-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDBHfmc+OGGDb2SB83IpGpXgwUclc9JLtuZ/muVsVQcmQhXpAgBIHJsj4QzCFFIg pZxWNSbH1gWYet+UHYeckg== 0000950172-99-001144.txt : 19990901 0000950172-99-001144.hdr.sgml : 19990901 ACCESSION NUMBER: 0000950172-99-001144 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990830 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH FORK BANCORPORATION INC CENTRAL INDEX KEY: 0000352510 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 363154608 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10458 FILM NUMBER: 99703286 BUSINESS ADDRESS: STREET 1: 275 BROAD HOLLOW RD STREET 2: PO BOX 8914 CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5168441004 MAIL ADDRESS: STREET 1: 275 BROAD HOLLOW RD STREET 2: PO BOX 8914 CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 30, 1999 ---------------- NORTH FORK BANCORPORATION, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 1-10458 36-3154608 --------------------- --------------- -------------------------- (STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 275 BROAD HOLLOW ROAD MELVILLE, NEW YORK 11747 -------------------------------------- -------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (516) 844-1004 --------------------- ITEM 5. OTHER EVENTS On August 30, 1999, North Fork Bancorporation, Inc., a Delaware corporation (the "Registrant"), announced that it had entered into an Agreement and Plan of Merger (the "Merger Agreement") with Reliance Bancorp, Inc., a Delaware corporation ("Reliance"), pursuant to which Reliance will merge with and into the Registrant (the "Merger"). The Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference in its entirety. The stock option agreement dated as of August 30, 1999 by and between the Registrant and Reliance (the "Stock Option Agreement") is attached hereto as Exhibit 99.1 and is incorporated herein by reference in its entirety. The press release issued by the Registrant with respect to the announcement of the proposed Merger is attached hereto as Exhibit 99.2 and is incorporated herein by reference in its entirety. The presentation to be given by the Registrant to investment analysts on August 31, 1999 with respect to the proposed Merger is attached hereto as Exhibit 99.3 and is incorporated herein by reference in its entirety. The unaudited pro forma condensed combined financial statements which give effect to the Merger and the Registrant's proposed merger with JSB Financial, Inc. ("JSB") in accordance with the Agreement and Plan of Merger between the Registrant and JSB, dated as of August 16, 1999 (the "JSB Merger Agreement"), are attached hereto as Exhibit 99.4 and are incorporated herein by reference in their entirety. The JSB Merger Agreement is attached hereto as Exhibit 2.2 and is incorporated herein by reference in its entirety. The stock option agreement dated as of August 16, 1999 by and between the Registrant and JSB (the "JSB Stock Option Agreement") is attached hereto as Exhibit 99.5 and is incorporated herein by reference in its entirety. The press release and the analyst presentation incorporated herein by reference contain certain forward looking statements with respect to the financial condition, results of operations and business of the Registrant following the consummation of the Merger, including statements relating to (a) the cost savings, revenue enhancements and other efficiencies that are expected to be realized as a result of the Merger and (b) estimated pro forma 2000 earnings per share. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) expected cost savings, revenue enhancements or other efficiencies from the Merger cannot be fully realized; (2) deposit attrition, customer loss or revenue loss following the Merger is greater than expected; (3) competitive pressure in the banking and financial services industry increases significantly; (4) changes in the interest rate environment reduce margins; and (5) general economic conditions, either nationally or in New York, are less favorable than expected. ITEM 7. FINANCIAL STATEMENT AND EXHIBITS (c) Exhibits 2.1 Agreement and Plan of Merger, dated as of August 30, 1999, by and between North Fork Bancorporation, Inc., and Reliance Bancorp, Inc. 2.2 Agreement and Plan of Merger, dated as of August 16, 1999, by and between North Fork Bancorporation, Inc., and JSB Financial, Inc. 99.1 Stock Option Agreement, dated as of August 30, 1999, by and between North Fork Bancorporation, Inc., and Reliance Bancorp, Inc. 99.2 Press Release issued by North Fork Bancorporation, Inc. on August 30, 1999 99.3 Analyst Presentation 99.4 Unaudited Pro Forma Condensed Combined Financial Statements 99.5 Stock Option Agreement, dated as of August 16, 1999, by and between North Fork Bancorporation, Inc., and JSB Financial, Inc. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTH FORK BANCORPORATION, INC. By: /s/ Daniel M. Healy -------------------------------- Name: Daniel M. Healy Title: Executive Vice President and Chief Financial Officer Date: August 30, 1999 EXHIBIT INDEX Exhibit Number Description 2.1 Agreement and Plan of Merger, dated as of August 30, 1999, by and between North Fork Bancorporation, Inc., and Reliance Bancorp, Inc. 2.2 Agreement and Plan of Merger, dated as of August 16, 1999, by and between North Fork Bancorporation, Inc., and JSB Financial, Inc. 99.1 Stock Option Agreement, dated as of August 30, 1999, by and between North Fork Bancorporation, Inc., and Reliance Bancorp, Inc. 99.2 Press Release issued by North Fork Bancorporation, Inc. on August 30, 1999 99.3 Analyst Presentation 99.4 Unaudited Pro Forma Condensed Combined Financial Statements 99.5 Stock Option Agreement, dated as of August 16, 1999, by and between North Fork Bancorporation, Inc., and JSB Financial, Inc. EX-2 2 EXHIBIT 2.1 - AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER Between NORTH FORK BANCORPORATION, INC. and RELIANCE BANCORP, INC. Dated as of August 30, 1999 TABLE of CONTENTS Page ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . 2 1.4. Conversion of Company Common Stock . . . . . . . . . . . . . . 2 1.5. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 3 1.6. Buyer Common Stock . . . . . . . . . . . . . . . . . . . . . . 5 1.7. Certificate of Incorporation . . . . . . . . . . . . . . . . . 5 1.8. By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.9. Directors and Officers . . . . . . . . . . . . . . . . . . . . 5 1.10. Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE II EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Buyer to Make Shares Available . . . . . . . . . . . . . . . . 5 2.2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III DISCLOSURE SCHEDULES; STANDARDS FOR REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 9 3.1. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . 9 3.2. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . 10 4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . 11 4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 12 4.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 13 4.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 15 4.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 16 4.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 18 4.8. Absence of Certain Changes or Events . . . . . . . . . . . . 18 4.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 19 4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.12. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . 23 4.13. Company Information. . . . . . . . . . . . . . . . . . . . 23 4.14. Compliance with Applicable Law . . . . . . . . . . . . . . 24 4.15. Certain Contracts. . . . . . . . . . . . . . . . . . . . . 24 4.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 25 4.17. Investment Securities . . . . . . . . . . . . . . . . . . . 25 4.18. State Takeover Laws; Business Combination Provision. . . . 25 4.19. Environmental Matters . . . . . . . . . . . . . . . . . . . 26 4.20. Derivative Transactions. . . . . . . . . . . . . . . . . . 27 4.21. Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.22. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 28 4.23. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 28 4.24. Property . . . . . . . . . . . . . . . . . . . . . . . . . 29 4.25. Reorganization . . . . . . . . . . . . . . . . . . . . . . 30 4.26. Company Rights Agreement . . . . . . . . . . . . . . . . . 30 4.27. Equity and Real Estate Investments . . . . . . . . . . . . 30 4.28. Year 2000 Matters . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.1. Corporate Organization . . . . . . . . . . . . . . . . . . . 31 5.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 32 5.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 33 5.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 34 5.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 35 5.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 36 5.8. Absence of Certain Changes or Events . . . . . . . . . . . . 37 5.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 37 5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 40 5.13. Buyer Information . . . . . . . . . . . . . . . . . . . . . 41 5.14. Compliance with Applicable Law . . . . . . . . . . . . . . 41 5.15. Ownership of Company Common Stock . . . . . . . . . . . . . 41 5.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 42 5.17. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 42 5.18. Tax Treatment for the Merger; Reorganization . . . . . . . . . . . . . . . . . . . . . 42 5.19. Environmental Matters . . . . . . . . . . . . . . . . . . . 42 5.20. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 43 5.21. Property . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.22. Derivative Transactions. . . . . . . . . . . . . . . . . . 45 5.23. Year 2000 Matters . . . . . . . . . . . . . . . . . . . . . 45 5.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS. . . . . . . . . . . . . 6.1. Covenants of the Company . . . . . . . . . . . . . . . . . . 46 6.2. Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE VII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 7.1. Regulatory Matters. . . . . . . . . . . . . . . . . . . . . 51 7.2. Access to Information . . . . . . . . . . . . . . . . . . . 53 7.3. Stockholder Meetings . . . . . . . . . . . . . . . . . . . . 55 7.4. Legal Conditions to Merger . . . . . . . . . . . . . . . . . 55 7.5. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.6. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . 56 7.7. Employee Benefit Plans; Existing Agreements . . . . . . . . 56 7.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . 58 7.9. Additional Agreements . . . . . . . . . . . . . . . . . . . 61 7.10. Advice of Changes . . . . . . . . . . . . . . . . . . . . . 61 7.11. Current Information . . . . . . . . . . . . . . . . . . . . 61 7.12. Execution and Authorization of Bank Merger Agreement . . . 62 7.13. Coordination of Dividends . . . . . . . . . . . . . . . . . 62 7.14. Directorship . . . . . . . . . . . . . . . . . . . . . . . 63 7.15. Accountants' Letter . . . . . . . . . . . . . . . . . . . . 63 7.16. Certain Revaluations, Changes and Adjustments . . . . . . . 63 7.17. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 64 7.19. Advisory Board . . . . . . . . . . . . . . . . . . . . . . 64 ARTICLE VIII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 64 8.1. Conditions to Each Party's Obligation To Effect the Merger . 64 8.2. Conditions to Obligations of Buyer . . . . . . . . . . . . . 65 8.3. Conditions to Obligations of the Company . . . . . . . . . . 67 ARTICLE IX TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . 68 9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . 68 9.2. Effect of Termination; Expenses . . . . . . . . . . . . . . 73 9.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 73 9.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 74 ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 74 10.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.2. Alternative Structure . . . . . . . . . . . . . . . . . . . 75 10.3. Nonsurvival of Representations, Warranties and Agreements . 75 10.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.6. Interpretation . . . . . . . . . . . . . . . . . . . . . . 77 10.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 77 10.8. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 77 10.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 77 10.10. Enforcement of Agreement . . . . . . . . . . . . . . . . . 77 10.11. Severability . . . . . . . . . . . . . . . . . . . . . . . 78 10.12. Publicity . . . . . . . . . . . . . . . . . . . . . . . . 78 10.13. Assignment; No Third Party Beneficiaries . . . . . . . . . 78 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1999 (this "Agreement"), by and between North Fork Bancorporation, Inc., a Delaware corporation ("Buyer"), and Reliance Bancorp, Inc., a Delaware corporation (the "Company"). Buyer and the Company are sometimes collectively referred to herein as the "Constituent Corporations". WHEREAS, the Boards of Directors of Buyer and the Company have determined that it is in the best interests of their respective companies and their stockholders to consummate the business combination transaction provided for herein in which the Company will, subject to the terms and conditions set forth herein, merge (the "Merger") with and into Buyer; and WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE MERGER 1.1. The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as defined in Section 1.2 hereof), the Company shall merge with and into Buyer. Buyer shall be the surviving corporation (hereinafter sometimes called the "Surviving Corporation") in the Merger, and shall continue its corporate existence under the laws of the State of Delaware. The name of the Surviving Corporation shall continue to be North Fork Bancorporation, Inc. Upon consummation of the Merger, the separate corporate existence of the Company shall terminate. 1.2. Effective Time. The Merger shall become effective as set forth in the certificate of merger (the "Certificate of Merger") which shall be filed with the Secretary of State of the State of Delaware (the "Secretary") on the Closing Date (as defined in Section 10.1 hereof). The term "Effective Time" shall be the date and time when the Merger becomes effective, as set forth in the Certificate of Merger. 1.3. Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in Sections 259 and 261 of the DGCL. 1.4. Conversion of Company Common Stock. (a) At the Effective Time, subject to Section 2.2(e) and Section 9.1(h) hereof, each share of the common stock, par value $0.01 per share, of the Company (the "Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than (x) shares of Company Common Stock held in the Company's treasury, (y) shares of Company Common Stock held directly or indirectly by Buyer or the Company or any of their respective Subsidiaries (as defined below) (except for Trust Account Shares and DPC shares, as such terms are defined in Section 1.4(b) hereof), or (z) unallocated shares of Company Common Stock held in the Company's Recognition and Retention Plans) together with the related Company Rights issued pursuant to the Company Rights Agreement (each as defined in Section 4.2(a) hereof) shall, by virtue of this Agreement and without any action on the part of the holder thereof, be converted into and exchangeable for 2 (two) shares (the "Exchange Ratio") of the common stock, par value $2.50 per share, of Buyer ("Buyer Common Stock"). All of the shares of Company Common Stock converted into Buyer Common Stock pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each certificate (each a "Certificate") previously representing any such shares of Company Common Stock shall thereafter only represent the right to receive (i) the number of whole shares of Buyer Common Stock and (ii) the cash in lieu of fractional shares into which the shares of Company Common Stock represented by such Certificate have been converted pursuant to this Section 1.4(a) and Section 2.2(e) hereof. Certificates previously representing shares of Company Common Stock shall be exchanged for certificates representing whole shares of Buyer Common Stock and cash in lieu of fractional shares issued in consideration therefor upon the surrender of such Certificates in accordance with Section 2.2 hereof, without any interest thereon. If, between the date of this Agreement and the Effective Time, the shares of Buyer Common Stock shall be changed into a different number or class of shares by reason of any reclassification, recapitalization, spilt-up, combination, exchange of shares or readjustment, or a stock dividend thereon shall be declared with a record date within said period, the Exchange Ratio shall be adjusted accordingly. (b) At the Effective Time, all shares of Company Common Stock that are owned by the Company as treasury stock, all shares of Company Common Stock that are owned directly or indirectly by Buyer or the Company or any of their respective Subsidiaries (other than shares of Company Common Stock (x) held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity for the benefit of third parties (any such shares, and shares of Buyer Common Stock which are similarly held, whether held directly or indirectly by Buyer or the Company, as the case may be, being referred to herein as "Trust Account Shares") and (y) held by Buyer or the Company or any of their respective Subsidiaries in respect of a debt previously contracted (any such shares of Company Common Stock, and shares of Buyer Common Stock which are similarly held, whether held directly or indirectly by Buyer or the Company, being referred to herein as "DPC Shares") and all unallocated shares of Company Common Stock that are held in the Company's Recognition and Retention Plans) shall be cancelled and shall cease to exist and no stock of Buyer or other consideration shall be delivered in exchange therefor. All shares of Buyer Common Stock that are owned by the Company or any of its Subsidiaries (other than Trust Account Shares and DPC Shares) shall become treasury stock of Buyer. 1.5. Stock Options. At the Effective Time, each option granted by the Company to purchase shares of Company Common Stock (a "Company Option") which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of Company Common Stock and shall be converted automatically into an option to purchase shares of Buyer Common Stock in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the Company's Amended and Restated 1996 Incentive Stock Option Plan, 1994 Incentive Stock Option Plan or Amended and Restated 1994 Stock Option Plan for Outside Directors (collectively, the "Company Option Plans"), the agreements evidencing grants thereunder, and any other agreements between the Company and an optionee regarding Company Options): (1) the number of shares of Buyer Common Stock to be subject to the new option shall be equal to the product of the number of shares of Company Common Stock subject to the original option and the Exchange Ratio, provided that any fractional share of Buyer Common Stock resulting from such multiplication shall be rounded down to the nearest whole share; and (2) the exercise price per share of Buyer Common Stock under the new option shall be equal to the exercise price per share of Company Common Stock under the original option divided by the Exchange Ratio, provided that such exercise price shall be rounded up to the nearest cent. The adjustment provided herein with respect to any options which are intended to be "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code, and to the extent it is not so consistent, such Section 424(a) shall override such adjustment. The duration and other terms of the new option shall be the same as the original option, except that all references to the Company shall be deemed to be references to Buyer, it being understood that any option that is intended to be an incentive stock option and which is exercised by the option holder more than 3 (three) months from the date of the option holder's termination of employment from the Company or its Subsidiaries or from Buyer or its Subsidiaries shall be treated as a non-statutory option. 1.6. Buyer Common Stock. Except for shares of Buyer Common Stock owned by the Company or any of its Subsidiaries (other than Trust Account Shares and DPC Shares), which shall be converted into treasury stock of Buyer as contemplated by Section 1.4 hereof, the shares of Buyer Common Stock issued and outstanding immediately prior to the Effective Time shall be unaffected by the Merger and such shares shall remain issued and outstanding. 1.7. Certificate of Incorporation. At the Effective Time, the Restated Certificate of Incorporation of Buyer, as in effect at the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation. 1.8. By-Laws. At the Effective Time, the By-Laws of Buyer, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended in accordance with applicable law. 1.9. Directors and Officers. Except as provided in Section 7.14 hereof, the directors and officers of Buyer immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified. 1.10. Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan of reorganization" for the purposes of Section 368 of the Code. ARTICLE II EXCHANGE OF SHARES 2.1. Buyer to Make Shares Available. At or prior to the Effective Time, Buyer shall deposit, or shall cause to be deposited, with a bank or trust company (which may be a Subsidiary of Buyer) (the "Exchange Agent") selected by Buyer and reasonably satisfactory to the Company, for the benefit of the holders of Certificates, for exchange in accordance with this Article II, certificates representing the shares of Buyer Common Stock and the cash in lieu of fractional shares (such cash and certificates for shares of Buyer Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding shares of Company Common Stock. 