulfill its obligations under this Agreement.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. FLBC and First Niagara Financial Special Meetings.
8.1.1. FLBC will (i) as promptly as practicable after the
Merger Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "FLBC Stockholders Meeting"), for the purpose of considering
this Agreement and the Merger, and for such other purposes as may be, in FLBC's
reasonable judgment, necessary or desirable, (ii) subject to the next sentence,
have its Board of Directors recommend approval of this Agreement to the FLBC
stockholders. The Board of Directors of FLBC may fail to make such a
recommendation, or withdraw, modify or change any such recommendation only in
connection with a Superior Proposal, as set forth in Section 6.10 of this
Agreement, and only if such Board of Directors, after having consulted with and
considered the advice of outside counsel to such Board, has determined that the
making of such recommendation, or the failure so to withdraw, modify or change
its recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law; and (iii) cooperate and consult with First
Niagara Financial and FNFG with respect to each of the foregoing matters. The
FLBC Stockholders Meeting shall not be held until the Conversion Registration
Statement has been declared effective by the SEC.
8.1.2. First Niagara Financial will (i) as promptly as
practicable after the Merger Registration Statement is declared effective by the
SEC, take all steps necessary to duly call, give notice of, convene and hold a
meeting of its stockholders (the "First Niagara Financial Stockholders
Meeting"), which shall not be held until the requisite approvals from the Bank
Regulators have been obtained and the Conversion Registration Statement has been
declared effective by the SEC, for the purpose of approving the transactions
contemplated by this Agreement, and for such other purposes as may be, in First
Niagara Financial's reasonable judgment, necessary or desirable, (ii) subject to
the fiduciary responsibility of the Board of Directors of First Niagara
Financial as advised by counsel, recommend to its stockholders the approval of
the aforementioned matters to be submitted by it to its stockholders, and (iii)
cooperate and consult with FLBC with respect to each of the foregoing matters.
8.2. Proxy Statement-Prospectus.
8.2.1. For the purposes (x) of registering FNFG Common Stock
to be offered to holders of FLBC Common Stock in connection with the Merger with
the SEC under the Securities Act and applicable state securities laws and (y) of
holding the FLBC Stockholders Meeting and First Niagara Financial Stockholders
Meeting, FNFG shall draft and prepare, and FLBC shall cooperate in the
preparation of, the Merger Registration Statement, including a combined proxy
statement and prospectus or statements satisfying all applicable requirements of
55
applicable state securities and banking laws, and of the Securities Act and the
Exchange Act, and the rules and regulations thereunder (such proxy
statement/prospectus in the form mailed by FLBC to the FLBC stockholders and by
First Niagara Financial to the First Niagara Financial stockholders, together
with any and all amendments or supplements thereto, being herein referred to as
the "Proxy Statement-Prospectus"). FNFG shall provide FLBC and its counsel with
appropriate opportunity to review and comment on the Proxy Statement-Prospectus
prior to the time it is initially filed with the SEC or any amendments are filed
with the SEC. FNFG shall file the Merger Registration Statement, including the
Proxy Statement-Prospectus, with the SEC. Each of FNFG and FLBC shall use their
best efforts to have the Merger Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing, and each of
FLBC and FNFG shall thereafter promptly mail the Proxy Statement-Prospectus to
its stockholders. FNFG shall also use its best efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement, and FLBC shall furnish all
information concerning FLBC and the holders of FLBC Common Stock as may be
reasonably requested in connection with any such action.
8.2.2. FLBC shall provide FNFG with any information concerning
itself that First Niagara Financial may reasonably request in connection with
the drafting and preparation of the Proxy Statement-Prospectus, and First
Niagara Financial shall notify FLBC promptly of the receipt of any comments of
the SEC with respect to the Proxy Statement-Prospectus and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to FLBC promptly copies of all correspondence between FNFG,
First Niagara Financial or any of their representatives and the SEC. FNFG and
First Niagara Financial shall give FLBC and its counsel the opportunity to
review and comment on the Proxy Statement-Prospectus prior to its being filed
with the SEC and shall give FLBC and its counsel the opportunity to review and
comment on all amendments and supplements to the Proxy Statement-Prospectus and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of First Niagara
Financial, FNFG and FLBC agrees to use all reasonable efforts, after
consultation with the other party hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement-Prospectus
and all required amendments and supplements thereto to be mailed to the holders
of FLBC Common Stock and First Niagara Financial Group Common Stock entitled to
vote at the FLBC Stockholders Meeting and First Niagara Financial Stockholders
Meeting, respectively, referred to in Section 8.1 hereof at the earliest
practicable time.
8.2.3. FLBC and First Niagara Financial shall promptly notify
the other party if at any time it becomes aware that the Proxy
Statement-Prospectus or the Merger Registration Statement contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. In such event,
FLBC shall cooperate with First Niagara Financial and FNFG in the preparation of
a supplement or amendment to such Proxy Statement-Prospectus which corrects such
misstatement or omission, and FNFG shall file an amended Merger Registration
Statement with the SEC, and each of FLBC, First Niagara Financial and FNFG shall
mail an amended Proxy Statement-Prospectus to FLBC's and First Niagara
Financial's stockholders, respectively. FLBC, on the one hand, and First Niagara
Financial and FNFG on the other shall each provide to the other a "comfort"
letter from its independent certified public accountant, dated as of the date of
the Proxy Statement-
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Prospectus and updated as of the date of consummation of the Merger, with
respect to certain financial information regarding FLBC and First Niagara
Financial and FNFG, respectively, each in form and substance which is customary
in transactions such as the Merger.
