Agreement and Plan of Merger - Sovereign Bancorp Inc. and Waypoint Financial Corp.
AGREEMENT AND PLAN OF MERGER
between
SOVEREIGN BANCORP, INC.
and
WAYPOINT FINANCIAL CORP
March 8, 2004
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGERS............................................................................ 1
Section 1.01 Definitions............................................................................ 1
Section 1.02 The Merger............................................................................. 11
Section 1.03 Bank Merger............................................................................ 20
ARTICLE II REPRESENTATIONS AND WARRANTIES OF WAYPOINT............................................. 20
Section 2.01 Organization........................................................................... 20
Section 2.02 Capitalization......................................................................... 21
Section 2.03 Authority; No Violation................................................................ 23
Section 2.04 Consents............................................................................... 24
Section 2.05 Financial Statements................................................................... 24
Section 2.06 Taxes.................................................................................. 25
Section 2.07 No Material Adverse Effect............................................................. 25
Section 2.08 Contracts.............................................................................. 25
Section 2.09 Ownership of Property; Insurance Coverage.............................................. 26
Section 2.10 Legal Proceedings...................................................................... 27
Section 2.11 Compliance With Applicable Law......................................................... 27
Section 2.12 ERISA.................................................................................. 28
Section 2.13 Brokers, Finders and Financial Advisors; Fairness Opinion.............................. 29
Section 2.14 Environmental Matters.................................................................. 29
Section 2.15 Allowance for Losses................................................................... 30
Section 2.16 Information to be Supplied............................................................. 30
Section 2.17 Securities Documents................................................................... 30
Section 2.18 Related Party Transactions............................................................. 30
Section 2.19 Loans.................................................................................. 30
Section 2.20 Takeover Laws.......................................................................... 31
Section 2.21 Labor and Employment Matters........................................................... 31
Section 2.22 Risk Management Instruments............................................................ 31
Section 2.23 Community Reinvestment Act, Anti-Money Laundering and Customer Information Security.... 32
Section 2.24 Credit Card Accounts................................................................... 32
Section 2.25 Merchant Processing.................................................................... 32
Section 2.26 Agreements with Regulatory Authorities................................................. 32
Section 2.27 Regulatory Capital..................................................................... 33
Section 2.28 Quality of Representations............................................................. 33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SOVEREIGN............................................ 33
Section 3.01 Organization........................................................................... 33
Section 3.02 Capital Structure...................................................................... 34
Section 3.03 Authority; No Violation................................................................ 34
Section 3.04 Consents............................................................................... 35
Section 3.05 Financial Statements................................................................... 36
Section 3.06 Taxes.................................................................................. 36
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TABLE OF CONTENTS
(continued)
Page
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Section 3.07 No Material Adverse Effect............................................................. 37
Section 3.08 Ownership of Property; Insurance Coverage.............................................. 37
Section 3.09 Legal Proceedings...................................................................... 37
Section 3.10 Compliance With Applicable Law......................................................... 37
Section 3.11 Information to be Supplied............................................................. 38
Section 3.12 ERISA.................................................................................. 38
Section 3.13 Securities Documents................................................................... 39
Section 3.14 Environmental Matters.................................................................. 39
Section 3.15 Allowance for Loan Losses.............................................................. 39
Section 3.16 Loans.................................................................................. 40
Section 3.17 Continuity of Business Enterprise...................................................... 40
Section 3.18 No Waypoint Capital Stock.............................................................. 40
Section 3.19 Regulatory Capital..................................................................... 40
Section 3.20 Agreements with Regulatory Authorities................................................. 40
Section 3.21 Community Reinvestment Act, Anti-Money Laundering and Customer Information Security.... 41
Section 3.22 No Brokers............................................................................. 41
Section 3.23 Tax Matters............................................................................ 41
Section 3.24 Quality of Representations............................................................. 41
ARTICLE IV COVENANTS OF THE PARTIES............................................................... 41
Section 4.01 Conduct of Waypoint's Business......................................................... 41
Section 4.02 Access; Confidentiality................................................................ 45
Section 4.03 Regulatory Matters and Consents........................................................ 46
Section 4.04 Taking of Necessary Action............................................................. 47
Section 4.05 Certain Agreements..................................................................... 48
Section 4.06 No Other Bids and Related Matters...................................................... 49
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule..................................... 50
Section 4.08 Conduct of Sovereign's Business........................................................ 50
Section 4.09 Current Information.................................................................... 50
Section 4.10 Undertakings by Sovereign and Waypoint................................................. 51
Section 4.11 Employee Benefits and Retention Bonuses................................................ 54
Section 4.12 Affiliate Letter....................................................................... 58
Section 4.13 Sovereign Rights Agreement............................................................. 58
Section 4.14 Nonsolicitation Agreements............................................................. 59
Section 4.15 NYSE Listing........................................................................... 59
Section 4.16 Amendment to Articles of Incorporation................................................. 59
Section 4.17 Advisory Board......................................................................... 59
Section 4.18 Section 16 Matters..................................................................... 59
ARTICLE V CONDITIONS............................................................................. 60
Section 5.01 Conditions to Waypoint's Obligations under this Agreement.............................. 60
Section 5.02 Conditions to Sovereign's Obligations under this Agreement............................. 61
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TABLE OF CONTENTS
(continued)
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ARTICLE VI TERMINATION, WAIVER AND AMENDMENT...................................................... 63
Section 6.01 Termination............................................................................ 63
Section 6.02 Effect of Termination.................................................................. 65
ARTICLE VII MISCELLANEOUS.......................................................................... 66
Section 7.01 Expenses............................................................................... 66
Section 7.02 Non-Survival of Representations and Warranties......................................... 67
Section 7.03 Amendment, Extension and Waiver........................................................ 67
Section 7.04 Entire Agreement....................................................................... 67
Section 7.05 No Assignment.......................................................................... 67
Section 7.06 Notices................................................................................ 67
Section 7.07 Captions............................................................................... 68
Section 7.08 Counterparts........................................................................... 68
Section 7.09 Severability........................................................................... 68
Section 7.10 Governing Law.......................................................................... 69
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THIS AGREEMENT AND PLAN OF MERGER, dated as of March 8, 2004,
is made between SOVEREIGN BANCORP, INC. ("Sovereign"), a Pennsylvania
corporation, having its principal place of business in Philadelphia,
Pennsylvania, and WAYPOINT FINANCIAL CORP. ("Waypoint"), a Pennsylvania
corporation, having its principal place of business in Harrisburg, Pennsylvania.
BACKGROUND
1. Sovereign and Waypoint desire for Waypoint to merge with
and into Sovereign, with Sovereign surviving such merger, in accordance with the
laws of the Commonwealth of Pennsylvania and the plan of merger set forth
herein.
2. The Boards of Directors of Sovereign and Waypoint have each
determined that it is advisable and in the best interests of their respective
companies for Waypoint to merge with and into Sovereign, subject to the terms
and conditions set forth herein.
3. It is the intention of the parties to this Agreement (as
hereinafter defined) that the Merger provided for herein be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code.
4. Subject to the terms of this Agreement, at or prior to the
execution and delivery of this Agreement, (a) each director and each executive
officer of Waypoint has executed in favor of Sovereign, a letter agreement dated
as of March 8, 2004, in the form attached hereto as Exhibit 1, and (b) Waypoint
has concurrently granted to Sovereign an option (the "Sovereign Option") to
acquire, under certain circumstances, Waypoint Common Stock (as hereinafter
defined) pursuant to a Stock Option Agreement between Sovereign and Waypoint,
dated as of March 8, 2004, attached hereto as Exhibit 2.
5. Sovereign desires to merge Waypoint Bank ("Waypoint Bank"),
a federal savings bank and a wholly-owned subsidiary of Waypoint, into and with
Sovereign Bank, a federal savings bank and a wholly-owned subsidiary of
Sovereign ("Sovereign Bank"), with Sovereign Bank surviving such merger in
accordance with the Bank Plan of Merger (as hereinafter defined).
6. Sovereign and Waypoint desire to provide the terms and
conditions governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, agreements, representations and warranties herein contained,
the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
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Acquisition Transaction shall mean one of the
following transactions with a party other than Sovereign or an
affiliate of Sovereign: (i) a merger or consolidation, or any similar
transaction, involving Waypoint or a Waypoint Subsidiary, (ii) a
purchase, lease or other acquisition of all or a substantial portion of
the assets or liabilities of Waypoint or a Waypoint Subsidiary or (iii)
a purchase or other acquisition (including by way of share exchange,
tender offer, exchange offer or otherwise) of 15% or more of any class
or series of equity securities of Waypoint or a Waypoint Subsidiary
(for purposes of Section 4.06) or 50% or more of any class or series of
equity securities of Waypoint or a Waypoint Subsidiary (for purposes of
Section 6.02(c)).
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person and, without limiting the generality of the foregoing, includes
any executive officer or director of such Person and any Affiliate of
such executive officer or director.
Aggregate Cash Election Share Number has the meaning
given that term in Section 1.02(f)(vii).
Aggregate Stock Election Share Number has the meaning
given that term in Section 1.02(f)(v).
Agreement means this agreement, and any amendment or
supplement hereto.
Applications means the applications for regulatory
approval which are required by the transactions contemplated hereby.
Articles of Merger means the articles of merger to be
executed by Sovereign and Waypoint and to be filed in the PDS in
accordance with the laws of the Commonwealth of Pennsylvania.
Bank Holding Company Act means the Bank Holding
Company Act of 1956, as amended.
Bank Merger means the merger of Waypoint Bank with
and into Sovereign Bank, with Sovereign Bank surviving such merger, as
contemplated by Section 1.03 of this Agreement.
Bank Plan of Merger has the meaning given to that
term in Section 1.03 of this Agreement.
BCL means the Pennsylvania Business corporation law
of 1988, as amended.
Benefits Schedule means the employee benefits
schedule included as part of the Waypoint Disclosure Schedule,
including without limitation, those Waypoint Disclosure Schedules
applicable to Sections 2.08 and 2.12 of this Agreement.
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Break-Up Election Notice has the meaning given that
term in Section 6.02(c).
Business Day means any day other than (i) a Saturday
or Sunday, or (ii) a day on which Sovereign is authorized or obligated
by law or executive order to close.
Cash Consideration has the meaning given that term in
Section 1.02(f)(iii).
Cash Election has the meaning given that term in
Section 1.02(f)(vi).
Cash Election Number shall have the meaning given
that term in Section 1.02(f)(vi).
Cash Election Shares has the meaning given that term
in Section 1.02(f)(vii).
Cash Proration Factor has the meaning given that term
in Section 1.02(f)(vii).
Cause has the meaning given that term in Section
4.11(d).
Closing Date means the date determined by Sovereign,
in its sole discretion, upon five (5) days prior written notice to
Waypoint, but in no event later than January 31, 2005, or such other
date as Sovereign and Waypoint shall agree.
Derivatives Contract has the meaning given that term
in Section 2.22.
Determination Date has the meaning given that term in
Section 6.01(e).
Distribution Date has the meaning given that term in
Section 4.13.
Effective Date means the date specified in the
Articles of Merger which shall be the same as the Closing Date.
Effective Time means the time specified in the
Articles of Merger for the effectiveness of the Merger or, if no such
time is specified, the time of filing the Articles of Merger.
Election shall have the meaning given that term in
Section 1.02(f)(viii).
Election Date shall have the meaning given that term
in Section 1.02(g)(ii).
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Environmental Law 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
Regulatory Authority relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life or any other natural
resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any
material containing any such substance as a component.
ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated from time
to time thereunder.
Exchange Agent has the meaning given that term in
Section 1.02(g)(i).
Exchange Fund has the meaning given that term in
Section 1.02(i)(i)
Exchange Ratio has the meaning given to such term in
Section 1.02(f)(iii).
Expenses has the meaning given that term in Section
6.02(b).
FDIA means the Federal Deposit Insurance Act, as
amended.
FDIA Limitations has the meaning given that term in
Section 2.03(a).
FDIC means the Federal Deposit Insurance Corporation.
Federal Reserve Board means the Board of Governors of
the Federal Reserve System.
Form of Election has the meaning given that term in
Section 1.02(g)(ii).
GAAP means generally accepted accounting principles
as in effect at the relevant date.
Governmental Authority means any United States or
foreign, federal, state or local governmental commission, board, body,
bureau, or other regulatory authority, agency, including courts and
other judicial bodies, or any self-regulatory body
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or authority, including any instrumentality or entity designated to act
for or on behalf of the foregoing.
HOLA means the Home Owners' Loan Act of 1933, as
amended.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
Indemnified Liabilities has the meaning given that
term in Section 4.05(a).
Indemnified Parties has the meaning given that term
in Section 4.05(a).
Indemnified Party has the meaning given that term in
Section 4.05(a).
Indemnifying Party has the meaning given that term in
Section 4.05(a).
Index Group has the meaning given that term in
Section 6.01(e).
Index Price has the meaning given that term in
Section 6.01(e).
Labor and Employment Law means any federal, state,
local, or foreign law, statute, ordinance, executive order, rule,
regulation, code, consent, order, judgment, decree, injunction or any
agreement with any regulatory authority relating to (i) employment
discrimination or affirmative action, (ii) labor relations, (iii)
employee compensation or benefits, (iv) safety and health, (v) wrongful
or retaliatory discharge, and/or (vi) any other aspect of the
employment relationship. Such laws shall include, but not be limited
to, Title VII of the Civil Rights Act of 1964 as amended, the Age
Discrimination in Employment Act, the Americans with Disabilities Act,
the Family and Medical Leave Act, the Employee Retirement Income
Security Act, the Occupational Safety and Health Act, the Fair Labor
Standards Act, the Fair Credit Collection Act, the Worker Adjustment
and Retraining Notification Act, Executive Order 11246, the Employee
Polygraph Protection Act, the Equal Pay Act, the National Labor
Relations Act, the Older Worker Benefit Protection Act, the
Rehabilitation Act, the Vietnam Era Veterans Readjustment Assistance
Act, as well as any and all state fair employment practices laws, any
and all state labor relations laws, any and all state wage and hour
laws, any and all state wage payment and collection laws, any and all
state statutes regarding wrongful or retaliatory discharge, and federal
and state common law regarding employment discrimination or affirmative
action, labor relations, employee compensation or benefits, safety and
health and/or wrongful or retaliatory discharge and/or related tort
claims.
Material Adverse Effect shall mean, with respect to
Sovereign or Waypoint, respectively, any effect which is material and
adverse to its assets, financial condition or results of operations on
a consolidated basis taken as a whole provided,
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however, that Material Adverse Effect shall not be deemed to include
(i) any change resulting from a change in interest rates generally,
(ii) any change occurring after the date hereof in any federal or state
law, rule or regulation (or in any interpretation of the foregoing) or
in GAAP or applicable regulatory accounting principles, which change
affects banking institutions (or their holding companies) generally,
(iii) changes in general economic, legal, regulatory or political
conditions affecting banking institutions (or their holding companies)
generally, (iv) changes resulting from the announcement contemplated by
this Agreement or the announcement, after the date of execution hereof,
of another transaction or transactions by Sovereign, (v) reasonable
expenses (plus reasonable legal fees, costs and expenses relating to
any litigation) arising as a result of the Merger, (vi) any
modifications or changes to valuation policies and practices in
connection with the Merger or restructuring charges taken in connection
with the Merger and the costs associated with Section 4.11 hereof
incurred in connection with this Agreement and the transactions
contemplated hereby, (vii) actions or omissions of a party (or any of
its Subsidiaries) taken with the prior written consent of the other
party in furtherance of the transactions contemplated hereby (including
without limitation any actions taken by Waypoint pursuant to Section
4.09(a)(vii) of this Agreement) or otherwise permitted to be taken by
the other party under this Agreement, (viii) the ability of such party
to complete the transactions contemplated by this Agreement on a timely
basis at any time prior to January 31, 2005, and (ix) any effect with
respect to a party hereto caused, in whole or in substantial part, by
the other party.
Maximum Amount has the meaning given that term in
Section 4.05(b).
Merger means the merger of Waypoint with and into
Sovereign, with Sovereign surviving such merger, as contemplated by
this Agreement.
Merger Consideration means the Cash Consideration or
the Stock Consideration, as applicable.
Mixed Election has the meaning given that term in
Section 1.02(f)(viii).
Nasdaq means the Nasdaq Stock Market, Inc.
Non-Election Shares has the meaning given that term
in Section 1.02(g)(v).
NYSE means the New York Stock Exchange.
OTS means the Office of Thrift Supervision.
PDS means the Department of State of the Commonwealth
of Pennsylvania.
Person means any individual, corporation,
partnership, limited liability company, limited liability partnership,
joint venture, association, trust or "group" (as that term is defined
in Section 13(d)(3) of the Exchange Act).
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Prospectus/Proxy Statement means the joint
prospectus/proxy statement, together with any supplements thereto, to
be transmitted to holders of Waypoint Common Stock in connection with
the transaction contemplated by this Agreement.
Quarterly Per Share Dividend Amount has the meaning
given to that term in Section 4.01(a)(ii).
Registration Statement means the registration
statement on Form S-4, including any pre-effective or post-effective
amendments or supplements thereto, as filed with the SEC under the
Securities Act with respect to the Sovereign Common Stock and Sovereign
Stock Purchase Rights to be issued in connection with the transactions
contemplated by this Agreement.
Regulatory Agreement has the meaning given to that
term in Section 2.11 and 3.10 of this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including without
limitation the OTS, the Federal Reserve Board, the FDIC, or the
respective staffs thereof.
Rights means warrants, options, rights, convertible
securities and other capital stock equivalents which obligate an entity
to issue its securities.
Ryan Beck has the meaning given that term in Section
2.13.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as
amended, and the rules and regulations promulgated from time to time
thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy materials, and
other documents required to be filed under the Securities Laws.
Securities Laws means the Securities Act and the
Exchange Act and the rules and regulations promulgated from time to
time thereunder.
Sovereign has the meaning given that term in the
Recitals hereto.
Sovereign Bank has the meaning given that term in the
Recitals hereto.
Sovereign Common Stock has the meaning given to that
term in Section 3.02(a) of this Agreement.
Sovereign Disclosure Schedule means a disclosure
schedule delivered by Sovereign to Waypoint pursuant to this Agreement.
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Sovereign ESOP has the meaning given that term in
Section 4.11(a)(i).
Sovereign Financials means (i) the audited
consolidated financial statements of Sovereign as of December 31, 2002
and for the three years ended December 31, 2002, including the notes
thereto, (ii) the unaudited interim consolidated financial statements
of Sovereign as of each calendar quarter thereafter included in
Securities Documents filed by Sovereign, including the notes thereto,
in the case of each of (i) and (ii) as included in the Sovereign
Securities Documents, and (iii) the unaudited consolidated financial
statements of Sovereign as of and for the year ended December 31, 2003,
including the notes thereto.
Sovereign 401(k) Plan has the meaning given that term
in Section 4.11(a)(ii).
Sovereign Market Price means, as of any date, the
closing sales price of a share of Sovereign Common Stock, as reported
on the NYSE.
Sovereign Market Value means, as of any date, the
average of the Sovereign Market Prices for the ten (10) consecutive
trading days ending on the trading day preceding the date as of which
the Sovereign Market Value is determined.
Sovereign Option means the option referenced in the
recitals to this Agreement granted to Sovereign by Waypoint to acquire
such number of shares of Waypoint Common Stock as shall equal 19.9% of
the shares of Waypoint Common Stock outstanding before giving effect to
the exercise of such option.
Sovereign Ratio has the meaning given that term in
Section 6.01(e).
Sovereign Regulatory Agreement has the meaning given
that term in Section 3.20.
Sovereign Regulatory Reports means the annual reports
of Sovereign or Sovereign Bank, as the case may be, filed with the OTS
from December 31, 2002 through the Closing Date.
Sovereign Rights Agreement means the Rights Agreement
dated as of September 19, 1989, as amended September 27, 1995, and as
further amended and restated June 21, 2001, between Sovereign and
Mellon Investor Services LLC, as rights agent, relating to Sovereign's
Series A Junior Participating Preferred Stock.
Sovereign Stock Purchase Rights means Rights to
purchase a unit of Sovereign's Series A Junior Participating Preferred
Stock in accordance with the terms of the Sovereign Rights Agreement.
Sovereign Subsidiaries means (i) any corporation, 50%
or more of the capital stock or equity interests of which are owned,
either directly or indirectly, by Sovereign, except any corporation the
stock of which is held in the ordinary course of the
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lending activities of a bank, (ii) Sovereign Bank and (iii) Sovereign
Capital Trust I, Sovereign Capital Trust III and Sovereign Capital
Trust IV and any similar entity sponsored or created by Sovereign.
Starting Date has the meaning given that term in
Section 6.01(e).
Stock Consideration shall have the meaning given that
term in Section 1.02(f)(iii).
Stock Election shall have the meaning given that term
in Section 1.02(f)(iv).
Stock Election Number has the meaning given that term
in Section 1.02(f)(iv).
Stock Election Shares shall have the meaning given
that term in Section 1.02(f)(v).
Stock Proration Factor shall have the meaning given
that term in Section 1.02(f)(v).
Subsidiary means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by
another entity, except any corporation the stock of which is held in
the ordinary course of the lending activities of a bank.
Surviving Corporation has the meaning given to that
term in Section 1.02(b).
Takeover Laws has the meaning given to that term in
Section 2.20.
Termination Fee has the meaning given that term in
Section 6.02(c).
USA Patriot Act has the meaning give that term in
Section 2.23.
Waypoint has the meaning given that term in the
Recitals hereto.
Waypoint Bank has the meaning given that term in the
Recitals hereto.
Waypoint Bank Board Designee has the meaning given
that term in Section 1.02(e)(iii).
Waypoint Bank Common Stock has the meaning given that
term in Section 2.02(b).
Waypoint Certificates has the meaning given to that
term in Section 1.02(g)(ii).
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Waypoint Common Stock means the common stock of
Waypoint described in Section 2.02(a).
Waypoint Director has the meaning given that term in
Section 1.02(e)(iii).
Waypoint Disclosure Schedule means a disclosure
schedule delivered by Waypoint to Sovereign pursuant to this Agreement.
Waypoint Financials means (i) the audited
consolidated financial statements of Waypoint as of December 31, 2002
and for the three years ended December 31, 2002, including the notes
thereto, (ii) the unaudited interim consolidated financial statements
of Waypoint as of each calendar quarter thereafter included in
Securities Documents filed by Waypoint, including the notes thereto, in
the case of each of (i) and (ii) above, included in the Waypoint
Securities Documents, and (iii) the unaudited consolidated financial
statements of Waypoint as of and for the year ended December 31, 2003,
including the notes thereto.
Waypoint 401(k) Plan has the meaning given that term
in Section 4.11(a)(iii).
Waypoint Option has the meaning given that term in
Section 1.02(h)(i).
Waypoint Preferred Stock has the meaning given that
term in Section 2.02(a).
Waypoint Regulatory Agreement has the meaning given
that term in Section 2.26.
Waypoint Regulatory Reports means the annual or
quarterly reports, and accompanying schedules, of Waypoint or Waypoint
Bank, filed with the OTS, Federal Reserve Board, or the FDIC from
December 31, 2002 through the Closing Date.
Waypoint Special Severance Policy means the Special
Waypoint Bank Severance Policy In Connection With Sovereign Merger, as
more fully described in Section 4.11(d).
Waypoint Stock Option Plans means the stock option
plans of Waypoint identified on the Waypoint Securities Documents that
have not terminated.
Waypoint Subsidiary means (i) Waypoint Bank, (ii) any
corporation or business trust, 50% or more of the capital stock or
equity interests of which are owned, either directly or indirectly, by
Waypoint, except any corporation the stock of which is held in the
ordinary course of the lending activities of Waypoint Bank and (iii)
those subsidiaries listed in the Waypoint Disclosure Schedule.
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Section 1.02 The Merger.
(a) Closing. The closing will take place on the
Closing Date at such time and place as are agreed to by the parties hereto;
provided, in any case, that all conditions to closing set forth in Article V
(other than the delivery of certificates, opinions and other instruments and
documents to be delivered at the closing) have been satisfied or waived at or
prior to the Closing Date. On the Closing Date, Sovereign and Waypoint shall
cause the Articles of Merger to be duly executed and filed with the PDS.
(b) The Merger. Subject to the terms and conditions
of this Agreement, on the Effective Date: Waypoint shall merge with and into
Sovereign; the separate corporate existence of Waypoint shall cease; Sovereign
shall be the Surviving Corporation in the Merger (Sovereign, as the surviving
corporation in the Merger, is sometimes referred to herein as the "Surviving
Corporation"); and all of the property (real, personal and mixed), rights,
powers, privileges, franchises, and duties and obligations of Waypoint shall be
taken and deemed to be transferred to and vested in Sovereign, as the Surviving
Corporation in the Merger, without further act or deed; all debts, liabilities,
obligations, restrictions, disabilities and duties of each of Waypoint and
Sovereign shall thereafter be the responsibility of Sovereign; all in accordance
with the applicable laws of the Commonwealth of Pennsylvania.
(c) Change to Structure of Merger. The parties may at
any time change the method of effecting the combination (including by providing
for the merger of Waypoint and a wholly owned subsidiary of Sovereign) if and to
the extent requested by either party and consented to by the other party (such
consent not to be unreasonably withheld); provided, however, that no such change
shall (i) alter or change the amount or kind of Merger Consideration, (ii)
adversely affect the Tax treatment of Waypoint's shareholders as a result of
receiving the Merger Consideration or the Tax treatment of either party pursuant
to this Agreement or (iii) materially impede or delay completion of the
transactions contemplated by this Agreement.