2.2. Exchange of Shares. (a) As soon as practicable after the Effective Time, and in no event more than three business days thereafter, the Exchange Agent shall mail to each holder of record of a Certificate or Certificates a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates in exchange for certificates representing the shares of Buyer Common Stock and the cash in lieu of fractional shares into which the shares of Company Common Stock represented by such Certificate or Certificates shall have been converted pursuant to this Agreement. Upon surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (x) a certificate representing that number of whole shares of Buyer Common Stock to which such holder of Company Common Stock shall have become entitled pursuant to the provisions of Article I hereof and (y) a check representing the amount of cash in lieu of fractional shares, if any, which such holder has the right to receive in respect of the Certificate surrendered pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the cash in lieu of fractional shares and unpaid dividends and distributions, if any, payable to holders of Certificates. (b) No dividends or other distributions declared after the Effective Time with respect to Buyer Common Stock and payable to the holders of record thereof shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Article II. After the surrender of a Certificate in accordance with this Article II, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Buyer Common Stock represented by such Certificate. No holder of an unsurrendered Certificate shall be entitled, until the surrender of such Certificate, to vote the shares of Buyer Common Stock into which his Company Common Stock shall have been converted. (c) If any certificate representing shares of Buyer Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Buyer Common Stock in any name other than that of the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for certificates representing shares of Buyer Common Stock as provided in this Article II. (e) Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Buyer Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Buyer Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Buyer. In lieu of the issuance of any such fractional share, Buyer shall pay to each former stockholder of the Company who otherwise would be entitled to receive a fractional share of Buyer Common Stock an amount in cash determined by multiplying (i) the average of the closing sale prices of Buyer Common Stock on the New York Stock Exchange (the "NYSE") as reported by The Wall Street Journal for the five trading days immediately preceding the date on which the Effective Time shall occur by (ii) the fraction of a share of Buyer Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 1.4 hereof. (f) Any portion of the Exchange Fund that remains unclaimed by the stockholders of the Company for six months after the Effective Time shall be paid to Buyer. Any stockholders of the Company who have not theretofore complied with this Article II shall thereafter look only to Buyer for payment of their shares of Buyer Common Stock, cash in lieu of fractional shares and unpaid dividends and distributions on the Buyer Common Stock deliverable in respect of each share of Company Common Stock such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Buyer, the Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (g) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Buyer, the posting by such person of a bond in such amount as Buyer may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Buyer Common Stock and cash in lieu of fractional shares deliverable in respect thereof pursuant to this Agreement. ARTICLE III DISCLOSURE SCHEDULES; STANDARDS FOR REPRESENTATIONS AND WARRANTIES 3.1. Disclosure Schedules. Prior to the execution and delivery of this Agreement, the Company has delivered to Buyer, and Buyer has delivered to the Company, a schedule (in the case of the Company, the "Company Disclosure Schedule," and in the case of Buyer, the "Buyer Disclosure Schedule") setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of such party's representations or warranties contained in Article IV, in the case of the Company, or Article V, in the case of Buyer, or to one or more of such party's covenants contained in Article VI; provided, however, that notwithstanding anything in this Agreement to the contrary (a) no such item is required to be set forth in the Disclosure Schedule as an exception to a representation or warranty (other than a representation or warranty contained in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27, with respect to the Company Disclosure Schedule, or Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a) 5.12 and 5.15, with respect to the Buyer Disclosure Schedule) if its absence would not result in the related representation or warranty being deemed untrue or incorrect under the standard established by Section 3.2, and (b) the mere inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a party that such item represents a material exception or material fact, event or circumstance or that such item has had or is reasonably likely to have a Material Adverse Effect (as defined herein) with respect to either the Company or Buyer, respectively. 3.2. Standards. (a) No representation or warranty of the Company contained in Article IV (other than the representations and warranties contained in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27) or of Buyer contained in Article V (other than the representations and warranties contained in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and 5.15) shall be deemed untrue or incorrect for any purpose under this Agreement, and no party hereto shall be deemed to have breached any such representation or warranty for any purpose under this Agreement, in any case as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all other facts, circumstances or events inconsistent with any representations or warranties contained in Article IV, in the case of the Company, or Article V, in the case of Buyer, has had or is reasonably likely to have a Material Adverse Effect with respect to the Company or Buyer, respectively. (b) As used in this Agreement, the term "Material Adverse Effect" means, with respect to Buyer or the Company, as the case may be, a material adverse effect on (i) the business, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries taken as a whole, other than any such effect attributable to or resulting from (x) any change in banking or similar laws, rules or regulations of general applicability or interpretations thereof by courts or governmental authorities, (y) any change in GAAP (as defined herein) or regulatory accounting principles, in each case which affects banks, thrifts or their holding companies generally, except to the extent any such condition or change affects the referenced party to a materially greater extent than banks, thrifts or their holding companies generally, or (z) any change in interest rates, provided, that any such change in interest rates shall not affect the referenced party to a materially greater extent than banks, thrifts or their holding companies generally, and provided further, that any such change shall not have a materially adverse effect on the credit quality of such party's assets, or (ii) the ability of such party and its Subsidiaries to consummate the transactions contemplated hereby. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY Subject to Article III hereof and except as set forth in the Company Disclosure Schedule, the Company hereby represents and warrants to Buyer as follows: 4.1. Corporate Organization. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. The Company is duly registered as a non-diversified unitary savings and loan holding company under the Home Owners' Loan Act of 1933, as amended. The Restated Certificate of Incorporation and By-laws of the Company, copies of which have previously been made available to Buyer, are true and correct copies of such documents as in effect as of the date of this Agreement. As used in this Agreement, the word "Subsidiary" when used with respect to any party means any corporation, partnership or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes. (b) Reliance Federal Savings Bank (the "Company Bank") is a stock savings bank duly organized, validly existing and in good standing under the laws of the United States of America. The deposit accounts of the Company Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") through the Savings Association Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. Each of the Company's other Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of the Company's Subsidiaries has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or the location of the properties and assets owned or leased by it makes such licensing or qualification necessary. The articles of incorporation, by-laws and similar governing documents of each Subsidiary of the Company, copies of which have previously been made available to Buyer, are true and correct copies of such documents as in effect as of the date of this Agreement. (c) The minute books of the Company and each of its Subsidiaries contain true and correct records of all meetings and other corporate actions held or taken since December 31, 1996 of their respective stockholders and Boards of Directors (including committees of their respective Boards of Directors). 4.2. Capitalization. (a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock and 4,000,000 shares of preferred stock, par value $.01 per share (the "Company Preferred Stock"). As of the date of this Agreement, there are (x) 8,584,410 shares of Company Common Stock outstanding and 2,166,410 shares of Company Common Stock held in the Company's treasury, (y) no shares of Company Common Stock reserved for issuance upon exercise of outstanding stock options or otherwise except for (i) 1,080,876 shares of Company Common Stock reserved for issuance pursuant to the Company Option Plans and described in Section 4.2(a) of the Company Disclosure Schedule, (ii) 1,708,297 shares of Company Common Stock reserved for issuance upon exercise of the option issued to Buyer pursuant to the Stock Option Agreement, dated August 30, 1999, between Buyer and the Company (the "Option Agreement") and (iii) approximately 25,000 shares of Company Common Stock issuable pursuant to an agreement between the Company and Continental Bank and (z) no shares of Company Preferred Stock issued or outstanding, held in the Company's treasury or reserved for issuance upon exercise of outstanding stock options or otherwise, except for [150,000] shares of Company Series A Junior Participating Preferred Stock reserved for issuance upon exercise of the rights (the "Company Rights") distributed to holders of Company Common Stock pursuant to the Stockholder Protection Rights Agreement, dated September 18, 1996 between the Company and Registrar and Transfer Co., as Rights Agent (the "Company Rights Agreement"). All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. Except as referred to above or reflected in Section 4.2(a) of the Company Disclosure Schedule, and except for the Option Agreement, the Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Company Common Stock or Company Preferred Stock or any other equity security of the Company or any securities representing the right to purchase or otherwise receive any shares of Company Common Stock or any other equity security of the Company. The names of the optionees, the date of each option to purchase Company Common Stock granted, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such option may be exercised under the Company Option Plans are set forth in Section 4.2(a) of the Company Disclosure Schedule. (b) Section 4.2(b) of the Company Disclosure Schedule sets forth a true and correct list of all of the Subsidiaries of the Company. Except as set forth in Section 4.2(b) of the Company Disclosure Schedule, the Company owns, directly or indirectly, all of the issued and outstanding shares of the capital stock of each of such Subsidiaries, free and clear of all liens, charges, encumbrances and security interests whatsoever, and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. Assuming compliance by Buyer with Section 1.5 hereof, at the Effective Time, there will not be any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character by which the Company or any of its Subsidiaries will be bound calling for the purchase or issuance of any shares of the capital stock of the Company or any of its Subsidiaries. 4.3. Authority; No Violation. (a) The Company has full corporate power and authority to execute and deliver this Agreement and the Option Agreement (this Agreement and the Option Agreement, collectively, the "Company Documents") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Company Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by the Board of Directors of the Company. The Board of Directors of the Company has directed that this Agreement and the transactions contemplated hereby be submitted to the Company's stockholders for approval at a meeting of such stockholders and, except for the approval and adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of the Company Common Stock, no other corporate proceedings on the part of the Company are necessary to approve the Company Documents and to consummate the transactions contemplated hereby and thereby. Each of the Company Documents has been duly and validly executed and delivered by the Company, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its 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 affecting creditors' rights and remedies generally. (b) Except as set forth in Section 4.3(b) of the Company Disclosure Schedule, neither the execution and delivery of the Company Documents by the Company, nor the consummation by the Company of the transactions contemplated hereby, nor compliance by the Company with any of the terms or provisions hereof, will (i) violate any provision of the Certificate of Incorporation or By-Laws of the Company or the certificate of incorporation, by-laws or similar governing documents of any of its Subsidiaries, or (ii) assuming that the consents and approvals referred to in Section 4.4 hereof are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to the Company or any of its Subsidiaries, or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, 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 or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected. 4.4. Consents and Approvals. Except for (a) the filing of an application with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended (the "BHC Act") and approval of such application, (b) the filing of an application with the FDIC under the Bank Merger Act and approval of such application, in the event the parties enter into the Bank Merger Agreement (as defined in Section 7.12) (c) the filing of applications and notices, as applicable, with the Office of Thrift Supervision (the "OTS") and approval of such applications and notices, (d) the filing of an application with the New York State Banking Department (the "Banking Department") and the approval of such application, (e) the filing with the Securities and Exchange Commission (the "SEC") of a proxy statement in definitive form relating to the meeting of the Company's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (the "Proxy Statement") and the filing and declaration of effectiveness of the registration statement on Form S-4 (the "S-4") in which the Proxy Statement will be included as a prospectus, (f) the approval of this Agreement by the requisite vote of the stockholders of the Company, (g) the filing of the Certificate of Merger with the Secretary pursuant to the DGCL, (h) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" Laws of various states in connection with the issuance of the shares of Buyer Common Stock pursuant to this Agreement, (i) approval of the listing of the Buyer Common Stock to be issued in the Merger on the NYSE, and (j) such filings, authorizations or approvals as may be set forth in Section 4.4 of the Company Disclosure Schedule, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") or with any third party are necessary in connection with the execution and delivery by the Company of the Company Documents or the consummation by the Company of the Merger and the other transactions contemplated hereby and thereby. 4.5. Reports. The Company and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 1996 with (i) the OTS, (ii) the FDIC, (iii) any state banking commissions or any other state regulatory authority (each a "State Regulator") and (iv) any other self-regulatory organization ("SRO") (collectively, with the Federal Reserve Board, the "Regulatory Agencies"), and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of the Company and its Subsidiaries, and except as set forth in Section 4.5 of the Company Disclosure Schedule, no Regulatory Agency has initiated any proceeding or, to the knowledge of the Company, investigation into the business or operations of the Company or any of its Subsidiaries since December 31, 1996. There is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its Subsidiaries. 4.6. Financial Statements. The Company has previously made available to Buyer copies of (a) the consolidated statements of condition of the Company and its Subsidiaries as of June 30 for the fiscal years 1997 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years 1996 through 1998, inclusive, as reported in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998 filed with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied by the audit report of KPMG LLP, independent public accountants with respect to the Company, (b) the unaudited consolidated statements of condition of the Company and its Subsidiaries as of March 31, 1998 and March 31, 1999 and the related unaudited consolidated statements of income, cash flows and changes in stockholders' equity for the nine-month periods then ended as reported in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1999 filed with the SEC under the Exchange Act, and (c) the consolidated statements of condition of the Company and its Subsidiaries as of June 30 for the fiscal years 1998 and 1999, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years 1997 through 1999, inclusive, as reported in the draft of the Company's Annual Report for the fiscal year ended June 30, 1999 to be filed with the SEC (the "Draft Financials"). The June 30, 1998 and June 30, 1999 consolidated statements of condition of the Company (including the related notes, where applicable) fairly present the consolidated financial position of the Company and its Subsidiaries as of the dates thereof, and the other financial statements referred to in this Section 4.6 (including the related notes, where applicable) fairly present, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated operations and consolidated financial position of the Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) complies, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will comply, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been, and the financial statements to be filed by the Company with the SEC after the date of this Agreement will be, prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except as indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of the Company and its Subsidiaries have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Section 4.6 of the Company Disclosure Schedule sets forth a true and correct description of the Company's "Borrowed Funds" as reflected in the Draft Financials. 4.7. Broker's Fees. Neither the Company nor any Subsidiary of the Company nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by the Company Documents, except that the Company has engaged, and will pay a fee or commission to, Sandler, O'Neill & Partners, L.P. ("Sandler O'Neill") in accordance with the terms of a letter agreement between Sandler O'Neill and the Company, a true and correct copy of which has been previously delivered by the Company to Buyer. 4.8. Absence of Certain Changes or Events. (a) Except as may be set forth in Section 4.8(a) of the Company Disclosure Schedule or as disclosed in any Company Report filed with the SEC prior to the date of this Agreement, since June 30, 1998, (i) neither the Company nor any of its Subsidiaries has incurred any liability, except in the ordinary course of their business consistent with their past practices, and (ii) there has been no change or development or combination of changes or developments which has had, or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Company. (b) Except as set forth in Section 4.8(b) of the Company Disclosure Schedule or as disclosed in any Company Report filed with the SEC prior to the date of this Agreement, since June 30, 1998, the Company and its Subsidiaries have carried on their respective businesses in the ordinary course consistent with their past practices. (c) Except as set forth in Section 4.8(c) of the Company Disclosure Schedule, since June 30, 1999, neither the Company nor any of its Subsidiaries has (i) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of June 30, 1999 (which amounts have been previously disclosed to Buyer), granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus, (ii) suffered any strike, work stoppage, slow-down, or other labor disturbance, (iii) been a party to a collective bargaining agreement, contract or other agreement or understanding with a labor union or organization, or (iv) had any union organizing activities. 