8.3. The Mutual Company Conversion from Mutual to Stock Form.
Commencing promptly after the date of this Agreement, the Mutual
Company, First Niagara Financial, FNFG and First Niagara Bank will take all
reasonable steps necessary to effect the Conversion. In addition, without
limiting the generality of the foregoing, the Mutual Company shall cause the
following to be done:
8.3.1. The First Niagara Financial Stockholders Meeting. First
Niagara Financial will (i) as promptly as practicable after the Conversion
Registration Statement is declared effective by the SEC, and the requisite
approvals from the Bank Regulators have been obtained, take all steps necessary
to duly call, give notice of, convene and hold the First Niagara Financial
Stockholders Meeting for the purpose of approving the Conversion and/or the Plan
of Conversion, and for such other purposes as may be, in the reasonable judgment
of First Niagara Financial, necessary or desirable, and (ii) subject to the
fiduciary responsibility of the Board of Directors of First Niagara Financial as
advised by counsel, recommend to its stockholders the approval of the
aforementioned matters to be submitted by it to its stockholders.
8.3.2. The Mutual Company Special Meeting. The Mutual Company
will (i) as promptly as practicable after the Conversion Registration Statement
is declared effective by the SEC, and the requisite approvals from the Bank
Regulators have been obtained, take all steps necessary to duly call, give
notice of, convene and hold a meeting of Depositors (the "Depositors Meeting")
for the purpose of approving the Plan of Conversion, and for such other purposes
as may be, in the reasonable judgment of the Mutual Company, necessary or
desirable, (ii) subject to the fiduciary responsibility of the Board of Trustees
of the Mutual Company as advised by counsel, recommend to Depositors the
approval of the aforementioned matters to be submitted by it to Depositors, and
(iii) cooperate and consult with FLBC with respect to each of the foregoing
matters.
8.3.3. The Mutual Company will use all reasonable efforts to
prepare and file all required regulatory applications required in connection
with the Conversion.
8.3.4. First Niagara Financial and FNFG shall prepare as
promptly as practicable, and FLBC shall co-operate in the preparation of, the
Conversion Prospectus. Such Conversion Prospectus shall be incorporated into the
Conversion Registration Statement. FNFG shall file the Conversion Registration
Statement with the SEC. FNFG shall use its reasonable best efforts to have the
Conversion Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing.
8.3.5. FLBC shall provide First Niagara Financial and FNFG
with any information concerning it that First Niagara Financial or FNFG may
reasonably request in connection with the Conversion Prospectus, and First
Niagara Financial shall notify FLBC promptly of the receipt of any comments of
the SEC, the OTS and any other
57
Bank Regulator with respect to the Conversion Prospectus and of any requests by
the SEC, the OTS or any other Bank Regulator for any amendment or supplement
thereto or for additional information, and shall provide to FLBC promptly copies
of all correspondence between FNFG or any representative of FNFG and the SEC,
the OTS or any other Bank Regulator. FNFG shall give FLBC and its counsel the
opportunity to review and comment on the Conversion Prospectus prior to its
being filed with the SEC, the OTS and any Bank Regulator and shall give FLBC and
its counsel the opportunity to review and comment on all amendments and
supplements to the Conversion Prospectus and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC, the OTS and any Bank Regulator. Each of First Niagara
Financial, FNFG and FLBC agrees to use all reasonable efforts, after
consultation with the other party hereto, to respond promptly to all such
comments of and requests by the SEC, the OTS and any Bank Regulator and to cause
the Conversion Prospectus and all required amendments and supplements thereto to
be mailed to Depositors at the earliest practicable time.
8.3.6. FLBC shall promptly notify First Niagara Financial if
at any time it becomes aware that the Conversion Prospectus or the Conversion
Registration Statement contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, FLBC shall cooperate with First
Niagara Financial and FNFG in the preparation of a supplement or amendment to
such Conversion Prospectus, which corrects such misstatement or omission, and
FNFG shall file an amended Conversion Registration Statement with the SEC. FLBC
shall provide to FNFG, First Niagara Financial and the placement agent for the
sale of FNFG Common Stock in the Conversion Offering a "comfort" letter from the
independent certified public accountants for FLBC, dated as of the date of the
Conversion Prospectus and updated as of the date of consummation of the
Conversion, with respect to certain financial information regarding FLBC, each
in form and substance which is customary in transactions such as the Conversion,
and shall cause its counsel to deliver to the placement agent for the Conversion
such opinions as First Niagara Financial and FNFG may reasonably request.
8.3.7. The aggregate price for which the shares of First
Niagara Financial Group Common Stock are sold to purchasers in the Conversion
Offering shall be based on the Independent Valuation. The Independent Valuation
shall be expressed as a range (the "Valuation Range"), the maximum and minimum
of which shall vary 15% above and below the midpoint of such range, and the
maximum of such range may be increased by an additional 15%.