(d) Sovereign's Articles of Incorporation and Bylaws.
On and after the Effective Date, the articles of incorporation and bylaws of
Sovereign, as in effect immediately prior to the Effective Date, shall
automatically be and remain the articles of incorporation and bylaws of
Sovereign, as the Surviving Corporation in the Merger, until thereafter altered,
amended or repealed.
(e) Board of Directors and Officers of Sovereign and
Sovereign Bank.
(i) On the Effective Date, the Board of Directors
of Sovereign, as the Surviving Corporation, shall consist of those
persons holding such office immediately prior to the Effective Date.
(ii) On the Effective Date, the officers of
Sovereign duly elected and holding office immediately prior to the
Effective Date shall be the officers of Sovereign, as the Surviving
Corporation in the Merger, existing on the Effective Date.
(iii) On the effective date of the Bank Merger,
the Board of Directors of Sovereign Bank, as the surviving institution
in the Bank Merger, shall consist of (A) those persons holding such
office immediately prior to such effective date, and
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(B) one (1) additional person designated by Waypoint prior to the date
of mailing the Proxy Statement/Prospectus who is presently a member of
Waypoint's Board of Directors (each current member of Waypoint's Board
of Directors is referred to herein as a "Waypoint Director") and who is
acceptable to Sovereign (the "Waypoint Bank Board Designee"). Sovereign
shall cause the Waypoint Bank Board Designee to be appointed as a
director of Sovereign Bank effective as of the effective date of the
Bank Merger to hold office until the 2005 annual reorganization meeting
of the Board of Directors of Sovereign Bank. Sovereign agrees to cause
the Waypoint Bank Board Designee, or a replacement Waypoint Director,
to be renominated as a director of Sovereign Bank for election at the
2006 and 2007 annual reorganization meetings of the Board of Directors
of Sovereign Bank, and agrees to vote its shares of Sovereign Bank in
favor of such election at such meetings. In the event that the Waypoint
Bank Board Designee is unable or unwilling to serve or is reasonably
unacceptable to Sovereign, a replacement Waypoint Board Designee shall
be substituted for such Designee.
(iv) On the effective date of the Bank Merger,
the officers of Sovereign Bank duly elected and holding office
immediately prior to such effective date shall be the officers of
Sovereign Bank, as the surviving institution in the Bank Merger.
(f) Effect on Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Sovereign, Waypoint
or the holders of any of the following securities, the following shall occur:
(i) Cancellation of Certain Common Stock. Each
share of Waypoint Common Stock which is owned by Sovereign, Waypoint or
any of their Subsidiaries (other than shares that are held in trust,
managed, custodial or nominee accounts and the like and which are
beneficially owned by third parties) shall be canceled and cease to be
issued and outstanding, and no consideration shall be delivered
therefor.
(ii) Certain Sovereign Common Stock Not Affected.
Each issued and outstanding share of Sovereign Common Stock shall, at
and after the Effective Time, continue to be issued and outstanding as
an identical share of Sovereign Common Stock.
(iii) Conversion of Waypoint Common Stock. Each
share of Waypoint Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares canceled pursuant to Section
1.02(f)(i)) shall be, based on the election procedures set forth below,
converted into the right to receive (A) $28.00 in cash (the "Cash
Consideration") or (B) 1.262 validly issued, fully paid and
nonassessable shares of Sovereign Common Stock (the "Stock
Consideration") (the "Exchange Ratio"), plus such additional
consideration, if any, provided by Section 1.02(f)(xi).
(iv) Stock Election. Subject to the immediately
following sentence, each record holder of Waypoint Common Stock,
determined pursuant to Section 1.02(g), shall be entitled to elect to
receive shares of Sovereign Common Stock for such holder's shares of
Waypoint Common Stock (a "Stock Election"). Notwithstanding the
foregoing, the number of shares of Waypoint Common Stock to be
converted into the right to receive Sovereign Common Stock at the
Effective Time will be equal to 70% of the total number of shares of
Waypoint Common Stock issued and outstanding as of the close of
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business on the second trading day prior to the Effective Time
(excluding for this purpose shares to be canceled pursuant to Section
1.02(f)(i)) (the "Stock Election Number").
(v) Stock Election Shares. As used herein, the
term "Stock Election Shares" means shares of Waypoint Common Stock for
which a Stock Election has been made and the term "Aggregate Stock
Election Share Number" means the aggregate number of shares of Waypoint
Common Stock covered by Stock Elections. If the Aggregate Stock
Election Share Number exceeds the Stock Election Number, each Stock
Election Share shall be converted into the right to receive shares of
Sovereign Common Stock or cash in the following manner:
(A) a proration factor (the "Stock Proration
Factor") shall be determined by dividing the Stock Election
Number by the Aggregate Stock Election Share Number;
(B) the number of Stock Election Shares
covered by each Stock Election that will be converted into the
right to receive the Stock Consideration shall be determined
by multiplying the Stock Proration Factor by the total number
of shares of Waypoint Common Stock covered by such Stock
Election; and
(C) each Stock Election Share other than
Stock Election Shares converted into the right to receive
Sovereign Common Stock in accordance with Section
1.02(f)(v)(B) above shall be converted into the right to
receive the Cash Consideration.
(vi) Cash Election. Subject to the immediately
following sentence, each record holder of shares of Waypoint Common
Stock, determined pursuant to Section 1.02(g), shall be entitled to
elect to receive Cash Consideration for such holder's shares of
Waypoint Common Stock (a "Cash Election"). Notwithstanding the
foregoing, the number of shares of Waypoint Common Stock to be
converted into the right to receive cash at the Effective Time will be
equal to 30% of the total number of shares of Waypoint Common Stock
issued and outstanding as of the close of business on the second
trading day prior to the Effective Time, minus the aggregate number of
shares with respect to which cash is paid in lieu of fractional shares
pursuant to Section 1.02(f)(x) (the "Cash Election Number").
(vii) Cash Election Shares. As used herein, the
term "Cash Election Shares" means the shares of Waypoint Common Stock
for which a Cash Election has been made and the term "Aggregate Cash
Election Share Number" means the aggregate number of shares of Waypoint
Common Stock covered by Cash Elections. If the Aggregate Cash Election
Share Number exceeds the Cash Election Number, each Cash Election Share
shall be converted into the right to receive cash or Sovereign Common
Stock in the following manner:
(A) a proration factor (the "Cash Proration
Factor") shall be determined by dividing the Cash Election
Number by the Aggregate Cash Election Share Number;
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(B) the number of Cash Election Shares
covered by each Cash Election that will be converted into the
right to receive Cash Consideration shall be determined by
multiplying the Cash Proration Factor by the total number of
shares of Waypoint Common Stock covered by such Cash Election;
and
(C) each Cash Election Share other than those
shares converted into the right to receive cash in accordance
with Section 1.02(f)(vii)(B) shall be converted into the right
to receive the Stock Consideration.
(viii) Mixed Election. Subject to the immediately
following sentence, each record holder of shares of Waypoint Common
Stock immediately prior to the Effective Time shall be entitled to
elect to receive shares of Sovereign Common Stock for part of such
holder's shares of Waypoint Common Stock and cash for the remaining
part of such holder's shares of Waypoint Common Stock (the "Mixed
Election" and, collectively with Stock Election and Cash Election, the
"Election"). With respect to each holder of Waypoint Common Stock who
makes a Mixed Election, the shares of Waypoint Common Stock such holder
elects to be converted into the right to receive the Stock
Consideration shall be treated as Stock Election Shares for purposes of
the provisions contained in Sections 1.02(f)(iv) and (v) and the shares
such holder elects to be converted into the right to receive Cash
Consideration shall be treated as Cash Election Shares for purposes of
the provisions contained in Sections 1.02(f)(vi) and (vii).
(ix) Adjustments to Stock and Cash Consideration.
Notwithstanding anything herein to the contrary, the total Stock
Consideration shall be increased and the total Cash Consideration shall
be decreased if, but only to the extent, necessary to secure the tax
opinions required by Sections 5.01(i) and 5.02(i).
(x) Cash in Lieu of Fractional Shares.
Notwithstanding anything herein to the contrary, no fraction of a whole
share of Sovereign Common Stock and no scrip or certificate therefore
shall be issued in connection with the Merger. Any former Waypoint
shareholder who would otherwise be entitled to receive a fraction of a
share of Sovereign Common Stock shall receive, in lieu thereof, cash in
an amount equal to such fraction multiplied by the Sovereign Market
Value on the last trading day immediately preceding the Effective Date.
(xi) Additional Consideration for Stock Election
Shares in Certain Cases. In the event that Waypoint delivers to
Sovereign a written notice of termination under Section 6.01(d) and
thereafter Sovereign delivers a written notice indicating that it
intends to proceed with the Merger by paying additional consideration,
then each Stock Election Share shall be converted into the right to
receive a number of shares of Sovereign Common Stock plus cash (if any)
equal in value to $25.20. For purposes of the preceding sentence, (A)
the number of shares of Sovereign Common Stock payable shall not be
less than the number of shares set forth in Clause (B) of Section
1.02(f)(iii), (B) shares of Sovereign Common Stock paid shall be valued
at the Sovereign Market Value as of the close of business on the
Determination Date, and (C) the determination to pay additional shares
of Sovereign Common Stock, cash or a combination of both shall be made
at Sovereign's sole discretion; provided, however, that in no event
shall the aggregate number of shares of Sovereign Common Stock payable
in the Merger pursuant
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to this Section 1.02(f)(xi) be less than a number of shares necessary
for Waypoint and Sovereign to secure the opinions described in Section
5.01(i) and Section 5.02(i), respectively.
(g) Form of Election.
(i) Prior to the Effective Time, Sovereign shall
appoint Mellon Shareholder Services, LLC, or some other entity selected
by Sovereign subject to the approval of Waypoint (which approval shall
not be unreasonably withheld or delayed), as the exchange and paying
agent (the "Exchange Agent") for the payment and exchange of the Cash
and Stock Consideration.
(ii) Sovereign shall prepare a form of election
(the "Form of Election") subject to the approval of Waypoint (which
approval shall not be unreasonably withheld or delayed) to be mailed by
the Exchange Agent to the record holders of Waypoint Common Stock not
more than 60 Business Days or less than 20 Business Days prior to the
Election Date. The Form of Election shall be used by each record holder
of shares of Waypoint Common Stock who wishes to elect to receive
Sovereign Common Stock or cash for any or all shares of Waypoint Common
Stock held by such holder, subject to the provisions of Section
1.02(f). The Exchange Agent shall use reasonable efforts to make the
Form of Election available to all persons who become holders of
Waypoint Common Stock during the period between the record date (for
the mailing of the Form of Election) and the Election Date. Any
holder's election shall have been properly made only if the Exchange
Agent shall have received at its designated office, by 5:00 p.m., New
York City time, on the Business Day specified in the Form of Election
(or a later Business Day specified by Sovereign in a subsequent press
release) (the "Election Date", which Election Date shall be two
Business Days prior to the date on which the Effective Time will
occur), a Form of Election properly completed and signed and
accompanied by certificates that immediately prior to the Effective
Time represented issued and outstanding shares of Waypoint Common Stock
(the "Waypoint Certificates") to which such Form of Election relates,
in form acceptable for transfer on the books of Waypoint (or by an
appropriate guarantee of delivery of such Waypoint Certificates as set
forth in such Form of Election from a firm which is an "eligible
guarantor institution" (as defined in Rule 17Ad-15 under the Exchange
Act) provided that such Waypoint Certificates are in fact delivered to
the Exchange Agent by the time set forth in such guarantee of
delivery).
(iii) Any Form of Election may be revoked by the
shareholder submitting it to the Exchange Agent only by written notice
received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Election Date. If a Form of Election is revoked, the Waypoint
Certificate or Waypoint Certificates (or guarantees of delivery, as
appropriate) for the shares of Waypoint Common Stock to which such Form
of Election relates shall be promptly returned by the Exchange Agent to
the shareholder of Waypoint submitting the same. In addition, in the
event that the Agreement is terminated for any reason, any Waypoint
Certificates in the possession of Sovereign or the Exchange Agent shall
be promptly returned to the shareholder of Waypoint who submitted the
Form of Election to which such Waypoint Certificates relate.
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(iv) Sovereign shall have the discretion, which
it may delegate in whole or in part to the Exchange Agent, to determine
whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of Sovereign or the Exchange Agent in such
matters shall be conclusive and binding. Neither Sovereign nor the
Exchange Agent shall be under any obligation to notify any person of
any defect in a Form of Election submitted to the Exchange Agent. The
Exchange Agent shall also make, within seven business days after the
Election Date, all computations contemplated by Section 1.02(f) and all
such computations shall be conclusive and binding on the holder of
shares of Waypoint Common Stock.
(v) For the purposes hereof, a holder of shares
of Waypoint Common Stock who does not submit a Form of Election which
is subsequently received by the Exchange Agent prior to the Election
Date (the "Non-Election Shares") shall be deemed not to have made a
Cash Election, Stock Election or Mixed Election. If Sovereign or the
Exchange Agent shall determine that any purported Election was not
properly made, the shares subject to such improperly made Election
shall be treated as Non-Election Shares. Non-Election Shares shall be
treated as Cash Election Shares up to the Cash Election Number and as
Stock Election Shares for any Non-Election Shares in excess of the Cash
Election Number.
(h) Stock Options.
(i) At the Effective Time, each option to acquire
Waypoint Common Stock ("Waypoint Option") which is then outstanding
whether or not exercisable, shall become fully vested and exercisable
and shall cease to represent a right to acquire shares of Waypoint
Common Stock and shall be converted automatically into an option to
purchase shares of Sovereign Common Stock and the corresponding number
of Sovereign Stock Purchase Rights, and Sovereign shall assume each
Waypoint Option, in accordance with the terms of the applicable
Waypoint Stock Option Plan and stock option agreement by which such
option is evidenced, except that from and after the Effective Time, (A)
Sovereign and its Board of Directors or a duly authorized committee
thereof shall be substituted for Waypoint and Waypoint's Board of
Directors or duly authorized committee thereof administering such
Waypoint Stock Option Plan, (B) each Waypoint Option assumed by
Sovereign may be exercised solely for shares of Sovereign Common Stock
and accompanying Sovereign Stock Purchase Rights (subject to any
limited rights or cash settlement rights set forth in the applicable
Waypoint Stock Option Plans or related Waypoint stock option
agreements), (C) the number of shares of Sovereign Common Stock subject
to such Waypoint Option shall be equal to the number of shares of
Waypoint Common Stock subject to such Waypoint Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, provided that
any fractional shares of Sovereign Common Stock resulting from such
multiplication shall be rounded down to the nearest share, and (D) the
per share exercise price under each such Waypoint Option shall be
adjusted by dividing the per share exercise price under each such
Waypoint Option by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. Notwithstanding clauses
(C) and (D) of the preceding sentence, each Waypoint Option which is an
"incentive stock option" shall be adjusted as required by Section 424
of the IRC, and the regulations promulgated thereunder, so as not
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to constitute a modification, extension or renewal of the option within
the meaning of Section 424(h) of the IRC. Sovereign and Waypoint agree
to take all necessary steps to effect the foregoing provisions of this
Section 1.02(h).
(ii) Prior to the Effective Time, Waypoint shall
take or cause to be taken all actions required under Waypoint Stock
Option Plans to provide for the actions set forth in paragraph (i) of
this Section 1.02(h), which actions shall be reasonably satisfactory to
Sovereign.
(iii) Within 90 days after the Effective Date,
Sovereign shall file a registration statement on Form S-8 (or any other
successor or appropriate form) with respect to the shares of Sovereign
Common Stock and Sovereign Stock Purchase Rights subject to the options
referenced in this Section 1.02(h), and shall use its reasonable best
efforts to maintain the current status of the prospectus or
prospectuses contained therein for so long as such options remain
outstanding.
(i) Surrender and Exchange of Waypoint Stock
Certificates.
(i) Exchange Fund. At or prior to the Effective
Time, Sovereign shall deposit with the Exchange Agent, in trust for the
benefit of holders of shares of Waypoint Common Stock sufficient cash
and certificates representing shares of Sovereign Common Stock to make
all payments and deliveries to shareholders of Waypoint pursuant to
Section 1.02(f). Any cash and certificates for Sovereign Common Stock
deposited with the Exchange Agent shall hereinafter be referred to as
the "Exchange Fund."
(ii) Exchange Procedures for Effective Forms of
Election Submitted by Election Date. As soon as practicable after the
Effective Time (and in any case no later than ten (10) days
thereafter), Sovereign shall cause the Exchange Agent to mail the
Merger Consideration to shareholders of Waypoint who have submitted
effective Forms of Election prior to the Election Date.
(iii) Exchange Procedures in Absence of Effective
Forms of Election Submitted Prior to Effective Date. As soon as
reasonably practicable after the Effective Time (and in any case no
later than fifteen (15) days thereafter), Sovereign shall cause the
Exchange Agent to mail to each record holder of Waypoint Common Stock
immediately prior to the Effective Time who has not surrendered
Waypoint Certificates representing all of the Shares of Waypoint Common
Stock owned by such holder pursuant to Section 1.02(g)(ii) a letter of
transmittal which shall specify that delivery of the Waypoint
Certificates shall be effected, and risk of loss and title to the
Waypoint Certificates shall pass, only upon delivery of the Waypoint
Certificates to the Exchange Agent, and which letter shall be in
customary form and have such other provisions as Sovereign may
reasonably specify and instructions for effecting the surrender of such
Waypoint Certificates in exchange for the Cash Consideration and/or the
Stock Consideration, as the case may be. Upon surrender of a Waypoint
Certificate to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Waypoint Certificate
shall be entitled to receive
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within fifteen (15) days in exchange therefor (A) a certificate
representing, in the aggregate, the whole number of shares of Sovereign
Common Stock that such holder has the right to receive pursuant to
Section 1.02(f) and/or (B) a check in the amount equal to the cash that
such holder has the right to receive pursuant to Section 1.02(f). No
interest will be paid or will accrue on any cash payment pursuant to
Section 1.02(f). In the event of a transfer of ownership of Waypoint
Common Stock which is not registered in the transfer records of
Waypoint, a certificate representing, in the aggregate, the proper
number of shares of Sovereign Common Stock and/or a check in the proper
amount pursuant to Section 1.02(f) may be issued with respect to such
Waypoint Common Stock, as the case may be, to such a transferee if the
Waypoint Certificate formerly representing such shares of Waypoint
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Persons who
have submitted an effective Form of Election as provided in Section
1.02(g) and surrendered Waypoint Certificates as provided therein shall
be treated as if they have properly surrendered Waypoint Certificates
together with the letter of transmittal pursuant to this Section
1.02(i).
(iv) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions declared or made with
respect to shares of Sovereign Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Waypoint Certificate with respect to the shares of Sovereign Common
Stock that such Waypoint Certificate holder would be entitled to
receive upon surrender of such Waypoint Certificate until such holder
shall surrender such Waypoint Certificate in accordance with Section
1.02(i)(iii). Subject to the effect of applicable laws, following
surrender of any such Waypoint Certificate, there shall be paid to such
holder of shares of Sovereign Common Stock issuable in exchange
therefor, without interest, (A) promptly after the time of such
surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such
whole shares of Sovereign Common Stock and (B) at the appropriate
payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such
whole shares of Sovereign Common Stock.
(v) No Further Ownership Rights. All shares of
Sovereign Common Stock issued and cash paid upon conversion of shares
of Waypoint Common Stock in accordance with the terms of this Agreement
shall be deemed to have been issued or paid in full satisfaction of all
rights pertaining to the shares of Waypoint Common Stock.
(vi) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the holders of
Waypoint Certificates for twelve (12) months after the Effective Date
shall be delivered to Sovereign or otherwise on the instructions of
Sovereign and any holders of the Waypoint Certificates who have not
previously complied with this Section 1.02(i) shall thereafter look
only to Sovereign for the Merger Consideration with respect to the
shares of Waypoint Stock formerly represented thereby to which such
holders are entitled pursuant to Section 1.02(f) any cash in lieu of
fractional shares of Sovereign Common Stock to which such holders are
entitled pursuant to Section 1.02(f)(x) and any dividends or
distributions with respect to
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shares of Sovereign Common Stock to which such holders are entitled
pursuant to Section 1.02(i)(iv).
(vii) No Liability. None of Sovereign, Waypoint,
any of their respective Affiliates or the Exchange Agent shall be
liable to any Person in respect of any Merger Consideration from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(viii) Investment of the Exchange Fund. The
Exchange Agent shall invest any cash included in the Exchange Fund as
reasonably directed by Sovereign; provided that, such investments shall
be in obligations of or guaranteed by the United States of America and
backed by a full faith and credit of the United States of America or in
commercial paper obligations rated P-1 and A-1 or better by Moody's
Investors Service, Inc. and Standard & Poor's Corporation,
respectively. Any interest and other income resulting from such
investments shall be payable to Sovereign.
(ix) Lost Certificates. If any Waypoint
Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Person claiming such Waypoint
Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent or Sovereign the posting by such Person of a bond in
such reasonable amount as Sovereign may direct as indemnity against any
claim that may be made against it with respect to such Waypoint
Certificate, the Exchange Agent will deliver or cause to be delivered
in exchange for such lost, stolen, or destroyed Waypoint Certificate
the applicable Merger Consideration with respect to the shares of
Waypoint Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Sovereign Common Stock to which the holders
thereof are entitled pursuant to Section 1.02(f)(x), and any dividends
or other distributions on shares of Sovereign Common Stock to which the
holders thereof are entitled pursuant to Section 1.02(i)(iv).
(x) Withholding Rights. Sovereign shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Waypoint
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the IRC and the rules and
regulations promulgated thereunder, or any provisions of state, local
or foreign tax law. To the extent that amounts are so withheld by
Sovereign, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of
Waypoint Common Stock in respect of which such deduction and
withholding was made by Sovereign.
(xi) Stock Transfer Books. At the close of
business on the Effective Date, the stock transfer books of Waypoint
with respect to Waypoint Common Stock issued and outstanding prior to
the Effective Time shall be closed and, thereafter, there shall be no
further registration of transfers on the records of Waypoint of shares
of Waypoint Common Stock issued and outstanding prior to the Effective
Time. From and after the Effective Time, the holders of Waypoint
Certificates shall cease to have any rights with respect to such shares
of Waypoint Common Stock formerly represented thereby, except as
otherwise provided herein or by law. On or after the Effective Time,
any Waypoint Certificates presented to the Exchange Agent or Sovereign
for any reason
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shall be exchanged for the applicable Merger Consideration with respect
to the shares of Sovereign or Waypoint Common Stock, as the case may
be, formerly represented thereby, any cash in lieu of fractional shares
of Sovereign Common Stock to which the holders thereof are entitled
pursuant to Section 1.02(f)(x), and any dividends or other
distributions on shares of Sovereign Common Stock to which the holders
thereof are entitled pursuant to Section 1.02(i)(iii).
(j) Anti-Dilution Provisions. If Sovereign shall, at
any time before the Effective Date, (i) issue a dividend with respect to its
common stock in shares of Sovereign capital stock (or any security convertible
into or exchangeable for Sovereign capital stock), (ii) combine the outstanding
shares of Sovereign Common Stock into a smaller number of shares, (iii)
subdivide the outstanding shares of Sovereign Common Stock, or (iv) reclassify
or recapitalize or otherwise adjust the shares of Sovereign Common Stock, then,
in any such event, the number of shares of Sovereign Common Stock to be
delivered to Waypoint shareholders who are entitled to receive shares of
Sovereign Common Stock in exchange for shares of Waypoint Common Stock shall be
adjusted so that each Waypoint shareholder shall be entitled to receive such
number of shares of Sovereign Common Stock as such shareholder would have been
entitled to receive if the Effective Date had occurred immediately prior to the
happening of such event. (By way of illustration, if Sovereign declares a stock
dividend of 7% payable with respect to a record date on or prior to the
Effective Date, the Exchange Ratio shall be adjusted upward by 7%). In addition,
in the event that, prior to the Effective Date, Sovereign enters into an
agreement pursuant to which shares of Sovereign Common Stock would be converted
into shares or other securities or obligations of another corporation, proper
provision shall be made in such agreement so that each Waypoint shareholder
entitled to receive shares of Sovereign Common Stock in the Merger shall be
entitled to receive such number of shares or other securities or amount of
obligations of such other corporation as such shareholder would be entitled to
receive if the Effective Date had occurred immediately prior to the happening of
such event.
Section 1.03 Bank Merger. Sovereign and Waypoint shall use
their best efforts to cause Waypoint Bank to merge with and into Sovereign Bank,
with Sovereign Bank surviving such merger, concurrently with, or as soon as
practicable after the Merger on the Effective Date. Concurrently with, or as
soon as reasonably practicable after, the execution and delivery of this
Agreement, Sovereign shall cause Sovereign Bank, and Waypoint shall cause
Waypoint Bank, to execute and deliver a bank plan of merger (the "Bank Plan of
Merger") in a form acceptable to Sovereign and Waypoint.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WAYPOINT
Waypoint hereby represents and warrants to Sovereign that,
except as specifically set forth in the Waypoint Disclosure Schedule delivered
to Sovereign by Waypoint on the date hereof:
Section 2.01 Organization.
(a) Waypoint is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Waypoint is a savings and loan holding company duly registered
under the HOLA. Waypoint has the corporate power and
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authority to carry on its business and operations as now being conducted and to
own and operate the properties and assets now owned and being operated by it.
Waypoint is qualified or licensed to do business as a foreign corporation in
each jurisdiction in which it is required to be so qualified or licensed as the
result of the ownership or leasing of property or the conduct of its business.