4.9. Legal Proceedings. (a) Except as set forth in Section 4.9 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any, and there are no pending or, to the Company's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against the Company or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by any of the Company Documents. (b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon the Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries. 4.10. Taxes. (a) Except as set forth in Section 4.10(a) of the Company Disclosure Schedule, each of the Company and its Subsidiaries has (i) duly and timely filed (including applicable extensions granted without penalty) all Tax Returns (as hereinafter defined) required to be filed at or prior to the Effective Time, and such Tax Returns are true and correct, and (ii) paid in full or made adequate provision in the financial statements of the Company (in accordance with GAAP) for all Taxes (as hereinafter defined). No deficiencies for any Taxes have been proposed, asserted, assessed or, to the knowledge of the Company, threatened against or with respect to the Company or any of its Subsidiaries. Except as set forth in Section 4.10(a) of the Company Disclosure Schedule, (i) there are no liens for Taxes upon the assets of either the Company or its Subsidiaries except for statutory liens for current Taxes not yet due, (ii) neither the Company nor any of its Subsidiaries has requested any extension of time within which to file any Tax Returns in respect of any fiscal year which have not since been filed and no request for waivers of the time to assess any Taxes are pending or outstanding, (iii) with respect to each taxable period of the Company and its Subsidiaries, the federal and state income Tax Returns of the Company and its Subsidiaries have been audited by the Internal Revenue Service or appropriate state tax authorities or the time for assessing and collecting income Tax with respect to such taxable period has closed and such taxable period is not subject to review, (iv) neither the Company nor any of its Subsidiaries has filed or been included in a combined, consolidated or unitary income Tax Return other than one in which the Company was the parent of the group filing such Tax Return, (v) neither the Company nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes (other than the allocation of federal income taxes as provided by Regulation 1.1552-1(a)(1) under the Code), (vi) neither the Company nor any of its Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code (or any similar or corresponding provision or requirement of state, local or foreign income Tax law), by reason of the voluntary change in accounting method (nor has any taxing authority proposed any such adjustment or change of accounting method), (vii) neither the Company nor any of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code, and (viii) neither the Company nor any of its Subsidiaries has made any payment or provided any benefit or may be obligated to make any payment or provide any benefit (by contract or otherwise) which will not be deductible by reason of Section 280G or Section 162(m) of the Code. (b) Except as set forth in Section 4.10(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries owns, directly or indirectly (including, without limitation, through partnerships, corporations, trusts or other entities), interests in real property ("Real Property Interests") situated in (A) New York State, which by reason of the Merger would be subject to either (i) the New York State Real Property Transfer Tax, or (ii) the New York City Real Property Transfer Tax (collectively, the "New York Transfer Taxes"), or (B) any state other than New York State which by reason of the Merger would be subject to any tax similar to the New York Transfer Taxes. For purposes of this Section 4.10(b), Real Property Interests include, without limitation, titles in fee, leasehold interests, beneficial interests, encumbrances, developments rights or any other interests with the right to use or occupy real property or the right to receive rents, profits or other income derived therefrom, or any options or contracts to purchase real property. (c) For the purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies, penalties or other assessments imposed by any United States federal, state, local or foreign taxing authority, including, but not limited to income, excise, property, sales, transfer, franchise, payroll, withholding, social security or other taxes, including any interest, penalties or additions attributable thereto. For purposes of this Agreement, "Tax Return" shall mean any return, report, information return or other document (including any related or supporting information) with respect to Taxes. 4.11. Employees. (a) Section 4.11(a) of the Company Disclosure Schedule sets forth a true and correct list of each deferred compensation plan, incentive compensation plan, equity compensation plan, "welfare" plan, fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program (within the meaning of Section 3(2) of ERISA); each employment, termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to (the "Plans") by the Company, any of its Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), all of which together with the Company would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the benefit of any employee or former employee of the Company or any Subsidiary. (b) The Company has heretofore made available to Buyer true and correct copies of each of the Plans and all related documents, including but not limited to (i) the actuarial report for such Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the Internal Revenue Service (if applicable) for such Plan. (c) Except as set forth in Section 4.11(c) of the Company Disclosure Schedule, (i) each of the Plans has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within the meaning of Section 401(a) of the Code either (1) has received a favorable determination letter from the IRS, or (2) is or will be the subject of an application for a favorable determination letter, and the Company is not aware of any circumstances likely to result in the revocation or denial of any such favorable determination letter, (iii) with respect to each Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits, (iv) no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of the Company, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service, other than (w) coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of the Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by the Company, its Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company, its Subsidiaries or an ERISA Affiliate of incurring a material liability thereunder, (vi) no Plan is a "multiemployer pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by the Company, its Subsidiaries or any ERISA Affiliates as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) neither the Company, its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection with which the Company, its Subsidiaries or any ERISA Affiliate could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no pending, or, to the best knowledge of the Company, threatened or anticipated claims or proceedings (other than routine claims for benefits) by, on behalf of or against any of the Plans or any trusts related thereto and (x) the consummation of the transactions contemplated by this Agreement will not (y) entitle any current or former employee or officer of the Company or any ERISA Affiliate to severance pay, termination pay or any other payment or benefit, except as expressly provided in this Agreement or (z) accelerate the time of payment or vesting or increase the amount or value of compensation or benefits due any such employee or officer. 4.12. SEC Reports. The Company has previously made available to Buyer a true and correct copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1997 by the Company with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act (the "Company Reports") and (b) communication mailed by the Company to its stockholders since January 1, 1997, and no such registration statement, prospectus, report, schedule, proxy statement or communication contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company has timely filed all Company Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Company Reports complied with the published rules and regulations of the SEC with respect thereto. 4.13. Company Information. The information relating to the Company and its Subsidiaries which is provided to Buyer by the Company or any of its affiliates or representatives for inclusion in the Proxy Statement and the S-4, or in any other document filed with any other regulatory agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Proxy Statement (except for such portions thereof that relate only to Buyer or any of its Subsidiaries) will comply with the provisions of the Exchange Act and the rules and regulations thereunder. 4.14. Compliance with Applicable Law. The Company and each of its Subsidiaries hold, and have at all times held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries knows of, or has received notice of, any violations of any of the above. 4.15. Certain Contracts. (a) Except as set forth in Section 4.15(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers, employees or consultants, (ii) which, upon the consummation of the transactions contemplated by this Agreement, will (either alone or upon the occurrence of any additional acts or events) result in any payment or benefits (whether of severance pay or otherwise) becoming due, or any increase in the amount of or acceleration or vesting of any rights to any payment or benefits, from Buyer, the Company, the Surviving Corporation or any of their respective Subsidiaries to any director, officer, employee or consultant thereof, (iii) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Company Reports, (iv) which is a consulting agreement (including data processing, software programming and licensing contracts) not terminable on 60 days or less notice involving the payment of more than $100,000 per annum, or (v) which materially restricts the conduct of any line of business by the Company or any of its Subsidiaries. Each contract, arrangement, commitment or understanding of the type described in this Section 4.15(a), whether or not set forth in Section 4.15(a) of the Company Disclosure Schedule, is referred to herein as a "Company Contract." The Company has previously delivered or made available to Buyer true and correct copies of each Company Contract. (b) Except as set forth in Section 4.15(b) of the Company Disclosure Schedule, (i) each Company Contract is valid and binding and in full force and effect, (ii) the Company and each of its Subsidiaries has performed all obligations required to be performed by it to date under each Company Contract, (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a default on the part of the Company or any of its Subsidiaries under any Company Contract, and (iv) no other party to such Company Contract is, to the knowledge of the Company, in default in any respect thereunder. 4.16. Agreements with Regulatory Agencies. Except as set forth in Section 4.16 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject to any cease-and-desist or other order 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 is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of (each, whether or not set forth on Section 4.16 of the Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has the Company or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 4.17. Investment Securities. Section 4.17 of the Company Disclosure Schedule sets forth the book and market value as of July 31, 1999 of the investment securities, mortgage backed securities and securities held for sale of the Company and its Subsidiaries. Section 4.17 of the Company Disclosure Schedule sets forth, with respect to such securities, descriptions thereof, CUSIP numbers, pool face values and coupon rates. 4.18. State Takeover Laws; Business Combination Provision. The Board of Directors of the Company has approved the transactions contemplated by this Agreement and the Option Agreement such that the provisions of Section 203 of the DGCL and Article VIII of the Company's Certificate of Incorporation will not, assuming the accuracy of the representations contained in Section 5.15 hereof, apply to this Agreement or the Option Agreement or any of the transactions contemplated hereby or thereby. 4.19. Environmental Matters. Except as set forth in Section 4.19 of the Company Disclosure Schedule: (a) Each of the Company and its Subsidiaries and, to the knowledge of the Company, each of the Participation Facilities and the Loan Properties (each as hereinafter defined) are and have been in compliance with all applicable federal, state and local laws including common law, regulations and ordinances and with all applicable decrees, orders and contractual obligations relating to pollution or the discharge of, or exposure to Hazardous Materials (as hereinafter defined) in the environment or workplace ("Environmental Laws"); (b) There is no suit, claim, action or proceeding, pending or, to the knowledge of the Company, threatened, before any Governmental Entity or other forum in which the Company, any of its Subsidiaries, any Participation Facility or any Loan Property, has been or, with respect to threatened proceedings, may be, named as a defendant (x) for alleged noncompliance (including by any predecessor), with any Environmental Laws, or (y) relating to the release, threatened release or exposure to any Hazardous Material whether or not occurring at or on a site owned, leased or operated by the Company or any of its Subsidiaries, any Participation Facility or any Loan Property; (c) During the period of (x) the Company's or any of its Subsidiaries' ownership or operation of any of their respective current or former properties, (y) the Company's or any of its Subsidiaries' participation in the management of any Participation Facility, or (z) to the knowledge of the Company, the Company's or any of its Subsidiaries' interest in a Loan Property, there has been no release of Hazardous Materials in, on, under or affecting any such property. To the knowledge of the Company, prior to the period of (x) the Company's or any of its Subsidiaries' ownership or operation of any of their respective current or former properties, (y) the Company's or any of its Subsidiaries' participation in the management of any Participation Facility, or (z) the Company's or any of its Subsidiaries' interest in a Loan Property, there was no release or threatened release of Hazardous Materials in, on, under or affecting any such property, Participation Facility or Loan Property; and (d) The following definitions apply for purposes of this Section 4.19: (x) "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or other regulated substances or materials, (y) "Loan Property" means any property in which the Company or any of its Subsidiaries holds a security interest, and, where required by the context, said term means the owner or operator of such property; and (z) "Participation Facility" means any facility in which the Company or any of its Subsidiaries participates in the management and, where required by the context, said term means the owner or operator of such property. 4.20. Derivative Transactions. Except as set forth in Section 4.20 of the Company Disclosure Schedule, since June 30, 1998, neither Company nor any of its Subsidiaries has engaged in transactions in or involving forwards, futures, options on futures, swaps or other derivative instruments except (i) as agent on the order and for the account of others, or (ii) as principal for purposes of hedging interest rate risk on U.S. dollar-denominated securities and other financial instruments. None of the counterparties to any contract or agreement with respect to any such instrument is in default with respect to such contract or agreement and no such contract or agreement, were it to be a Loan (as defined below) held by the Company or any of its Subsidiaries, would be classified as "Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar import. The financial position of the Company and its Subsidiaries on a consolidated basis under or with respect to each such instrument has been reflected in the books and records of the Company and such Subsidiaries in accordance with GAAP consistently applied, and no open exposure of the Company or any of its Subsidiaries with respect to any such instrument (or with respect to multiple instruments with respect to any single counterparty) exceeds $250,000. 4.21. Opinion. Prior to the execution of this Agreement, the Company has received an opinion from Sandler O'Neill to the effect that as of the date thereof and based upon and subject to the matters set forth therein, the Exchange Ratio is fair to the stockholders of the Company from a financial point of view. Such opinion has not been amended or rescinded as of the date of this Agreement. 4.22. Approvals. As of the date of this Agreement, the Company knows of no reason why all regulatory approvals required for the consummation of the transactions contemplated hereby should not be obtained. 4.23. Loan Portfolio. (a) Except as set forth in Section 4.23 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any written or oral (i) loan agreement, note or borrowing arrangement (including, without limitation, leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, "Loans"), other than any Loan the unpaid principal balance of which does not exceed $100,000, under the terms of which the obligor was, as of June 30, 1999, over 90 days delinquent in payment of principal or interest or in default of any other provision, or (ii) Loan with any director, executive officer or five percent or greater stockholder of the Company or any of its Subsidiaries, or to the knowledge of the Company, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing. Section 4.23 of the Company Disclosure Schedule sets forth (i) all of the Loans in original principal amount in excess of $100,000 of the Company or any of its Subsidiaries that as of June 30, 1999, were classified by any bank examiner (whether regulatory or internal) as "Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (ii) by category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of the Company and its Subsidiaries that as of June 30, 1999, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Loans by category and (iii) each asset of the Company that as of June 30, 1999, was classified as "Other Real Estate Owned" and the book value thereof. The Company shall promptly inform Buyer in writing of any Loan that becomes classified in the manner described in the previous sentence, or any Loan the classification of which is changed, at any time after the date of this Agreement. (b) Each Loan in original principal amount in excess of $250,000 (i) is evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid liens and security interests which have been perfected and (iii) 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. 4.24. Property. Each of the Company and its Subsidiaries has good and marketable title free and clear of all liens, encumbrances, mortgages, pledges, charges, defaults or equitable interests to all of the properties and assets, real and personal, tangible or intangible, which are reflected on the consolidated statement of financial condition of the Company as of June 30, 1999 or acquired after such date, except (i) liens for taxes not yet due and payable or contested in good faith by appropriate proceedings, (ii) pledges to secure deposits and other liens incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not interfere with the use of the property as such property is used on the date of this Agreement, (iv) for dispositions and encumbrances of, or on, such properties or assets in the ordinary course of business or (v) mechanics', materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other similar liens and encumbrances arising in the ordinary course of business. All leases pursuant to which the Company or any Subsidiary of the Company, as lessee, leases real or personal property are valid and enforceable in accordance with their respective terms and neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party thereto is in default thereunder. 4.25. Reorganization. As of the date of this Agreement, the Company has no reason to believe that the Merger will fail to qualify as a reorganization under Section 368(a) of the Code. 4.26. Company Rights Agreement. The Company has (a) duly entered into an appropriate amendment to the Company Rights Agreement and (b) taken all other action necessary or appropriate, in each case so that the execution of this Agreement and the Stock Option Agreement and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the Merger) do not and will not result in the ability of any person to exercise any rights under the Company Rights Agreement or enable or require the Company Rights to separate from the shares of Company Common Stock to which they are attached or to be triggered or become exercisable. 4.27. Equity and Real Estate Investments. Except as set forth in Section 4.27 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has (i) equity investments other than investments in wholly owned Subsidiaries or (ii) investments in real estate or real estate development projects, other than assets classified as "other real estate owned." 4.28. Year 2000 Matters. Section 4.28 of the Company Disclosure Schedule contains a true and correct copy of the Company's plan for addressing year 2000 computer issues (the "Year 2000 Plan"). The Company is in material compliance with the Company's Year 2000 Plan. The Company has been examined by the OTS with respect to being "Year 2000 Compliant" and the Company's Year 2000 Plan has been reviewed by the OTS and the Company has received a "satisfactory" rating in connection therewith, and neither the Company nor the Company Bank has received any written communication from the OTS commenting adversely with respect to the ability of the Company to become Year 2000 compliant. ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER Subject to Article III hereof and except as set forth in the Buyer Disclosure Schedule, Buyer hereby represents and warrants to the Company as follows: 5.1. Corporate Organization. (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. Buyer is duly registered as a bank holding company under the BHC Act. The Restated Certificate of Incorporation and By-laws of Buyer, copies of which have previously been made available to the Company, are true and correct copies of such documents as in effect as of the date of this Agreement. (b) North Fork Bank ("Buyer Bank") is a commercial bank duly organized, validly existing and in good standing under the laws of the State of New York. The deposit accounts of Buyer Bank are insured by the FDIC through the Bank Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required in connection therewith have been paid when due. Each of Buyer's other Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Subsidiary of Buyer has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. The articles of organization and by-laws of Buyer Bank, copies of which have previously been made available to the Company, are true and correct copies of such documents as in effect as of the date of this Agreement. (c) The minute books of Buyer and each of its Subsidiaries contain true and correct records of all meetings and other corporate actions held or taken since December 31, 1996 of their respective stockholders and Boards of Directors (including committees of their respective Boards of Directors). 5.2. Capitalization. (a) As of the date of this Agreement, the authorized capital stock of Buyer consists of 200,000,000 shares of Buyer Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per share ("Buyer Preferred Stock"). As of August 23, 1999, (i) 135,802,670 shares of Buyer Common Stock were issued and outstanding, (ii) no shares of Buyer Preferred Stock were issued and outstanding, (iii) no shares of Buyer Common Stock were reserved for issuance, except that 2,000,000 shares of Buyer Common Stock were reserved for issuance pursuant to the Buyer Dividend Investment and Stock Purchase Plan, 1,973,140 shares of Buyer Common Stock were reserved for issuance pursuant to the Buyer 1985 Incentive Stock Option Plan, the Buyer 1987 Long-Term Incentive Plan, the Buyer 1989 Executive Management and Compensation Plan, the Buyer 1994 Key Employee Stock Plan, the Buyer 1997 Non-Officer Stock Plan and the Buyer 1998 Stock Compensation Plan (the "Buyer Stock Plans"), and 31,000,000 shares of Buyer Common Stock were reserved for issuance pursuant to the Agreement and Plan of Merger, dated as of August 16, 1999, between Buyer and JSB Financial, Inc., (iv) no shares of Buyer Preferred Stock were reserved for issuance and (v) 9,323,852 shares of Buyer Common Stock were held by Buyer in its treasury or by Buyer's Subsidiaries. All of the issued and outstanding shares of Buyer Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except as referred to above or reflected in Section 5.2(a) of the Buyer Disclosure Schedule, Buyer does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Buyer Common Stock or Buyer Preferred Stock or any other equity securities of Buyer or any securities representing the right to purchase or otherwise receive any shares of Buyer Common Stock or Buyer Preferred Stock or any other equity security of the Buyer. The shares of Buyer Common Stock to be issued pursuant to the Merger will be duly authorized and validly issued and, at the Effective Time, all such shares will be fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. (b) Section 5.2(b) of the Buyer Disclosure Schedule sets forth a true and correct list of all of the Subsidiaries of the Buyer as of the date of this Agreement. Except as set forth in Section 5.2(b) of the Buyer Disclosure Schedule, as of the date of this Agreement, Buyer owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Subsidiaries of Buyer, free and clear of all liens, charges, encumbrances and security interests whatsoever, and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, no Subsidiary of Buyer has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character with any party that is not a direct or indirect Subsidiary of Buyer calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. 5.3. Authority; No Violation. (a) Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Buyer, and no other corporate proceedings on the part of Buyer are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Buyer and (assuming due authorization, execution and delivery by the Company) this Agreement constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its 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 affecting creditors' rights and remedies generally. (b) Except as set forth in Section 5.3(b) of the Buyer Disclosure Schedule, neither the execution and delivery of this Agreement by Buyer nor the consummation by Buyer of the transactions contemplated hereby, nor compliance by Buyer with any of the terms or provisions hereof, will (i) violate any provision of the Restated Certificate of Incorporation or By-Laws of Buyer, or the articles of incorporation or by-laws or similar governing documents of any of its Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Buyer or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, 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 or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of Buyer or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Buyer or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected. 5.4. Consents and Approvals. Except for (a) the filing of an application with the Federal Reserve Board under the BHC Act, and approval of such application, (b) the filing of an application with the FDIC under the Bank Merger Act and approval of such application, in the event the parties enter into the Bank Merger Agreement (as defined in Section 7.12), (c) the filing of applications and notices, as applicable, with the OTS and approval of such applications and notices, (d) the State Banking Approvals, (e) the filing with the SEC of the Proxy Statement and the filing and declaration of effectiveness of the S-4, (f) the approval of this Agreement by the requisite vote of the stockholders of the Company, (g) the filing of the Certificate of Merger with the Secretary, (h) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Buyer Common Stock pursuant to this Agreement, (i) approval of the listing of the Buyer Common Stock to be issued in the Merger on the NYSE, and (j) such filings, authorizations or approvals as may be set forth in Section 5.4 of the Buyer Disclosure Schedule, no consents or approvals of or filings or registrations with any Governmental Entity or with any third party are necessary in connection with the execution and delivery by Buyer of this Agreement or the consummation by Buyer of the Merger and the other transactions contemplated hereby. 5.5. Reports. Buyer and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 1996 with any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Buyer and its Subsidiaries, and except as set forth in Section 5.5 of the Buyer Disclosure Schedule, no Regulatory Agency has initiated any proceeding or, to the knowledge of Buyer, investigation into the business or operations of Buyer or any of its Subsidiaries since December 31, 1996. There is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Buyer or any of its Subsidiaries. 5.6. Financial Statements. Buyer has previously made available to the Company copies of (a) the consolidated statements of financial condition of Buyer and its Subsidiaries as of December 31 for the fiscal years 1997 and 1998 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years 1996 through 1998, inclusive, as reported in Buyer's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 filed with the SEC under the Exchange Act, in each case accompanied by the audit report of KPMG LLP, independent public accountants with respect to Buyer, and (b) the unaudited consolidated statements of financial condition of Buyer and its Subsidiaries as of March 31, 1998 and March 31, 1999 and the related unaudited consolidated statements of income, changes in stockholder's equity and cash flows for the three-month periods then ended as reported in Buyer's Quarterly Report on Form 10-Q for the period ended March 31, 1999 filed with the SEC under the Exchange Act. The December 31, 1998 consolidated statements of financial condition of Buyer (including the related notes, where applicable) fairly presents the consolidated financial position of Buyer and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 5.6 (including the related notes, where applicable) fairly present, and the financial statements to be filed by Buyer with the SEC after the date of this Agreement will fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Buyer and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) complies, and the financial statements to be filed by Buyer with the SEC after the date of this Agreement will comply, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been, and the financial statements to be filed by Buyer with the SEC after the date of this Agreement will be, prepared in accordance with GAAP consistently applied during the periods involved, except as indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Buyer and its Subsidiaries have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 5.7. Broker's Fees. Neither Buyer nor any Subsidiary of Buyer, nor any of their respective officers or directors, has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement or the Option Agreement, except that Buyer has engaged, and will pay a fee or commission to, Donaldson, Lufkin & Jenrette Securities Corporation. 5.8. Absence of Certain Changes or Events. (a) Except as may be set forth in Section 5.8(a) of the Buyer Disclosure Schedule or as disclosed in any Buyer Report filed with the SEC prior to the date of this Agreement, since December 31, 1998, (i) neither Buyer nor any of its Subsidiaries has incurred any liability, except in the ordinary course of their business consistent with their past practices, and (ii) there has been no change or development or combination of changes or developments which has had, or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Buyer. (b) Except as disclosed in any Buyer Report filed with the SEC prior to the date of this Agreement, since December 31, 1998, the Buyer and its Subsidiaries have carried on their respective businesses in the ordinary course consistent with prudent banking practices. (c) Since December 31, 1998, neither the Buyer nor any of its Subsidiaries has (i)suffered any strike, work stoppage, slow-down, or other labor disturbance, (ii) been a party to a collective bargaining agreement, contract or other agreement or understanding with a labor union or organization, or (iii) had any union organizing activities. 5.9. Legal Proceedings. (a) Except as set forth in Section 5.9 of the Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries is a party to any and there are no pending or, to Buyer's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Buyer or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement. (b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Buyer, any of its Subsidiaries or the assets of Buyer or any of its Subsidiaries. 5.10. Taxes. Except as set forth in Section 5.10 of the Buyer Disclosure Schedule, each of Buyer and its Subsidiaries has (i) duly and timely filed (including applicable extensions granted without penalty) all Tax Returns required to be filed at or prior to the Effective Time, and such Tax Returns are true and correct, and (ii) paid in full or made adequate provision in the financial statements of Buyer (in accordance with GAAP) for all Taxes. No deficiencies for any Taxes have been proposed, asserted, assessed or, to the best knowledge of Buyer, threatened against or with respect to Buyer or any of its Subsidiaries. Except as set forth in Section 5.10 of the Buyer Disclosure Schedule, (i) there are no liens for Taxes upon the assets of either Buyer or its Subsidiaries except for statutory liens for current Taxes not yet due, (ii) neither Buyer nor any of its Subsidiaries has requested any extension of time within which to file any Tax Returns in respect of any fiscal year which have not since been filed and no request for waivers of the time to assess any Taxes are pending or outstanding, (iii) with respect to each taxable period of Buyer and its Subsidiaries, the federal and state income Tax Returns of Buyer and its Subsidiaries have been audited by the Internal Revenue Service or appropriate state tax authorities or the time for assessing and collecting income Tax with respect to such taxable period has closed and such taxable period is not subject to review, (iv) neither Buyer nor any of its Subsidiaries has filed or been included in a combined, consolidated or unitary income Tax Return other than one in which Buyer was the parent of the group filing such Tax Return, (v) neither Buyer nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes (other than the allocation of federal income taxes as provided by Regulation 1.1552-1(a)(1) under the Code), (vi) neither Buyer nor any of its Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code (or any similar or corresponding provision or requirement of state, local or foreign income Tax law), by reason of the voluntary change in accounting method (nor has any taxing authority proposed in writing any such adjustment or change of accounting method), and (vii) neither Buyer nor any of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code. 5.11. Employees. (a) Section 5.11(a) of the Buyer Disclosure Schedule sets forth a true and correct list of each deferred compensation plan, incentive compensation plan, equity compensation plan, "welfare" plan, fund or program (within the meaning of section 3(1) of the ERISA); "pension" plan, fund or program (within the meaning of section 3(2) of ERISA); each employment, termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to as of the date of this Agreement (the "Buyer Plans") by Buyer, any of its Subsidiaries or by any trade or business, whether or not incorporated (a "Buyer ERISA Affiliate"), all of which together with Buyer would be deemed a "single employer" within the meaning of Section 4001 of ERISA, for the benefit of any employee or former employee of Buyer, any Subsidiary or any Buyer ERISA Affiliate. (b) Except as set forth in Section 5.11(b) of the Buyer Disclosure Schedule, (i) each of the Buyer Plans has been operated and administered in accordance with its terms and applicable law, including but not limited to ERISA and the Code, (ii) each of the Buyer Plans intended to be "qualified" within the meaning of Section 401(a) of the Code has either (1) received a favorable determination letter from the IRS, or (2) is or will be the subject of an application for a favorable determination letter, and Buyer is not aware of any circumstances likely to result in the revocation or denial of any such favorable determination letter, (iii) with respect to each Buyer Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Buyer Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Buyer Plan's actuary with respect to such Buyer Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Buyer Plan allocable to such accrued benefits, (iv) no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of Buyer, its Subsidiaries or any Buyer ERISA Affiliate beyond their retirement or other termination of service, other than (w) coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of Buyer, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by Buyer, its Subsidiaries or any Buyer ERISA Affiliate that has not been satisfied in full and no condition exists that presents a material risk to the Buyer, its Subsidiaries or an ERISA Affiliate of incurring a material liability thereunder, (vi) no Buyer Plan is a "multiemployer pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Buyer, its Subsidiaries or any ERISA Affiliate as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) neither Buyer, its Subsidiaries nor any Buyer ERISA Affiliate has engaged in a transaction in connection with which Buyer, its Subsidiaries or any Buyer ERISA Affiliate could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no pending, or, to the best knowledge of Buyer, threatened or anticipated claims or proceedings (other than routine claims for benefits) by, on behalf of or against any of the Buyer Plans or any trusts related thereto and (x) the consummation of the transactions contemplated by this Agreement will not (y) entitle any current or former employee or officer of Buyer or any Buyer ERISA Affiliate to severance pay, termination pay or any other payment or benefit, except as expressly provided in this Agreement or (z) accelerate the time of payment or vesting or increase in the amount or value of compensation or benefits due any such employee or officer. 5.12. SEC Reports. Buyer has previously made available to the Company a true and correct copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1997 by Buyer with the SEC pursuant to the Securities Act or the Exchange Act (the "Buyer Reports") and (b) communication mailed by Buyer to its stockholders since January 1, 1997, and no such registration statement, prospectus, report, schedule, proxy statement or communication contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Buyer has timely filed all Buyer Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Buyer Reports complied with the published rules and regulations of the SEC with respect thereto. 5.13. Buyer Information. The information relating to Buyer and its Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other document filed with any other regulatory agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The S-4 will comply with the provisions of the Securities Act and the rules and regulations thereunder. 5.14. Compliance with Applicable Law. Buyer and each of its Subsidiaries hold, and have at all times held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Buyer or any of its Subsidiaries, and neither Buyer nor any of its Subsidiaries knows of, or has received notice of violation of, any violations of any of the above. 5.15. Ownership of Company Common Stock. (a) Except for the Option Agreement and 55,000 shares of Company Common Stock beneficially owned by Buyer, neither Buyer nor any of its affiliates or associates (as such terms are defined under the Exchange Act), (i) beneficially owns, directly or indirectly, or (ii) is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, in each case, any shares of capital stock of the Company (other than Trust Account Shares and DPC Shares). (b) Neither Buyer nor any of its Subsidiaries is an "affiliate" (as such term is defined in DGCL section 203(c)(1)) or an "associate" (within the meaning of DGCL section 203(c)(2)) of the Company or an "Interested Stockholder" (as such term is defined in Article VIII of the Company's Certificate of Incorporation). 5.16. Agreements with Regulatory Agencies. Neither Buyer nor any of its Subsidiaries is subject to any cease-and-desist or other order 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 is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of (each, whether or not set forth in Section 5.16 of the Buyer Disclosure Schedule, a "Buyer Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has Buyer or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 5.17. Approvals. As of the date of this Agreement, Buyer knows of no reason why all regulatory approvals required for the consummation of the transactions contemplated hereby should not be obtained. 5.18. Tax Treatment for the Merger; Reorganization. As of the date of this Agreement, Buyer has no reason to believe that the Merger will fail to qualify as a reorganization under Section 368(a) of the Code. 5.19. Environmental Matters. Except as set forth in Section 5.19 of the Buyer Disclosure Schedule: (a) Each of Buyer and its Subsidiaries and, to the knowledge of the Buyer, each of the Participation Facilities and the Loan Properties (each as hereinafter defined) are and have been in compliance with all Environmental Laws; (b) There is no suit, claim, action or proceeding, pending or, to the knowledge of Buyer, threatened, before any Governmental Entity or other forum in which Buyer, any of its Subsidiaries, any Participation Facility or any Loan Property, has been or, with respect to threatened proceedings, may be, named as a defendant (x) for alleged noncompliance (including by any predecessor) with any Environmental Laws, or (y) relating to the release, threatened release or exposure to any Hazardous Material whether or not occurring at or on a site owned, leased or operated by Buyer or any of its Subsidiaries, any Participation Facility or any Loan Property. As used in this Section 5.19, "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or other regulated substances or materials; (c) During the period of (x) Buyer's or any of its Subsidiaries' ownership or operation of any of their respective current or former properties, (y) Buyer's or any of its Subsidiaries' participation in the management of any Participation Facility, or (z) to the knowledge of the Buyer, Buyer's or any of its Subsidiaries' interest in a Loan Property, there has been no release of Hazardous Materials in, on, under or affecting any such property. To the knowledge of the Buyer, prior to the period of (x) Buyer's or any of its Subsidiaries' ownership or operation of any of their respective current or former properties, (y) Buyer's or any of its Subsidiaries' participation in the management of any Participation Facility, or (z) Buyer's or any of its Subsidiaries' interest in a Loan Property, there was no release of Hazardous Materials in, on, under or affecting any such property, Participation Facility or Loan Property; and (d) The following definitions apply for purposes of this Section 5.19: (x) "Loan Property" means any property in which Buyer or any of its Subsidiaries holds a security interest, and, where required by the context, said term means the owner or operator of such property; and (y) "Participation Facility" means any facility in which Buyer or any of its Subsidiaries participates in the management and, where required by the context, said term means the owner or operator of such property. 