8.3.8. If any shares of FNFG Common Stock that are offered for
sale in the subscription offering that is conducted as part of the Conversion
Offering remain unsold then, at First Niagara Financial's discretion, such
shares may be issued to FLBC shareholders as part of the Merger Consideration.
8.4. Regulatory Approvals.
Each of FLBC, FNFG and First Niagara Financial will cooperate with the
other and use all reasonable efforts to promptly prepare all necessary
documentation, to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of the SEC, the OTS, and any
other Bank Regulator and third parties and governmental bodies necessary to
58
consummate the transactions contemplated by this Agreement, including without
limitation the Merger and the Conversion. FLBC and First Niagara Financial will
furnish each other and each other's counsel with all information concerning
themselves, their subsidiaries, directors, officers and stockholders and such
other matters as may be necessary or advisable in connection with the Conversion
Prospectus, the Proxy Statement-Prospectus and any application, petition or any
other statement or application made by or on behalf of FLBC, FNFG or First
Niagara Financial to any governmental body in connection with the Conversion,
the Merger, and the other transactions contemplated by this Agreement. FLBC
shall have the right to review and approve in advance all characterizations of
the information relating to FLBC and any of its Subsidiaries, which appear in
any filing made in connection with the transactions contemplated by this
Agreement with any governmental body. In addition, FLBC, First Niagara Financial
and FNFG shall each furnish to the other for review a copy of each such filing
made in connection with the transactions contemplated by this Agreement with any
governmental body prior to its filing.
8.5. Affiliates.
8.5.1. FLBC shall use all reasonable efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of FLBC to deliver to First Niagara
Financial, as soon as practicable after the date of this Agreement, and at least
thirty (30) days prior to the date of the shareholders meeting called by FLBC to
approve this Agreement, a written agreement, in the form of Exhibit B hereto,
providing that such person will not sell, pledge, transfer or otherwise dispose
of any shares of FNFG Common Stock to be received by such "affiliate," as a
result of the Merger otherwise than in compliance with the applicable provisions
of the Securities Act and the rules and regulations thereunder.
ARTICLE IX
CLOSING CONDITIONS
9.1. Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Pre-Closing Date of the following
conditions, none of which may be waived:
9.1.1. Stockholder and Depositor Approval.
(A) This Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the stockholders of
FLBC and, if legally required, by the stockholders of First Niagara Financial.
(B) The Conversion and the Plan of Conversion shall
have been approved by the requisite vote of Depositors and stockholders of First
Niagara Financial.
9.1.2. Injunctions. None of the parties hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the transactions
contemplated by this Agreement.
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9.1.3. Regulatory Approvals. All necessary approvals,
authorizations and consents of all Bank Regulators and Governmental Entities
required to consummate the transactions contemplated by this Agreement shall
have been obtained and shall remain in full force and effect and all waiting
periods relating to such approvals, authorizations or consents shall have
expired; and no such approval, authorization or consent shall include any
condition or requirement, excluding standard conditions that are normally
imposed by the regulatory authorities in bank merger transactions or in
mutual-to-stock conversions, that would, in the good faith reasonable judgment
of the Board of Directors of First Niagara Financial or FLBC, materially and
adversely affect the business, operations, financial condition, property or
assets of the combined enterprise of FLBC, SBFL and First Niagara Financial
Group or otherwise materially impair the value of FLBC or SBFL to First Niagara
Financial Group.
9.1.4. Effectiveness of Merger Registration Statement. The
Merger Registration Statement shall have become effective under the Securities
Act and no stop order suspending the effectiveness of the Merger Registration
Statement shall have been issued, and no proceedings for that purpose shall have
been initiated or threatened by the SEC and, if the offer and sale of FNFG
Common Stock in the Merger is subject to the blue sky laws of any state, shall
not be subject to a stop order of any state securities commissioner.
9.1.5. Stock Exchange Listing. The shares of FNFG Common Stock
to be issued in the Merger shall have been authorized for listing on the Stock
Exchange, subject to official notice of issuance.
9.1.6. Tax Opinion. On the basis of facts, representations and
assumptions which shall be consistent with the state of facts existing at the
Pre-Closing date, First Niagara Financial, FNFG and FLBC shall have received an
opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. reasonably acceptable in form and
substance to First Niagara Financial, FNFG and FLBC dated as of the Pre-Closing
Date, substantially to the effect that, for Federal income tax purposes:
(A) The Merger, when consummated in accordance with
the terms hereof, either will constitute a reorganization within the meaning of
Section 368(a) of the Code or will be treated as part of a reorganization within
the meaning of Section 368(a) of the Code;
(B) None of the Conversion, the Exchange Offer, or
the merger of SBFL into First Niagara Bank will adversely affect the Merger
qualifying as a Reorganization within the meaning of Section 368(A) of the Code.
(C) No gain or loss will be recognized by First
Niagara Financial, FNFG, First Niagara Financial Group Savings, FLBC or SBFL by
reason of the Merger;
(D) The exchange of FLBC Common Stock to the extent
exchanged for FNFG Common Stock will not give rise to recognition of gain or
loss for Federal income tax purposes to the shareholders of FLBC;
(E) The basis of the FNFG Common Stock to be received
(including any fractional shares deemed received for tax purposes) by a FLBC
shareholder will be the same as the basis of the FLBC Common Stock surrendered
pursuant to the Merger in exchange therefor; and
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(F) The holding period of the shares of FNFG Common
Stock to be received by a shareholder of FLBC will include the period during
which the shareholder held the shares of FLBC Common Stock surrendered in
exchange therefor, provided the FLBC Common Stock surrendered is held as a
capital asset at the Effective Time.