(b) Waypoint Bank is a federal savings bank, duly
organized and validly existing under the laws of the United States of America.
Waypoint Bank has the corporate power and authority to carry on its business and
operations as now being conducted and to own and operate the properties and
assets now owned and being operated by it. Waypoint Bank and each other Waypoint
Subsidiary is qualified or licensed to do business as a foreign corporation in
each jurisdiction in which it is required to be so qualified or licensed as the
result of the ownership or leasing of property or the conduct of its business.
(c) There are no Waypoint Subsidiaries other than
Waypoint Bank and those identified in the Waypoint Disclosure Schedule.
(d) The deposits of Waypoint Bank are insured by the
FDIC to the extent provided in the FDIA.
(e) The respective minute books of Waypoint and
Waypoint Bank and each other Waypoint Subsidiary accurately reflect all material
corporate actions of their respective shareholders and boards of directors
(including committees).
(f) Prior to the date of this Agreement, Waypoint has
made available to Sovereign true and correct copies of the articles of
organization and bylaws of Waypoint, the charter and bylaws of Waypoint Bank and
the articles of organization and bylaws of each other Waypoint Subsidiary, each
as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of Waypoint consists
of (i) 100,000,000 shares of common stock, $0.01 par value per share ("Waypoint
Common Stock"), of which as of the date of this Agreement 9,589,027 shares were
issued and held by Waypoint as treasury stock and 33,316,368 shares are
outstanding, validly issued, fully paid and nonassessable and free of preemptive
rights, including, without limitation, shares of unvested restricted stock of
Waypoint Common Stock awarded or granted or to be awarded or to be granted to
directors, officers and employees of Waypoint under any employee benefit plan or
other agreement or arrangement and (ii) 10,000,000 shares of preferred stock,
none of which, as of the date hereof, are issued or outstanding ("Waypoint
Preferred Stock"). Neither Waypoint nor Waypoint Bank nor any other Waypoint
Subsidiary has or is bound by any subscription, option, warrant, call,
commitment, agreement, plan or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of Waypoint Common Stock, Waypoint Preferred Stock
or any other security of Waypoint or any securities representing the right to
vote, purchase or otherwise receive any shares of Waypoint Common Stock,
Waypoint Preferred Stock or any other security of Waypoint, other than (i)
shares issuable or to be issued under Waypoint Stock Option Plans or stock
options otherwise granted by the Waypoint Board of Directors and each as set
forth in reasonable detail (including the exercise price, the grant date, the
vesting date and the expiration date of all such
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options) in the Waypoint Disclosure Schedule, (ii) 362,135 shares of unvested
restricted stock awarded or granted or to be awarded or to be granted to
directors, officers or employees of Waypoint under any employee benefit plan or
other agreement or arrangement each as set forth in reasonable detail (including
the grant date, the vesting date, the performance criteria, if any, for vesting
and the expiration date of all such restricted stock) in the Waypoint Disclosure
Schedule, (iii) shares issuable under the Waypoint Employee Stock Ownership
Plan, (iv) shares issuable or to be issued under any of the Waypoint Stock
Option Plans, (v) shares issuable under Waypoint's Key Employee/Outside Director
Recognition and Retention Plan (including any deferred shares thereunder), (vi)
shares issuable or to be issued under the Waypoint 401(k) Plan, (vii) shares
that may be issuable from the Waypoint Deferred Compensation Trust to
participants under Waypoint's directors or officers deferred compensation plans,
(viii) capital securities issued by Waypoint Capital Trust I, Waypoint Capital
Trust II and Waypoint Statutory Trust III and (ix) shares issuable under the
Sovereign Option.
(b) The authorized capital stock of Waypoint Bank
consists of (i) 50 million shares of common stock, $0.01 par value (the
"Waypoint Bank Common Stock"), of which 100 shares are outstanding, validly
issued, fully paid, nonassessable, free of preemptive rights, all of which are
owned by Waypoint free and clear of any lien, security interests, pledges,
charges and restrictions of any kind or nature, and (ii) 20 million authorized
preferred shares, none of which are issued or outstanding. Neither Waypoint nor
any Waypoint Subsidiary has or is bound by any subscription, option, warrant,
call, commitment, agreement or other Right of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of the capital stock of any Waypoint Subsidiary or
any other security of any Waypoint Subsidiary or any securities representing the
right to vote, purchase or otherwise receive any shares of the capital stock or
any other security of any Waypoint Subsidiary. Except as set forth on the
Waypoint Disclosure Schedule, either Waypoint or Waypoint Bank own all of the
outstanding shares of capital stock of each Waypoint Subsidiary free and clear
of all liens, security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature, except that, in the case of Waypoint Capital
Trust I, Waypoint Capital Trust II, and Waypoint Statutory Trust III Waypoint
owns 100% of the common securities.
(c) Except for the Waypoint Subsidiaries, neither (i)
Waypoint, (ii) Waypoint Bank, nor (iii) any other Waypoint Subsidiary, owns any
equity interest, directly or indirectly, in any other company or controls any
other company, except for equity interests held in the investment portfolios of
Waypoint Subsidiaries, equity interests held by Waypoint Subsidiaries in a
fiduciary capacity, equity interests held in connection with the commercial loan
activities of Waypoint Subsidiaries, or other securities and interests held in a
fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted. There are no subscriptions,
options, warrants, calls, commitments, agreements or other Rights outstanding
and held by Waypoint or Waypoint Bank with respect to any other company's
capital stock or the equity of any other person.
(d) To the best of Waypoint's knowledge, except as
disclosed in Waypoint's proxy statement dated April 21, 2003, or in any
subsequent Schedule 13D or 13G filed with the SEC, 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 Waypoint Common Stock.
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Section 2.03 Authority; No Violation.
(a) Waypoint has requisite corporate power and
authority to execute and deliver this Agreement and to complete the transactions
contemplated hereby subject to receipt of all necessary approvals of
Governmental Authorities and the approval of Waypoint's shareholders of this
Agreement. Waypoint Bank has requisite corporate power and authority to execute
and deliver the Bank Plan of Merger and to complete the Bank Merger subject to
receipt of all necessary approvals of Governmental Authorities. The execution
and delivery of this Agreement by Waypoint and the completion by Waypoint of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Waypoint and, except for approval by the shareholders of
Waypoint, no other corporate proceedings on the part of Waypoint are necessary
to complete the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Waypoint and, subject to (i) approval of
the shareholders of Waypoint of this Agreement and (ii) receipt of the required
approvals from Regulatory Authorities described in Section 3.04 hereof and
compliance with such required approvals, constitutes the valid and binding
obligation of Waypoint, enforceable against Waypoint 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, general equity
principles or by applicable conservatorship or receivership provisions of the
FDIA ("FDIA Limitations")). The Bank Plan of Merger, upon its execution and
delivery by Waypoint Bank concurrently with, or as soon as reasonably
practicable after, the execution and delivery of this Agreement, will constitute
the valid and binding obligation of Waypoint Bank, enforceable against Waypoint
Bank in accordance with its terms, subject to the applicable FDIA Limitations,
or insolvency and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity.
(b) None of (i) the execution and delivery of this
Agreement by Waypoint, (ii) the execution and delivery of the Bank Plan of
Merger by Waypoint Bank, (iii) subject to receipt of approvals from Waypoint's
shareholders and the receipt of approvals from the Regulatory Authorities
referred to in Section 3.04 hereof and Waypoint's and Sovereign's compliance
with any conditions contained therein (including the expiration of related
waiting periods), the completion of the transactions contemplated hereby, and
(iv) compliance by Waypoint or Waypoint Bank with any of the terms or provisions
hereof or of the Bank Plan of Merger, will (A) conflict with or result in a
breach of any provision of the articles of incorporation or bylaws of Waypoint
or any Waypoint Subsidiary; (B) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Waypoint
or any Waypoint Subsidiary or any of their respective properties or assets; or
(C) 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 Waypoint or any Waypoint Subsidiary under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, commitment or other
instrument or obligation to which Waypoint or any Waypoint Subsidiary is a
party, or by which they or any of their respective properties or assets may be
subject.
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Section 2.04 Consents. Except for the consents, approvals,
filings and registrations from or with the Regulatory Authorities referred to in
Section 3.04 hereof and compliance with any conditions contained therein, and
the approval of this Agreement by the shareholders of Waypoint under the BCL,
Waypoint's articles of incorporation and bylaws, and Nasdaq requirements
applicable to it, and the approval of the Bank Plan of Merger by Waypoint as
sole shareholder of Waypoint Bank, and by the Board of Directors of Waypoint
Bank, no consents or approvals of, or filings or registrations with, any public
body or authority are necessary, and no consents or approvals or waivers of any
third parties are necessary, or will be, in connection with (a) the execution
and delivery of this Agreement by Waypoint or the Bank Plan of Merger by
Waypoint Bank, and (b) the completion by Waypoint of the transactions
contemplated hereby or by Waypoint Bank of the Bank Merger. As of the date
hereof, Waypoint has no reason to believe that the consents and approvals set
forth above will not be received or will be received with conditions,
limitations or restrictions unacceptable to it or which would adversely impact
Waypoint's ability to complete the transactions contemplated by this Agreement.
Shareholders of Waypoint are not entitled to exercise dissenters' rights in
connection with the transactions contemplated by this Agreement under applicable
law.
Section 2.05 Financial Statements.
(a) Waypoint has previously made available or will
make available to Sovereign the Waypoint Regulatory Reports. The Waypoint
Regulatory Reports have been, or will be, prepared in all respects in accordance
with applicable regulatory accounting principles and practices, including, but
not limited to, all applicable rules, regulations and pronouncements of
applicable Regulatory Authorities, throughout the periods covered by such
statements, and fairly present, or will fairly present in all respects, the
financial position, results of operations and changes in shareholders' equity of
Waypoint as of and for the periods ended on the dates thereof, in accordance
with applicable regulatory accounting principles, including, but not limited to,
all applicable rules, regulations and pronouncements of applicable Regulatory
Authorities, applied on a consistent basis.
(b) Waypoint has previously made available or will
make available to Sovereign the Waypoint Financials filed by it with the SEC.
The Waypoint Financials have been, or will be, prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered by such statements,
except as noted therein, and fairly present, or will fairly present, the
consolidated financial position, results of operations and cash flows of
Waypoint as of and for the periods ended on the dates thereof, in accordance
with GAAP applied on a consistent basis, except as noted therein. Except as set
forth in the Waypoint Disclosure Schedule, Waypoint has no reason to believe
that there exists any material "loss contingency" as that term is defined in
FASB 5, with respect to its restatement of its financial statements for the
years ended December 31, 2000, 2001 and 2002 and selected financial data
contained within management's discussion and analysis of Form 10-K for the years
ended December 31, 1998, 1999, 2000, 2001 and 2002.
(c) Since September 30, 2003, neither Waypoint nor
Waypoint Bank (as the case may be) had, or will have, any liabilities,
obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such Waypoint
Financials or Waypoint Regulatory Reports or in the footnotes thereto which are
not appropriately reflected or reserved against therein or appropriately
disclosed in a footnote
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thereto, except for liabilities, obligations and loss contingencies which are
not material in the aggregate and which are incurred in the ordinary course of
business, consistent with past practice and except for liabilities, obligations
and loss contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of any unaudited
statements, to normal, recurring audit adjustments and the absence of footnotes.
Section 2.06 Taxes. Waypoint and the Waypoint Subsidiaries are
members of the same affiliated group within the meaning of IRC Section 1504(a).
Waypoint has duly filed, and will file, all federal, state and local tax returns
required to be filed by or with respect to Waypoint and all Waypoint
Subsidiaries on or prior to the Closing Date (taking into account any extensions
of time within which to file which have not expired) (all such returns being or
will be true and complete in all respects) and has duly paid or will pay, or
made or will make provisions and related balance sheet accruals (if required)
for the payment of, all federal, state and local taxes which have been incurred
by or are due or claimed to be due from Waypoint and any Waypoint Subsidiary by
any taxing authority or pursuant to any tax sharing agreement or arrangement
(written or oral) on or prior to the Closing Date other than taxes which (a) are
not delinquent or (b) are being contested in good faith (which are described on
the Waypoint Disclosure Schedule). Except as disclosed in the Waypoint
Disclosure Schedule, neither Waypoint nor any Waypoint Subsidiary has (i) any
pending federal, state or local tax audits, (ii) waived or extended any federal,
state or local tax statute of limitations for tax purposes.
Section 2.07 No Material Adverse Effect. Waypoint has not
suffered any Material Adverse Effect since September 30, 2003.
Section 2.08 Contracts.
(a) Except as described in this Agreement, documents
listed as exhibits to Waypoint's Securities Documents, or in the Waypoint
Disclosure Schedule, neither Waypoint nor any Waypoint Subsidiary is a party to
or subject to: (i) any employment, consulting or severance contract or
arrangement with any past or present officer, director or employee of Waypoint
or any Waypoint Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options, deferred
compensation, retirement payments, profit sharing or similar arrangements for or
with any past or present officers, directors or employees of Waypoint or any
Waypoint Subsidiary; (iii) any collective bargaining agreement with any labor
union relating to employees of Waypoint or any Waypoint Subsidiary; (iv) any
agreement which by its terms limits the payment of dividends by any Waypoint
Subsidiary; (v) any instrument evidencing or related to indebtedness for
borrowed money whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase, guaranty or otherwise, in respect
of which Waypoint or any Waypoint Subsidiary is an obligor to any person, which
instrument evidences or relates to indebtedness, other than deposits, repurchase
agreements, the junior subordinated debentures referred to in Section 4.05(e) or
as set forth in the Waypoint Disclosure Schedule, bankers acceptances and
"treasury tax and loan" accounts established in the ordinary course of business
and transactions in "federal funds" or which contains financial covenants or
other restrictions (other than those relating to the payment of principal and
interest when due) which would be applicable on or after the Closing Date to
Sovereign or any Sovereign Subsidiary; (vi) any contract (other than this
Agreement) limiting the freedom of Waypoint or any Waypoint Subsidiary to engage
in any type of banking or bank-related business permissible under law; or (vii)
any contractual or other
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agreements which give any director, officer or employee of Waypoint or any
Waypoint Subsidiary the right to terminate such agreement prior to 90 days after
the Effective Date.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) have been made
available to Sovereign on or before the date hereof, are listed on the Waypoint
Disclosure Schedule and are in full force and effect on the date hereof and
neither Waypoint nor any Waypoint Subsidiary (nor, to the knowledge of Waypoint,
any other party to any such contract, plan, arrangement or instrument) has
breached any provision of, or is in default in any respect under any term of,
any such contract, plan, arrangement or instrument. Except as described in this
Agreement or as set forth in the Waypoint Disclosure Schedule, (i) no party to
any material contract, plan, arrangement or instrument will have the right to
terminate any or all of the provisions of any such contract, plan, arrangement
or instrument as a result of the transactions contemplated by this Agreement,
(ii) none of the employees (including officers) of Waypoint or any Waypoint
Subsidiary, possess the contractual right to terminate their employment as a
result of the execution of this Agreement or upon completion of the Merger on
the Effective Date, and each contract with any director, officer and employee is
listed on the Waypoint Disclosure Schedule and such Schedule contains a true and
correct summary of (A) severance and other benefits, if any, such individual
would be entitled to receive upon termination of their employment for other than
cause and (B) the provisions of any covenant not to compete, covenant not to
solicit customers and covenant not to solicit employees (if any), (iii) no plan,
employment agreement, termination agreement, or similar agreement or arrangement
to which Waypoint or any Waypoint Subsidiary is a party or under which Waypoint
or any Waypoint Subsidiary may be liable contains provisions which permit an
employee or independent contractor to terminate it without cause and continue to
accrue future benefits thereunder, and (iv) no such agreement, plan or
arrangement (A) provides for acceleration in the vesting of benefits or payments
due thereunder upon the occurrence of a change in ownership or control of
Waypoint or any Waypoint Subsidiary absent the occurrence of a subsequent event;
(B) provides for benefits which may cause the disallowance of a federal income
tax deduction under IRC Section 280G; or (C) requires Waypoint or any Waypoint
Subsidiary to provide a benefit in the form of Waypoint Common Stock or
determined by reference to the value of Waypoint Common Stock.
Section 2.09 Ownership of Property; Insurance Coverage.
(a) Waypoint and the Waypoint Subsidiaries have, or
will have as to property acquired after the date hereof, good and, as to real
property, marketable title to all assets and properties owned by Waypoint or any
Waypoint 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 Waypoint Regulatory
Reports and in the Waypoint Financials or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair value,
in the ordinary course of business, since the date of such balance sheets),
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) statutory liens for amounts not yet delinquent or which are being
contested in good faith, (ii) items permitted under Article IV of this
Agreement, (iii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iv) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (v) as reflected on the consolidated statement of financial condition
of Waypoint as of September 30, 2003 included in Waypoint's Securities
Documents.
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Waypoint and the Waypoint Subsidiaries, as lessee, have the right under valid
and subsisting leases of real and personal properties used by Waypoint 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 the Notes to the Waypoint Financials.
(b) With respect to all agreements pursuant to which
Waypoint or any Waypoint Subsidiary has purchased securities subject to an
agreement to resell, if any, Waypoint or such Waypoint Subsidiary, as the case
may be, has a valid, perfected first lien or security interest in the securities
or other collateral securing the repurchase agreement, and the value of such
collateral equals or exceeds the amount of the debt secured thereby.
(c) Waypoint and the Waypoint Subsidiaries currently
maintain insurance considered by Waypoint to be reasonably prudent for their
respective operations in accordance with industry practice. Neither Waypoint nor
any Waypoint Subsidiary 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. Except with regard to ordinary course claims under
Waypoint's medical insurance plans, and except as disclosed in the Waypoint
Disclosure Schedule, there are presently no material claims pending under such
policies of insurance and no notices have been given by Waypoint or Waypoint
Bank under such policies during the past two (2) years with respect to any
potential material claims. All such insurance is valid and enforceable and in
full force and effect, and within the last three years Waypoint, Waypoint Bank
and each Waypoint Subsidiary has received each type of insurance coverage for
which they have applied and during such periods have not been denied
indemnification for any claims submitted under any of their insurance policies.
Section 2.10 Legal Proceedings. Except as set forth in the
Waypoint Disclosure Schedule, neither Waypoint nor any Waypoint Subsidiary is a
party to any, and there are no pending or, to the best of Waypoint's knowledge,
threatened legal, administrative, arbitration or other proceedings, claims
(whether asserted or unasserted), actions or governmental investigations or
inquiries of any nature (a) against Waypoint or any Waypoint Subsidiary or (b)
to which Waypoint or any Waypoint Subsidiary's assets are or may be subject, (c)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (d) which could adversely affect the ability of Waypoint to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (a) or (b) which, if
adversely determined, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on Waypoint.
Section 2.11 Compliance With Applicable Law.
(a) Except as disclosed in the Waypoint Disclosure
Schedule, Waypoint and Waypoint Subsidiaries and their employees hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of the businesses of Waypoint and Waypoint Subsidiaries under, and have
complied in all respects with, applicable laws, statutes, orders, rules or
regulations of any federal, state or local governmental authority relating to
them.
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(b) Except as disclosed on the Waypoint Disclosure
Schedule, (i) Waypoint and each Waypoint Subsidiary is in substantial compliance
with all of the statutes, regulations or ordinances which each Regulatory
Authority applicable to them enforces; (ii) since December 31, 2001, no
Regulatory Authority has threatened to revoke any license, franchise, permit or
governmental authorization which is material to Waypoint or any Waypoint
Subsidiary or required or threatened to require Waypoint or any Waypoint
Subsidiary to enter into a cease and desist order or memorandum of understanding
with it; (iii) since December 31, 2001, no Regulatory Authority has restricted
or limited the operations of Waypoint or any Waypoint Subsidiary, including
without limitation any restriction on the payment of dividends (any such
memorandum or order described in this sentence is hereinafter referred to as a
"Regulatory Agreement"); and (iv) there is, at present, no Regulatory Agreement
threatened, outstanding or in effect. Neither Waypoint nor any Waypoint
Subsidiary has consented to or entered into any Regulatory Agreement. Waypoint
received a rating of at least "Satisfactory" in connection with its last CRA
examination.
Section 2.12 ERISA. Waypoint has previously delivered or made
available to Sovereign true and complete copies of all employee pension benefit
plans within the meaning of ERISA Section 3(2), including profit sharing plans,
defined benefit pension plans, employee stock ownership plans, employee stock
purchase plans, deferred compensation and supplemental income plans,
supplemental executive retirement plans, employment agreements, annual executive
and administrative incentive plans or long term incentive plans, severance
plans, policies and agreements, group insurance plans, and all employee welfare
benefit plans within the meaning of ERISA Section 3(1) (including vacation pay,
sick leave, short-term disability, long-term disability, and medical plans) and
all other employee benefit plans, policies, programs, agreements and
arrangements, all of which are set forth in the Waypoint Disclosure Schedule,
sponsored or contributed to for the benefit of the employees or former employees
(including retired employees) and any beneficiaries thereof or directors or
former directors of Waypoint or any Waypoint Subsidiary, together with (a) the
most recent actuarial and valuation reports (if any) and financial reports
relating to those plans which constitute "qualified plans" under IRC Section
401(a), or which are self-insured or self-funded employee benefit plans within
the meaning of ERISA Section 3(3), (b) the most recent annual reports relating
to such plans filed by them, respectively, with any government agency, and (c)
all rulings (other than determination letters and including any voluntary
compliance filing or self-correction actions) and the most recent determination
letters and any pending request for a determination letter pertaining to any
such plans. Neither Waypoint, any Waypoint Subsidiary, nor any employee benefit
pension plan (as defined in ERISA Section 3(2)) maintained by Waypoint or any
Waypoint Subsidiary, has incurred, directly or indirectly, within the past six
(6) years any liability under Title IV of ERISA (including to the Pension
Benefit Guaranty Corporation) or to the IRS with respect to any employee benefit
pension plan qualified under IRC Section 401(a) which liability has resulted in
or will result in a Material Adverse Effect with respect to Waypoint, except
liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any reportable event
under ERISA Section 4043 occurred with respect to any such pension plan which
would result in a Material Adverse Effect. Except as set forth in the Waypoint
Disclosure Schedule, to the knowledge of Waypoint, with respect to each of such
plans that is subject to Title IV of ERISA, the present value of the accrued
benefits under such plans, calculated on a plan termination basis (using
appropriate or required annuity purchase rates and lump-sum distribution
assumptions), based on the plan's most recent valuation date and determined as
of such date, did not exceed the then current value of the assets of such plan
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allocable to such accrued benefits. To the knowledge of Waypoint, after
appropriate inquiry, neither Waypoint nor any Waypoint Subsidiary has incurred
or is subject to any liability under ERISA Section 4201 for a complete or
partial withdrawal from a multiemployer plan. To the knowledge of Waypoint, all
"employee benefit plans," as defined in ERISA Section 3(3), comply and within
the past six (6) years have complied in all material respects with (i) relevant
provisions of ERISA and (ii) in the case of plans intended to qualify for
favorable income tax treatment, provisions of the IRC relevant to such
treatment. Except as set forth in the Waypoint Disclosure Schedule, to the
knowledge of Waypoint, after appropriate inquiry, no prohibited transaction
(which shall mean any transaction prohibited by ERISA Section 406 and not exempt
under ERISA Section 408 or any transaction prohibited under IRC Section 975) has
occurred within the past six (6) years with respect to any employee benefit plan
maintained by Waypoint or any Waypoint Subsidiary which would result in the
imposition, directly or indirectly, of an excise tax under IRC Section 4975 or
other penalty under ERISA or the IRC, which, individually or in the aggregate,
has resulted in or will result in a Material Adverse Effect with respect to
Waypoint. Waypoint and the Waypoint Subsidiaries provide continuation coverage
under group health plans for separating employees and "qualified beneficiaries"
in compliance with the provisions of IRC Section 4980B(f). Such group health
plans are in material compliance with Section 1862(b)(1) of the Social Security
Act and the applicable provisions of the Health Insurance Portability and
Accountability Act of 1996, as amended.
Section 2.13 Brokers, Finders and Financial Advisors; Fairness
Opinion. Except for Waypoint's engagement of Ryan, Beck & Co. LLC ("Ryan Beck")
in connection with transactions contemplated by this Agreement, or as otherwise
set forth on the Waypoint Disclosure Schedule, neither Waypoint nor any Waypoint
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or financial advisor in connection with
the transactions contemplated by this Agreement or in connection with any
transaction other than the Merger, or, except for its commitments disclosed in
Waypoint Disclosure Schedule, incurred any liability or commitment for any fees
or commissions to any such person in connection with the transactions
contemplated by this Agreement or in connection with any transaction other than
the Merger, which has not been reflected in the Waypoint Financials. The
engagement letter between Waypoint and Ryan Beck relating to Ryan Beck's
engagement as Waypoint's financial advisor in connection with the transactions
contemplated by this Agreement has been made available to Sovereign. Ryan Beck
has provided Waypoint with its opinion to the effect that, as of the date of
approval of this Agreement by the Board of Directors of Waypoint, the Exchange
Ratio is fair to shareholders of Waypoint from a financial point of view.