5.20. Loan Portfolio. Section 5.20 of the Buyer Disclosure Schedule sets forth, by category, the aggregate book value amount of (i) all of the Loans in original principal amount in excess of $100,000 of the Buyer or any of its Subsidiaries that as of July 31, 1999, were classified by any bank examiner (whether regulatory or internal) as "Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder and (ii) all assets of the Buyer that as of June 30, 1999, were classified as "Other Real Estate Owned". (b) Each Loan in original principal amount in excess of $250,000 (i) is evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid liens and security interests which have been perfected and (iii) 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. 5.21. Property. Each of the Buyer and its Subsidiaries has good and marketable title free and clear of all liens, encumbrances, mortgages, pledges, charges, defaults or equitable interests to all of the properties and assets, real and personal, tangible or intangible, which are reflected on the consolidated statement of financial condition of the Buyer as of June 30, 1999 or acquired after such date, except (i) liens for taxes not yet due and payable or contested in good faith by appropriate proceedings, (ii) pledges to secure deposits and other liens incurred in the ordinary course of business, (iii) such imperfections of title, easements and encumbrances, if any, as do not interfere with the use of the property as such property is used on the date of this Agreement, (iv) for dispositions and encumbrances of, or on, such properties or assets in the ordinary course of business or (v) mechanics', materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other similar liens and encumbrances arising in the ordinary course of business. All leases pursuant to which the Buyer or any Subsidiary of the Buyer, as lessee, leases real or personal property are valid and enforceable in accordance with their respective terms and neither the Buyer nor any of its Subsidiaries nor, to the knowledge of the Buyer, any other party thereto is in default thereunder. 5.22. Derivative Transactions. Except as set forth in Section 5.22 of the Buyer Disclosure Schedule, since December 31, 1998, neither Buyer nor any of its Subsidiaries has engaged in transactions in or involving forwards, futures, options on futures, swaps or other derivative instruments except (i) as agent on the order and for the account of others, or (ii) as principal for purposes of hedging interest rate risk on U.S. dollar-denominated securities and other financial instruments. None of the counterparties to any contract or agreement with respect to any such instrument is in default with respect to such contract or agreement and no such contract or agreement, were it to be a Loan (as defined below) held by the Buyer or any of its Subsidiaries, would be classified as "Other Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar import. The financial position of Buyer and its Subsidiaries on a consolidated basis under or with respect to each such instrument has been reflected in the books and records of Buyer and such Subsidiaries in accordance with GAAP consistently applied, and no open exposure of Buyer or any of its Subsidiaries with respect to any such instrument (or with respect to multiple instruments with respect to any single counterparty) exceeds $250,000. 5.23. Year 2000 Matters. Section 5.23 of the Buyer Disclosure Schedule contains a true and correct copy of the Buyer's plan for addressing year 2000 computer issues (the "Year 2000 Plan"). The Buyer is in material compliance with the Buyer's Year 2000 Plan. 5.24. Insurance. The Buyer and its Subsidiaries are presently insured, and since December 31, 1998, have been insured, for reasonable amounts with financially sound and reputable insurance companies, against such risks as companies engaged in a similar business would, in accordance with good business practice, customarily be insured. All of the insurance policies and bonds maintained by the Buyer and its Subsidiaries are in full force and effect, the Buyer and its Subsidiaries are not in default thereunder and all material claims thereunder have been filed in due and timely fashion. ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS 6.1. Covenants of the Company. During the period from the date of this Agreement and continuing until the Effective Time, except as expressly contemplated or permitted by this Agreement or the Option Agreement or with the prior written consent of Buyer, the Company and its Subsidiaries shall carry on their respective businesses in the ordinary course consistent with past practice and consistent with prudent banking practice. The Company will use its best efforts to (x) preserve its business organization and that of its Subsidiaries intact, (y) keep available to itself and Buyer the present services of the employees of the Company and its Subsidiaries and (z) preserve for itself and Buyer the goodwill of the customers of the Company and its Subsidiaries and others with whom business relationships exist. Without limiting the generality of the foregoing, and except as set forth in Section 6.1 of the Company Disclosure Schedule or as otherwise contemplated by this Agreement or consented to in writing by Buyer, the Company shall not, and shall not permit any of its Subsidiaries to: (a) solely in the case of the Company, declare or pay any dividends on, or make other distributions in respect of, any of its capital stock, other than normal quarterly dividends not in excess of $0.21 per share of Company Common Stock; (b) (i) split, combine or reclassify any shares of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (ii) repurchase, redeem or otherwise acquire (except for the acquisition of Trust Account Shares and DPC Shares, as such terms are defined in Section 1.4(b) hereof) any shares of the capital stock of the Company or any Subsidiary of the Company, or any securities convertible into or exercisable for any shares of the capital stock of the Company or any Subsidiary of the Company; or (iii) issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares, or enter into any agreement with respect to any of the foregoing, except, in the case of clauses (i) and (iii), for the issuance of Company Common Stock upon the exercise or fulfillment of rights or options issued or existing pursuant to employee benefit plans, programs or arrangements, all to the extent outstanding and in existence on the date of this Agreement and in accordance with their present terms; (c) amend its Certificate of Incorporation, By-laws or other similar governing documents; (d) authorize any of its officers, directors, or agents to directly or indirectly solicit, initiate or encourage any inquiries relating to, or the making of any proposal which constitutes, a "takeover proposal" (as defined below), or recommend or endorse any takeover proposal, or participate in any discussions or negotiations, or provide third parties with any nonpublic information, relating to any such inquiry or proposal or otherwise facilitate any effort or attempt to make or implement a takeover proposal; provided, however, that the Company may communicate information about any such takeover proposal to its stockholders if, in the judgment of the Company's Board of Directors, based upon the advice of outside counsel, such communication is required under applicable law; provided further, however, that nothing contained in this Section 6.1(d) shall prohibit the Company from furnishing information to, or entering into discussions or negotiations with, any person or entity that makes an unsolicited, bona fide takeover proposal that constitutes a Superior Proposal (as defined below) in each case if, and only to the extent that (A) such actions occur at a time prior to approval of the Merger Agreement by the Company's stockholders, (B) the Board of Directors of the Company concludes in good faith, after consultation with and based upon the advice of outside counsel, that it is required to do so in order to comply with its fiduciary duties to the Company's stockholders under applicable law, and (C) prior to taking such action, the Company receives from such person or entity an executed confidentiality agreement and an executed standstill agreement, each in reasonably customary form (provided that such agreements shall contain terms that are no less restrictive than the terms of any such agreement between Buyer and the Company). For purposes of this Agreement, "Superior Proposal" means any bona fide written takeover proposal for or in respect of all of the outstanding shares of Company Common Stock, (i) on terms that the Board of Directors of the Company determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation and taking into account all the terms and conditions of the takeover proposal deemed relevant by such Board of Directors, including the consideration to be paid pursuant thereto, any break-up fees, expense reimbursement provisions, conditions to consummation, and the ability of the party making such proposal to obtain financing therefor) are more favorable from a financial point of view to its stockholders than the Merger, and (ii) that constitutes a transaction that, in such Board of Directors' good faith judgment, is reasonably likely to be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations previously conducted with any parties other than Buyer with respect to any of the foregoing. The Company 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 6.1(d). The Company will notify Buyer immediately if any such inquiries or takeover proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with, the Company, and the Company will promptly inform Buyer in writing of all of the relevant details with respect to the foregoing. As used in this Agreement, "takeover proposal" shall mean any tender or exchange offer, proposal for a merger, consolidation or other business combination involving the Company or any Subsidiary of the Company or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets of, the Company or any Subsidiary of the Company other than the transactions contemplated or permitted by this Agreement and the Option Agreement; (e) make any capital expenditures other than those which (i) are made in the ordinary course of business or are necessary to maintain existing assets in good repair and (ii) in any event are in an amount of no more than $500,000 in the aggregate; (f) enter into any new line of business; (g) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets, which would be material, individually or in the aggregate, to the Company, other than in connection with foreclosures, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business consistent with prudent banking practices; (h) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth in Article VIII not being satisfied; (i) change its methods of accounting in effect at June 30, 1998 except as required by changes in GAAP or regulatory accounting principles as concurred to by the Company's independent auditors; (j) (i) except as required by applicable law or as required to maintain qualification pursuant to the Code, adopt, amend, renew or terminate any employee benefit plan (including, without limitation, any Plan) or any agreement, arrangement, plan or policy between the Company or any Subsidiary of the Company and one or more of its current or former directors, officers or employees or (ii) except for normal increases in the ordinary course of business consistent with past practice or except as required by applicable law, increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any Plan or agreement as in effect as of the date hereof (including, without limitation, the granting of stock options, stock appreciation rights, restricted stock, restricted stock units or performance units or shares); (k) take or cause to be taken any action which would disqualify the Merger as a tax free reorganization under Section 368(a) of the Code; (l) other than activities in the ordinary course of business consistent with past practice, sell, lease, encumber, assign or otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of, any of its material assets, properties or other rights or agreements; (m) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity; (n) file any application to relocate or terminate the operations of any banking office of it or any of its Subsidiaries; (o) make any equity investment or commitment to make such an investment in real estate or in any real estate development project, other than in connection with foreclosures, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business consistent with prudent banking practices; (p) create, renew, amend or terminate or give notice of a proposed renewal, amendment or termination of, any material contract, agreement or lease for goods, services or office space to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or their respective properties is bound; (q) other than in prior consultation with Buyer, restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; or (r) agree to do any of the foregoing. 6.2. Covenants of Buyer. During the period from the date of this Agreement and continuing until the Effective Time, except as expressly contemplated or permitted by this Agreement or the Option Agreement or with the prior written consent of the Company, Buyer and its Subsidiaries shall carry on their respective businesses in the ordinary course consistent with prudent banking practice. Except as set forth in Section 6.2 of the Buyer Disclosure Schedule or as otherwise contemplated by this Agreement or consented to in writing by the Company, Buyer shall not, and shall not permit any of its Subsidiaries to: (a) solely in the case of Buyer, declare or pay any extraordinary or special dividends on or make any other extraordinary or special distributions in respect of any of its capital stock; provided, however, that nothing contained herein shall prohibit Buyer from increasing the quarterly cash dividend on the Buyer Common Stock; (b) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth in Article VIII not being satisfied; (c) change its methods of accounting in effect at December 31, 1998, except in accordance with changes in GAAP or regulatory accounting principles as concurred to by Buyer's independent auditors; (d) take or cause to be taken any action which would disqualify the Merger as a tax free reorganization under Section 368(a) of the Code; or (e) change any provisions of the Certificate of Incorporation of the Buyer, other than as disclosed in Section 6.2(e) of the Buyer Disclosure Schedule; (f) agree to do any of the foregoing. ARTICLE VII ADDITIONAL AGREEMENTS 7.1. Regulatory Matters. (a) The Company shall promptly prepare and file with the SEC the Proxy Statement and Buyer shall promptly prepare and file with the SEC the S-4, in which the Proxy Statement will be included as a prospectus. Each of the Company and Buyer shall use all reasonable efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after such filing, and the Company shall thereafter mail the Proxy Statement to its stockholders. Buyer shall also use all reasonable efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and the Company shall furnish all information concerning the Company and the holders of Company Common Stock as may be reasonably requested in connection with any such action. (b) The parties hereto shall cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement. The Company and Buyer shall have the right to review in advance, and to the extent practicable each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to the Company or Buyer, as the case may be, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. 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 all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein. (c) Buyer and the Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Buyer, the Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. (d) Buyer and the Company shall promptly furnish each other with copies of written communications received by Buyer or the Company, as the case may be, or any of their respective Subsidiaries, Affiliates or Associates (as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement) from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated hereby. 7.2. Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, the Company shall, and shall cause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of Buyer, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments, records, officers, employees, accountants, counsel and other representatives and, during such period, the Company shall, and shall cause its Subsidiaries to, make available to Buyer (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of Federal securities laws or Federal or state banking laws (other than reports or documents which the Company is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as Buyer may reasonably request. Neither the Company nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of the Company's customers, jeopardize any attorney-client privilege or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (b) Upon reasonable notice and subject to applicable laws relating to the exchange of information, Buyer shall, and shall cause its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the Company, access, during normal business hours during the period prior to the Effective Time, to such information regarding Buyer and its Subsidiaries as shall be reasonably necessary for the Company to fulfill its obligations pursuant to this Agreement to assist in the preparation of the Proxy Statement or which may be reasonably necessary for the Company to confirm that the representations and warranties of Buyer contained herein are true and correct and that the covenants of Buyer contained herein have been performed in all material respects. Neither Buyer nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of Buyer's customers, jeopardize any attorney-client privilege or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (c) All information furnished by either party to the other party or its representatives pursuant hereto shall be treated as the sole property of the delivery party and, if the Merger shall not occur, the receiving party and its representatives shall return to the delivering party all of such written information and all documents, notes, summaries or other materials containing, reflecting or referring to, or derived from, such information. The receiving party shall, and shall use its best efforts to cause its representatives to, keep confidential all such information, and shall not directly or indirectly use such information for any competitive or other commercial purpose. The obligation to keep such information confidential shall continue for ten years from the date the proposed Merger is abandoned and shall not apply to (i) any information which (x) was already in the receiving party's possession prior to the disclosure thereof by the delivering party; (y) was then generally known to the public; or (z) was disclosed to the receiving party by a third party not bound by an obligation of confidentiality or (ii) disclosures made as required by law. It is further agreed that, if in the absence of a protective order or the receipt of a waiver hereunder the receiving party is nonetheless, in the opinion of its counsel, compelled to disclose information concerning delivering party to any tribunal or governmental body or agency or else stand liable for contempt or suffer other censure or penalty, the receiving party may disclose such information to such tribunal or governmental body or agency without liability hereunder. (d) No investigation by either of the parties or their respective representatives shall affect the representations, warranties, covenants or agreements of the other set forth herein. 7.3. Stockholder Meetings. The Company shall take all steps necessary to duly call, give notice of, convene and hold a meeting of its stockholders to be held as soon as is reasonably practicable after the date on which the S-4 becomes effective for the purpose of voting upon the approval of this Agreement and the consummation of the transactions contemplated hereby. The Company will, through its Board of Directors, recommend to its stockholders approval of this Agreement and the transactions contemplated hereby and such other matters as may be submitted to its stockholders in connection with this Agreement; provided, however, that nothing shall prohibit the Board of Directors of the Company from withdrawing or modifying in a manner adverse to Buyer such recommendation to the Company's stockholders if (a) the Company is not in breach of, and has not breached, any of the provisions of Section 6.1(d), (b) the Company receives an unsolicited, bona fide written takeover proposal which constitutes a Superior Proposal (each as defined in Section 6.1(d)), and (c) the Board of Directors of the Company determines in good faith that it is required to take such action, but only after consultation with outside counsel and only if such outside counsel concludes and advises the Board that the failure to take such action would result in a violation of its fiduciary duties under applicable law. 7.4. Legal Conditions to Merger. Each of Buyer and the Company shall, and shall cause its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article VIII hereof, to consummate the transactions contemplated by this Agreement and (b) to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by the Company or Buyer or any of their respective Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement, and to comply with the terms and conditions of such consent, authorization, order or approval. 