Each of First Niagara Financial, FNFG and FLBC shall provide a letter
setting forth the facts, assumptions and representations on which such counsel
may rely in rendering its opinion.
9.1.7. Conversion. Solely with respect to determining whether
the consideration for this transaction shall include FNFG Common Stock, FNFG
shall have received and accepted orders to purchase, including any shares to be
issued as Merger Consideration, for at least the minimum number of shares of
FNFG Common Stock offered for sale in the Conversion Offering.
9.2. Conditions to the Obligations of First Niagara Financial under
this Agreement.
The obligations of First Niagara Financial and FNFG under this
Agreement shall be further subject to the satisfaction of the conditions set
forth in Sections 9.2.1 through 9.2.4 at or prior to the Pre-Closing, and the
satisfaction of the condition set forth in Section 9.2.5 at or prior to the
Closing:
9.2.1. Representations and Warranties. Except as otherwise
contemplated by this Agreement or consented to in writing by First Niagara
Financial, each of the representations and warranties of FLBC and SBFL set forth
in this Agreement which is qualified as to materiality shall be true and
correct, and each such representation or warranty that is not so qualified shall
be true and correct in all material respects, in each case as of the date of
this Agreement, and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time; and FLBC shall have
delivered to First Niagara Financial a certificate of FLBC to such effect signed
by the Chief Executive Officer and the Chief Financial Officer of FLBC as of the
Effective Time.
9.2.2. Agreements and Covenants. As of the Pre-Closing Date,
FLBC, SBFL and each FLBC Subsidiary shall have performed in all material
respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by each of them at or
prior to the Effective Time, and First Niagara Financial shall have received a
certificate signed on behalf of FLBC by the Chief Executive Officer and Chief
Financial Officer of FLBC to such effect dated as of the Effective Time.
9.2.3. Permits, Authorizations, Etc. FLBC and the FLBC
Subsidiaries shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required for the lawful consummation
of the Merger by FLBC.
9.2.4. Accountants' Letter. First Niagara Financial shall have
received a "comfort" letter from the independent certified public accountants
for FLBC, dated (i) the effective date of the Merger Registration Statement and
(ii) the Pre-Closing Date, with respect to certain financial information
regarding FLBC, each in form and substance which is customary in transactions of
the nature contemplated by this Agreement.
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9.2.5. No Material Adverse Effect. Since December 31, 2001, no
event has occurred or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
FLBC.
FLBC will furnish First Niagara Financial with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 9.2 as First Niagara Financial may
reasonably request.
9.3. Conditions to the Obligations of FLBC under this Agreement.
The obligations of FLBC under this Agreement shall be further subject
to the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.4
at or prior to the Pre-Closing, and the satisfaction of the condition set forth
in Section 9.3.5 and 9.3.6 at or prior to the Closing:
9.3.1. Representations and Warranties. Except as otherwise
contemplated by this Agreement or consented to in writing by FLBC, each of the
representations and warranties of First Niagara Financial, FNFG, First Niagara
Bank and Mutual Company set forth in this Agreement which is qualified as to
materiality shall be true and correct, and each such representation or warranty
that is not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Time; and First Niagara Financial shall have delivered to FLBC a certificate of
First Niagara Financial to such effect signed by the Chief Executive Officer and
the Chief Financial Officer of FLBC as of the Effective Time.
9.3.2. Agreements and Covenants. As of the Pre-Closing Date,
First Niagara Financial, FNFG, the Mutual Company and First Niagara Bank shall
have performed in all material respects all obligations and complied in all
material respects with all agreements or covenants to be performed or complied
with by each of them at or prior to the Effective Time, and FLBC shall have
received a certificate signed on behalf of First Niagara Financial by the Chief
Executive Officer and Chief Financial Officer to such effect dated as of the
Effective Time.
9.3.3. Permits, Authorizations, Etc. The Mutual Company, FNFG,
First Niagara Financial and its Subsidiaries shall have obtained any and all
material permits, authorizations, consents, waivers, clearances or approvals
required for the lawful consummation of the Merger by First Niagara Financial
and FNFG, the failure to obtain which would have a Material Adverse Effect on
First Niagara Financial and its Subsidiaries, taken as a whole.
9.3.4. Accountants' Letter. FLBC shall have received a
"comfort" letter from the independent certified public accountants for First
Niagara Financial and FNFG, dated (i) the effective date of the Merger
Registration Statement and (ii) the Pre-Closing Date, with respect to certain
financial information regarding First Niagara Financial and FNFG, each in form
and substance which is customary in transactions of the nature contemplated by
this Agreement.
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9.3.5. Payment of Merger Consideration. FNFG shall have
delivered the Exchange Fund to the Exchange Agent on or before the Closing Date
and the Exchange Agent shall provide FLBC with a certificate evidencing such
delivery.