Section 2.14 Environmental Matters. Except as set forth on the
Waypoint Disclosure Schedule, neither Waypoint nor any Waypoint Subsidiary, nor
any properties operated by Waypoint or any Waypoint Subsidiary during Waypoint's
use or ownership has been or is in violation of or liable under any
Environmental Law. There are no actions, suits or proceedings, or demands,
claims, notices or, to the knowledge of Waypoint, investigations (including
without limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of Waypoint,
overtly threatened, relating to the liability of any property owned or operated
by Waypoint or any Waypoint Subsidiary under any Environmental Law. Waypoint has
previously made available to Sovereign copies of any and all environmental
reports, studies, assessments and information regarding underground storage
tanks relating to the environmental condition of any property
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owned or operated by Waypoint or any of its Subsidiaries. Except as disclosed in
the Waypoint Disclosure Schedules Waypoint has no knowledge of: (a) the presence
of lead paint or asbestos or asbestos containing materials in any structures on
its owned or leased properties; (b) any federal or state superfund or similar
listing for any disposal sites to which the waste of Waypoint has been
transported; and (c) any environmental liens on its owned or leased properties.
Section 2.15 Allowance for Losses. The allowance for loan
losses reflected, and to be reflected, in the Waypoint Regulatory Reports each
has been, and will be, established in compliance with the requirements of all
applicable regulatory criteria, and the allowance for loan losses shown, and to
be shown, on the balance sheets contained in the Waypoint Financials have been,
and will be, established in compliance with the applicable requirements of GAAP.
Section 2.16 Information to be Supplied. The information to be
supplied by Waypoint and Waypoint Bank for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) and each amendment or
supplement thereto, if any, and/or any information Waypoint filed with the SEC
under the Exchange Act which is incorporated by reference into the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act and
as of the date the Prospectus/Proxy Statement is mailed to shareholders of
Waypoint and up to and including the date of the meeting of shareholders of
Waypoint to which such Prospectus/Proxy Statement relates, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The information supplied,
or to be supplied, by Waypoint for inclusion in the Applications will, at the
time such documents are filed with any Regulatory Authority and up to and
including the date of the attainment of any required regulatory approvals or
consents, be accurate in all material respects.
Section 2.17 Securities Documents. The Securities Documents
filed or to be filed by Waypoint under the Exchange Act at any time since
December 31, 2002 complied, at the time filed with the SEC, in all respects,
with the Exchange Act and all applicable rules and regulations of the SEC.
Section 2.18 Related Party Transactions. Except as disclosed
in the Securities Documents filed by Waypoint, in the footnotes to the Waypoint
Financials, or in the Waypoint Disclosure Schedule, Waypoint is not a party to
any transaction (including any loan or other credit accommodation, but excluding
deposits in the ordinary course of business) with any Affiliate of Waypoint
(except a Waypoint Subsidiary). All such transactions (a) were made in the
ordinary course of business, (b) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other Persons, and (c) did not involve more than
the normal risk of collectability or present other risks or unfavorable
features. No loan or credit accommodation to any Affiliate of Waypoint 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 Waypoint nor Waypoint Bank has been notified that principal and interest
with respect to any such loan or other credit accommodation will not be paid
when due or that the loan grade classification accorded such loan or credit
accommodation by a Waypoint Bank is inappropriate.
Section 2.19 Loans. Each loan reflected as an asset in the
Waypoint Financial Statements (a) was originated, underwritten, approved,
documented and periodically approved in
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all material respects in accordance with prudent lending standards generally
accepted in the banking business and, to the knowledge of Waypoint, after
appropriate inquiry, except as disclosed on the Waypoint Disclosure Schedule,
did not deviate in any material respect from Waypoint's policies and procedures
currently in effect, and (b) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to the affecting creditors' rights or by general
equity principles or FDIA Limitations).
Section 2.20 Takeover Laws. Assuming the accuracy of the
representation and warranty of Sovereign set forth in Section 3.18, Waypoint has
taken all action required to be taken by it in order to exempt this Agreement,
the Bank Plan of Merger and the Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the Bank Plan of
Merger and the Option Agreement and the transactions contemplated hereby and
thereby are exempt from, the requirements of any "moratorium," "control share,"
"fair price," "affiliate transaction," "business combination," or other
antitakeover laws and regulations of any jurisdiction (collectively, the
"Takeover Laws"), including, without limitation, the Commonwealth of
Pennsylvania.
Section 2.21 Labor and Employment Matters. To the knowledge of
Waypoint, neither Waypoint nor any Waypoint Subsidiary, nor any facilities owned
or operated by Waypoint or any Waypoint Subsidiary has been or is in violation
of or is liable under any Labor and Employment Law, which violation or
liability, individually or in the aggregate, resulted in, or will result in, a
Material Adverse Effect with respect to Waypoint. Except as disclosed in the
Waypoint Disclosure Schedule, there are no legal, administrative, arbitration or
other proceedings, demands, claims, notices, audits or, to the knowledge of
Waypoint, investigations (including without limitation notices, demand letters
or requests for information from any federal, state or local commission, agency
or board) instituted or pending, or to the knowledge of Waypoint threatened,
relating to the liability of Waypoint or any Waypoint Subsidiary under any Labor
and Employment Law.
Section 2.22 Risk Management Instruments. Neither Waypoint nor
any of the Waypoint Subsidiaries is a party or has agreed to enter into an
exchange traded or over-the-counter equity, interest rate, foreign exchange or
other swap, forward, future, option, cap, floor or collar or any other contract
that is not included on the balance sheet and is a derivatives contract
(including various combinations thereof) (each, a "Derivatives Contract") or
owns securities that (a) are referred to generically as "structured notes,"
"high risk mortgage derivatives," "capped floating rate notes" or "capped
floating rate mortgage derivatives" or (b) are likely to have changes in value
as a result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes,
except for those Derivatives Contracts and other instruments legally purchased
or entered into in the ordinary course of business, consistent with safe and
sound banking principles and regulatory guidance. All of such Derivatives
Contracts or other instruments, are legal, valid and binding obligations of
Waypoint or any of the Waypoint Subsidiaries enforceable in accordance with
their terms (except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws
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affecting creditors' rights and remedies generally), and are in full force and
effect. Waypoint and the Waypoint Subsidiaries have duly performed in all
respects all of their obligations thereunder to the extent that such obligations
to perform have accrued, and, to Waypoint's knowledge, there are no breaches,
violations or defaults or allegations or assertions of such by any party
thereunder which would have or would reasonably be expected to have a Material
Adverse Effect on Waypoint.
Section 2.23 Community Reinvestment Act, Anti-Money Laundering
and Customer Information Security. Except as set forth in the Waypoint
Disclosure Schedules, neither Waypoint nor Waypoint Bank is aware of, has been
advised of, or has reason to believe that any facts or circumstances exist,
which would cause Waypoint Bank (a) to be deemed not to be in satisfactory
compliance in any material respect with the Community Reinvestment Act, and the
regulations promulgated thereunder, or to be assigned a rating for Community
Reinvestment Act purposes by federal or state bank regulators of lower than
"satisfactory," or (b) to be deemed to be operating in violation in any respect
of the federal Bank Secrecy Act, as amended, and its implementing regulations
(31 C.F.R. Part 103), the USA Patriot Act of 2001, Public Law 107-56 (the "USA
Patriot Act"), and the regulations promulgated thereunder, any order issued with
respect to anti-money laundering by the U.S. Department of the Treasury's Office
of Foreign Assets Control, or any other applicable anti-money laundering
statute, rule or regulation, or (c) to be deemed not to be in satisfactory
compliance in any respect with the applicable privacy of customer information
requirements contained in any federal and state privacy laws and regulations,
including, without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999
and regulations promulgated thereunder, as well as the provisions of the
information security program adopted by Waypoint Bank pursuant to 12 C.F.R. Part
364. Except as set forth in the Waypoint Disclosure Schedule, the board of
directors of Waypoint Bank has adopted and implemented an anti-money laundering
program that contains adequate and appropriate customer identification
certification procedures that has not been deemed ineffective in any material
respects by any Regulatory Authority and that meets the requirements in all
material respects of Section 352 of the USA Patriot Act and the regulations
thereunder.
Section 2.24 Credit Card Accounts. Except as set forth on the
Waypoint Disclosure Schedules, neither Waypoint nor any Waypoint Subsidiary
originates, maintains or administers credit card accounts.
Section 2.25 Merchant Processing. Except as set forth on the
Waypoint Disclosure Schedule, neither Waypoint nor any Waypoint Subsidiary
provides, or has provided, merchant credit card processing services to any
merchants.
Section 2.26 Agreements with Regulatory Authorities. Except as
set forth on the Waypoint Disclosure Schedule, neither Waypoint nor any Waypoint
Subsidiary is subject to any presently pending cease-and-desist or other order
or enforcement action issued by or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
has been ordered to pay any civil money penalty by, or has been since January 1,
2003, a recipient of any supervisory letter from, or since January 1, 2003, has
adopted any policies, procedures or board resolutions at the request of
suggestion of any Regulatory Authority or other governmental entity that
currently restricts in any material respect the conduct of its business or that
in any manner relates to its capital adequacy, its ability to pay dividends, its
credit or risk
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management policies, its management or its business, other than those of general
application that apply to similarly situated financial holding companies or
their subsidiaries (each item in this sentence, whether or not set forth in the
Waypoint Disclosure Schedule, a "Waypoint Regulatory Agreement"), nor has
Waypoint or any of its Subsidiaries been advised since January 1, 2003 by any
Regulatory Authority or other governmental entity that it is considering
issuing, initiating, ordering, or requesting any such Waypoint Regulatory
Agreement.
Section 2.27 Regulatory Capital. Waypoint and Waypoint Bank
meet or exceed all applicable regulatory capital requirements, and Waypoint Bank
is deemed "well capitalized" under such regulatory requirements.
Section 2.28 Quality of Representations. The representations
made by Waypoint in this Agreement are true, correct and complete in all
material respects and do not omit statements necessary to make the
representations not misleading under the circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Sovereign hereby represents and warrants to Waypoint that,
except as set forth in the Sovereign Disclosure Schedule delivered by Sovereign
to Waypoint on or prior to the date hereof:
Section 3.01 Organization.
(a) Sovereign is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Sovereign is a savings and loan holding company duly registered
under the HOLA. Sovereign has the corporate power and authority to carry on its
business and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each Sovereign
Subsidiary is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation and each possesses full corporate
power and authority to carry on its respective business and to own, lease and
operate its properties as presently conducted. Neither Sovereign nor any
Sovereign Subsidiary is required by the conduct of its business or the ownership
or leasing of its assets to qualify to do business as a foreign corporation in
any jurisdiction other than the Commonwealth of Pennsylvania and the states of
Delaware, New Jersey, Massachusetts, Connecticut, Rhode Island, and New
Hampshire.
(b) Sovereign Bank is a federal savings bank, duly
organized and validly existing under the laws of the United States of America.
Sovereign Bank has the corporate power and authority to carry on its business
and operations as now being conducted and to own and operate the properties and
assets now owned and being operated by it.
(c) The deposits of Sovereign Bank are insured by the
FDIC to the extent provided in the FDIA.
(d) The respective minute books of Sovereign and
Sovereign Bank accurately reflect all material corporate action of their
respective shareholders and boards of directors (including committees) through
the date of this Agreement.
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(e) Prior to the execution of this Agreement,
Sovereign has made available to Waypoint true and correct copies of the articles
of incorporation and the bylaws of Sovereign and Sovereign Bank, respectively,
as in effect on the date hereof.
Section 3.02 Capital Structure.
(a) The authorized capital stock of Sovereign
consists of (a) 400,000,000 shares of common stock, no par value ("Sovereign
Common Stock"), of which, at the date of this Agreement, 1,184,570 shares were
issued and held by Sovereign as treasury stock and 306,422,547 shares are
outstanding, validly issued, fully paid and nonassessable, and (b) 7,500,000
shares of preferred stock, no par value, of which, at the date of this
Agreement, no shares are issued or outstanding. No shares of Sovereign Common
Stock were issued in violation of any preemptive rights. Sovereign has no Rights
authorized, issued or outstanding, other than (i) the Sovereign Stock Purchase
Rights, (ii) options or other rights to acquire shares of Sovereign Common Stock
authorized under Sovereign's stock option plans, non-employee directors
compensation plan, employee stock ownership plan, employee stock purchase plan,
and dividend reinvestment and stock purchase plan, and other employee benefit
and stock based benefit plans, (iii) securities issued by Sovereign Capital
Trust I, (iv) securities issued by Sovereign Capital Trust III, (v) securities
issued by Sovereign Capital Trust IV, (vi) the deemed rights to acquire
Sovereign Common Stock possessed by the holders of the common stock of Seacoast
Financial Services Corporation under the Agreement and Plan of Merger, dated as
of January 26, 2004, between Sovereign and Seacoast Financial Services
Corporation.
(b) To the best of Sovereign's knowledge, except as
disclosed in Sovereign's proxy statement dated March 21, 2003, in any subsequent
Schedule 13D or 13G filed with the SEC, or in the Sovereign Disclosure Schedules
no person or "group" (as that term is used in Section 13(d)(3) of the Exchange
Act) is the beneficial owner (as defined in Section 13(d) of the Exchange Act)
of 5% or more of the outstanding shares of Sovereign Common Stock.
(c) Except as disclosed in the Sovereign Disclosure
Schedule, Sovereign owns all of the capital stock of Sovereign Bank, free and
clear of any lien, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature and either Sovereign or
Sovereign Bank owns all of its shares of capital stock of each other Sovereign
Subsidiary free and clear of all liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature. Except for the
Sovereign Subsidiaries, Sovereign does not possess, directly or indirectly, any
equity interest in any corporation, except for equity interests held in the
investment portfolios of Sovereign Subsidiaries, equity interests held by
Sovereign Subsidiaries in a fiduciary capacity, and equity interests held in
connection with the commercial loan activities of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Sovereign has requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby subject to (i) receipt of all necessary
approvals of Governmental Authorities, and (ii) the approval of Sovereign's
shareholders of a proposed amendment to Sovereign's articles of incorporation to
increase the number of authorized shares of Sovereign Common Stock. Sovereign
Bank has
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requisite corporate power and authority to execute and deliver the Bank Plan of
Merger and to consummate the Bank Merger subject to receipt of all necessary
approvals of Governmental Authorities. The execution and delivery of this
Agreement by Sovereign and the completion by Sovereign of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Sovereign, and except for shareholder approval of the amendment to
its articles of incorporation referred to above, no other corporate proceedings
on the part of Sovereign are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Sovereign and, except for the required approvals of Regulatory Authorities
described in Section 3.04 hereof, and except for shareholder approval of the
amendment to its articles of incorporation referred to above, constitutes the
valid and binding obligation of Sovereign, enforceable against Sovereign 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 or FDIA Limitations). The Bank
Plan of Merger, upon its execution and delivery by Sovereign Bank, will
constitute the valid and binding obligation of Sovereign Bank, enforceable
against Sovereign Bank in accordance with its terms, subject to applicable
conservatorship and receivership provisions of the FDIA, or insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) None of (i) The execution and delivery of this
Agreement by Sovereign, (ii) the execution and delivery of the Bank Plan of
Merger by Sovereign Bank, (iii) subject to receipt of approval from Sovereign's
shareholders of the amendment to its articles of incorporation to increase the
number of authorized shares of Sovereign Common Stock and the receipt of
approvals from the Regulatory Authorities referred to in Section 3.04 hereof and
Waypoint's and Sovereign's compliance with any conditions contained therein
(including the expiration of related waiting periods), the completion of the
transactions contemplated hereby, and (iv) compliance by Sovereign or Sovereign
Bank with any of the terms or provisions of this Agreement or of the Bank Plan
of Merger will (A) conflict with, or result in a breach of, any provision of the
articles of incorporation or bylaws of Sovereign or any other Sovereign
Subsidiary or the charter and bylaws of Sovereign Bank; (B) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Sovereign or any other Sovereign Subsidiary or any of their
respective properties or assets; or (C) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Sovereign or
Sovereign Bank under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
investment or obligation to which Sovereign or Sovereign Bank is a party, or by
which they or any of their respective properties or assets may be subject.
Section 3.04 Consents. Except for consents, approvals, filings
and registrations from or with the OTS, the SEC, and state "blue sky"
authorities, and compliance with any conditions contained therein, no consents
or approvals or waivers of, or filings or registrations with, any public body or
authority are necessary, and no consents or approvals of any third parties other
than Sovereign or its Affiliates are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by Sovereign or the Bank Plan
of Merger by Sovereign
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Bank, and (b) the completion by Sovereign of the transactions contemplated
hereby or by Sovereign Bank of the Bank Merger. Sovereign has no reason to
believe that the consents and approvals set forth above will not be received or
will be received with conditions, limitations or restrictions unacceptable to it
or which would adversely impact the ability of Sovereign or Sovereign Bank to
complete the transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) Sovereign has previously made available, or will
make available, to Waypoint, the Sovereign Regulatory Reports available to
Waypoint for inspection. The Sovereign Regulatory Reports have been, or will be,
prepared in all respects in accordance with applicable regulatory accounting
principles and practices, including, but not limited to, all applicable rules,
regulations and pronouncements of applicable Regulatory Authorities, throughout
the periods covered by such statements, and fairly present, or will fairly
present in all respects, the financial position, results of operations, and
changes in shareholders' equity of Sovereign as of and for the periods ended on
the dates thereof, in accordance with applicable regulatory accounting
principles, including, but not limited to, all applicable rules, regulations and
pronouncements of applicable Regulatory Authorities, applied on a consistent
basis.
(b) Sovereign has previously made available, or will
make available, to Waypoint the Sovereign Financials. The Sovereign Financials
have been, or will be, prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered by the Sovereign Financials, except as
noted therein and fairly present, or will fairly present, the consolidated
financial position, results of operations and cash flows of Sovereign as of and
for the periods ending on the dates thereof, in accordance with GAAP applied on
a consistent basis throughout the periods covered by the Sovereign Financials,
except as noted therein.
(c) At the date of each balance sheet included in the
Sovereign Financials or Sovereign Regulatory Reports, neither Sovereign nor
Sovereign Bank has any liabilities, obligations or loss contingencies of any
nature (whether absolute, accrued, contingent or otherwise) of a type required
to be reflected in such Sovereign Financials or Sovereign Regulatory Reports or
in the footnotes thereto which are not appropriately reflected or reserved
against therein or appropriately disclosed in a footnote thereto, except for
liabilities, obligations or loss contingencies which are not material in the
aggregate and which are incurred in the ordinary course of business, consistent
with past practice, and except for liabilities, obligations or loss
contingencies which are within the subject matter of a specific representation
and warranty herein and subject, in the case of any unaudited statements, to
normal recurring audit adjustments and the absence of footnotes.
Section 3.06 Taxes. Sovereign and the Sovereign Subsidiaries
are members of the same affiliated group within the meaning of IRC Section
1504(a). Sovereign has duly filed, and will file, all federal, state and local
tax returns required to be filed by or with respect to Sovereign and all
Sovereign Subsidiaries on or prior to the Closing Date (taking into account any
extensions of time within which to file which have not expired) (all such
returns being or will be true and complete in all respects) and has duly paid or
will pay, or made or will make, provisions and related balance sheet accruals
(if required) for the payment of all federal, state and local taxes which have
been incurred by or are due or claimed to be due from Sovereign and any
Sovereign Subsidiary by any taxing authority or pursuant to any tax sharing
agreement or
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arrangement (written or oral) on or prior to the Closing Date other than taxes
which (a) are not delinquent or (b) are being contested in good faith.
Section 3.07 No Material Adverse Effect. Sovereign has not
suffered any Material Adverse Effect since September 30, 2003.
Section 3.08 Ownership of Property; Insurance Coverage.
(a) Sovereign and the Sovereign Subsidiaries have
good and, as to real property, marketable title to all assets and properties
owned by Sovereign or any of its Subsidiaries in the conduct of their
businesses, whether such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance sheets
contained in the Sovereign Financials and in the Sovereign Regulatory Reports or
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value, in the ordinary course of
business, since the date of such balance sheets), subject to no encumbrances,
liens, mortgages, security interests or pledges, except (i) those items that
secure liabilities for borrowed money and that are described in the Sovereign
Disclosure Schedule, (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith, (iii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iv) such
imperfections of title, easements and encumbrances , if any, as are not material
in character, amount or extent and (v) as reflected on the consolidated
statement of financial condition of Sovereign as of September 30, 2003 included
in Sovereign's Securities Documents . Sovereign and the Sovereign Subsidiaries,
as lessee, have the right under valid and subsisting leases of real and personal
properties used by Sovereign and its Subsidiaries in the conduct of their
businesses to occupy and use all such properties as presently occupied and used
by each of them.
(b) Sovereign and the Sovereign Subsidiaries
currently maintain insurance in amounts considered by Sovereign to be reasonably
prudent for their respective operations in accordance with industry practice.
Neither Sovereign nor any Sovereign Subsidiary 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 insurance (except with respect to directors and officers liability
insurance and employment law liability insurance) will be substantially
increased. All such insurance is in full force and effect.
Section 3.09 Legal Proceedings. Neither Sovereign nor any
Sovereign Subsidiary is a party to any, and there are no pending or, to the best
of Sovereign's knowledge, threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations or inquiries of any
nature (a) against Sovereign or any Sovereign Subsidiary, or (b) which could
adversely affect the ability of Sovereign to perform under this Agreement,
except for any proceedings, claims, actions, investigations or inquiries
referred to in clauses (a) or (b) which, individually or in the aggregate, could
not be reasonably expected to have a Material Adverse Effect on Sovereign.
Section 3.10 Compliance With Applicable Law.
(a) Sovereign and the Sovereign Subsidiaries and
their employees hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of the
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businesses of Sovereign and Sovereign Subsidiaries as presently conducted under,
and have complied in all respects with, applicable laws, statutes, orders, rules
or regulations of any federal, state or local governmental authority relating to
them.
(b) Except as disclosed on the Sovereign Disclosure
Schedule, (i) Sovereign and each Sovereign Subsidiary is in substantial
compliance with all of the statutes, regulations or ordinances which each
Regulatory Authority applicable to them enforces; (ii) since December 31, 2001,
no Regulatory Authority has threatened to revoke any license, franchise, permit
or governmental authorization which is material to Sovereign or any Sovereign
Subsidiary or required or threatened to require Sovereign or any Sovereign
Subsidiary to enter into a cease and desist order or memorandum of understanding
with it and (iii) since December 31, 2001, no Regulatory authority has
restricted or limited the operations of Sovereign or any Sovereign Subsidiary,
including without limitation any restriction on the payment of dividends (any
such memorandum or order described in this sentence is hereinafter referred to
as a "Regulatory Agreement"). Neither Sovereign nor any Sovereign Subsidiary is
a party to any Regulatory Agreement. Sovereign received a rating of at least
"Satisfactory" in connection with its last CRA examination.
Section 3.11 Information to be Supplied. The information to be
supplied by Sovereign for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) and each amendment or supplement thereto, if any
information Sovereign filed with the SEC under the Exchange Act which is
incorporated by reference into the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act and as of the date the
Prospectus/Proxy Statement is mailed to shareholders of Waypoint and up to and
including the date of the meeting of shareholders of Waypoint to which such
Prospectus/Proxy Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by Sovereign for inclusion in the Applications will, at the time such documents
are filed with any Regulatory Authority and up to and including the date(s) of
the obtainment of any required regulatory approvals or consents, be accurate in
all aspects.
Section 3.12 ERISA. Sovereign has previously made available to
Waypoint true and complete copies of the employee pension benefit plans within
the meaning of ERISA Section 3(2), profit sharing plans, employee stock
ownership plans, stock purchase plans, deferred compensation and supplemental
income plans, supplemental executive retirement plans, annual incentive plans,
group insurance plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), and all other employee
benefit plans, policies, programs, agreements and arrangements, all of which are
set forth on the Sovereign Disclosure Schedule, sponsored or contributed to for
the benefit of the employees or former employees (including retired employees)
and any beneficiaries thereof or directors or former directors of Sovereign or
any Sovereign Subsidiary, together with (a) the most recent actuarial (if any)
and financial reports relating to those plans which constitute "qualified plans"
under IRC Section 401(a), (b) the most recent annual reports relating to such
plans filed by them, respectively, with any government agency, and (c) all
rulings and determination letters which pertain to any such plans. Neither
Sovereign, any Sovereign Subsidiary, nor any pension plan maintained by
Sovereign or any Sovereign Subsidiary, has incurred, directly or indirectly,
within
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the past six (6) years any liability under Title IV of ERISA (including to the
Pension Benefit Guaranty Corporation) or to the IRS with respect to any pension
plan qualified under IRC Section 401(a) which liability has resulted in or will
result in a Material Adverse Effect with respect to Sovereign, except
liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any reportable event
under ERISA Section 4043 occurred with respect to any such pension plan which
would result in a Material Adverse Effect. To the knowledge of Sovereign, after
appropriate inquiry, with respect to each of such plans that is subject to Title
IV of ERISA, the present value of the accrued benefits under such plan, based
upon the actuarial assumptions used for funding purposes in the plan's most
recent actuarial report did not, as of its latest valuation date, exceed the
then current value of the assets of such plan allocable to such accrued
benefits. To the knowledge of Sovereign, after appropriate inquiry, neither
Sovereign nor any Sovereign Subsidiary has incurred or is subject to any
liability under ERISA Section 4201 for a complete or partial withdrawal from a
multiemployer plan. To the knowledge of Sovereign, after appropriate inquiry,
all "employee benefit plans," as defined in ERISA Section 3(3), comply and
within the past six (6) years have complied in all material respects with (i)
relevant provisions of ERISA, and (ii) in the case of plans intended to qualify
for favorable income tax treatment, provisions of the IRC relevant to such
treatment. To the knowledge of Sovereign, after appropriate inquiry, no
prohibited transaction (which shall mean any transaction prohibited by ERISA
Section 406 and not exempt under ERISA Section 408 or any transaction prohibited
under IRC Section 4975) has occurred within the past six (6) years with respect
to any employee benefit plan maintained by Sovereign or any Sovereign Subsidiary
that would result in the imposition, directly or indirectly, of an excise tax
under IRC Section 4975 or other penalty under ERISA or the IRC, which
individually or in the aggregate, has resulted in or will result in a Material
Adverse Effect with respect to Sovereign. Sovereign and the Sovereign
Subsidiaries provide continuation coverage under group health plans for
separating employees and "qualified beneficiaries" in accordance with the
provisions of IRC Section 4980B(f). Such group health plans are in compliance
with Section 1862(b)(1) of the Social Security Act and the applicable provisions
of the Health Insurance Portability and Accountability Act of 1996, as amended.