7.5. Affiliates. The Company shall use its reasonable best efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act) of the Company to deliver to Buyer, as soon as practicable after the date of this Agreement, a written agreement, in the form of Exhibit 7.5 hereto. 7.6. Stock Exchange Listing. Buyer shall use all reasonable efforts to cause the shares of Buyer Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance, as of the Effective Time. 7.7. Employee Benefit Plans; Existing Agreements. (a) As soon as practicable following the Effective Time, the employees of the Company and its Subsidiaries (the "Company Employees") shall be eligible to participate in Buyer's employee benefit plans in which similarly situated employees of Buyer or Buyer Bank participate, to the same extent as similarly-situated employees of Buyer or Buyer Bank (it being understood that inclusion of Company Employees in Buyer's employee benefit plans may occur at different times with respect to different plans) provided, however, that Buyer shall continue the comparable plans of Company and its Subsidiaries for the exclusive benefit of Company Employees until such time Company Employees become eligible to participate in the plans of Buyer or Buyer Bank. Company's ESOP shall terminate as of the Effective Time and prior to such time Company shall make contributions to the ESOP sufficient to enable the trustee of the plan to repay in full all outstanding acquisition loans of the plan. If Company cannot make contributions sufficient to enable the trustee to repay such loans in full by reasons of the operation of Section 415(c) of the Code then, in accordance with the terms of the ESOP, the trustee shall sell a number of shares sufficient to repay the remaining portion of the loan. All shares of stock and cash held by the plan as of the Effective Time shall be allocated to participants of the ESOP in accordance with its terms. (b) With respect to each Buyer Plan that is an "employee benefit plan," as defined in Section 3(3)of ERISA, for purposes of determining eligibility to participate, vesting, and entitlement to benefits, including for severance benefits and vacation entitlement (but not for accrual of pension benefits), service with the Company and its Subsidiaries shall be treated as service with Buyer; provided however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any preexisting condition limitations. Company Employees shall be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Buyer Plan. (c) Buyer shall honor and shall cause the appropriate Subsidiaries of Buyer to honor and Company shall pay at the Closing Date, in accordance with their terms all employment, severance and other compensation agreements and arrangements existing prior to the execution of this Agreement which are between the Company or any of its Subsidiaries and any director, officer or employee thereof and which have been disclosed in the Company Disclosure Schedule and previously have been delivered to Buyer. All payments under employment and change in control agreements, identified in Section 4.15(a) of the Company Disclosure Schedule between the Company or its Subsidiaries and individual officers and employees of the Company or its Subsidiaries shall be paid by the Company at the Closing Date regardless of whether or not such individual continues in employment with Buyer or its Subsidiaries. The Company Disclosure Schedule sets forth the reasonable, good faith estimates of amounts payable under employment and severance agreements between the Company or its Subsidiaries and certain individuals and the amounts shown and methodology used in preparing such estimates shall be followed in determining the actual amounts payable under such agreements. (d) Employees of the Company and its Subsidiaries shall be entitled to receive payment for accrued but unused vacation days and any accrued but unused vacation days of employees of the Company or its Subsidiaries as of the Closing Date shall, at the employee's option, either be paid immediately prior to the Closing Date or taken as vacation as soon as practicable following the Closing Date; provided, however, that the Company shall deliver to Buyer, not later than fifteen (15) business days after the date of this Agreement, a schedule of employees indicating their accrued but unused vacation days as of the most recent date practicable. (e) The Company or its Subsidiaries shall pay bonuses in accordance with its past practices through December 31, 1999, and the compensation with respect to which bonuses are paid for any individual shall be for the period of time that has elapsed since the payment of the last bonus. At the Closing Date each Company Employee shall be entitled to receive a bonus equal to the bonus received by such Company Employee for the period ended as of December 31, 1999, multiplied by a fraction, the numerator of which shall be the number of days from December 31 through the date on which the Closing Date occurs and the denominator of which is 366 (in the case of employees who were paid annual bonuses as of December 31) and 180 days (in the case of employees who received semi annual bonuses as of both June 30 and December 31), as the case may be. 7.8. Indemnification. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation 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 Time, a director or officer of the Company or any of its Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a party 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 or officer of the Company, any of the Subsidiaries of the Company 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 Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto. It is understood and agreed that after the Effective Time, Buyer shall indemnify and hold harmless, as and to the extent permitted by law, each such Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorney's fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Effective Time), the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Buyer; provided, however, that (1) Buyer shall have the right to assume the defense thereof with counsel reasonably acceptable to the Indemnified party and upon such assumption Buyer shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if Buyer elects not to assume such defense or counsel for the Indemnified Parties reasonably advises that there are issues which raise conflicts of interest between Buyer and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Buyer, and Buyer shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (2) Buyer shall in all cases be obligated pursuant to this paragraph to pay for only one firm of counsel with respect to any claim, action or suit for all Indemnified Parties, (3) Buyer shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld) and (4) Buyer shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Any Indemnified Party wishing to claim Indemnification under this Section 7.8, upon learning of any such claim, action, suit, proceeding or investigation, shall notify promptly Buyer thereof, provided that the failure to so notify shall not affect the obligations of Buyer under this Section 7.8 except to the extent such failure to notify prejudices Buyer. Buyer's obligations under this Section 7.8 shall continue in full force and effect for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any claim (a "Claim") asserted or made within such period shall continue until the final disposition of such Claim. (b) Buyer shall cause the persons serving as officers and directors of the Company immediately prior to the Effective Time to be covered for a period of six (6) years from the Effective Time by the directors' and officers' liability insurance policy maintained by the Company (provided that Buyer may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such policy) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall Buyer be required to expend on an annual basis more than 175% of the current amount expended by the Company (the "Insurance Amount") to maintain or procure insurance coverage, and further provided that if Buyer is unable to maintain or obtain the insurance called for by this Section 7.8(b) Buyer shall use all reasonable efforts to obtain as much comparable insurance as is available for the Insurance Amount. (c) In the event Buyer or any of its 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 or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Buyer assume the obligations set forth in this section. (d) The provisions of this Section 7.8 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. 7.9. Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by Buyer. 7.10. Advice of Changes. Buyer and the Company 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 contained herein. From time to time prior to the Effective Time (and on the date prior to the Closing Date), each party will supplement or amend its Disclosure Schedules delivered in connection with the execution of this Agreement to reflect any matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedules or which is necessary to correct any information in such Disclosure Schedules which has been rendered inaccurate thereby. No supplement or amendment to such Disclosure Schedules shall have any effect for the purpose of determining satisfaction of the conditions set forth in Sections 8.2(a) or 8.3(a) hereof, as the case may be, or the compliance by the Company or Buyer, as the case may be, with the respective covenants and agreements of such parties contained herein. 7.11. Current Information. (a) During the period from the date of this Agreement to the Effective Time, the Company will cause one or more of its designated representatives to confer on a regular and frequent basis (not less than monthly) with representatives of Buyer and to report the general status of the ongoing operations of the Company and its Subsidiaries. The Company will promptly notify Buyer of any material change in the normal course of business or in the operation of the properties of the Company or any of its Subsidiaries and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of significant litigation involving the Company or any of its Subsidiaries, and will keep Buyer fully informed of such events. (b) During the period from the date of this Agreement to the Effective Time, Buyer shall inform the Company of any proposed acquisition or merger transaction involving Buyer. 7.12. Execution and Authorization of Bank Merger Agreement. As soon as reasonably practicable following a request made by Buyer, (a) Buyer shall (i) cause the Board of Directors of Buyer Bank to approve an Agreement and Plan of Merger providing for the merger of Company Bank into Buyer Bank (the "Bank Merger Agreement"), (ii) cause Buyer Bank to execute and deliver the Bank Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole stockholder of Buyer Bank, and (b) the Company shall (i) cause the Board of Directors of the Company Bank to approve the Bank Merger Agreement, (ii) cause the Company Bank to execute and deliver the Bank Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole stockholder of the Company Bank. The Bank Merger Agreement shall contain terms that are normal and customary in light of the transactions contemplated hereby and such additional terms as are necessary to carry out the purposes of this Agreement. 7.13. Coordination of Dividends. From the date of this Agreement to the Effective Time, each of Buyer and the Company shall coordinate with the other the declaration, record and payment dates with respect to dividends in respect of the Buyer Common Stock and the Company Common Stock and the record dates and payments dates relating thereto, it being the intention of the parties that the holders of Buyer Common Stock or Company Common Stock shall not receive more than one dividend, or fail to receive one dividend, for any single calendar quarter with respect to their shares of Buyer Common Stock and/or Company Common Stock and any shares of Buyer Common Stock any holder of Company Common Stock receives in exchange therefor in the Merger. 7.14. Directorship. Effective as of the Effective Time, Buyer shall cause its Board of Directors to be expanded by one member and shall appoint Raymond A. Nielsen to fill the vacancy on Buyer's Board of Directors created by such increase as of the Effective Time and shall cause Mr. Nielsen to be nominated for election to the Board of Directors for a period not less than three (3) years. 7.15. Accountants' Letter. The Company shall use its reasonable efforts to cause to be delivered to Buyer a letter of its independent public accountants dated (i) the date on which the S-4 shall become effective and (ii) a date shortly prior to the Effective Time, and addressed to Buyer, in form and substance customary for "comfort" letters delivered by independent accountants in accordance with Statement of Financial Accounting Standards No. 72. 7.16. Certain Revaluations, Changes and Adjustments. At or before the Effective Time, upon the request of Buyer, the Company shall, consistent with GAAP, modify and change its loan, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied consistently on a mutually satisfactory basis with those of Buyer and establish such accruals and reserves as shall be necessary to reflect Merger-related expenses and costs incurred by the Company, provided, however, that the Company shall not be required to take such action unless Parent acknowledges in writing that all conditions to closing set forth in Article VIII have been satisfied or waived (other than those conditions relating to delivery of documents on the Closing Date); provided further, however, that no accrual or reserve made by the Company or any Company Subsidiary pursuant to this Section 7.16 shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. 7.17. Year 2000. Each of Buyer and the Company shall use its commercially reasonable efforts to implement its respective Y2K Plan. At the request of the other party, each of Buyer and the Company shall periodically update the other party regarding its process with respect to its Y2K Plan. 7.18. It is understood by the parties that the Merger shall be accounted for under the Purchase Method of accounting. Accordingly, the parties agree to use all reasonable efforts to cause the Effective Time to occur prior to the consummation of the Merger of Buyer with JSB Financial, Inc. pursuant to the Agreement and Plan of Merger between such parties dated as of August 16, 1999. 7.19. Advisory Board. Buyer shall, as of the Effective Time, invite Gerald M. Sauvigne and all of the members of the Company's Board of Directors as of the date of this Agreement, other than Mr. Nielsen, who are willing to serve to be appointed as members of Buyer's advisory board (the "Advisory Board"). The members of the Advisory Board who are willing to so serve shall be elected to a term of three (3) years beginning on the Closing Date and shall receive an annual retainer fee in the amount set forth in Section 7.19 of the Buyer Disclosure Schedule. ARTICLE VIII CONDITIONS PRECEDENT 8.1. Conditions to Each Party's Obligation To Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement shall have been approved and adopted by the requisite vote of the holders of the outstanding shares of Company Common Stock under applicable law. (b) NYSE Listing. The shares of Buyer Common Stock which shall be issued to the stockholders of the Company upon consummation of the Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance. (c) Other Approvals. All regulatory approvals required to consummate the transactions contemplated hereby (including the Merger) shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to herein as the "Requisite Regulatory Approvals"). (d) S-4. The S-4 shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. (e) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, restricts or makes illegal consummation of the Merger. 8.2. Conditions to Obligations of Buyer. The obligation of Buyer to effect the Merger is also subject to the satisfaction or waiver by Buyer at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. (i) Subject to Section 3.2, the representations and warranties of the Company set forth in this Agreement (other than those set forth in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27) shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; and (ii) the representations and warranties of the Company set forth in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27 of this Agreement shall be true and correct in all material respects (without giving effect to Section 3.2 of this Agreement) as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Buyer shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to the foregoing effect. (b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Buyer shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect. (c) Consents Under Agreements. The consent, approval or waiver of each person (other than the Governmental Entities referred to in Section 8.1(c)) whose consent or approval shall be required in order to permit the succession by the Surviving Corporation pursuant to the Merger to any obligation, right or interest of the Company or any Subsidiary of the Company under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument shall have been obtained, except where the failure to obtain such consent, approval or waiver would not have a Material Adverse Effect on the Company. (d) No Pending Governmental Actions. No proceeding initiated by any Governmental Entity seeking an Injunction shall be pending. (e) Federal Income Tax Opinion. Buyer shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Buyer ("Buyer's Counsel"), dated the Effective Date, in form and substance reasonably satisfactory to Buyer, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Buyer's Counsel may require and rely upon representations and covenants, including those contained in certificates of officers of Buyer, the Company and others reasonably satisfactory in form and substance to such counsel. 8.3. Conditions to Obligations of the Company. The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. (i) Subject to Section 3.2, the representations and warranties of Buyer (other than those set forth in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and 5.15) set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; and (ii) the representations and warranties of Buyer set forth in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and 5.15 of this Agreement shall be true and correct in all material respects (without giving effect to Section 3.2 of this Agreement) as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. The Company shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer and the Chief Financial Officer of Buyer to the foregoing effect. (b) Performance of Obligations of Buyer. Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer and the Chief Financial Officer of Buyer to such effect. (c) Consents Under Agreements. The consent, approval or waiver of each person (other than the Governmental Entities referred to in Section 8.1(c)) whose consent or approval shall be required in connection with the transactions contemplated hereby under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument to which Buyer or any of its Subsidiaries is a party or is otherwise bound shall have been obtained, except where failure to obtain such consents and approvals would not, individually or in the aggregate, have a Material Adverse Effect on Buyer and its Subsidiaries taken as a whole (after giving effect to the transactions contemplated hereby). (d) No Pending Governmental Actions. No proceeding initiated by any Governmental Entity seeking an Injunction shall be pending. (e) Federal Income Tax Opinion. The Company shall have received an opinion of Muldoon, Murphy & Faucette LLP (the "Company's Counsel"), in form and substance reasonably satisfactory to the Company, dated the Effective Date, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, the Company's Counsel may require and rely upon representations and covenants, including those contained in certificates of officers of Buyer, the Company and others, reasonably satisfactory in form and substance to such counsel. ARTICLE IX TERMINATION AND AMENDMENT 9.1. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of the Company: (a) by mutual consent of the Company and Buyer in a written instrument, if the Board of Directors of each so determines by a vote of a majority of the members of its entire Board; (b) by either Buyer or the Company upon written notice to the other party (i) 60 days after the date on which any request or application for a Requisite Regulatory Approval shall have been denied or withdrawn at the request or recommendation of the Governmental Entity which must grant such Requisite Regulatory Approval, unless within the 60-day period following such denial or withdrawal a petition for rehearing or an amended application has been filed with the applicable Governmental Entity, provided, however, that no party shall have the right to terminate this Agreement pursuant to this Section 9.1(b)(i) if such denial or request or recommendation for withdrawal shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein or (ii) if any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order enjoining or otherwise prohibiting the Merger; (c) by either Buyer or the Company if the Merger shall not have been consummated on or before June 30, 2000, unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein; (d) by either Buyer or the Company (provided that the terminating party shall not be in material breach of any of its obligations under Section 7.3) if any approval of the stockholders of the Company required for the consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such stockholders or at any adjournment or postponement thereof; (e) by either Buyer or the Company (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement on the part of the other party, which breach is not cured within thirty days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing; provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 9.1(e) unless the breach of representation or warranty, together with all other such breaches, would entitle the party receiving such representation not to consummate the transactions contemplated hereby under Section 8.2(a) (in the case of a breach of representation or warranty by the Company) or Section 8.3(a) (in the case of a breach of representation or warranty by Buyer); (f) by either Buyer or the Company (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach shall not have been cured within thirty days following receipt by the breaching party of written notice of such breach from the other party hereto, or which breach, by its nature, cannot be cured prior to the Closing; (g) by Buyer, if the Board of Directors of the Company does not publicly recommend in the Proxy Statement that the Company's stockholders approve and adopt this Agreement or if, after recommending in the Proxy Statement that stockholders approve and adopt this Agreement, the Board of Directors of the Company shall have withdrawn, modified or amended such recommendation in any manner adverse to Buyer; or (h) by the Company at any time during the five business-day period commencing on the first business day after the Determination Date (as defined below), if both of the following conditions are satisfied: (1) the Average Closing Price (as defined below) shall be less than $16.20 and (2) (i) the number obtained by dividing the Average Closing Price by the Starting Price (such number being referred to herein as the "Buyer Ratio") shall be less than (ii) the number obtained by dividing the Index Price on the Determination Date by the Index Price on the Starting Date and subtracting 0.15 from such quotient (such number being referred to herein as the "Index Ratio"), subject to the following provisions. If the Company elects to exercise its termination right pursuant to the immediately preceding sentence, it shall give prompt written notice to Buyer; provided that such notice of election to terminate may be withdrawn at any time within the aforementioned five business-day period. During the five business-day period commencing with its receipt of such notice, Buyer shall have the option of adjusting the Exchange Ratio to equal the lesser of (i) a number equal to a quotient (rounded to the nearest one-ten-thousandth), the numerator of which is the product of 0.85, the Starting Price and the Exchange Ratio (as then in effect) and the denominator of which is the Average Closing Price, and (ii) a number equal to a quotient (rounded to the nearest one-ten-thousandth), the numerator of which is the Index Ratio multiplied by the Exchange Ratio (as then in effect) and the denominator of which is the Buyer Ratio. If Buyer makes the election contemplated by the preceding sentence, within such five business-day period, it shall give prompt written notice to the Company of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 9.1(h) and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified), and any references in this Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant to this Section 9.1(h). For purposes of this Section 9.1(h), the following terms shall have the meanings indicated: "Average Closing Price" means the average of the last reported sale prices per share of Buyer Common Stock as reported on NYSE (as reported in The Wall Street Journal or, if not reported therein, in another mutually agreed upon authoritative source) for the 20 consecutive trading days on the NYSE ending at the close of trading on the Determination Date. "Determination Date" means the business day prior to the date on which the last of the Requisite Regulatory Approvals shall have been received, without regard to any requisite waiting periods in respect thereof. "Index Group" means the group of each of the twenty-one (21) bank holding companies listed below, the common stock of each of which shall be publicly traded and as to which there shall not have been, since the Starting Date and before the Determination Date, an 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 acquiror's market capitalization as of the Starting Date. In the event that, on or prior to the date immediately preceding the Determination Date, the common stock of any such company ceases to be publicly traded or any such announcement is made with respect to any such company, such company will be removed from the Index Group, and the weights (which have been determined based on the number of outstanding shares of common stock) redistributed proportionately for purposes of determining the Index Price. The twenty-one (21) bank holding companies and the weights attributed to them are as follows: Company Symbol Weighting Astoria Financial Corporation ASFC 5.67% CCB Financial Corporation CCB 5.71% Charter One Financial, Inc. COFI 12.05% Chittenden Corporation CHZ 2.25% Commerce Bancorp, Inc./NJ CBH 3.53% Dime Bancorp, Inc. DME 6.52% First Commonwealth Financial Corporation FCF 2.01% FirstMerit Corporation FMER 7.00% Fulton Financial Corporation FULT 4.04% GreenPoint Financial Corp. GPT 9.27% Independence Community Bank Corp. ICBC 2.62% Keystone Financial, Inc. KSTN 3.86% M & T Bank Corporation MTB 10.89% Peoples Heritage Financial Group, Inc. PHBK 5.33% Queens County Bancorp, Inc. QCSB 1.70% Richmond County Financial Corp. RCBK 1.88% Roslyn Bancorp, Inc. RSLN 3.91% Staten Island Bancorp, Inc. SIB 2.14% Susquehanna Bancshares, Inc. SUSQ 1.81% Valley National Bancorp VLY 4.77% Webster Financial Corporation WBST 3.03% ------- 99.99% "Index Price" on a given date means the weighted average (weighted in accordance with the factors listed above) of the closing prices of the companies comprising the Index Group. "Starting Date" means August 27, 1999. "Starting Price" shall mean the last reported sale price per share of Buyer Common Stock on the Starting Date, as reported by NYSE (as reported in The Wall Street Journal or, if not reported therein, in another mutually agreed upon authoritative source). If Buyer of any company belonging to the Index Group declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the Starting Date and the Determination Date, the prices for the common stock of such company or Buyer shall be appropriately adjusted for the purposes of applying this Section 9.1(h). 9.2. Effect of Termination; Expenses. In the event of termination of this Agreement by either Buyer or the Company as provided in Section 9.1, this Agreement shall forthwith become void and have no effect except that (i) Sections 7.2(c), 9.2 and 10.4 shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, no party shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement. 9.3. Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company; provided, however, that after any approval of the transactions contemplated by this Agreement by the Company's stockholders, there may not be, without further approval of such stockholders, any amendment of this Agreement which reduces the amount or changes the form of the consideration to be delivered to the Company stockholders hereunder other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 9.4. Extension; Waiver. At any time prior to the Effective Time, each of the parties hereto, by action taken or authorized by its Board of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto and (c) waive compliance by the other party with any of its agreements contained herein, or waive compliance with any of the conditions to its obligations hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. ARTICLE X GENERAL PROVISIONS 10.1. Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") will take place at 10:00 a.m. on the first day which is (a) the last business day of a month and (b) at least two business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VIII hereof (other than those conditions which relate to actions to be taken at the Closing)(the "Closing Date"), at the offices of Buyer's Counsel unless another time, date or place is agreed to in writing by the parties hereto. 10.2. Alternative Structure. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, Buyer shall be entitled to revise the structure of the Merger and the related transactions contemplated hereby (including, without limitation, (x) substituting a subsidiary of Buyer as a Constituent Corporation in the Merger, (y) providing that a different entity shall be the Surviving Corporation in the Merger, and (z) providing for the merger of Company Bank into Buyer Bank in accordance with a Bank Merger Agreement), provided that each of the transactions comprising such revised structure shall (i) fully qualify as, or fully be treated as part of, one or more tax-free reorganizations within the meaning of Section 368(a) of the Code, (ii) not change the amount of consideration to be received by the stockholders of the Company, and (iii) be capable of consummation in as timely a manner as the structure contemplated herein. This Agreement and any related documents shall be appropriately amended in order to reflect any such revised structure. 10.3. Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than pursuant to the Option Agreement which shall terminate in accordance with its terms) shall survive the Effective Time, except for those covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time. 10.4. Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense, provided, however, that the costs and expenses of printing and mailing the Proxy Statement to the stockholders of the Company and Buyer, and all filing and other fees paid to the SEC or any other Governmental Entity in connection with the Merger and the other transactions contemplated hereby, shall be borne equally by Buyer and the Company, provided further, however, that nothing contained herein shall limit either party's rights to recover any liabilities or damages arising out of the other party's willful breach of any provision of this Agreement. 10.5. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Buyer, to: North Fork Bancorporation, Inc. 275 Broad Hollow Road Melville, New York 11747 Facsimile: (516) 844-1471 Attention: Mr. John Adam Kanas Chairman, President and Chief Executive Officer with a copy to: William S. Rubenstein, Esq. Skadden, Arps Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Facsimile: (212) 735-2000 and (b) if to the Company, to: Reliance Bancorp, Inc. 585 Stewart Avenue Garden City, New York 11530 Facsimile: (516) 222-1805 Attention: Mr. Raymond A. Nielsen President and Chief Executive Officer with a copy to: Lawrence M.F. Spaccasi Muldoon, Murphy & Faucette 5101 Wisconsin Avenue, N.W. Washington, D.C. 20016 Facsimile: (202) 966-9409 10.6. Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The phrases "the date of this Agreement", "the date hereof" and terms of similar import, unless the context otherwise requires, shall be deemed to refer to August 30, 1999. 10.7. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 10.8. Entire Agreement. This Agreement (including the documents and the instruments referred to herein), together with the Option Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 10.9. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to any applicable conflicts of law. 10.10. Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that the provisions contained in and Section 7.2(c) of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of Section 7.2(c) of this Agreement and to enforce specifically the terms and provisions thereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 10.11. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 10.12. Publicity. Except as otherwise required by law or by the rules of the NYSE or The NASDAQ Stock Market, so long as this Agreement is in effect, neither Buyer nor the Company shall, or shall permit any of its Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. 10.13. Assignment; No Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise expressly provided herein, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. NORTH FORK BANCORPORATION, INC. By: /s/ John Adam Kanas -------------------------- John Adam Kanas Chairman of the Board, President and Chief Executive Officer RELIANCE BANCORP, INC. By: /s/ Raymond A. Nielsen ---------------------------- Raymond A. Nielsen President and Chief Executive Officer EX-2 3 EXHIBIT 2.2 - AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of August 16, 1999 by and between NORTH FORK BANCORPORATION, INC. and JSB FINANCIAL, INC. TABLE OF CONTENTS INTRODUCTORY STATEMENT PAGE ARTICLE I THE MERGER Section 1.1. Structure of the Merger.......................................2 Section 1.2. Effect on Outstanding Shares of JSB Common Stock..............2 Section 1.3. Exchange Procedures...........................................3 Section 1.4. Stock Options.................................................4 Section 1.5. Bank Merger...................................................5 Section 1.6. Directors of NFB after Effective Time.........................5 Section 1.7. Alternative Structure.........................................5 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Disclosure Letters............................................6 Section 2.2. Standards.....................................................6 Section 2.3. Representations and Warranties of JSB.........................7 Section 2.4. Representations and Warranties of NFB........................18 ARTICLE III CONDUCT PENDING THE MERGER Section 3.1. Conduct of JSB's Business Prior to the Effective Time........28 Section 3.2. Forbearance by JSB...........................................28 Section 3.3. Conduct of NFB's Business Prior to the Effective Time........30 Section 3.4. Forbearance by NFB...........................................30 ARTICLE IV COVENANTS Section 4.1. Acquisition Proposals........................................31 Section 4.2. Certain Policies of JSB......................................32 Section 4.3. Access and Information.......................................33 Section 4.4. Certain Filings, Consents and Arrangements...................34 Section 4.5. Antitakeover Provisions......................................34 Section 4.6. Additional Agreements........................................34 Section 4.7. Publicity....................................................34 Section 4.8. Stockholders Meetings........................................34 Section 4.9. Proxy Statements; Comfort Letters............................35 Section 4.10. Registration of NFB Common Stock.............................35 Section 4.11. Affiliate Letters............................................36 Section 4.12. Notification of Certain Matters..............................36 Section 4.13. Directors and Officers.......................................36 Section 4.14. Indemnification; Directors' and Officers' Insurance..........37 Section 4.15. Employees; Benefit Plans and Programs........................38 Section 4.16. Advisory Board...............................................41 ARTICLE V CONDITIONS TO CONSUMMATION Section 5.1. Conditions to Each Party's Obligations.......................41 Section 5.2. Conditions to the Obligations of NFB and NFB Bank............42 Section 5.3. Conditions to the Obligations of JSB and JSB Bank............43 ARTICLE VI TERMINATION Section 6.1. Termination..................................................44 Section 6.2. Effect of Termination........................................47 Section 6.3 Termination Fee..............................................47 ARTICLE VII CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME Section 7.1. Effective Date and Effective Time............................49 Section 7.2. Deliveries at the Closing....................................49 ARTICLE VIII CERTAIN OTHER MATTERS Section 8.1. Certain Definitions; Interpretation..........................49 Section 8.2. Survival.....................................................49 Section 8.3. Waiver; Amendment............................................50 Section 8.4. Counterparts.................................................50 Section 8.5. Governing Law................................................50 Section 8.6. Expenses.....................................................50 Section 8.7. Notices......................................................50 Section 8.8. Entire Agreement; etc........................................51 Section 8.9. Assignment...................................................51 EXHIBITS AND SCHEDULES Exhibit A Plan of Bank Merger Exhibit B Form of Affiliate Letter for JSB Affiliates Exhibit C Form of Affiliate Letter for NFB Affiliates Schedule 4.13(d) Schedule 4.15(e) INDEX OF DEFINED TERMS Acquisition Proposal........................................................32 Acquisition Transaction.....................................................31 Advisory Board .............................................................41 Agreement ..............................................................1 Bank Merger ..............................................................1 Bank Regulator .............................................................10 BHCA .............................................................19 BIF ..............................................................7 Closing .............................................................49 Closing Date .............................................................49 Code ..............................................................1 Converted Options............................................................5 Costs .............................................................37 Covered Person .............................................................17 Date Data .............................................................18 Date-Sensitive System.......................................................18 Derivatives Contract........................................................17 Disclosure Letter............................................................6 Effective Date .............................................................49 Effective Time .............................................................49 Environmental Law...........................................................14 ERISA .............................................................12 Exchange Act .............................................................16 Exchange Agent ..............................................................3 Exchange Ratio ..............................................................2 Excluded Shares..............................................................2 FDIA ..............................................................7 FDIC ..............................................................7 FHLB .............................................................17 Final Index Price...........................................................45 Final Price .............................................................45 FRB ..............................................................9 GAAP ..............................................................9 GATT .............................................................40 Governmental Entity.........................................................10 Hazardous Material..........................................................15 HOLA ..............................................................7 Indemnified Party...........................................................37 Index Group .............................................................45 Index Ratio .............................................................45 Initial Index Price.........................................................47 Initial NFB Market Value....................................................47 Initial Termination Date....................................................44 IRS .............................................................12 Joint Proxy Statement-Prospectus............................................18 JSB ..............................................................1 JSB Bank ..............................................................1 JSB Bank BRP .............................................................40 JSB Bank ESOP .............................................................41 JSB Bank Outside Directors' Plan............................................36 JSB Certificate..............................................................3 JSB Common Stock.............................................................1 JSB Employee .............................................................38 JSB Employee Plans..........................................................12 JSB ERISA Affiliate.........................................................12 JSB Option ..............................................................4 JSB Option Agreement.........................................................1 JSB Option Plans.............................................................4 JSB Pension Plan............................................................12 