9.3.6. No Material Adverse Effect. Since December 31, 2001, no
event has occurred or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
First Niagara Financial.
First Niagara Financial and FNFG will furnish FLBC with such
certificates of their officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 9.3 as FLBC may
reasonably request.
ARTICLE X
THE CLOSING
10.1. Time and Place.
Subject to the provisions of Articles IX and XI hereof, the Closing of
the transactions contemplated hereby shall take place at the offices of ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. at
10:00 a.m. on the date determined by First Niagara Financial, in its sole
discretion, upon five (5) days prior written notice to FLBC, but in no event
later than thirty days (30) after the last condition precedent pursuant to this
agreement has been fulfilled or waived (including the expiration of any
applicable waiting period), or at such other place, date or time upon which
First Niagara Financial and FLBC mutually agree. A pre-closing of the
transactions contemplated hereby (the "Pre-Closing") shall take place at the
offices of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. at 10:00 a.m. on the day prior to the Closing Date.
10.2. Deliveries at the Pre-Closing and the Closing.
At the Pre-Closing there shall be delivered to First Niagara Financial,
FNFG and FLBC the opinions, certificates, and other documents and instruments
required to be delivered at the Pre-Closing under Article IX hereof. At or prior
to the Closing, First Niagara Financial or FNFG shall deliver the Merger
Consideration as set forth under Section 9.3.5 hereof.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination.
This Agreement may be terminated at any time prior to the Pre-Closing
Date, whether before or after approval of the Merger by the stockholders of
FLBC:
11.1.1. At any time by the mutual written agreement of First
Niagara Financial and FLBC;
11.1.2. By either FLBC or First Niagara Financial (provided,
that the terminating party is not then in material breach of any representation,
warranty, covenant or
63
other agreement contained herein) if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement on the part
of the other party, which breach by its nature cannot be cured prior to the
Pre-Closing Date or shall not have been cured within 30 business days after
written notice by First Niagara Financial to FLBC (or by FLBC to First Niagara
Financial) of such breach provided that if the breach is non-monetary but
curable in nature and cannot be cured within 30 days, the time to cure shall be
extended to such time as may be reasonable, not to exceed an additional thirty
(30) days (60 days in the aggregate) (and not beyond June 30, 2003) ,
conditioned upon the defaulting party promptly commencing to cure the default
and thereafter continuing to cure the competitor;
11.1.3. By either FLBC or First Niagara Financial (provided,
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material failure to perform or comply with any of the covenants or agreements
set forth in this Agreement on the part of the other party, which failure by its
nature cannot be cured prior to the Pre-Closing Date or shall not have been
cured within 30 business days after written notice by First Niagara Financial to
FLBC (or by FLBC to First Niagara Financial) of such failure provided that if
the breach is non-monetary but curable in nature and cannot be cured within 30
days, the time to cure shall be extended to such time as may be reasonable, not
to exceed an additional thirty (30) days (60 days in the aggregate) (and not
beyond June 30, 2003), conditioned upon the defaulting party promptly commencing
to cure the default and thereafter continuing to cure;
11.1.4. At the election of either First Niagara Financial or
FLBC, if the Closing shall not have occurred by the Termination Date, or such
later date as shall have been agreed to in writing by First Niagara Financial
and FLBC; provided, that no party may terminate this Agreement pursuant to this
Section 11.1.4 if the failure of the Closing to have occurred on or before said
date was due to such party's breach of any of its obligations under this
Agreement;
11.1.5. By either FLBC or First Niagara Financial if the
stockholders of FLBC shall have voted at the FLBC stockholders meeting on the
transactions contemplated by this Agreement and such vote shall not have been
sufficient to approve such transactions;
11.1.6. By either FLBC or First Niagara Financial if (i) final
action has been taken by a Bank Regulator whose approval is required in
connection with this Agreement and the transactions contemplated hereby, which
final action (x) has become unappealable and (y) does not approve this Agreement
or the transactions contemplated hereby, (ii) any Bank Regulator whose approval
or nonobjection is required in connection with this Agreement and the
transactions contemplated hereby has stated in writing that it will not issue
the required approval or nonobjection, or (iii) any court of competent
jurisdiction or other governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger or Conversion and such order, decree, ruling or other action shall
have become final and nonappealable;
11.1.7. By the Board of Directors of either party (provided,
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the
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obligations of such party to consummate the Merger cannot be satisfied or
fulfilled by the date specified in Section 11.1.4 of this Agreement.
11.1.8. By the Board of Directors of First Niagara Financial
or FLBC, provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein, if
by June 30, 2003, the Closing shall not have occurred, provided that no party
may terminate this Agreement pursuant to this Section 11.1.8 if the failure of
the Closing to have occurred on or before said date was due to such party's
breach of any of its obligations under this Agreement.
11.1.9. By the Board of Directors of First Niagara Financial
if FLBC has received a Superior Proposal, and in accordance with Section 6.10 of
this Agreement, the Board of Directors of FLBC has entered into an acquisition
agreement with respect to the Superior Proposal, terminated this Agreement, or
withdraws its recommendation of this Agreement, fails to make such
recommendation or modifies or qualifies its recommendation in a manner adverse
to First Niagara Financial.