Section 3.13 Securities Documents. The Securities Documents
filed or to be filed by Sovereign under the Exchange Act at any time since
December 31, 2002 complied, at the time filed with the SEC, in all respects,
with the Exchange Act and the applicable rules and regulations of the SEC.
Section 3.14 Environmental Matters. To the knowledge of
Sovereign, neither Sovereign nor any Sovereign Subsidiary, nor any properties
operated by Sovereign or any Sovereign Subsidiary during Sovereign's use or
ownership has been or is in violation of or liable under any Environmental Law
that would have a Material Adverse Effect on Sovereign. There are no actions,
suits or proceedings, or demands, claims, notices or, to the knowledge of
Sovereign, investigations (including without limitation notices, demand letters
or requests for information from any environmental agency) instituted or
pending, or to the knowledge of Sovereign, overtly threatened, relating to the
liability of any property owned or operated by Sovereign or any Sovereign
Subsidiary under any Environmental Law that would have a Material Adverse Effect
on Sovereign.
Section 3.15 Allowance for Loan Losses. The allowance for loan
losses reflected, and to be reflected, in the Sovereign Regulatory Reports each
has been, and will be,
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established in accordance with the requirements of all applicable regulatory
criteria, and the allowance for loan losses, shown, and to be shown, on the
balance sheets contained in the Sovereign Financials have been, and will be,
established in compliance with the applicable requirements of GAAP.
Section 3.16 Loans. Each loan reflected as an asset in the
Sovereign Financial Statements (a) is evidenced in all respects in accordance
with customary lending standards in the ordinary course of business, and (b) to
the knowledge of Sovereign, is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (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 or the FDIA Limitations).
Section 3.17 Continuity of Business Enterprise. It is the
present intent of Sovereign that, following the Merger, Sovereign will continue
the historic business of Waypoint or use a significant portion of Waypoint's
historic business assets in a business, in each case within the meaning of
Treasury Reg. Section 1.368-1(d).
Section 3.18 No Waypoint Capital Stock. Except as set forth in
the Sovereign Disclosure Schedule, neither Sovereign nor any Sovereign
Subsidiary beneficially owns, directly or indirectly, any shares of Waypoint
Common Stock, or any options, warrants or other rights to acquire any Waypoint
Common Stock, except pursuant to the Merger as contemplated in this Agreement.
Section 3.19 Regulatory Capital. Sovereign and Sovereign Bank
meet or exceed all applicable regulatory capital requirements, and Sovereign
Bank is deemed "well capitalized" under such regulatory requirements.
Section 3.20 Agreements with Regulatory Authorities. Neither
Sovereign nor any Sovereign Subsidiary is subject to any cease-and-desist or
other order or enforcement action issued by or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has been ordered to pay any civil money penalty by, or has
been since January 1, 2003, a recipient of any supervisory letter from, or sine
January 1, 2003, has adopted any policies, procedures or board resolutions at
the request or suggestion of any Regulatory Authority or other governmental
entity that currently restricts in any material respect the conduct of its
business or that in any material manner relates to its capital adequacy, its
ability to pay dividends, its credit or risk management policies, its management
or its business, other than those of general application that apply to similarly
situated financial holding companies or their subsidiaries (each item in this
sentence, whether or not set forth in the Sovereign Disclosure Schedule, a
"Sovereign Regulatory Agreement"), nor has Sovereign or any of its Subsidiaries
been advised since January 1, 2003 by any Regulatory Authority or other
governmental entity that it is considering issuing, initiating, ordering, or
requesting any such Sovereign Regulatory Agreement.
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Section 3.21 Community Reinvestment Act, Anti-Money Laundering
and Customer Information Security. Except as set forth in the Sovereign
Disclosure Schedule, neither Sovereign nor Sovereign Bank is aware of, has been
advised of, or has reason to believe that any facts or circumstances exist,
which would cause Sovereign Bank (a) to be deemed not to be in satisfactory
compliance in any respect with the Community Reinvestment Act, and the
regulations promulgated thereunder, or to be assigned a rating for Community
Reinvestment Act purposes by federal or state bank regulators of lower than
"satisfactory," or (b) to be deemed to be operating in violation in any respect
of the USA Patriot Act, and the regulations promulgated thereunder, any order
issued with respect to anti-money laundering by the U.S. Department of the
Treasury's Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation, or (c) to be deemed not to be in
satisfactory compliance in any material respect with the applicable privacy of
customer information requirements contained in any federal and state privacy
laws and regulations, including, without limitation, in Title V of the
Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well
as the provisions of the information security program adopted by Sovereign Bank
pursuant to 12 C.F.R. Part 364. Furthermore, the board of directors of Sovereign
Bank has adopted and implemented an anti-money laundering program that contains
adequate and appropriate customer identification certification procedures that
has not been deemed ineffective in any material respects by any Regulatory
Authority and that meets the requirements in all material respects of Section
352 of the USA Patriot Act and the regulations thereunder.
Section 3.22 No Brokers. No action has been taken by Sovereign
or its Subsidiaries that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or similar payment with respect
to the transactions contemplated hereby.
Section 3.23 Tax Matters. As of the date hereof, Sovereign
does not have any reason to believe that any conditions exist that might prevent
or impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the IRC.
Section 3.24 Quality of Representations. The representations
made by Sovereign in this Agreement are true, correct and complete in all
material respects and do not omit statements necessary to make the
representations not misleading under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of Waypoint's Business.
(a) From the date of this Agreement to the Closing
Date, Waypoint and each Waypoint Subsidiary will conduct its business and engage
in transactions, including extensions of credit, only in the ordinary course and
consistent with past practice and policies, except as otherwise permitted or
required by this Agreement or consented to in writing by Sovereign. Waypoint
will use its reasonable good faith efforts, and will cause Waypoint Bank to use
its reasonable good faith efforts, to (i) preserve its business organizations
intact, (ii) maintain good relationships with employees, (iii) preserve for
itself the goodwill of customers of Waypoint and Waypoint Subsidiaries and
others with whom business relationships exist. From the date hereof to the
Effective Time, except as expressly contemplated by this Agreement or
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disclosed in the Waypoint Disclosure Schedule or otherwise consented to or
approved by Sovereign through a representative designated in writing by
Sovereign, Waypoint will not, and Waypoint will not permit any Waypoint
Subsidiary to:
(i) amend or change any provision of its articles
of incorporation, charter, or bylaws;
(ii) change the number of authorized or issued
shares of its capital stock or issue or grant any option, warrant,
call, commitment, subscription, Right or agreement of any character
relating to its authorized or issued capital stock or any securities
convertible into shares of such stock, except as contemplated by
Section 4.11 of this Agreement, 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) Waypoint may issue
shares of Waypoint Common Stock upon the valid exercise of outstanding
options to acquire Waypoint Common Stock under the Waypoint Stock
Option Plans or pursuant to written stock option agreements set forth
in the Waypoint Disclosure Schedule, in accordance with Section 4.11 of
this Agreement; (B) Waypoint may grant awards of up to 10,000 shares of
Waypoint Common Stock under the Waypoint Key Employee/Outside Director
Recognition and Retention Plan which have heretofore been authorized
but have not, at present, been granted; (C) Waypoint may issue shares
of Waypoint Common Stock that may be issuable from the Waypoint
Deferred Compensation Trust to participants under Waypoint's directors
or officers deferred compensation plans; (D) Waypoint may pay a regular
quarterly cash dividend to shareholders in an amount not to exceed its
fourth quarter 2003 dividend ($0.14 per share) ("the Quarterly Per
Share Dividend Amount") in the ordinary course of business consistent
with past practice for each full calendar quarter during which Waypoint
in consultation with Sovereign does not reasonably anticipate that the
Effective Date will occur; (E) any Waypoint Subsidiary may pay
dividends to Waypoint in the ordinary course of business consistent
with past practice; (F) subject to applicable regulatory restrictions,
if any, Waypoint Bank may pay cash dividends, in the aggregate, to
Waypoint sufficient to fund any dividend or other obligation by
Waypoint permitted hereunder; (G) Waypoint may issue shares of Waypoint
Common Stock pursuant to the Sovereign Option; and (H) Waypoint may pay
a pro rata cash dividend to Waypoint shareholders in the quarter in
which Waypoint, in consultation with Sovereign reasonably anticipates
that the Effective Date will occur, which pro rata dividend will not
exceed, on a per share basis, an amount equal to the product of (x) the
Quarterly Per Share Dividend Amount and (y) a fraction, the numerator
of which is the number of days from the first day of the calendar
quarter in which the Effective Date occurs to the Effective Date and
the denominator of which is the total number of days in such quarter.
Nothing set forth in this Section 4.01(a)(ii) or in any other Section
of this Agreement shall be construed to permit Waypoint shareholders to
receive two dividends either from Waypoint or from Waypoint and
Sovereign in any calendar quarter or to deny or prohibit them from
receiving one dividend from Waypoint or Sovereign in any calendar
quarter and Waypoint shall cooperate with Sovereign to coordinate
dividend payment dates and record dates in the quarter in which the
Closing is reasonably anticipated to occur to achieve such results;
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(iii) grant any severance or termination pay
(other than pursuant to written policies or agreements of Waypoint or
Waypoint Subsidiaries in effect on the date hereof and listed on the
Waypoint Disclosure Schedule, as contemplated by this Agreement, or as
otherwise agreed to in writing by Sovereign and Waypoint) to, or enter
into any new or amend any existing employment, severance or change in
control agreement with, or increase the compensation of, any employee,
officer or director of Waypoint or any Waypoint Subsidiary, except for
routine periodic increases, individually and in the aggregate, in
accordance with past practice;
(iv) merge or consolidate Waypoint or any
Waypoint Subsidiary with any other corporation other than Waypoint or a
Waypoint Subsidiary; sell or lease all or any substantial portion of
the assets or business of Waypoint or any Waypoint 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 and other than in connection with the collection of any
loan or credit arrangement between any Waypoint 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 Waypoint Subsidiary of its certificate of authority to maintain,
or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to
establish a new branch office;
(v) sell or otherwise dispose of the capital
stock of Waypoint Bank, or sell or otherwise dispose of any asset of
Waypoint or of any Waypoint Subsidiary other than in the ordinary
course of business consistent with past practice; subject any asset of
Waypoint or of any Waypoint Subsidiary to a lien, pledge, security
interest or other encumbrance (other than in connection with deposits,
repurchase agreements, advances from the Federal Home Loan Bank,
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 for advances from the Federal
Home Loan Bank or otherwise in the ordinary course of business
consistent with past practice;
(vi) take any action which would result in any of
the representations and warranties of Waypoint set forth in this
Agreement becoming untrue as of any date after the date hereof or in
any of the conditions set forth in Article V hereof not being
satisfied, except in each case as may be required by applicable law;
(vii) change any method, practice or principle of
accounting, except as may be required from time to time by law or GAAP
(without regard to any optional early adoption date) or any Regulatory
Authority responsible for regulating Waypoint or Waypoint Bank;
(viii) except as set forth in the Waypoint
Disclosure Schedule, waive, release, grant or transfer any rights of
value or modify or change in any material respect any existing material
agreement to which Waypoint or any Waypoint Subsidiary is a party,
other than in the ordinary course of business, consistent with past
practice;
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(ix) implement any employee benefit plan within
the meaning of ERISA Section 3(3) including, but not limited to,
pension, retirement, profit sharing, bonus, severance, welfare benefit
or similar plan or arrangement, whether qualified or unqualified, which
was not in effect on the date of this Agreement, or materially amend
any existing plan or arrangement except to the extent such amendments
do not result in an increase in cost; provided, however, that nothing
herein shall prohibit Waypoint from (A) making contributions to any
employee benefit plan through the Effective Date in accordance with its
terms and in the ordinary course of business, consistent with past
practice; or (B) amending the provisions of any Waypoint Stock Option
Plan and related agreements issued under any such Waypoint Stock Option
Plan (to the extent necessary) to permit an optionholder to exercise
any vested (determined as of the Effective Time) outstanding stock
option for a period of at least one year from the Effective Date, but
not later than the expiration date of such option.
(x) purchase any security for its investment
portfolio not rated "AA" or higher by Standard & Poor's Corporation or
"A2" or higher by Moody's Investor Services, Inc. or otherwise alter,
in any material respect, the mix, maturity, credit or interest rate
risk profile of its portfolio of investment securities or its portfolio
of mortgage-backed securities, except in the ordinary course of
business consistent with past practice;
(xi) make any new loan or other credit facility
commitment (including without limitation, lines of credit and letters
of credit) to any borrower or group of affiliated borrowers in excess
of $5,000,000 in the aggregate, or increase, compromise, extend, renew
or modify any existing loan or commitment outstanding in excess of
$2,500,000 except for any commitment disclosed in the Waypoint
Disclosure Schedule;
(xii) except as set forth in the Waypoint
Disclosure Schedule or except in the ordinary course of business
consistent with past practice, enter into, renew, extend or modify any
other transaction with any Affiliate other than deposit and loan
transactions in the ordinary course of business and which are in
compliance with applicable laws and regulations;
(xiii) enter into any interest rate swap or
similar commitment, agreement or arrangement except in the ordinary
course of business consistent with past practice;
(xiv) except for the execution of this Agreement,
or resulting therefrom, take any action that would give rise to a right
of payment to any individual under any employment agreement;
(xv) other than charitable contributions
contractually committed on the date hereof, make any charitable
contribution prior to the Effective Date in excess of Waypoint's
budgeted amount for 2004 previously submitted to Sovereign or agree to
make any such contribution for any period after the Effective Date; or
(xvi) agree to do any of the foregoing.
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For purposes of this Section 4.01, it shall not be considered
in the ordinary course of business for Waypoint or any Waypoint Subsidiary to do
any of the following: (i) make any capital expenditure exceeding $500,000
individually or in the aggregate not disclosed on Schedule 4.01 of the Waypoint
Disclosure Schedule, without the prior written consent of Sovereign; (ii) make
any sale, assignment, transfer, pledge, hypothecation or other disposition of
any assets having a book or market value, whichever is greater, in the aggregate
in excess of $1,000,000, other than sales of mortgage loans in the ordinary
course of business consistent with past practice, sales of other loans in
amounts not exceeding $1,000,000 in the ordinary course of business consistent
with past practice, pledges of assets to secure government deposits, to exercise
trust powers, sales of assets received in satisfaction of debts previously
contracted in the normal course of business, issuance of loans, or transactions
in the investment securities portfolio by Waypoint or a Waypoint Subsidiary or
repurchase agreements made, in each case, in the ordinary course of business; or
(iii) undertake or enter any lease, contract or other commitment for its
account, other than in the normal course of providing credit to customers as
part of its banking business, involving a payment by Waypoint or any Waypoint
Subsidiary of more than $100,000 annually, or containing a material financial
commitment and extending beyond 12 months from the date hereof which is not
terminable by Waypoint upon sixty (60) days' notice without premium or penalty.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, Waypoint or Sovereign, as the case may be, shall afford to, and
shall cause each Waypoint Subsidiary or Sovereign Subsidiary to afford to, the
other party and its authorized agents and representatives, complete access to
their respective properties, assets, books and records and personnel, during
normal business hours and after reasonable notice; and the officers of Waypoint
and Sovereign will furnish any person making such investigation on behalf of the
other party with such financial and operating data and other information with
respect to the businesses, properties, assets, books and records and personnel
as the person making such investigation shall from time to time reasonably
request.
(b) Waypoint and Sovereign each agree to conduct such
investigation and discussions hereunder in a manner so as not to interfere
unreasonably with normal operations and customer and employee relationships of
the other party.
(c) In addition to the access permitted by
subparagraph (a) above, from the date of this Agreement through the Closing
Date, Waypoint shall permit employees of Sovereign reasonable access to and
participation in matters relating to problem loans, loan restructurings and loan
workouts, investments, derivatives, and other asset/liability activities of
Waypoint and any Waypoint Subsidiary, provided that nothing contained in this
subparagraph shall be construed to grant Sovereign or any Sovereign employee any
final decision-making authority with respect to such matters.
(d) Prior to the Effective Time, Waypoint and
Sovereign shall hold in confidence all confidential information of the other
party on the terms and subject to the conditions contained in the previously
executed confidentiality agreements. If the transactions contemplated by this
Agreement shall not be completed, Waypoint and Sovereign will continue to comply
with the terms of such confidentiality agreements.
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Section 4.03 Regulatory Matters and Consents.
(a) Waypoint and Sovereign shall to prepare a
registration statement on Form S-4 or other applicable form (the
"Prospectus/Proxy Statement") to be filed by Sovereign with the SEC in
connection with the issuance of Sovereign Common Stock in the Merger (including
the proxy statements of Waypoint and Sovereign and the related prospectus and
all related documents). Waypoint shall prepare and furnish such information
relating to it and its directors, officers and shareholders as may be required
in connection with the above referenced documents. Waypoint agrees to cooperate
with Sovereign and Sovereign's counsel and accountants in requesting and
obtaining appropriate opinions, consents and letters from its financial advisor
and independent auditor in connection with the Prospectus/Proxy Statement. After
the execution of this Agreement, each of Waypoint and Sovereign agrees to use
its reasonable best efforts to cause the Prospectus/Proxy Statement to be
declared effective under the Securities Act as promptly as reasonably
practicable after the filing thereof. Sovereign also agrees to use its
reasonable 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. After the Prospectus/Proxy Statement is declared effective
under the Securities Act, Waypoint shall promptly mail the Prospectus/Proxy
Statement to its shareholders.
(b) Each of Waypoint and Sovereign agrees that none
of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Prospectus/Proxy Statement shall, at the
time the Prospectus/Proxy Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the
Prospectus/Proxy Statement and any amendment or supplement thereto shall, at the
date(s) of mailing to shareholders of Waypoint and at the time of the meeting of
shareholders of Waypoint to vote on the Merger, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading at the time and in
light of the circumstances under which such statement is made. Each of Waypoint
and Sovereign further agree that if such party shall become aware prior to the
Effective Date of any information furnished by such party that would cause any
of the statements in the Prospectus/Proxy Statement to be false or misleading
with respect to any material fact, or to omit to state any material fact
necessary to make the statements therein not false or misleading, to promptly
inform the other parties thereof and to take the necessary steps to correct the
Prospectus/Proxy Statement.
(c) Sovereign agrees to advise Waypoint, promptly
after Sovereign receives notice thereof, of the time when the Prospectus/Proxy
Statement has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification of
Sovereign Common Stock for offering or sale in any jurisdiction, of the
initiation or, to the extent Sovereign is aware thereof, threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Prospectus/Proxy Statement or for additional information or
of any comments provided to Waypoint by the SEC in regard to the
Prospectus/Proxy Statement or Registration Statement. Each of Sovereign and
Waypoint shall cooperate and provide the other party with a reasonable
opportunity to review and comment on any amendment or supplement to the
Prospectus/Proxy Statement or Registration Statement prior to the filing of such
with the SEC.
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(d) Sovereign and Waypoint and their respective
Subsidiaries shall cooperate and use their respective commercially reasonable
efforts to prepare all Applications to Regulatory Authorities and make all
filings for, and use their commercially reasonable efforts to obtain as promptly
as practicable after the date hereof, all necessary permits, consents,
approvals, waivers and authorizations of all Regulatory Authorities necessary or
advisable to complete the transactions contemplated by this Agreement.
(e) Waypoint will furnish Sovereign with all
information concerning Waypoint and Waypoint Subsidiaries as may be reasonably
necessary or advisable in connection with the Registration Statement and any
Application or filing made by or on behalf of Sovereign to any Regulatory
Authority in connection with the transactions contemplated by this Agreement and
the Bank Plan of Merger.
(f) Sovereign and Waypoint shall have the right to
review in advance, and to the extent practicable each will consult with the
other on, in each case subject to applicable laws related to the exchange of
information, all information which appears in any filing made with or written
materials submitted to any Regulatory Authority or any third party in connection
with the transactions contemplated by this Agreement and the Bank Plan of
Merger. In exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of the SEC, Regulatory Authorities and
third parties necessary or advisable to consummate the transactions contemplated
by this Agreement and the Bank Plan of Merger and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated hereby and thereby.
(g) Each party will promptly furnish the other party
with copies of all written communications to, or received by it or any
Subsidiary from, any Regulatory Authority in respect of the transactions
contemplated hereby.
Section 4.04 Taking of Necessary Action. Sovereign and
Waypoint shall each use commercially reasonable efforts in good faith, and each
of them shall cause its Subsidiaries to use their commercially reasonable
efforts in good faith, to take or cause to be taken all action necessary or
desirable on its part using commercially reasonable efforts so as to permit
completion of the Merger and the Bank Merger, as soon as reasonably practicable
after the date hereof, including, without limitation, (a) obtaining the consent
or approval of each individual, partnership, corporation, association or other
business or professional entity whose consent or approval is required or
desirable for consummation of the transactions contemplated hereby (including
assignment of leases without any change in terms), provided that neither
Waypoint nor any Waypoint Subsidiary shall agree to make any payments or
modifications to agreements in connection therewith without the prior written
consent of Sovereign and (b) requesting the delivery of appropriate opinions,
consents and letters from its counsel and independent auditors. No party hereto
shall take, or cause, or to the best of its ability permit to be taken, any
action that would substantially impair the prospects of completing the Merger
and the Bank Merger pursuant to this Agreement and the Bank Plan of Merger;
provided that nothing herein contained shall preclude Sovereign or Waypoint or
from exercising its rights under this Agreement.
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Section 4.05 Certain Agreements.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Date, a
director or officer or employee of Waypoint or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party to a suit based
in whole or in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he is or was a director, officer or employee of Waypoint, any
of the Waypoint's Subsidiaries or any of their respective predecessors or (ii)
this Agreement or any of the transactions contemplated hereby, whether in any
case asserted or arising before or after the Effective Date, the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto to the extent permitted or required by the BCL and the articles of
incorporation and bylaws of Waypoint. For a period of six (6) years after the
Effective Date, Sovereign (the "Indemnifying Party") shall indemnify, defend and
hold harmless all prior and then-existing directors and officers of Waypoint and
any Waypoint Subsidiary, against (A) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts which are paid in settlement (with
the approval of Sovereign, which approval shall not be unreasonably withheld) of
or incurred in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is, or was, a director, officer, or employee (an
"Indemnified Party") of Waypoint or any Waypoint Subsidiary, whether pertaining
to any matter existing or occurring at or prior to the Effective Date and
whether asserted or claimed prior to, or at or after, the Effective Date
("Indemnified Liabilities") and (B) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, to the same extent as such
officer, director, or employee would be entitled to be indemnified by Waypoint
or any Waypoint Subsidiary as of the date hereof, including the right to
advancement of expenses; provided, however, that any such officer, directors or
employee of Waypoint or any Waypoint Subsidiary shall not be indemnified by
Sovereign and/or Sovereign Bank if such indemnification is prohibited by
applicable law.
(b) Sovereign shall maintain Waypoint's existing
directors' and officers' liability insurance policy (or a policy providing
comparable coverage amounts on terms generally no less favorable, including
Sovereign's existing policy if it meets the foregoing standard) covering persons
who are currently covered by such insurance for a period of six (6) years after
the Effective Date; provided, however, that in no event shall Sovereign be
obligated to expend, in order to maintain or provide insurance coverage pursuant
to this Section 4.05(b), any amount per annum in excess of 200% of the amount of
the annual premiums paid as of the date hereof by Waypoint for such insurance
(the "Maximum Amount"). If the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount,
Sovereign shall use all reasonable efforts to maintain the most advantageous
policies of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Amount. In the event that Sovereign acts as its own insurer
for all of its directors and officers with respect to matters typically covered
by a directors' and officers' liability insurance policy, Sovereign's
obligations under this Section 4.05(b) may be satisfied by such self insurance,
so long as its senior debt ratings by Standard & Poor's Corporation and Moody's
Investors Services, Inc. are not lower than such ratings as of the date hereof.
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(c) In the event that Sovereign or any of its
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 4.05.
(d) Sovereign agrees to honor and Sovereign agrees to
cause Sovereign Bank to honor all terms and conditions of all existing
employment contracts, special termination agreements, deferred compensation
plans and agreements, change in control agreements and incentive plans disclosed
in the Waypoint Disclosure Schedule, but only to the extent such contracts,
agreements, and plans are not inconsistent with the terms of Sections 4.05 and
4.10 hereof. Waypoint shall cooperate with Sovereign and use its reasonable best
efforts to secure the agreement of its employees to take such action as shall be
necessary and appropriate to decrease (or potentially eliminate) the amount of
compensation expense which might otherwise be nondeductible by Sovereign
pursuant to the provisions of IRC Section 4999 with respect to such payments to
such employees. Under no circumstances shall Waypoint or any Waypoint
Subsidiary, or any Waypoint employee or Waypoint Subsidiary employee, be
required, as a condition of continued employment or otherwise, to agree to
modify the terms of any such employee's existing agreements with Waypoint or any
Waypoint Subsidiary.
(e) Effective with the Effective Date, Sovereign
shall cause Sovereign Bank to assume Waypoint's $46.4 million principal amount
of variable rate junior subordinated debentures due 2033, if required by the
terms thereof together with all of Waypoint's obligations under the related
trust indenture, and shall take all action necessary or appropriate in
accordance therewith, including, if required by the trustee, execution of a
supplemental indenture and other appropriate documents or certificates.
(f) Effective with the Effective Date, Sovereign
shall cause Sovereign Bank to assume the contractual commitments listed on
Schedule 4.03(f) of the Waypoint Disclosure Schedule which Waypoint Bank has
made to community, civic and charitable organizations. Sovereign also agrees to
cause Sovereign Bank to make additional contributions to community, civic and
charitable organizations throughout Waypoint's branch system consistent with
contributions it makes to such organizations throughout its other branch systems
and consistent with Waypoint's policies and procedures.
Section 4.06 No Other Bids and Related Matters. So long as
this Agreement remains in effect, Waypoint shall not and Waypoint shall not
authorize or permit any of its directors, officers, employees, investment
bankers, lawyers or agents or other representatives to directly or indirectly:
(a) solicit, initiate or encourage any inquiries relating to, or the making of
any proposal which relates to, an Acquisition Transaction, (b) respond to any
inquiry relating to an Acquisition Transaction, except as otherwise advised in a
written legal opinion of outside counsel to Waypoint to the effect that a
failure to do so would result in a breach of their fiduciary obligations under
Pennsylvania law (provided that a copy of such written opinion shall have been
provided to Sovereign together with a written notice that Waypoint intends to
respond to the inquiry no earlier that three (3) Business Days following receipt
by Sovereign of such notice), (c) recommend or endorse an Acquisition
Transaction, (d) participate in any discussions or negotiations regarding an
Acquisition Transaction, (e) provide any third party (other than Sovereign or an
affiliate of Sovereign) with any nonpublic information in connection with any
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inquiry or proposal relating to an Acquisition Transaction, (f) enter into an
agreement with any other party with respect to an Acquisition Transaction, or
(g) fail to recommend and support the Merger to Waypoint shareholders. Waypoint
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations previously conducted with any parties other than
Sovereign with respect to any of the foregoing, and will take all actions
necessary or advisable to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 4.06. Waypoint will notify Sovereign orally (within one day) and in
writing (as promptly as practicable) if any inquiries or proposals relating to
an Acquisition Transaction are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, Waypoint.
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedule. Each party shall promptly advise the other party of any change or
event having a Material Adverse Effect on it or which it believes would, or
would be reasonably likely to, cause or constitute a material breach of any of
its representations, warranties or covenants set forth herein. Each party shall
update its respective Disclosure Schedule as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had occurred prior
to the date of this Agreement, would have been disclosed in such Disclosure
Schedule. The delivery of such updated Schedule shall not relieve a party from
any breach or violation of this Agreement and shall not have any effect for the
purposes of determining the satisfaction of the condition set forth in Sections
5.01(c) and 5.02(c) hereof, as applicable.
Section 4.08 Conduct of Sovereign's Business. From the date of
this Agreement to the Closing Date, Sovereign will use its reasonable good faith
efforts to (a) preserve its business organizations intact, (b) maintain good
relationships with employees, and (iii) preserve for itself the goodwill of
customers of Sovereign and Sovereign Subsidiaries and others with whom business
relationships exist.
Section 4.09 Current Information.
(a) During the period from the date of this Agreement
to the Effective Date, each party shall, upon the request of the other party,
cause one or more of its designated representatives to confer on a monthly or
more frequent basis with representatives of the other party regarding the
financial condition, operations and business and matters of the parties hereto
and the completion of the transactions contemplated hereby. Within fifteen (15)
days after the end of each month, Waypoint will deliver to Sovereign a
consolidating and consolidated balance sheet and a consolidating and
consolidated statement of operations, without related notes, for such month for
Waypoint.
(b) Waypoint shall provide to Sovereign a copy of the
minutes of any meeting of the Board of Directors of Waypoint or any Waypoint
Subsidiary, or any committee thereof, or of any senior management committee
promptly after such minutes are approved at a subsequent meeting of the board or
committee, but in any event within thirty (30) days of the meeting of such board
or committee to which such minutes relate, except that with respect to any
meeting held within thirty (30) days of the Closing Date, such minutes shall be
provided prior to the Closing Date.
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(c) During the period commencing on the date of this
Agreement and ending on the Effective Date, Waypoint, within seven (7) days
after the end of each calendar month, shall provide to Sovereign, in such
electronic format as shall be reasonably requested by Sovereign, investment,
loan, deposit and borrowing information, in account and deposit level detail.
Section 4.10 Undertakings by Sovereign and Waypoint.
(a) From and after the date of this Agreement,
Waypoint shall:
(i) Shareholder Meeting. Take all action
necessary to properly call and convene a special meeting of its
shareholders as soon as reasonably practicable to consider and vote
upon this Agreement and the transactions contemplated hereby;
(ii) Recommendation of Board. Use its reasonable
best efforts to cause each member of its Board of Directors to vote all
shares of Waypoint common stock which they own for this Agreement and
otherwise support the Merger, and through its Board of Directors,
unanimously recommend that Waypoint's shareholders approve this
Agreement and the transactions contemplated hereby; provided that
nothing in this Agreement shall prevent the Board of Waypoint from
exercising its rights under Section 4.06 of this Agreement.
(iii) Approval of Bank Plan of Merger. Take all
action necessary and appropriate to approve the Bank Plan of Merger as
sole shareholder of Waypoint Bank and obtain the approval of, and cause
the execution and delivery of, the Bank Plan of Merger by Waypoint Bank
in accordance with applicable laws and regulations and as soon as
practicable after completion of the Merger on the Effective Date;
(iv) Proxy Solicitor. If Sovereign requests,
retain a proxy solicitor in connection with the solicitation of
Waypoint shareholder approval of this Agreement;
(v) Outside Service Bureau Contracts. If
Sovereign requests, use its reasonable commercial efforts to obtain an
extension of any contract with an outside service bureau or other
vendor of services to any Waypoint or Waypoint Subsidiary on terms and
conditions mutually acceptable to Waypoint and Sovereign;
(vi) Committee Meetings. Permit a representative
of Sovereign, who is reasonably acceptable to Waypoint, to attend all
management committee meetings of Waypoint and Waypoint Bank, including,
without limitation, any loan, asset/liability, investment, risk
management committees;
(vii) Reserves and Merger-Related Costs. Prior to
the Effective Date, (A) 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 Waypoint to
those of Sovereign (as such practices and methods are to be applied to
Waypoint from and after the Effective Date), and to Sovereign's plans
with respect to the conduct of the business of Waypoint following the
Merger, (B) otherwise to reflect Merger-related expenses and costs
incurred by Waypoint and (C) sell such assets and/or sell or prepay
such liabilities Sovereign shall so require; provided, however, that
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Waypoint shall not be required to take such action (I) more than five
(5) days prior to the Effective Date; and (II) unless Sovereign agrees
in writing that all conditions to closing set forth in Section 5.02
(a), (d), (e), and (j) have been satisfied or waived (except for the
expiration of any applicable waiting periods); prior to the delivery by
Sovereign of the writing referred to in the preceding clause, Waypoint
shall provide Sovereign a written statement, certified without personal
liability by the chief executive officer of Waypoint and dated the date
of such writing, that the representation made in Section 2.15 hereof is
true as of such date or, alternatively, setting forth in detail the
circumstances that prevent such representation from being true as of
such date; and no accrual or reserve made by Waypoint or any Waypoint
Subsidiary pursuant to this subsection, or any litigation or regulatory
proceeding arising out of any such accrual or reserve, shall constitute
or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or
to constitute a termination event within the meaning of Section 6.01(g)
hereof. In the event that Waypoint or any of its Subsidiaries takes, at
the request of Sovereign, any action pursuant to this Section
4.10(a)(vii), Sovereign shall reimburse Waypoint and its Subsidiaries
for any fees, expenses and charges, and the costs of reversing any
action taken if the Merger is not consummated other than as a result of
termination of the Agreement (w) under Section 6.01(b)(ii), unless the
failure of the occurrence specified therein shall be due to Sovereign's
failure to observe, in any material respect, agreements set forth in
the Agreement required to be performed or observed by Sovereign on or
before the Closing Date, (x) by Waypoint under Section 6.01(e), (y) by
Sovereign under Section 6.01(f), or (z) by Sovereign under Section
6.01(g) as a result of a breach by Waypoint of any material covenant or
representation and warranty as provided therein;
(viii) Personnel Information. Deliver to
Sovereign, if not done so heretofore, schedule(s) of all employees,
including pertinent information concerning each such employee (other
than medical-related records without the consent of the affected
employee) as reasonably requested by Sovereign and sorted as reasonably
requested by Sovereign; such schedule(s) shall be updated as necessary
to reflect in a timely manner any deletions or additions; make
available for inspection and copying by Sovereign all personnel
records;
(ix) Personnel Additions and Terminations. Advise
and consult with Sovereign regarding the termination or resignation, or
threatened termination or resignation, of any member of the executive
management of Waypoint or any Waypoint subsidiary. If requested by
Sovereign, advise and consult with Sovereign regarding the hiring or
termination of any other employee;
(x) Employment Policies. Deliver to Sovereign all
personnel policy manuals, memoranda and postings, and all employee
handbooks or other communications with employees regarding personnel
policies and practices; furnish additional information as reasonably
requested by Sovereign with respect to such policies and practices and
any others not covered by any such written materials;
(xi) WARN Notices. Assist Sovereign as reasonably
requested by it in connection with Sovereign providing notices to
affected employees under the Workers
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Adjustment and Retraining Notification Act or complying with any other
Labor and Employment Law;
(xii) Employment Law Claims. Inform Sovereign
promptly upon receiving notice of any legal, administrative,
arbitration or other proceedings, demands, notices, audits or
investigations (by any federal, state or local commission, agency or
board) relating to the alleged liability of Waypoint or any Waypoint
Subsidiary under any Labor and Employment Law; and
(xiii) permit Sovereign, if it so elects, to
cause a "phase I environmental audit" to be performed at any physical
location owned or occupied by Waypoint or any Waypoint subsidiary.
(b) From and after the date of this Agreement,
Sovereign shall:
(i) take all necessary action to call and convene
its annual meeting of shareholders to, among other things, vote upon
the proposed amendment to Sovereign's articles of incorporation to
increase the number of authorized shares of its common stock; and
(ii) use its reasonable best efforts to complete
the transactions contemplated by this Agreement on or before November
1, 2004, with due regard to system conversion and employee benefit
issues.
(c) From and after the date of this Agreement,
Sovereign and Waypoint shall each:
(i) Identification of Waypoint's Affiliates.
Cooperate with the other and use their best efforts to identify those
persons who may be deemed to be affiliates of Waypoint within the
meaning of Rule 145 promulgated by the SEC under the Securities Act;
(ii) Public Announcements. Cooperate and use
reasonable efforts to cause their respective officers, directors,
employees and agents to cooperate in good faith, consistent with their
respective legal obligations, in the preparation and distribution of,
and agree upon the form and substance of, any press releases related to
this Agreement and the transactions contemplated hereby, and any other
public disclosures related thereto, including, without limitation,
communications to Waypoint shareholders, Waypoint's internal
announcement and customer disclosures; provided that nothing herein
shall prohibit either party from making any disclosure which its
counsel deems necessary under applicable law. Sovereign and Waypoint
shall cooperate to develop all public announcement materials and make
appropriate management available at presentations related to the
transactions contemplated by this Agreement as reasonably requested by
the other party;
(iii) Maintenance of Insurance. Maintain, and
cause their respective Subsidiaries to maintain, insurance in such
amounts as is reasonable to cover such risks as are customary in
relation to the character and location of their respective properties
and the nature of their respective businesses;
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(iv) Maintenance of Books and Records. Maintain,
and cause their respective Subsidiaries to maintain, books of account
and records in accordance with GAAP applied on a basis consistent with
those principles used in preparing the financial statements heretofore
delivered;
(v) Delivery of Securities Documents. Deliver to
the other, copies of all Securities Documents promptly after the filing
thereof; and
(vi) Taxes. File all federal, state and local tax
returns required to be filed by them or their respective Subsidiaries
on or before the date such returns are due (including any extensions)
and pay all taxes shown to be due on such returns on or before the date
such payment is due and provided or properly accrued for taxes not yet
due and payable, and
(vii) Relationship Officers. Work with each other
in identifying and retaining relationship managers and other key
Waypoint employees.
Section 4.11 Employee Benefits and Retention Bonuses.
(a) Employee Benefits. On and after the Effective
Date, the employee pension and welfare benefit plans of Sovereign and Waypoint
(as well as any other plan of Waypoint providing for benefits not subject to
ERISA) may, at Sovereign's election and subject to the requirements of the IRC,
continue to be maintained separately, consolidated, frozen or terminated. In
connection with implementation of the foregoing, the following provisions and
guidelines shall apply:
(i) Sovereign Employee Stock Ownership Plan
("Sovereign ESOP"). Employees of Waypoint and Waypoint Subsidiaries who
become employees of Sovereign or a Sovereign Subsidiary shall become
entitled to participate in the Sovereign ESOP in accordance with its
terms by treating them as newly employed individuals without any prior
service credit under such plan. Employees of Waypoint and Waypoint
Subsidiaries will not receive past service credit for purposes of
eligibility to participate or for vesting purposes under the Sovereign
ESOP.
(ii) Sovereign 401(k) Retirement Plan ("Sovereign
401(k) Plan"). Employees of Waypoint and Waypoint Subsidiaries who
become employees of Sovereign or a Sovereign Subsidiary shall receive,
for purposes of eligibility to participate in the Sovereign 401(k) Plan
only, credit for all service with Waypoint or Waypoint Subsidiary
credited to each such employee under Waypoint's 401(k) Plan as of the
Effective Date, and shall enter the Sovereign 401(k) Plan in accordance
with its terms as soon as administratively feasible following
completion of six (6) months of service with either Waypoint, a
Waypoint Subsidiary or Sovereign, a Sovereign Subsidiary or both.
(iii) Waypoint Retirement Savings Plan ("Waypoint
401(k) Plan"). After the Effective Date, Sovereign shall amend the
Waypoint 401(k) Plan to freeze participation and contributions under
such plan. After the Effective Date, Sovereign will continue to
maintain the individual participant accounts under Waypoint's 401(k)
Plan. Thereafter, Sovereign shall have the right, but not the
obligation, to combine the
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Waypoint 401(k) Plan and the Sovereign 401(k) Plan on such terms as it
deems appropriate and in accordance with applicable law.
(iv) Waypoint Employee Stock Ownership Plan
("Waypoint ESOP"). As of the Effective Date, the Waypoint ESOP shall be
terminated. As soon as practicable following the execution of this
Agreement, Waypoint shall file all necessary documents with the IRS for
a favorable determination letter for the termination of the Waypoint
ESOP as of the Effective Date. As soon as practicable after the receipt
of a favorable determination letter for termination from IRS, the
account balances in the Waypoint ESOP, including any surplus in the
suspense account after full payment of the ESOP loan and all Waypoint
ESOP administrative expenses, shall be distributed to participants and
beneficiaries in accordance with applicable law and terms of the
Waypoint ESOP. Prior to the Effective Date, contributions to, and
payments on the loan of, the Waypoint ESOP shall be made consistent
with past practices on the regularly scheduled payment dates; provided,
however, that Waypoint may make a contribution to, and payment on the
loan of, the Waypoint ESOP with respect to the period from January 1,
2004 through the Effective Date.
(v) Waypoint Nonqualified Deferred Compensation
Plans. Not later than the Effective Date, Waypoint will freeze future
participation and benefit accruals under any nonqualified deferred
compensation plans then maintained by Waypoint effective as of the
Closing Date. The freezing of participation and benefit accruals under
such nonqualified deferred compensation plans shall be effected in such
a manner that no person receive redundant benefits, lose existing
benefits, or result in an acceleration of payment of benefits unless a
participant's prior election form so provides. The intent of the
preceding sentence is that affected employees of Waypoint and Waypoint
Subsidiaries generally shall be entitled only to the benefits accrued
under the Waypoint deferred compensation plans as of the Effective Date
of the Merger. Waypoint may amend certain of its nonqualified deferred
compensation plans, which amendments shall be provided to Sovereign for
review and comment prior to adoption, to partition, spin-off, or
segregate those portions of such plans which provide for investment
measurement determined by the performance of Waypoint Common Stock.
(vi) Welfare Benefit Plans. After the Effective
Date, the welfare benefit plans of Sovereign and Waypoint (and their
respective subsidiaries) may, at Sovereign's election, be terminated,
remain unchanged until the contracts underlying such welfare benefit
plans expire or continue to be maintained by Sovereign as long as is
administratively feasible or required, following the Effective Date.
Sovereign shall take such action with respect to such plans (which may
include the implementation of new benefits, reduction or elimination of
some benefits, and the adjustment of the respective cost allocation
between employer and employee) as it deems appropriate under the
circumstances. In the event of any termination of or consolidation of a
Waypoint welfare plan with any Sovereign welfare plan, all employees of
Waypoint and Waypoint Subsidiaries who become employees of Sovereign or
a Sovereign Subsidiary and who are eligible for coverage under the
Waypoint welfare plan shall have immediate coverage under any successor
welfare plan without the necessity of satisfying a waiting period for
coverage of any pre-existing condition and shall become participants in
the Sovereign welfare benefit plans, subject to the terms and
conditions of such plans, including the
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required cost allocation between employer and employee and co-pays,
deductibles and out-of-pocket expenses. Sovereign does not provide
welfare benefits to retired employees.
(vii) Waypoint Bonus Plans and Arrangements.
Waypoint may continue to administer such bonus programs and
arrangements as are disclosed pursuant to this Agreement through the
Effective Date, with such equitable modifications as may be appropriate
to take into account the circumstances of the Merger and the timing
thereof; provided, however, that aggregate payments under Waypoint
bonus plans and arrangements for the fiscal year ending December 31,
2004 shall not exceed the amount set forth in the Waypoint Disclosure
Schedule.
(viii) Waypoint Defined Benefit Pension Plan.
From the date of this Agreement, Waypoint shall continue to maintain,
without change other than change required by law, its frozen defined
benefit pension plan and shall timely make any required contributions.
(ix) Other Waypoint Plans. From the date of this
Agreement through the Effective Date of the Merger, without the prior
written consent of Sovereign and except as otherwise expressly
permitted by this Agreement, no further benefits, grants or awards
shall be made available under any other Waypoint plans to employees or
directors, including, without limitation, the granting of stock
options, stock appreciation rights, restricted stock, re-load stock
options and performance shares.
(x) Nothing in this subsection shall be construed
as precluding Sovereign from amending or terminating any plan, program
or arrangement following the Effective Date of the Merger.
(b) Retention Bonuses. Each employee of Waypoint or a
Waypoint Subsidiary jointly designated in writing by Sovereign and Waypoint
shall be entitled to receive a "retention" bonus from Waypoint, a Waypoint
Subsidiary, Sovereign or a Sovereign Subsidiary, as the case may be, in an
amount to be mutually agreed upon in writing by Sovereign and Waypoint, which
amount shall not exceed $40,000 per employee or $1,000,000 in the aggregate for
all employees (excluding any amounts agreed to by Sovereign, after the date
hereof, paid as a retention bonus to any Waypoint or Waypoint Subsidiary
employee who is a party to an employment or other agreement which provides
severance benefits or payments in the event of a termination of employment
following a change in control of Waypoint or a Waypoint Subsidiary), in the
event that such employee remains an employee of Waypoint or a Waypoint
Subsidiary, or Sovereign or a Sovereign Subsidiary, as applicable, until the
Effective Date (or in certain cases, a date, after the Effective Date, that the
systems conversion occurs or thereafter as determined by Sovereign) provided
that such employee satisfactorily fulfills the duties and responsibilities of
the position of such employee of Waypoint or a Waypoint Subsidiary, or Sovereign
or a Sovereign Subsidiary, as the case may be, through the Effective Date and
thereafter, if applicable. Except as otherwise agreed to by Sovereign, retention
bonuses shall not be payable to any Waypoint or Waypoint Subsidiary employee who
is a party to an employment or other agreement that provides severance benefits
or payments in the event of a termination of employment following a change in
control of Waypoint or a Waypoint Subsidiary.
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(c) Termination Benefits. Waypoint shall use its
reasonable best efforts to cause to be delivered to Sovereign within thirty (30)
Business Days following execution of this Agreement with respect to each
executive officer named on the Benefits Schedule included in the Waypoint
Disclosure Schedule, the written acknowledgment of each such individual pursuant
to which each such individual agrees and acknowledges that the dollar amount set
forth opposite such individual's name on such Benefits Schedule is the maximum
amount that would be due to such individual under any employment agreement,
special termination agreement, change in control agreement, supplemental
executive retirement plan, deferred bonus plan, deferred compensation plan,
salary continuation plan, or any other non-qualified pension benefit or welfare
benefit plan maintained by Waypoint solely for the benefit of officers of
Waypoint or Waypoint Subsidiaries assuming a termination of such individual's
employment on the Effective Date. Waypoint and Sovereign acknowledge and agree
that the amounts shown on the Benefits Schedule and the letter of acknowledgment
for each officer named herein reflect a good faith estimate of the maximum
amounts that will be payable to such individuals under the circumstances
described and may be subject to adjustment upon an actual termination of
employment in order to reflect increases in such individuals' compensation and
benefit plans consistent with past practices for routine periodic increases and
changes in tax rates and assumptions used in making such good faith estimates.
(d) Severance Policy. Sovereign agrees to cause
Sovereign Bank to provide severance pay, as set forth below, to any full or
part-time, active employee of Waypoint whose employment is terminated hereafter
in connection with the Merger up to twelve (12) months beyond the Effective
Date, because (i) such employee's position is eliminated, or (ii) such employee
is not offered or retained in comparable employment (i.e., a position with no
reduction in base pay, no adverse change in status (full or part-time), and
where the employee is not required to commute more than 30 miles farther than
the employee's present commute), excluding any employee (A) who has an existing
employment or change in control agreement that provides for severance benefits
or employment termination payments or who is otherwise entitled to severance
benefits or employment termination payments from Waypoint or a Waypoint
Subsidiary, (B) who has accepted an offer from Sovereign of noncomparable
employment or (C) whose employment is terminated for Cause (as defined below),
provided such employee executes such documentation as Sovereign may reasonably
require, including Sovereign's customary form of waiver and release. The amount
of severance pay to be provided to an eligible employee by Sovereign Bank under
this subsection shall be determined in accordance with the formula set forth in
Schedule 4.11(d) of the Sovereign Disclosure Schedule and administered in
accordance with the Waypoint Special Severance Policy. Payments to an employee
hereunder shall cease if, during the severance benefit payment period, such
employee (x) becomes employed by Sovereign or a Sovereign Subsidiary in a
permanent position, (y) discloses or uses confidential information or trade
secrets of Sovereign or Waypoint gained while employed by Waypoint or a Waypoint
Subsidiary or by Sovereign or a Sovereign Subsidiary, as the case may be, or (z)
fails to cooperate with reasonable requests of Sovereign or a Sovereign
Subsidiary for assistance with respect to matters on which the employee worked
or with which the employee was familiar while employed by Waypoint or a Waypoint
Subsidiary or by Sovereign or a Sovereign subsidiary, as the case my be.
Continuation of health and dental benefits after termination shall be available
in accordance with the provisions of IRC Section 4980B(f). In addition to
severance pay, a terminated employee shall receive a lump sum payment of any
accrued but unused vacation in accordance with the terms of the Waypoint Special
Severance Policy. For purposes of this Section 4.11(d), "Cause" shall mean
termination
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because of neglect of or refusal to perform, other than as a result of sickness,
accident or similar cause beyond an employee's reasonable control, any duty or
responsibility as an employee of Sovereign or a Sovereign Subsidiary after
written notice by Sovereign or a Sovereign Subsidiary to the employee; any
material breach by the employee of any agreement to which the employee and
Sovereign or a Sovereign Subsidiary are both parties; dishonesty with respect to
Sovereign or a Sovereign Subsidiary or the commission of any crime (other than
minor traffic violations); or any material misconduct or material neglect of
duties by the employee in connection with the business or affairs of Sovereign
or a Sovereign Subsidiary. The foregoing definition of Cause is in no way
intended to limit or qualify the right of Sovereign or a Sovereign Subsidiary to
terminate any person's employment for any reason. The benefits provided to
terminated Waypoint or Waypoint Subsidiary employees under this subsection are
the only severance benefits payable by Sovereign, a Sovereign Subsidiary,
Waypoint or a Waypoint Subsidiary to such employees (excluding severance
benefits otherwise required by law). The benefits payable to Waypoint or
Waypoint Subsidiary employees under this subsection or otherwise shall in any
event be in lieu of any termination benefits to which such employees would
otherwise be entitled under Sovereign's or a Sovereign Subsidiary's severance
policies or programs then in effect.
(e) Change of Control Agreements. Prior to the
Effective Date, Sovereign shall use its reasonable best efforts, consistent with
its past practices, to enter into a change of control agreement with each such
employee of Waypoint who continues as, and who is then, an employee of Sovereign
or a Sovereign Subsidiary and who is currently a party to a change in control
agreement with Waypoint. Such change in control agreement shall contain
provisions which are, in the aggregate, comparable to the provisions in the
current change of control agreement between each such employee and Waypoint and
which has been disclosed in the Waypoint Benefits Schedule.
(f) Outplacement Services. Sovereign shall make
outplacement services and job counseling services available to Waypoint
employees at a management level or above and on a basis to be negotiated by the
parties as soon as practicable after the date hereof, whose employment is
terminated by Sovereign not for cause in connection with the Merger.