11.1.10. By the Board of Directors of FLBC if FLBC has
received a Superior Proposal, and in accordance with Section 6.10 of this
Agreement, the Board of Directors of FLBC has made a determination to accept
such Superior Proposal; provided that FLBC shall not terminate this Agreement
pursuant to this Section 11.1.10 and enter in a definitive agreement with
respect to the Superior Proposal until the expiration of three (3) business days
following First Niagara Financial receipt of written notice advising First
Niagara Financial that FLBC has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal (and including a copy
thereof with all accompanying documentation, if in writing) identifying the
person making the Superior Proposal and stating whether FLBC intends to enter
into a definitive agreement with respect to the Superior Proposal. After
providing such notice, FLBC shall provide a reasonable opportunity to First
Niagara Financial during the three-day period to make such adjustments in the
terms and conditions of this Agreement as would enable FLBC to proceed with the
Merger on such adjusted terms.
It is the intention of the parties that following completion of the
Pre-Closing, which completion will be acknowledged in writing by the parties at
such time, neither party shall have the right to terminate this Agreement at any
time thereafter. If, after the Pre-Closing Date, any party hereto shall attempt
to terminate this Agreement or shall fail to take any action necessary to effect
the consummation of the Merger (including, without limitation, First Niagara
Financial's obligation to satisfy the condition set forth in Section 9.3.6), the
other party shall be entitled to injunctive relief to enforce this Agreement,
and the first party hereby agrees not to contest any judicial proceeding seeking
the granting of such an injunction.
11.2. Effect of Termination.
11.2.1. In the event of termination of this Agreement pursuant
to any provision of Section 11.1, this Agreement shall forthwith become void and
have no further force, except that (i) the provisions of Sections 11.2, 12.1,
12.2, 12.6, 12.9, 12.10, and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect.
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11.2.2. If this Agreement is terminated, expenses and damages
of the parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(B) In the event of a termination of this Agreement
because of a willful breach of any representation, warranty, covenant or
agreement contained in this Agreement, the breaching party shall remain liable
for any and all damages, costs and expenses, including all reasonable attorneys'
fees, sustained or incurred by the non-breaching party as a result thereof or in
connection therewith or with respect to the enforcement of its rights hereunder.
(C) As a condition of First Niagara Financial's
willingness, and in order to induce First Niagara Financial to enter into this
Agreement, and to reimburse First Niagara Financial for incurring the costs and
expenses related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, FLBC and SBFL hereby agrees to pay
First Niagara Financial or FNFG, and First Niagara Financial or FNFG shall be
entitled to payment of a fee of $3,350,000 (the "Fee"), within three business
days after written demand for payment is made by First Niagara Financial or
FNFG, following the occurrence of any of the events set forth below:
(i) FLBC terminates this Agreement pursuant to Section 11.1.10
or First Niagara Financial or First Niagara Financial or FNFG
terminates this Agreement pursuant to Section 11.1.9; or
(ii) The entering into a definitive agreement by FLBC relating
to an Acquisition Proposal or the consummation of an Acquisition
Proposal involving FLBC within nine months after the occurrence of any
of the following: (i) the termination of the Agreement by First Niagara
Financial pursuant to Section 11.1.2 or 11.1.3 because of a willful
breach by FLBC or any FLBC Subsidiary; or (ii) the failure of the
stockholders of FLBC to approve this Agreement after the occurrence of
an Acquisition Proposal.
(D) If demand for payment of the Fee is made pursuant
to Section 11.2.2(C) and payment is timely made, then neither First Niagara
Financial nor FNFG will have any other rights or claims against FLBC or SBFL,
their Subsidiaries, and their respective officers and directors, under this
Agreement, it being agreed that the acceptance of the Fee under Section
11.2.2(C) will constitute the sole and exclusive remedy of First Niagara
Financial and FNFG against FLBC and SBFL, their Subsidiaries and their
respective officers and directors.
11.3. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time
(whether before or after approval thereof by the stockholders of FLBC), the
parties hereto by action of their respective Boards of Directors, may (a) amend
this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or
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(d) waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of this Agreement and the
transactions contemplated hereby by the stockholders of FLBC, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount, value or changes the form of consideration to be
delivered to FLBC's stockholders pursuant to this Agreement. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto. Any agreement on the part of a party hereto to any extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE XII
MISCELLANEOUS
12.1. Confidentiality.
Except as specifically set forth herein, First Niagara Financial and
FLBC mutually agree to be bound by the terms of the confidentiality agreements
dated June 24, 2002 (the "Confidentiality Agreement") previously executed by the
parties hereto, which Confidentiality Agreement is hereby incorporated herein by
reference. The parties hereto agree that such Confidentiality Agreements shall
continue in accordance with their respective terms, notwithstanding the
termination of this Agreement.
12.2. Public Announcements.
FLBC and First Niagara Financial shall cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement, except as may be otherwise required
by law, and neither FLBC nor First Niagara Financial shall issue any joint news
releases with respect to this Agreement unless such news releases have been
mutually agreed upon by the parties hereto, except as required by law.
12.3. Survival.
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on and be
terminated and extinguished at the Effective Time, other than those covenants
set forth in Sections 2.5, 7.8.2, 7.8.3, 7.8.4, 7.9 and 7.10, which shall
survive or be performed after the Effective Time.