(g) Intention Regarding Future Employment. Sovereign
and Sovereign Bank shall use their reasonable best efforts to inform employees
of Waypoint, at least sixty (60) days prior to the Effective Date, of the
likelihood of such employees having continued employment with Sovereign Bank
following the Effective Date and, where appropriate in Sovereign Bank's
judgment, it will consider for employment opportunities at Sovereign Bank such
employees who would otherwise be terminated.
Section 4.12 Affiliate Letter. Waypoint shall deliver to
Sovereign, concurrently with the execution of this Agreement, the Letter
Agreement attached hereto as Exhibit 1, executed by each director and each
executive officer of Waypoint.
Section 4.13 Sovereign Rights Agreement. Sovereign Rights
issued pursuant to the Sovereign Rights Agreement shall be issued with respect
to each share of Sovereign Common Stock issued pursuant to the terms hereof
regardless whether there has occurred a "Distribution Date" under the terms of
such Sovereign Rights Agreement prior to the Effective Date, as well as to take
all action necessary or advisable to enable the holder of each such share of
Sovereign Common Stock to obtain the benefit of such Sovereign Stock Purchase
Rights
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notwithstanding their prior distribution, including without limitation,
amendment of the Sovereign Rights Agreement.
Section 4.14 Nonsolicitation Agreements. As soon as
practicable after the date of this Agreement, Waypoint shall use reasonable best
efforts to deliver to Sovereign the agreement required by Section 5.02(k).
Section 4.15 NYSE Listing. Sovereign shall use its reasonable
best efforts to list, prior to the Effective Date, on the NYSE, the shares of
Sovereign Common Stock to be issued in connection with the Merger.
Section 4.16 Amendment to Articles of Incorporation. Sovereign
shall use its reasonable best efforts to cause its shareholders to approve a
proposed amendment to its articles of incorporation to increase the number of
authorized shares of Sovereign Common Stock.
Section 4.17 Advisory Board. On the Effective Date, Sovereign
Bank shall establish the Waypoint Advisory Board (the "Waypoint Advisory
Board"), which shall consist of all members of the Waypoint Board immediately
prior to the Effective Date, other than such member who becomes director of
Sovereign Bank. The Waypoint Advisory Board shall be maintained for a term of
thirty-six (36) months after the Effective Date. Each member of the Waypoint
Advisory Board (other than the current Chairman, President and former
Co-Chairman who shall serve without compensation) shall be paid for services as
such an annual retainer of $3,000 plus $600 per each advisory board meeting
attended, provided, however, that notwithstanding anything else in this Section
4.17, (a) if a member fails to attend at least 25% of the meetings of the
Waypoint Advisory Board called within any year, such member will not have any
rights to additional fees thereafter as a Waypoint Advisory Board member; (b) no
attendance fees shall be paid for meetings not actually attended; and (c)
Sovereign Bank shall have no obligation to continue the services of any advisory
director who, in the reasonable judgment of Sovereign Bank, acts in a manner
detrimental to Sovereign Bank. In the event that Sovereign Bank terminates,
suspends or disbands the Waypoint Advisory Board, fails to require or request
the attendance of a member with respect to at least ten (10) meetings of the
Waypoint Advisory Board and/or committee thereof within a single year or removes
a member of the Waypoint Advisory Board other than because such member acted in
a manner detrimental to Bank, in each case prior to the end of the thirty-six
(36) month period contemplated by this Section 4.17 and subject to the proviso
of the preceding sentence, any member affected by any such action or failure
shall nonetheless be paid the full fees (assuming at least ten (10) meetings
annually had been held) pursuant to clause (a) of the preceding sentence or the
amount contemplated by clause (b) thereof, whichever is greater, with respect to
such thirty-six (36) month period.
Section 4.18 Section 16 Matters. Sovereign and Waypoint agree
that, in order to most effectively compensate and retain Waypoint Insiders (as
defined below) in connection with the Merger, both prior to and after the
Effective Time, it is desirable that Waypoint Insiders not be subject to risk of
liability under Section 16(b) of the Exchange Act to the fullest extent
permitted by applicable law in connection with the conversion of Waypoint Common
Stock and Waypoint Options into shares of Sovereign Common Stock and options to
purchase Sovereign Common Stock, respectively, in the Merger, and for that
compensatory and retentive purpose agree to the provisions of this Section 4.18.
Assuming that Waypoint delivers to Sovereign the Section 16 Information (as
defined below) in a timely fashion, Sovereign Board, or a committee
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of Non-Employee Directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), shall adopt a resolution providing that the
receipt by Waypoint Insiders of Sovereign Common Stock in exchange for shares of
Waypoint Common Stock and of options to purchase Sovereign Common Stock upon
conversion of Waypoint Options, in each case pursuant to the Merger and to the
extent such securities are listed in the Section 16 Information, are intended to
be exempt from liability pursuant to Section 16(b) under the Exchange Act.
"Section 16 Information" shall mean information accurate in all material
respects regarding the Waypoint Insiders, the number of shares of Waypoint
Common Stock held by each such Waypoint Insider and expected to be exchanged for
Sovereign Common Stock in the Merger and the number and description of Waypoint
Options held by each such Waypoint Insider and expected to be converted into
options to purchase Sovereign Common Stock in connection with the Merger;
provided that the requirement for a description of any Waypoint Options shall be
deemed to be satisfied if copies of all Waypoint Stock Option Plans, and forms
of agreements evidencing grants thereunder, under which such Waypoint Options
have been granted have been made available to Sovereign. "Waypoint Insiders"
shall mean those officers and directors of Waypoint who are subject to the
reporting requirements of Section 16(a) of the Exchange Act and who are listed
in the Section 16 Information.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to Waypoint's Obligations under this
Agreement. The obligations of Waypoint hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Waypoint pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be
taken by, or on the part of, Sovereign, its shareholders and Sovereign Bank to
authorize the execution, delivery and performance of this Agreement and the Bank
Plan of Merger, respectively, and the consummation of the transactions
contemplated by this Agreement and the Bank Plan of Merger, shall have been duly
and validly taken by Sovereign and Sovereign Bank; and Waypoint shall have
received certified copies of minutes or resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of
Sovereign required by this Agreement to be performed by Sovereign at or prior to
the Closing Date shall have been duly performed and complied with in all
respects, except where the failure to perform or comply with any obligation or
covenant would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Sovereign;
(c) Representations and Warranties. The
representations and warranties of Waypoint set forth in this Agreement shall be
true and correct as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date except that as to any representation
and warranty (i) that by its terms speaks as of the date of this Agreement or
some other date shall be true and correct as of such date or (ii) where the
breach of the representation or warranty would not, either individually or in
the aggregate, constitute a Material Adverse Effect;
(d) Approvals of Regulatory Authorities. Sovereign
and Waypoint shall have received all approvals of Regulatory Authorities of the
Merger required to have been
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obtained to consummate the transactions contemplated by this Agreement, and all
notice and waiting periods required thereunder shall have expired or been
terminated;
(e) No Injunction. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby;
(f) No Change Resulting in Material Adverse Effect.
Since September 30, 2003 through the Closing Date, there shall not have occurred
any change that individually or in the aggregate has a Material Adverse Effect
with respect to Sovereign;
(g) Officer's Certificate. Sovereign shall have
delivered to Waypoint a certificate and such other documents, dated the Closing
Date and signed, without personal liability, by an officer of Sovereign to the
effect that the conditions set forth in subsections (a) through (e) of this
Section 5.01 have been satisfied, to the best knowledge of the officer executing
the same;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no proceedings shall
be pending by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained and neither the Registration Statement nor any such
approval by state securities or "blue sky" authorities shall be subject to a
stop order or threatened stop order by the SEC or any such authority;
(i) Tax Opinion. Waypoint shall have received a
letter setting forth the written opinion of its counsel in form and substance
reasonably satisfactory to Waypoint, dated as of the Effective Date,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such letter, the Merger will constitute a
reorganization described in section 368(a)(1) of the IRC;
(j) Listing. The shares of Sovereign Common Stock to
be issued in the Merger shall have been approved for listing on the NYSE; and
(k) Approval of Waypoint's Shareholders. This
Agreement shall have been approved by the shareholders of Waypoint by such vote
as is required under Waypoint's articles of incorporation and bylaws and the
BCL.
Section 5.02 Conditions to Sovereign's Obligations under this
Agreement. The obligations of Sovereign hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Sovereign pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be
taken by, or on the part of, Waypoint and Waypoint Bank to authorize the
execution, delivery and performance of this Agreement and the Bank Plan of
Merger, respectively, and the consummation of the transactions contemplated by
this Agreement and the Bank Plan of Merger, shall have been duly and validly
taken by (i) Waypoint, (ii) Waypoint Bank and (iii) Waypoint's shareholders by
such vote as is required under Waypoint's articles of incorporation and bylaws;
and Sovereign shall have received certified copies of the resolutions evidencing
such authorizations;
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(b) Covenants. The obligations and covenants of
Waypoint, required by this Agreement to be performed by it at or prior to the
Closing Date shall have been duly performed and complied with in all respects,
except where the failure to perform or comply with any obligation or covenant
would not, either individually or in the aggregate, result in a Material Adverse
Effect with respect to Waypoint;
(c) Representations and Warranties. The
representations and warranties of Waypoint set forth in this Agreement shall be
true and correct as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date except that as to any representation
and warranty (i) that by its terms speaks as of the date of this Agreement or
some other date shall be true and correct as of such date or (ii) where the
breach of the representation or warranty would not, either individually or in
the aggregate, constitute a Material Adverse Effect;
(d) Approvals of Regulatory Authorities. Sovereign
and Waypoint shall have received all approvals of Regulatory Authorities for the
Merger required to have been obtained to consummate the transactions
contemplated by this Agreement; and all notice and waiting periods required
thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby;
(f) No Change Resulting in Material Adverse Effect.
Since September 30, 2003, there shall not have occurred any change that
individually or in the aggregate has a Material Adverse Effect with respect to
Waypoint;
(g) Officer's Certificate. Waypoint shall have
delivered to Sovereign a certificate and such other documents, dated the Closing
Date and signed, without personal liability, by its chairman of the board and
chief executive officer, to the effect that the conditions set forth in
subsections (a) through (f) of this Section 5.02 have been satisfied, to the
best knowledge of the officer executing the same;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no proceedings shall
be pending by the SEC to suspend the effectiveness of the Registration
Statement; and all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this Agreement,
shall have been obtained and neither the Registration Statement nor any such
approval by state securities or "blue sky" authorities shall be subject to a
stop order or threatened stop order by the SEC or any such authority;
(i) Tax Opinion. Sovereign shall have received a
letter setting forth the written opinion of its counsel, in form and substance
reasonably satisfactory to Waypoint, dated as of the Effective Date,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such letter, the Merger will constitute a
reorganization described in section 368(a)(1) of the IRC;
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(j) Amendment to Articles of Incorporation. Sovereign
shall have amended its articles of incorporation to increase the number of
authorized shares of Sovereign Common Stock;
(k) Non-Solicitation of Customers and Employees. The
present President shall have executed and delivered to Sovereign an agreement
substantially in the form set forth in the Waypoint Disclosure Schedule to
Waypoint setting forth certain covenants not to compete and covenants not to
solicit customers or employees of Waypoint after the Closing Date; and
(l) Approval of Waypoint's Shareholders. This
Agreement shall have been approved by the shareholders of Waypoint by such vote
as is required under Waypoint's articles of incorporation and bylaws and the
BCL.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be terminated on
or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By Sovereign or Waypoint:
(i) if the Closing Date shall not have occurred
on or before January 31, 2005; or
(ii) if either party has received a final
unappealable administrative order from a Regulatory Authority whose
approval or consent has been requested that such approval or consent
will not be granted or an application therefor shall have been
permanently withdrawn at the request of a Regulatory Authority;
unless in the case of both Section 6.01(b)(i) and 6.01(b)(ii) hereof the failure
of such occurrence shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in any material respect its agreements set
forth herein required to be performed or observed by such party on or before the
Closing Date.
(c) By Waypoint or Sovereign, if Waypoint's
shareholders fail to approve this Agreement at a special meeting of Waypoint
shareholders called for that purpose;
(d) By Sovereign or Waypoint, if Sovereign's
shareholders fail to approve the proposed amendment to Sovereign's articles of
incorporation to increase the number of authorized shares of its Common Stock by
October 31, 2004.
(e) By Waypoint, on the Determination Date, if both
of the following conditions are satisfied:
(1) the Sovereign Market Value as of
the close of business on the Determination Date shall be less than
$18.84; and
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(2) (i) the quotient obtained by
dividing the Sovereign Market Value as of the close of business on the
Determination Date by $22.16 (such number being referred to herein as
the "Sovereign Ratio") shall be less than (ii) the quotient obtained by
dividing the Index Price on the Determination Date by the Index Price
on the Starting Date and subtracting 0.15 from the quotient in this
clause (2)(ii).
Provided however, if Waypoint elects to exercise its termination right pursuant
to the immediately preceding sentence, it shall give written notice to Sovereign
on the Determination Date. Sovereign shall have the option of paying additional
consideration in the form of cash, Sovereign Common Stock or a combination of
cash and Sovereign Common Stock so that each Stock Election Share shall be
converted into the right to receive cash, Sovereign Common Stock or a
combination of cash and Sovereign Common Stock equal in value to $25.20. If
Sovereign delivers to Waypoint on the Effective Date written notice that it
intends to proceed with the Merger by paying such additional consideration, as
contemplated by the preceding sentence, then no termination shall have occurred
pursuant to this Section 6.01(e).
For purposes of this Section 6.01(e), the following terms
shall have the meanings indicated.
"Determination Date" shall mean the trading day immediately
preceding the Effective Date.
"Index Group" shall mean the ten bank or thrift holding
companies listed below, the common stocks of all of which shall be publicly
traded and as to which there shall not have been, since the Starting Date and
before the Determination Date, any public announcement of a proposal for such
company to be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquirer's market
capitalization. In the event that any such company or companies are removed from
the Index Group, the weights (which have been determined based upon relative
market capitalization) redistributed proportionately for purposes of determining
the Index Price. The ten bank or thrift holding companies and the weights
attributed to them are as follows:
Bank or Thrift Holding Companies % Weighting
-------------------------------- -----------
M&T Bank Corporation 19.14%
Charter One Financial, Inc. 13.77%
BankNorth Group, Inc. 9.27%
North Fork Bancorporation, Inc. 10.93%
Astoria Financial Corporation 5.13%
Valley National Bancorp 4.39%
Webster Financial Corporation 3.93%
PNC Financial Services Group, Inc. 27.62%
Fulton Bancshares Corporation 4.07%
Susquehanna Bancshares 1.75%
------
Total.............................................. 100.00%
======
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"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing sales
prices of the companies composing the Index Group (reported as provided with
respect to the Sovereign Market Value).
"Starting Date" shall mean the trading day prior to
announcement of this Agreement.
If any company belonging to the Index Group or Sovereign declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or Sovereign
shall be appropriately adjusted for the purposes of applying this Section
6.01(e).
(f) By Sovereign at any time prior to the Effective
Date if (i) Waypoint shall have breached, in any material respect the provisions
of Section 4.06 of this Agreement, (ii) the Board of Directors of Waypoint shall
have failed to recommend or endorse the Merger or withdrawn or modified its
approval or recommendation of this Agreement and the Merger or recommended or
endorsed a proposal for another Acquisition Transaction, or (iii) failed to
call, give notice of, convene or hold a meeting of shareholders to consider the
Merger.
(g) At any time on or prior to the Effective Date, by
Waypoint in writing if Sovereign has, or by Sovereign in writing if Waypoint
has, breached (i) any material covenant or undertaking contained herein or (ii)
any representation or warranty contained herein, which in the case of a breach
referred to in subclause (i) or (ii) above by Sovereign would, individually or
in the aggregate, result in a Material Adverse Effect on Sovereign and in case
of a breach referred to in subclause (i) or (ii) above by Waypoint would,
individually or in the aggregate, result in a Material Adverse Effect on
Waypoint, in any case if such breach has not been substantially cured by the
earlier of thirty (30) days after the date on which written notice of such
breach is given to the party committing such breach or the Effective Date unless
on such date such breach no longer causes a Material Adverse Effect.
Section 6.02 Effect of Termination.
(a) If this Agreement is terminated pursuant to
Section 6.01 hereof, this Agreement shall forthwith become void (except for
Section 4.02(d), Section 4.09(c)(ii) Section 7.01 hereof and this Section 6.02,
and all obligations of the parties intended to be performed after the
termination of this Agreement, which shall remain in full force and effect), and
there shall be no further liability on the part of Sovereign or Waypoint to the
other, except for any liability arising out of any uncured willful breach of any
covenant or other agreement contained in this Agreement.
(b) If this Agreement is terminated as a result of
any breach of a representation, warranty, covenant or other agreement which is
caused by the willful or intentional breach of a party hereto, such party shall
be liable to the other for out-of-pocket costs and expenses, including, without
limitation, the reasonable fees and expenses of lawyers, accountants and
investment bankers, incurred by such other party in connection with the entering
into of this Agreement and the carrying out of any and all acts contemplated
hereunder ("Expenses"); provided, however, that the maximum amount Waypoint
shall be liable to Sovereign for Expenses pursuant to this Section 6.02(b) shall
be $4,500,000, and the maximum
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amount Sovereign shall be liable to Waypoint for Expenses pursuant to this
Section 6.02(b) shall be $4,500,000. The payment of Expenses shall not
constitute an exclusive remedy, but is in addition to any other rights or
remedies available to the parties hereto at law.
(c) In the event this Agreement is terminated by: (i)
Sovereign pursuant to Section 6.01(c) in circumstances where the Board of
Directors of Waypoint shall not have held a shareholders meeting to consider the
Merger, failed to publicly recommended to such shareholders that such
shareholders vote in favor of the approval of this Agreement or shall have
withdrawn, modified or amended such recommendation in a manner adverse to
Sovereign; or (ii) Sovereign pursuant to Section 6.01(f) in circumstances where
both (A) within eighteen (18) months after such termination, Waypoint shall have
entered into an agreement to engage in or there has otherwise occurred an
Acquisition Transaction with any person other than Sovereign or any Affiliate of
Sovereign and (B) at the time of such termination or event giving rise to such
termination, it shall have been publicly announced that any Person (other than
Sovereign or any Affiliate of Sovereign) shall have (y) made, or disclosed an
intention to make, a bona fide offer to engage in an Acquisition Transaction, or
(z) filed an application (or given a notice), whether in draft or final form,
under the Bank Holding Company Act or the Change in Bank Control Act of 1978,
for approval to engage in an Acquisition Transaction; then Sovereign, in its
sole and absolute discretion, may elect, upon written notice to Waypoint within
ten (10) Business Days after such termination (the "Break-Up Election Notice"),
to require Waypoint to make a single cash payment in the amount of $39,276,720
upon such termination (the "Termination Fee"). Waypoint shall pay the
Termination Fee (by wire transfer of immediately available fund to an account
designated by Sovereign) within two (2) Business Days after receipt of the
Break-Up Election Notice. If Sovereign elects to receive the Termination Fee,
and upon Sovereign's receipt of the Termination Fee, the Sovereign Option shall
automatically terminate and Waypoint will not have any further obligations or
liabilities to Waypoint with respect to this Agreement or the Sovereign Option
or the transactions contemplated by this Agreement or the Sovereign Option. If
Sovereign does not elect to require Waypoint to pay the Termination Fee, the
Sovereign Option will not automatically terminate as set forth in this Section
6.02(c) and the Sovereign Option shall be enforceable in accordance with its
terms until terminated in accordance with its terms.
(d) In the event this Agreement is terminated by
Waypoint because of the failure of Sovereign to amend its articles of
incorporation to increase its authorized common stock on or before October 31,
2004, Sovereign shall be liable to Waypoint for its Expenses up to $4,500,000 in
the aggregate).
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except as otherwise provided in Section
6.02 and except for the cost of printing and mailing the Proxy
Statement/Prospectus which shall be shared equally, each party hereto shall bear
and pay all costs and expenses incurred by it in connection with the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel and, in the case of Sovereign,
the registration fee to be paid to the SEC in connection with the Registration
Statement.
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Section 7.02 Non-Survival of Representations and Warranties.
All representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants that by
their terms are to be performed after the Effective Date, including without
limitation the covenants set forth in Sections 1.02(e), 1.02(h), 1.02(i), 4.05,
4.10(a) and 4.10(b), which will survive the Merger, shall terminate on the
Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject to
applicable law, at any time prior to the consummation of the transactions
contemplated by this Agreement, the parties may (a) amend this Agreement, (b)
extend the time for the performance of any of the obligations or other acts of
either party hereto, (c) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (d)
waive compliance with any of the agreements or conditions contained in Articles
IV and V hereof or otherwise, provided that any amendment, extension or waiver
granted or executed after shareholders of Waypoint have approved this Agreement
shall not modify either the amount or the form of the consideration to be
provided hereby to holders of Waypoint Common Stock upon consummation of the
Merger or otherwise materially adversely affect the shareholders of Waypoint
without the approval of the shareholders who would be so affected. This
Agreement may not be amended except by an instrument in writing authorized by
the respective Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement, including the
Waypoint Disclosure Schedule, the Sovereign Disclosure Schedule and the Exhibits
hereto, contains the entire agreement and understanding of the parties with
respect to its subject matter, together with the confidentiality agreements
previously executed between Sovereign and Waypoint. This Agreement supersedes
all prior arrangements and understandings between the parties, both written or
oral, with respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors; provided, however, that nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 1.02(h), 1.02(i), 4.05, 4.10(a) and 4.10(b).
Section 7.05 No Assignment. Neither party hereto may assign
any of its rights or obligations hereunder to any other person, without the
prior written consent of the other party hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
Section 7.06 Notices. All notices or other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
mailed by prepaid registered or certified mail (return receipt requested), or
sent by telecopy, addressed as follows:
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(a) If to Sovereign, to:
Sovereign
1130 Berkshire Boulevard
Wyomissing, PA 19610
Attention: Mark R. McCollom
Telecopy No.: (610) 320-8448
with a copy to:
Stevens & Lee
111 North Sixth Street, Box 679
Reading, PA 19603
Attention: Joseph M. Harenza, Esquire
Telecopy No.: (610) 376-5610
(b) If to Waypoint, to:
235 North Second Street
P.O. Box 1711
Harrisburg, PA 17105
Attention: David E. Zuern
Telecopy No.: (717) 231-2950
with copies to:
Rhoads & Sinon LLP
One South Market Square, P.O. Box 1146
Harrisburg, PA 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Section 7.08 Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
Section 7.09 Severability. If any provision of this Agreement
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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Section 7.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the domestic internal law of the
Commonwealth of Pennsylvania, excluding its conflicts of law principles.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
SOVEREIGN BANCORP, INC.
By /s/ Jay S. Sidhu
---------------------------------------------------
Jay S. Sidhu
Chairman, President and Chief Executive
Officer
By /s/ Mark R. McCollom
---------------------------------------------------
Mark R. McCollom
Senior Vice President
WAYPOINT FINANCIAL CORP.
By /s/ Charles C. Pearson, Jr.
---------------------------------------------------
Charles C. Pearson, Jr.
Chairman of the Board of Directors
By /s/ David E. Zuern
---------------------------------------------------
David E. Zuern
President and Chief Executive Officer
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EXHIBIT 1
FORM OF AFFILIATE LETTER
March 8, 2004
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, PA 19610
Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and Waypoint Financial Corp.
("Waypoint") desire to enter into an Agreement and Plan of Merger, dated as of
March 8, 2004 ("Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) Waypoint will merge with and into Sovereign
with Sovereign surviving the merger (the "Merger") and (b) shareholders of
Waypoint will receive shares of Sovereign common stock and/or cash in exchange
for shares of common stock of Waypoint (as provided in Section 1.02(f) of the
Agreement).
Sovereign has required, as a condition to its execution and delivery to
Waypoint of the Agreement, and pursuant to Section 4.12 of the Agreement, that
the undersigned, being a director and/or executive officer of Waypoint, execute
and deliver to Sovereign this letter agreement (the "Letter Agreement").
The undersigned, in order to induce Sovereign to execute the Agreement,
hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of Waypoint called to vote for approval of the Agreement and the
Merger so that all shares of common stock of Waypoint then owned by the
undersigned or over which the undersigned exercises voting control
(collectively, "Shares") will be counted for the purpose of determining the
presence of a quorum at such meetings, and agrees to vote or cause to be voted
all such Shares (i) in favor of approval and adoption of the Agreement and the
transactions contemplated thereby (including any amendments or modifications of
the terms thereof approved by the Board of Directors of Waypoint) and (ii)
against approval or adoption of any other merger, business combination,
recapitalization, asset sale, partial liquidation or similar transaction
involving Waypoint;
(b) Agrees not to vote or execute any written consent to rescind or
amend in any manner any prior vote or written consent, as a shareholder of
Waypoint, to approve or adopt the Agreement;
(c) Agrees to recommend the Merger to shareholders of Waypoint and not
to withdraw or modify such recommendation if the undersigned is a member of the
Board of Directors of Waypoint, and to otherwise use reasonable best efforts to
cause the Merger to be completed;
(d) Except as required by law, agrees that the undersigned will not,
and will not permit any company, trust or other entity controlled by the
undersigned to, contract to sell, sell or
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otherwise transfer or dispose of any of the Shares or any interest therein or
any voting rights with respect thereto, other than subsequent to the shareholder
meeting of Waypoint held in connection with the vote on the Agreement or
pursuant to a gift where the transferee has agreed in writing to abide by the
terms of this Letter Agreement in a form reasonably satisfactory to Sovereign;
(e) Agrees not to offer, sell, transfer or otherwise dispose of any
shares of common stock of Sovereign received in the Merger, except (i) at such
time as a registration statement under the Securities Act of 1933, as amended
("Securities Act") covering sales of such Sovereign common stock is effective
and a prospectus is made available under the Securities Act, (ii) within the
limits, and in accordance with the applicable provisions of, Rule 145(d) under
the Securities Act or (iii) in a transaction which, in the opinion of counsel
satisfactory to Sovereign or as described in a "no-action" or interpretive
letter from the staff of the Securities and Exchange Commission, is not required
to be registered under the Securities Act; and acknowledges and agrees that
Sovereign is under no obligation to register the sale, transfer or other
disposition of Sovereign common stock by the undersigned or on behalf of the
undersigned, or to take any other action necessary to make an exemption from
registration available;
(f) Agrees that neither Waypoint nor Sovereign shall be bound by any
attempted sale by the undersigned of any of the Shares or of shares of Sovereign
Common Stock, respectively, and Sovereign's transfer agent shall be given an
appropriate stop transfer order and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance with the terms
of this Letter Agreement; and further agrees that the certificate representing
shares of Sovereign common stock owned by the undersigned may be endorsed with a
restrictive legend consistent with the terms of this Letter Agreement;
(g) Acknowledges and agrees to use reasonable efforts to cause the
provisions of subparagraph (e) hereof the be observed with respect to shares of
Sovereign Common Stock received in the Merger or owned by (i) his or her spouse,
(ii) any of his or her relatives or relatives of his or her spouse occupying his
or her home, (iii) any trust or estate in which he or she, his or her spouse, or
any such relative owns at least a 10% beneficial interest or of which any of
them serves as trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any affiliate of the
undersigned, his or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest; and
(h) Represents that the undersigned has the capacity to enter into this
Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
It is understood and agreed that the provisions of subparagraphs (a),
(b) and (c) of this Letter Agreement relate solely to the capacity of the
undersigned as a shareholder or other beneficial owner of shares of Waypoint
common stock and is not in any way intended to affect the exercise by the
undersigned of the undersigned's responsibilities as a director or officer of
Waypoint. It is further understood and agreed that such subparagraphs of this
Letter Agreement
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are not in any way intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in respect of any shares
of Waypoint common stock held or controlled by the undersigned as of the date
hereof.
The obligations set forth herein shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
This Letter Agreement shall inure to the benefit of Sovereign, and
shall be binding on the undersigned and his or her executors, personal
representatives, administrators, heirs, legatees, guardians and other personal
representatives. This Letter Agreement shall survive the death or incapacity of
the undersigned.
The undersigned agrees that, in the event of his or her breach of this
Letter Agreement, Sovereign shall be entitled to such remedies and relief
against the undersigned as are available at law or in equity. The undersigned
acknowledges that there is not an adequate remedy at law to compensate Sovereign
for a violation of this Letter Agreement, and irrevocably waives, to the extent
permitted by law, any defense that he or she might have based on the adequacy of
a remedy at law which might be asserted as a bar to specific performance,
injunctive relief, or other equitable relief. The undersigned agrees to the
granting of injunctive relief without the posting of any bond and further agrees
that, if any bond shall be required, such bond shall be in a nominal amount.
Please confirm, intending to be legally bound, that the foregoing
correctly states the understanding between the undersigned and Sovereign by
signing and returning to Sovereign a counterpart hereof.
Very truly yours,
Name:____________________________
Accepted as of this ____ day of March, 2004:
Sovereign Bancorp, Inc.
By: ____________________________
Name:
Title:
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EXHIBIT 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement"), dated as of
March 8, 2004, is by and between SOVEREIGN BANCORP, INC., a Pennsylvania
corporation ("Sovereign") and WAYPOINT FINANCIAL CORP., a Pennsylvania
corporation ("Waypoint").
BACKGROUND
1. Sovereign and Waypoint desire to enter into an Agreement and Plan of
Merger, dated as of March 8, 2004 (the "Agreement"), providing, among other
things, for the acquisition by Sovereign of Waypoint through the merger of
Waypoint with and into Sovereign, with Sovereign surviving the merger (the
"Merger").
2. As a condition to Sovereign executing the Agreement, Waypoint is
granting to Sovereign an option to purchase up to that number of shares of
common stock, $0.01 par value per share of Waypoint (the "Common Stock"), as
shall equal 19.9% of shares of Common Stock of Waypoint issued and outstanding
immediately prior to such purchase, on the terms and conditions hereinafter set
forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein, Sovereign and Waypoint, intending to be legally
bound hereby, agree:
1. Grant of Option.
(a) Waypoint hereby grants to Sovereign, on the terms and
conditions set forth herein, an unconditional irrevocable option to purchase
(the "Option") up to 6,629,957 shares (as adjusted as set forth herein, the
"Option Shares") of Common Stock at a price per share (the "Option Price") equal
to $24.76, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock of Waypoint without giving effect to any shares subject
to or issued pursuant to the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Stock Option Agreement), the number of shares of Common
Stock subject to the Option shall be increased so that, after such issuance,
such number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section 1(b) or elsewhere in this Stock
Option Agreement shall be deemed to authorize Issuer to issue shares in breach
of any provision of the Agreement.
2. Exercise of Option. Provided that (i) Sovereign shall not on the
date of exercise be in material breach of the agreements or covenants contained
in the Agreement or herein, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option issued by any
court of competent jurisdiction in the United States shall be in effect, upon
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or after the occurrence of a Triggering Event (as such term is hereinafter
defined) and until termination of this Stock Option Agreement in accordance with
the provisions of Section 23 hereof, Sovereign may exercise the Option, in whole
or in part, at any time or one or more times, from time to time. As used herein,
the term "Triggering Event" means the occurrence of any of the following events:
(a) a person or group (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder), other than Sovereign or an affiliate of Sovereign,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 15% or more of the then outstanding shares of Common Stock
(excluding any shares eligible to be reported on Schedule 13G of the Securities
and Exchange Commission);
(b) a person or group, other than Sovereign or an affiliate of
Sovereign, enters into an agreement, letter of intent, or similar document with
Waypoint pursuant to which such person or group or any affiliate of such person
or group would (i) merge or consolidate, or enter into any similar transaction,
with Waypoint, (ii) acquire all or substantially all of the assets or
liabilities of Waypoint or all or substantially all of the assets or liabilities
of Waypoint Bank, a wholly-owned subsidiary of Waypoint ("Waypoint Bank") or any
other subsidiaries of Waypoint, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 15% or more of the then outstanding shares of Common
Stock (excluding any shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission) or the then outstanding shares of common
stock of Waypoint Bank; or
(c) a person or group, other than Sovereign or an affiliate of
Sovereign, publicly announces a bona fide proposal (including a written
communication that is or becomes the subject of public disclosure) for (i) any
merger, consolidation or acquisition of all or substantially all the assets or
liabilities of Waypoint or all or substantially all the assets or liabilities of
Waypoint Bank or any other subsidiary of Waypoint, or any other business
combination involving Waypoint, Waypoint Bank or any other subsidiary of
Waypoint, or (ii) a transaction involving the transfer of beneficial ownership
of securities representing, or the right to acquire beneficial ownership or to
vote securities representing, 15% or more of the then outstanding shares of
Common Stock or the then outstanding shares of common stock of Waypoint Bank or
any other subsidiary of Waypoint (collectively, a "Proposal"), and thereafter,
if such Proposal has not been Publicly Withdrawn (as such term is hereinafter
defined) at least 30 days prior to the meeting of shareholders of Waypoint
called to vote on the Merger, Waypoint's shareholders fail to approve the Merger
by the vote required by applicable law at the meeting of shareholders called for
such purpose or such meeting has been cancelled; or
(d) a person or group, other than Sovereign or an affiliate of
Sovereign, makes a bona fide proposal and thereafter, but before such Proposal
has been Publicly Withdrawn, Waypoint willfully takes any action in a manner
which would likely result in the failure of either party to satisfy a material
condition to the closing of the Merger or materially reduce the value of the
transaction to Sovereign; or
(e) the Board of Directors of Waypoint shall (i) fail to call a
meeting of shareholders to consider the Merger, (ii) fail to recommend and
endorse the Agreement and the transactions
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contemplated thereby or (iii) withdraw, modify, or change in a manner adverse to
Sovereign its approval or recommendation of the Agreement and the transactions
contemplated thereby, or (iv) recommend or endorse an Acquisition Transaction
(as defined in Section 4.06 of the Agreement); or
(f) Waypoint breaches, in any material respect, any binding term
of the Agreement with respect to the Merger which would permit Sovereign to
terminate the Agreement or this Stock Option Agreement after a Proposal is made
and before it is Publicly Withdrawn or publicly announces an intention to
authorize, recommend or accept any such Proposal; provided, however, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable law.
If more than one of the transactions giving rise to a Triggering Event
under this Section 2 is undertaken or effected, then all such transactions shall
give rise only to one Triggering Event, which Triggering Event shall be deemed
continuing for all purposes hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2 shall mean an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Waypoint or in soliciting or inducing any other
person (other than Sovereign or an affiliate of Sovereign) to do so.
Notwithstanding the foregoing, the obligation of Waypoint to issue
Option Shares upon exercise of the Option shall be deferred (but shall not
terminate) (i) until the receipt of all required governmental or regulatory
approvals or consents necessary for Waypoint to issue the Option Shares, or
Sovereign to exercise the Option, or until the expiration or termination of any
waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares, and, in each case, notwithstanding any provision to the contrary set
forth herein, the Option shall not expire or otherwise terminate.
Waypoint shall notify Sovereign promptly in writing of the occurrence
of any Triggering Event known to it, it being understood that the giving of such
notice by Waypoint shall not be a condition to the right of Sovereign to
exercise the Option. Subject to compliance with the applicable banking and
securities laws or regulations, Waypoint will not take any action which would
have the effect of preventing or disabling Waypoint from delivering the Option
Shares to Sovereign upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement. In the event Sovereign wishes to
exercise the Option, Sovereign shall send a written notice to Waypoint (the date
of which is hereinafter referred to as the "Notice Date") specifying the total
number of Option Shares it wishes to purchase and a place and date between two
and ten business days inclusive from the Notice Date for the closing of such a
purchase (a "Closing"); provided, however, that a Closing shall not occur prior
to two days after the later of receipt of any necessary regulatory approvals or
the expiration of any legally required notice or waiting period, if any.
3. Repurchase of Option by Waypoint.
(a) At the request of Sovereign at any time and from time to time
commencing upon the first occurrence of a Repurchase Event (as hereinafter
defined) and ending upon termination
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of this Stock Option Agreement in accordance with the provisions of Section 23
hereof, Waypoint shall repurchase from Sovereign upon Sovereign's request (i)
all or any portion of the Option Shares not yet purchased by Sovereign pursuant
hereto and (ii) all or any portion shares of Common Stock purchased by Sovereign
pursuant hereto with respect to which Sovereign then has beneficial ownership.
The date on which Sovereign exercises its rights under this Section 3 is
referred to as the "Request Date." Such repurchase shall be at an aggregate
price (the "Section 3 Repurchase Consideration") equal to the sum of: (A) the
aggregate Purchase Price paid by Sovereign for any shares of Common Stock being
repurchased which were acquired pursuant to the Option and with respect to which
Sovereign then has beneficial ownership; (B) the excess, if any, of (x) the
Applicable Price (as defined below) for each share of Common Stock over (y) the
Option Price (subject to adjustment pursuant to Section 6 hereof), multiplied by
the number of shares of Common Stock being repurchased with respect to which the
Option has not been exercised; and (C) the excess, if any, of the Applicable
Price over the Option Price (subject to adjustment pursuant to Section 6 hereof)
paid (or, in the case of Option Shares with respect to which the Option has been
exercised, but the Closing has not occurred, payable) by Sovereign for each
share of Common Stock being repurchased with respect to which the Option has
been exercised and with respect to which Sovereign then has beneficial
ownership, multiplied by the number of such shares.
(b) If Sovereign exercises its rights under this Section 3,
Waypoint shall, within ten (10) business days after the Request Date, pay the
Section 3 Repurchase Consideration to Sovereign in immediately available funds,
and contemporaneously with such payment, Sovereign shall surrender to Waypoint
the Option and the certificate evidencing the shares of Common Stock being
repurchased with respect to which Sovereign then has beneficial ownership, and
Sovereign shall warrant that it has sole record and beneficial ownership of such
shares, and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. In the event of the repurchase of less
than all of the Option Shares with respect to which the Option has not been
exercised, Waypoint shall issue a new Stock Option Agreement to Sovereign
reflecting the remaining balance, if any, of Option Shares after giving effect
to such repurchase. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any banking agency or department of any federal
or state government, including without limitation the Office of Thrift
Supervision, the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, or the respective staffs thereof (the "Regulatory
Authority"), is required in connection with the payment of all or any portion of
the Section 3 Repurchase Consideration, Sovereign shall have the ongoing option
to revoke its request for repurchase pursuant to Section 3 hereof, in whole or
in part, or to require that Waypoint deliver from time to time that portion of
the Section 3 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval), in which case the ten (10) business day period of time that would
otherwise run pursuant to the preceding sentence for the payment of the portion
of the Section 3 Repurchase Consideration shall run instead from the date on
which, as the case may be, any required notification period has expired or been
terminated or such approval has been obtained and, in either event, any
requisite waiting period shall have passed. If any Regulatory Authority
disapproves of any part of Waypoint's proposed repurchase pursuant to this
Section 3, Waypoint shall promptly give notice of such fact to Sovereign. If any
Regulatory Authority prohibits repurchase pursuant to this Section 3, Waypoint
shall promptly give notice of such fact to Sovereign. If any Regulatory
Authority
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prohibits the repurchase in part but not in whole, then Sovereign shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted by
such Regulatory Authority, determine whether the repurchase should apply to the
Option and/or Option Shares subject to the repurchase request and to what extent
to each, and Sovereign shall thereupon have the right to exercise the Option as
to the number of Option Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 3(a)(ii)(B) hereof
and the number of shares covered by the portion of the Option (if any) that has
been repurchased. Sovereign shall notify Waypoint of its determination under the
preceding sentence within five (5) business days of receipt of notice of
disapproval of the repurchase.
(c) For purposes of this Stock Option Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of Common Stock paid
for any such share by the person or groups described in Section 3(d)(i) hereof,
(ii) the price per share of Common Stock received by a holder of Common Stock in
connection with any merger or other business combination transaction described
in Section 3(d)(ii), 3(d)(iii) or 3(d)(iv) hereof, or (iii) the highest closing
sales price per share of Common Stock quoted on the Nasdaq Stock Market, Inc.
during the sixty (60) business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Waypoint's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Waypoint's as determined
by a nationally-recognized investment banking firm selected by Sovereign,
divided by the number of shares of Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either of
the foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent
nationally-recognized investment banking firm selected by Sovereign and
reasonably acceptable to Waypoint, which determination shall be conclusive for
all purposes of this Agreement.
(d) As used herein, a Repurchase Event shall occur if (i) any
person or group (as such terms are defined in the Exchange Act and the rules and
regulations thereunder), other than Sovereign or an affiliate of Sovereign,
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership of, 15% or more
of the then-outstanding shares of Common Stock, (ii) Waypoint shall have merged
or consolidated with any person, other than Sovereign or an affiliate of
Sovereign, and shall not be the surviving or continuing corporation of such
merger or consolidation, (iii) any person, other than Sovereign or an affiliate
of Sovereign, shall have merged into Waypoint and Waypoint shall be the
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Common Stock have been changed into or exchanged for stock or other
securities of Waypoint or any other person or cash or any other property or the
outstanding shares of Common Stock immediately prior to such merger shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the surviving corporation or (iv) Waypoint shall have sold or
otherwise transferred more than 15% of its consolidated assets to any person,
other than Sovereign or an affiliate of Sovereign.
4. Payment and Delivery of Certificates. At any Closing hereunder, (a)
Sovereign will make payment to Waypoint of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Waypoint, (b) Waypoint will deliver to Sovereign a stock
certificate or certificates representing the number of Option Shares
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so purchased, registered in the name of Sovereign or its designee, in such
denominations as were specified by Sovereign in its notice of exercise, and (c)
Sovereign will pay any transfer or other taxes required by reason of the
issuance of the Option Shares so purchased.
A legend will be placed on each stock certificate evidencing Option
Shares issued pursuant to this Stock Option Agreement, which legend will read
substantially as follows:
"The shares of stock evidenced by this certificate have not
been the subject of a registration statement filed under the Securities
Act of 1933, as amended (the "Act"), and declared effective by the
Securities and Exchange Commission. These shares may not be sold,
transferred or otherwise disposed of prior to such time unless Waypoint
Financial Corp. receives an opinion of counsel reasonably acceptable to
it stating that an exemption from the registration provisions of the
Act is available for such transfer."
5. Registration Rights. On or after the date of first exercise of the
Option and upon receipt of a written request from Sovereign, Waypoint shall
prepare and file as soon as practicable a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission covering the Option and such number of Option Shares as
Sovereign shall specify in its request, and Waypoint shall use its best efforts
to cause such registration statement to be declared effective in order to permit
the sale or other disposition of the Option and the Option Shares, provided that
Sovereign shall in no event have the right to have more than one such
registration statement become effective, and provided further that Waypoint
shall not be required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel to Waypoint
delivers to Waypoint and to Sovereign its opinion to the effect that no such
filing is required under applicable laws and regulations with respect to such
sale or disposition; provided, however, that Waypoint may delay any registration
of Option Shares above for a period not exceeding sixty (60) days in the event
that Waypoint shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other securities by
Waypoint. Sovereign shall provide all information reasonably requested by
Waypoint for inclusion in any registration statement to be filed hereunder. In
connection with such filing, Waypoint shall use its commercially reasonable
efforts to cause to be delivered to Sovereign such certificates, opinions,
accountant's letters and other documents as Sovereign shall reasonably request
and as are customarily provided in connection with registration of securities
under the Securities Act. Waypoint shall provide to Sovereign such number of
copies of the preliminary prospectus and final prospectus and any amendments and
supplements thereto as Sovereign may reasonably request.
All expenses incurred by Waypoint in complying with the provisions of
this Section 5, including, without limitation, all registration and filing fees,
reasonable printing expenses, reasonable fees and disbursements of counsel for
Waypoint and blue sky fees and expenses, shall be paid by Waypoint. Underwriting
discounts and commissions to brokers and dealers relating to the Option Shares,
fees and disbursements of counsel to Sovereign and any other expenses incurred
by Sovereign in connection with such filing shall be borne by Sovereign. In
connection with such filing, Waypoint shall indemnify and hold harmless
Sovereign against any losses, claims, damages or liabilities, joint or several,
to which Sovereign may become subject, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in
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any preliminary or final registration statement or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and Waypoint will reimburse Sovereign for
any legal or other expense reasonably incurred by Sovereign in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that Waypoint will not be liable in any case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such preliminary or final registration statement or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished by or on behalf of Sovereign specifically for use in the preparation
thereof. Sovereign will indemnify and hold harmless Waypoint to the same extent
as set forth in the immediately preceding sentence but only with reference to
written information furnished by or on behalf of Sovereign for use in the
preparation of such preliminary or final registration statement or such
amendment or supplement thereto; and Sovereign will reimburse Waypoint for any
legal or other expense reasonably incurred by Waypoint in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary contained herein, no indemnifying party
shall be liable for any settlement effected without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the event of any
change in the Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, divisions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
7. Filings and Consents. Each of Sovereign and Waypoint will use its
commercially reasonable efforts to make all filings with, and to obtain consents
of, all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Stock Option Agreement.
8. Representations and Warranties of Waypoint. Waypoint hereby
represents and warrants to Sovereign as follows:
(a) Due Authorization. Waypoint has the requisite corporate power
and authority to execute, deliver and perform this Stock Option Agreement and
all corporate action necessary for execution, delivery and performance of this
Stock Option Agreement has been duly taken by Waypoint. This Stock Option
Agreement constitutes a legal, valid and binding obligation of Waypoint,
enforceable against Waypoint in accordance with its terms (except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(b) Authorized Shares. Waypoint has taken all necessary corporate
action to authorize and reserve for issuance all shares of Common Stock that may
be issued pursuant to any exercise of the Option.
9. Representations and Warranties of Sovereign. Sovereign hereby
represents and warrants to Waypoint that Sovereign has the requisite corporate
power and authority to execute, deliver and perform this Stock Option Agreement
and all corporate action necessary for
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execution, delivery and performance of this Stock Option Agreement has been duly
taken by Sovereign. This Stock Option Agreement constitutes a legal, valid and
binding obligation of Sovereign, enforceable against Sovereign in accordance
with its terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles). Sovereign or its assignee agrees to execute a standard investment
representation letter with respect to its acquisition of any Waypoint securities
acquired in connection with this transaction.
10. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Stock Option Agreement and
that the obligations of the parties hereto shall be specifically enforceable.
11. Entire Agreement. This Stock Option Agreement and the Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof.
12. Assignment or Transfer. Sovereign may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to a subsidiary of Sovereign subject to
compliance with applicable securities laws. Sovereign represents that it is
acquiring the Option for Sovereign's own account and not with a view to, or for
sale in connection with, any distribution of the Option or the Option Shares.
Sovereign is aware that neither the Option nor the Option Shares is the subject
of a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to Section 5 of the Securities Act,
but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by Sovereign in connection therewith.
13. Amendment of Stock Option Agreement. By mutual consent of the
parties hereto, this Stock Option Agreement may be amended in writing at any
time, for the purpose of facilitating performance hereunder or to comply with
any applicable regulation of any governmental authority or any applicable order
of any court or for any other purpose.
14. Validity. The invalidity or unenforceability of any provision of
this Stock Option Agreement shall not affect the validity or enforceability of
any other provisions of this Stock Option Agreement, which shall remain in full
force and effect.
15. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by telegram or telecopy, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
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(i) If to Sovereign, to:
Sovereign
1130 Berkshire Boulevard
Wyomissing, PA 19610
Attention: Mark R. McCollom
Telecopy No.: (610) 320-8448
with a copy to:
Stevens & Lee
111 North Sixth Street, Box 679
Reading, PA 19603
Attention: Joseph M. Harenza, Esquire
Telecopy No.: (610) 376-5610
(ii) If to Waypoint, to:
235 North Second Street
P.O. Box 1711
Harrisburg, PA 17105
Attention: David E. Zuern
Telecopy No.: (717) 231-2950
with copies to:
Rhoads & Sinon LLP
One South Market Square, P.O. Box 1146
Harrisburg, PA 17108
Attention: Charles J. Ferry, Esquire
Telecopy No.: (717) 232-1459
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
16. Governing Law. This Stock Option Agreement shall be governed by and
construed in accordance with the domestic internal law (but not the law of
conflicts of law) of the Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option Agreement are inserted
for convenience and reference purposes, and shall not limit or otherwise affect
any of the terms or provisions hereof.
18. Waivers and Extensions. The parties hereto may, by mutual consent,
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive
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(i) compliance with any of the covenants of the other party contained in this
Stock Option Agreement and/or (ii) the other party's performance of any of its
obligations set forth in this Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, nothing in this
Stock Option Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
21. Expenses. Except as otherwise provided herein, all costs and
expenses incurred by the parties hereto in connection with the transactions
contemplated by this Stock Option Agreement or the Option shall be paid by the
party incurring such cost or expense.
22. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Agreement.
23. Termination. This Stock Option Agreement shall terminate and be of
no further force or effect upon the earliest to occur of: (a) the Effective Time
(as defined in the Agreement); (b) Sovereign's receipt of the Termination Fee
(as defined in the Agreement) from Waypoint pursuant to Section 6.02(c) of the
Agreement; or (c) termination of the Agreement in accordance with the terms
thereof, except that if (i) the Agreement is terminated by Sovereign pursuant to
any of Sections 6.01(b)(i), 6.01(f), or 6.01(g) of the Agreement (provided the
failure of the occurrence of the event specified in Section 6.01(b)(i) of the
Agreement shall be due to the failure of Waypoint to perform or observe its
agreements set forth in the Agreement required to be performed or observed by
Waypoint prior to the Closing Date (as defined in the Agreement) and further
provided that the breach specified in Section 6.01(f) of the Agreement shall
result from a willful action taken by Waypoint), this Stock Option Agreement
shall not terminate until eighteen (18) months after the date of termination of
the Agreement or (ii) the Agreement is terminated as a result of the failure of
Waypoint shareholders to approve the Agreement following (A) a withdrawal or
modification by the Board of Directors of Waypoint of a prior recommendation to
approve the Agreement, (B) a failure of the Board of Directors of Waypoint to
recommend approval of the Agreement, or (C) the making of a Proposal (as defined
in Section 2(c) of this Stock Option Agreement) by a person or group, other than
Sovereign or an affiliate of Sovereign, which is not Publicly Withdrawn (as
defined in Section 2 of this Stock Option Agreement) at least thirty (30) days
prior to the meeting of shareholders of Waypoint called to vote on the Merger,
this Stock Option Agreement shall not terminate until eighteen (18) months after
the date of termination of the Agreement.
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IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Stock Option Agreement to be
executed by its duly authorized officer and has caused its corporate seal to be
affixed hereunto and to be duly attested, all as of the day and year first above
written.
SOVEREIGN BANCORP, INC.
By_________________________________
Jay S. Sidhu
Chairman, President and Chief Executive
Officer
WAYPOINT FINANCIAL CORP.
By_________________________________
Charles C. Pearson
Chairman of the Board of Directors
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