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12.4. Notices.
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered by receipted hand delivery or mailed by
prepaid registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to FLBC or SBFL, to: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Chairman of the Board, President and Chief
Executive Officer
Savings Bank of the Finger Lakes, FSB
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With required copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇ Peabody LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to First Niagara Financial, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
FNFG or First Niagara Bank, to: Chairman of the Board, President and Chief
Executive Officer
First Niagara Financial Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With required copies to: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party, and that (except as provided in Section 7.9
of this
68
Agreement) nothing in this Agreement is intended to confer upon any other person
any rights or remedies under or by reason of this Agreement.
12.6. Complete Agreement.
This Agreement, including the Exhibits and Disclosure Schedules hereto
and the documents and other writings referred to herein or therein or delivered
pursuant hereto, and the Confidentiality Agreement, referred to in Section 12.1,
contains the entire agreement and understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings (other than the Confidentiality Agreements referred to in Section
12.1 hereof) between the parties, both written and oral, with respect to its
subject matter.
12.7. Counterparts.
This Agreement may be executed in one or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original.
12.8. Severability.
In the event that any one or more provisions of this Agreement shall
for any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
12.9. Governing Law.
This Agreement shall be governed by the laws of Delaware, without
giving effect to its principles of conflicts of laws.
12.10. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. The recitals hereto constitute an integral part of this
Agreement. References to Sections include subsections, which are part of the
related Section (e.g., a section numbered "Section 5.5.1" would be part of
"Section 5.5" and references to "Section 5.5" would also refer to material
contained in the subsection described as "Section 5.5.1"). The table of
contents, index and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the Recitals to this Agreement.
69
12.11. Specific Performance.
The parties hereto agree that irreparable damage would occur in the
event that the provisions contained in this Agreement were not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
70
IN WITNESS WHEREOF, the Mutual Company, First Niagara Financial, FNFG,
First Niagara Bank, FLBC and SBFL have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first set forth
above.
First Niagara Financial Group, MHC
Dated: July 21, 2002 By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President & CEO
First Niagara Financial Group, Inc.
Dated: July 21, 2002 By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President & CEO
First Niagara Bank
Dated: July 21, 2002 By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman, President & CEO
Finger Lakes Bancorp, Inc.
Dated: July 21, 2002 By: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
Name: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, President & CEO
Savings Bank of the Finger Lakes, FSB
Dated: July 21, 2002 By: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
Name: G. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, President & CEO
71
EXHIBIT A
FORM OF VOTING AGREEMENT
---------------------
First Niagara Financial Group, Inc.
---------------------
---------------------
Ladies and Gentlemen
The undersigned is a director of Finger Lakes Bancorp, Inc. ("FLBC")
and is the beneficial holder of shares of common stock of FLBC ("FLBC Common
Stock").
FLBC and First Niagara Financial Group, Inc. ("First Niagara
Financial") are considering the execution of an Agreement And Plan of
Reorganization ("Agreement") contemplating the merger of FLBC with and into
First Niagara Financial or a successor thereto (collectively referred to as
First Niagara Financial), with First Niagara Financial as the surviving
corporation of the merger (the "Merger"), such execution being subject in the
case of First Niagara Financial to the execution and delivery of this letter
agreement ("letter agreement"). In consideration of the substantial expenses
that First Niagara Financial will incur in connection with the transactions
contemplated by the Agreement and in order to induce First Niagara Financial to
execute the Agreement and to proceed to incur such expenses, the undersigned
agrees and undertakes, in his capacity as a shareholder of FLBC and not in his
capacity as a director of FLBC, as follows:
1. The undersigned, while this letter agreement is in effect, shall
vote or cause to be voted all of the shares of FLBC Common Stock that the
undersigned shall be entitled to so vote, whether such shares are beneficially
owned by the undersigned on the date of this letter agreement or are
subsequently acquired, whether pursuant to the exercise of stock options or
otherwise, at the special meeting of FLBC's stockholders to be called and held
following the date hereof, to consider the Agreement and the Merger.
2. The undersigned acknowledges and agrees that any remedy at law for
breach of the foregoing provisions shall be inadequate and that, in addition to
any other relief which may be available, First Niagara Financial shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving actual damages.
3. The foregoing restrictions shall not apply to shares with respect to
which the undersigned may have voting power as a fiduciary for others. In
addition, this letter agreement shall only apply to actions taken by the
undersigned in his capacity as a shareholder of FLBC and shall not in any way
limit or affect actions the undersigned may take in his capacity as a director
of FLBC.
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4. This letter agreement shall automatically terminate if the Agreement
is not entered into by the parties thereto or upon termination of the Agreement
on or before March 31, 2003 in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first above written.
Very truly yours,
Signature
--------------------------------
Name (please print)
Accepted and agreed to as of
the date first above written:
FIRST NIAGARA FINANCIAL GROUP, INC.
By:
-----------------------------------------
Title:
--------------------------------------
A-2
EXHIBIT B
AFFILIATES AGREEMENT
---------------------
First Niagara Financial Group, Inc.
---------------------
---------------------
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Finger Lakes Bancorp, Inc., a Delaware corporation ("FLBI"), for purposes of
paragraphs (c) and (d) of Rule 145 of the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Securities Act").
First Niagara Financial Group, Inc. ("First Niagara Financial") and
FLBI have entered into an Agreement and Plan of Reorganization, dated as of July
21, 2002 (the "Agreement"). Upon consummation of the merger contemplated by the
Agreement (the "Merger"), I may receive shares of common stock of First Niagara
Financial or any successor thereto ("First Niagara Financial Group Common
Stock") in exchange for my shares of common stock, par value $0.01 per share, of
FLBI ("FLBI Common Stock"). This agreement is hereinafter referred to as the
"Letter Agreement."
I represent and warrant to, and agree with, First Niagara Financial as
follows:
1. I have read this Letter Agreement and the Agreement and have
discussed their requirements and other applicable limitations upon my ability to
sell, pledge, transfer or otherwise dispose of shares of the First Niagara
Financial Group Common Stock, to the extent I felt necessary, with my counsel or
counsel for FLBI.
2. I have been advised that any issuance of shares of the First Niagara
Financial Group Common Stock to me pursuant to the Merger will be registered
with the SEC. I have also been advised, however, that, because I may be an
"affiliate" of FLBI at the time the Merger will be submitted for a vote of the
stockholders of FLBI and my disposition of such shares has not been registered
under the Securities Act, I must hold such shares indefinitely unless (i) such
disposition of such shares is subject to an effective registration statement and
to the availability of a prospectus under the Securities Act, (ii) a sale of
such shares is made in conformity with the provisions of Rule 145(d) under the
Securities Act, (iii) a sale of such shares is made following expiration of the
restrictive period set forth in Rule 145(d)(2) or (iv) in an opinion of counsel,
in form and substance reasonably satisfactory to First Niagara Financial, I am
advised that some other exemption from registration is available with respect to
any such proposed disposition of such shares.
3. I understand and agree that stop transfer instructions will be given
to the transfer agent of First Niagara Financial with respect to the shares of
First Niagara Financial Group Common Stock I receive pursuant to the Merger and
that there will be placed on the certificate representing such shares, or any
certificates delivered in substitution therefor, a legend stating in substance:
The shares represented by this certificate were issued in a transaction
to which Rule 145 under the Securities Act applies. The shares represented by
this certificate may only be transferred in accordance with the terms of an
agreement between the registered holder hereof and First Niagara Financial, a
copy of which agreement is on file at the principal offices of First Niagara
Financial. A copy of such agreement shall be provided to the holder hereof
without charge upon receipt by First Niagara Financial of a written request.
4. Unless a transfer of my shares of the First Niagara Financial Group
Common Stock is a sale made in conformity with the provisions of Rule 145(d),
made following expiration of the restrictive period set forth in Rule 145(d) or
made pursuant to any effective registration statement under the Securities Act,
First Niagara Financial reserves the right to put an appropriate legend on the
certificate issued to my transferee.
It is understood and agreed that this Letter Agreement shall terminate
and be of no further force and effect if the Agreement is terminated in
accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect and the stop
transfer instructions set forth above shall be lifted forthwith upon the
delivery by the undersigned to First Niagara Financial of a copy of a letter
from the staff of the SEC, an opinion of counsel in form and substance
reasonably satisfactory to First Niagara Financial, or other evidence reasonably
satisfactory to First Niagara Financial, to the effect that a transfer of my
shares of the First Niagara Financial Group Common Stock will not violate the
Securities Act or any of the rules and regulations of the SEC thereunder. In
addition, it is understood and agreed that the legend set forth in Paragraph 2
above shall be removed forthwith from the certificate or certificates
representing my shares of the First Niagara Financial Group Common Stock upon
expiration of the restrictive period set forth in Rule 145(d)(2), so long as
First Niagara Financial is then in compliance with SEC Rule 144(c), or if First
Niagara Financial shall have received a copy of a letter from the staff of the
SEC, an opinion of counsel in form and substance reasonably satisfactory to
First Niagara Financial, or other evidence satisfactory to First Niagara
Financial that a transfer of my shares of the First Niagara Financial Group
Common Stock represented by such certificate or certificates will be a sale made
in conformity with the provisions of Rule 145(d), or made pursuant to an
effective registration statement under the Securities Act.
5. I recognize and agree that the foregoing provisions also apply to
(i) my spouse, (ii) any relative of mine or my spouse's occupying my home, (iii)
any trust or estate in which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as trustee, executor or in any
similar capacity and (iv) any corporation or other organization in which I, my
spouse or any such relative owns at least 10% of any class of equity securities
or of the equity interest.
B-2
6. I further recognize that in the event I become a director or officer
of First Niagara Financial upon consummation of the Merger, any sale of First
Niagara Financial stock by me may be subject to liability pursuant to Section
16(b) of the Securities Exchange Act of 1934, as amended.
7. Execution of this Letter Agreement should not be construed as an
admission on my part that I am an "affiliate" of FLBI as described in the first
paragraph of this Letter Agreement or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
Letter Agreement.
* * * * *
This Letter Agreement shall be binding on my heirs, legal
representative and successors.
Very truly yours,
Signature
--------------------------------
Name (please print)
Accepted as of the date first above written
FIRST NIAGARA FINANCIAL GROUP, INC.
By:
-------------------------------------
Name:
Title:
B-3