JSB Preferred Stock..........................................................7 JSB Qualified Plan..........................................................12 JSB Y2K Plan .............................................................18 JSB's Reports ..............................................................9 Letter of Transmittal........................................................3 Loan .............................................................15 Loan Property .............................................................14 Material Adverse Effect......................................................6 Maximum Agreement...........................................................38 Merger ..............................................................2 Merger Consideration.........................................................2 Named Individual............................................................13 New Compensation and Benefits Program.......................................39 New NFB Director............................................................36 NFB ..............................................................1 NFB Bank ..............................................................1 NFB Common Stock.............................................................2 NFB Employee Plans..........................................................23 NFB ERISA Affiliate.........................................................23 NFB Market Value.............................................................2 NFB Pension Plan............................................................23 NFB Preferred Stock.........................................................19 NFB Qualified Plan..........................................................23 NFB Ratio .............................................................44 NFB Stock Plans.............................................................19 NFB Y2K Plan .............................................................27 NFB's Reports .............................................................21 NYSBD ..............................................................9 NYSE ..............................................................2 OREO .............................................................16 OTS ..............................................................9 Participation Facility......................................................14 PBGC .............................................................12 Permitted Transaction.......................................................47 Registration Statement......................................................18 Requisite Regulatory Approvals...............................................9 SEC ..............................................................9 Securities Act .............................................................18 Skadden .............................................................42 Specified Compensation and Benefit Programs.................................13 SRO ..............................................................9 Stock Adjustment.............................................................2 Stockholder Meeting.........................................................34 Subsidiary ..............................................................7 Superfund .............................................................15 Superlien .............................................................15 Thacher Proffitt............................................................43 Unsolicited Acquisition Proposal............................................32 Valuation Date ..............................................................2 Voting Debt ..............................................................8 Year 2000 Compliance........................................................18 AGREEMENT AND PLAN OF MERGER This is an AGREEMENT AND PLAN OF MERGER, dated as of the 16th day of August, 1999 ("Agreement"), by and between NORTH FORK BANCORPORATION, INC., a Delaware corporation ("NFB"), and JSB FINANCIAL, INC., a Delaware corporation ("JSB"). INTRODUCTORY STATEMENT The Board of Directors of NFB (i) has determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of NFB and its stockholders, (ii) has determined that this Agreement and the transactions contemplated hereby are consistent with, and in furtherance of, its business strategy and (iii) has approved this Agreement. The Board of Directors of JSB (i) has determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of JSB and in the best long-term interests of its stockholders, (ii) has determined that this Agreement and the transactions contemplated hereby are consistent with, and in furtherance of, its business strategy and (iii) has approved this Agreement. Concurrently with the execution and delivery of this Agreement, and as a condition and inducement to NFB's willingness to enter into this Agreement, NFB and JSB have entered into a stock option agreement ("JSB Option Agreement"), pursuant to which JSB has granted to NFB an option to purchase shares of JSB's common stock, par value $.01 per share ("JSB Common Stock"), upon the terms and conditions therein contained. Following the consummation of the Merger (as defined below), Jamaica Savings Bank, a wholly owned subsidiary of JSB Financial, Inc. ("JSB Bank"), may be merged with and into North Fork Bank, a wholly owned subsidiary of North Fork Bancorporation, Inc. ("NFB Bank"), with NFB Bank being the surviving entity ("Bank Merger"). The parties hereto intend that the Merger and the Bank Merger, if effected, each shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended ("Code"), for federal income tax purposes, and that the Merger shall be accounted for as a pooling-of-interests for financial accounting purposes. NFB and JSB desire to make certain representations, warranties and agreements in connection with the business combination and related transactions provided for herein and to prescribe various conditions to such transactions. In consideration of their mutual promises and obligations hereunder, the parties hereto adopt and make this Agreement and prescribe the terms and conditions hereof and the manner and basis of carrying it into effect, which shall be as follows: ARTICLE I THE MERGER Section 1.1. Structure of the Merger. On the Effective Date (as defined in Section 7.1), JSB will merge with and into NFB ("Merger"), with NFB being the surviving entity, pursuant to the provisions of, and with the effect provided in, the Delaware General Corporation Law. Upon consummation of the Merger, the separate corporate existence of JSB shall cease. NFB shall continue to be governed by the laws of the State of Delaware and its name and separate corporate existence, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger. Section 1.2. Effect on Outstanding Shares of JSB Common Stock. (a) By virtue of the Merger, automatically and without any action on the part of the holder thereof, each share of JSB Common Stock issued and outstanding at the Effective Time (as defined in Section 7.1), other than (i) shares held directly or indirectly by NFB (other than shares held in a fiduciary capacity or in satisfaction of a debt previously contracted) and (ii) shares held by JSB as treasury stock (such shares referred to in clauses (i) and (ii) being referred to herein as the "Excluded Shares"), shall become and be converted into the right to receive 3.0 shares (the "Exchange Ratio") of NFB's common stock, par value $2.50 per share ("NFB Common Stock"); provided, however, that, notwithstanding any other provision hereof, no fraction of a share of NFB Common Stock and no certificates or scrip therefor will be issued in the Merger; instead, NFB shall pay to each holder of JSB Common Stock who would otherwise be entitled to a fraction of a share of NFB Common Stock an amount in cash, rounded to the nearest cent, determined by multiplying such fraction by the NFB Market Value (as defined below). The shares of NFB Common Stock and any cash for fractional shares are collectively referred to in this Agreement as the "Merger Consideration." (b) As used herein, "NFB Market Value" shall be the average of the daily closing sales prices of a share of NFB Common Stock (and if there is no closing sales price on any such day, then the mean between the closing bid and the closing asked prices on that day), as reported on the New York Stock Exchange ("NYSE"), for the 15 consecutive trading days immediately preceding the Valuation Date. (c) As used herein, "Valuation Date" shall mean the date that is the latest of (i) the day of expiration of the last waiting period with respect to any of the Requisite Regulatory Approvals (as defined in Section 2.3(e)), (ii) the day on which the last of the Requisite Regulatory Approvals is obtained and (iii) the day on which the last of the required stockholder approvals have been obtained. (d) If, between the date of this Agreement and the Effective Time, the outstanding shares of NFB Common Stock shall have been changed into a different number of shares or into a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares (each, a "Stock Adjustment"), the Exchange Ratio shall be adjusted correspondingly to the extent appropriate to reflect the Stock Adjustment. (e) As of the Effective Time, each Excluded Share shall be canceled and retired and shall cease to exist, and no exchange or payment shall be made with respect thereto. All shares of NFB Common Stock and NFB Preferred Stock (as defined in Section 2.4(b)) that are held by JSB, if any, other than shares held in a fiduciary capacity or in satisfaction of a debt previously contracted, shall become treasury stock of NFB. Section 1.3. Exchange Procedures. (a) Appropriate transmittal materials ("Letter of Transmittal") shall be mailed as soon as reasonably practicable after the Effective Time, and in no event later than 5 business days thereafter, to each holder of record of JSB Common Stock as of the Effective Time. A Letter of Transmittal will be deemed properly completed only if accompanied by certificates representing all shares of JSB Common Stock to be converted thereby. (b) At and after the Effective Time, each certificate ("JSB Certificate") previously representing shares of JSB Common Stock (except as specifically set forth in Section 1.2) shall represent only the right to receive the Merger Consideration. (c) Prior to the Effective Time, NFB shall deposit, or shall cause to be deposited, with such bank or trust company that is selected by NFB and is reasonably acceptable to JSB to act as exchange agent ("Exchange Agent"), for the benefit of the holders of shares of JSB Common Stock, for exchange in accordance with this Section 1.3, an estimated amount of cash sufficient to pay the aggregate amount of cash in lieu of fractional shares to be paid pursuant to Section 1.2, and NFB shall reserve for issuance with its transfer agent and registrar a sufficient number of shares of NFB Common Stock to provide for payment of the Merger Consideration. (d) The Letter of Transmittal shall (i) specify that delivery shall be effected, and risk of loss and title to the JSB Certificates shall pass, only upon delivery of the JSB Certificates to the Exchange Agent, (ii) be in a form and contain any other provisions as NFB may reasonably determine and (iii) include instructions for use in effecting the surrender of the JSB Certificates in exchange for the Merger Consideration. Upon the proper surrender of the JSB Certificates to the Exchange Agent, together with a properly completed and duly executed Letter of Transmittal, the holder of such JSB Certificates shall be entitled to receive in exchange therefor (m) a certificate representing that number of whole shares of NFB Common Stock that such holder has the right to receive pursuant to Section 1.2 and (n) a check in the amount equal to the cash in lieu of fractional shares, if any, that such holder has the right to receive pursuant to Section 1.2 and any dividends or other distributions to which such holder is entitled pursuant to this Section 1.3. JSB Certificates so surrendered shall forthwith be canceled. As soon as practicable, but no later than 10 business days following receipt of the properly completed Letter of Transmittal and any necessary accompanying documentation, the Exchange Agent shall distribute NFB Common Stock and cash as provided herein. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of NFB Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the persons entitled thereto. If there is a transfer of ownership of any shares of JSB Common Stock not registered in the transfer records of JSB, the Merger Consideration shall be issued to the transferee thereof if the JSB Certificates representing such JSB Common Stock are presented to the Exchange Agent, accompanied by all documents required, in the reasonable judgment of NFB and the Exchange Agent, (x) to evidence and effect such transfer and (y) to evidence that any applicable stock transfer taxes have been paid. (e) No dividends or other distributions declared or made after the Effective Time with respect to NFB Common Stock shall be remitted to any person entitled to receive shares of NFB Common Stock hereunder until such person surrenders his or her JSB Certificates in accordance with this Section 1.3. Upon the surrender of such person's JSB Certificates, such person shall be entitled to receive any dividends or other distributions, without interest thereon, which theretofore had become payable with respect to shares of NFB Common Stock represented by such person's JSB Certificates. (f) From and after the Effective Time there shall be no transfers on the stock transfer records of JSB of any shares of JSB Common Stock. If, after the Effective Time, JSB Certificates are presented to NFB, they shall be canceled and exchanged for the Merger Consideration deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Section 1.3. (g) Any portion of the aggregate amount of cash to be paid in lieu of fractional shares pursuant to Section 1.2, any dividends or other distributions to be paid pursuant to this Section 1.3 or any proceeds from any investments thereof that remain unclaimed by the stockholders of JSB for six months after the Effective Time shall be repaid by the Exchange Agent to NFB upon the written request of NFB. After such request is made, any stockholders of JSB who have not theretofore complied with this Section 1.3 shall look only to NFB for the Merger Consideration deliverable in respect of each share of JSB Common Stock such stockholder holds, as determined pursuant to Section 1.2 of this Agreement, without any interest thereon. If outstanding JSB Certificates are not surrendered prior to the date on which such payments would otherwise escheat to or become the property of any governmental unit or agency, the unclaimed items shall, to the extent permitted by any abandoned property, escheat or other applicable laws, become the property of NFB (and, to the extent not in its possession, shall be paid over to it), free and clear of all claims or interest of any person previously entitled to such claims. Notwithstanding the foregoing, none of NFB, NFB Bank, the Exchange Agent or any other person shall be liable to any former holder of JSB Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (h) NFB and the Exchange Agent shall be entitled to rely upon JSB's stock transfer books to establish the identity of those persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any JSB Certificate, NFB and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto. (i) If any JSB Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such JSB Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent, the posting by such person of a bond in such amount as the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such JSB Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed JSB Certificate the Merger Consideration deliverable in respect thereof pursuant to Section 1.2. Section 1.4. Stock Options. (a) Each option to purchase shares of JSB Common Stock issued by JSB and outstanding at the Effective Time (a "JSB Option") pursuant to the JSB 1990 Incentive Stock Option Plan, the JSB 1990 Stock Option Plan for Outside Directors and the JSB 1996 Stock Option Plan (collectively, the "JSB Option Plans") shall be converted into an option to purchase shares of NFB Common Stock as follows: (i) the aggregate number of shares of NFB Common Stock issuable upon the exercise of the converted JSB Option after the Effective Time shall be equal to the product of the Exchange Ratio multiplied by the number of shares of JSB Common Stock issuable upon exercise of the JSB Option immediately prior to the Effective Time, such product to be rounded to the nearest whole share of NFB Common Stock; and (ii) the exercise price per share of each converted JSB Option shall be equal to the quotient of the exercise price of such JSB Option at the Effective Time divided by the Exchange Ratio, such quotient to be rounded to the nearest whole cent; provided, however, that, in the case of any JSB Option that is intended to qualify as an incentive stock option under Section 422 of the Code, the number of shares of NFB Common Stock issuable upon exercise of and the exercise price per share for such converted JSB Option determined in the manner provided above shall be further adjusted in such manner as NFB may determine to be necessary to conform to the requirements of Section 424(b) of the Code. Options to purchase shares of NFB Common Stock that arise from the operation of this Section 1.4 shall be referred to as the "Converted Options." All Converted Options shall be exercisable for the same period and otherwise have the same terms and conditions applicable to the JSB Options that they replace; provided, however, that such exercise period, terms and conditions shall be further modified if and to the extent necessary to enable the Merger to qualify for pooling-of-interests accounting treatment. Prior to the Effective Time, NFB shall take, or cause to be taken, all necessary action to effect the intent of the provisions set forth in this Section 1.4. (b) Prior to the date of the JSB stockholders meeting contemplated by Section 4.8, JSB shall take, or cause to be taken, appropriate action under the terms of any stock option plan, agreement or arrangement under which JSB Options have been granted to provide for the conversion of JSB Options outstanding at the Effective Time into Converted Options and to effect any other modifications contemplated by Section 1.4(a). (c) Concurrently with the reservation of shares of NFB Common Stock to provide for the payment of the Merger Consideration, NFB shall take all corporate action necessary to reserve for future issuance a sufficient additional number of shares of NFB Common Stock to provide for the satisfaction of its obligations with respect to the Converted Options. On or before the Effective Time, NFB shall file a registration statement on Form S-8 (or any successor or other appropriate form) and make any state filings or obtain state exemptions with respect to the NFB Common Stock issuable upon exercise of the Converted Options. Within 15 days after the Effective Time, NFB shall cause to be executed and delivered to each holder of a Converted Option an agreement, certificate or other instrument, in such form and of such substance as NFB may reasonably determine, evidencing such holder's rights with respect to the Converted Options. JSB shall use its best efforts to obtain from each person holding JSB Options, within 30 days after the date of this Agreement, a waiver of such person's limited stock appreciation rights for purposes of the Merger, in the form mutually agreed to by the parties. Section 1.5. Bank Merger. At the election of NFB, concurrently with or within 60 days after the execution and delivery of this Agreement, NFB Bank and JSB Bank shall enter into the Plan of Bank Merger, in the form attached hereto as Exhibit A, pursuant to which the Bank Merger will be effected. The parties hereto intend that, if the Plan of Bank Merger is entered into, the Bank Merger shall become effective promptly following consummation of the Merger. The Plan of Bank Merger shall provide that the directors of NFB Bank as the surviving entity of the Bank Merger shall be all of the directors of NFB Bank serving immediately prior to the Bank Merger and the additional person who shall become a director of NFB Bank in accordance with Section 4.13. Section 1.6. Directors of NFB after Effective Time. At and after the Effective Time, the directors of NFB shall consist of all of the directors of NFB serving immediately prior to the Effective Time and the additional person who shall become a director of NFB in accordance with Section 4.13. Section 1.7. Alternative Structure. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, NFB may specify that the structure of the transactions contemplated hereby be revised and the parties shall enter into such alternative transactions as NFB may determine to effect the purposes of this Agreement; provided, however, that such revised structure shall not adversely affect the tax effects or economic benefits of the transactions contemplated hereby to the holders of JSB Common Stock, and, further, such revised structure shall not materially delay the Closing Date (as defined in Section 7.1). This Agreement and any related documents shall be appropriately amended in order to reflect any such revised structure. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Disclosure Letters. On or prior to the execution and delivery of this Agreement, JSB and NFB each shall have delivered to the other a letter (each, its "Disclosure Letter") setting forth, among other things, facts, circumstances and events the disclosure of which is required or appropriate in relation to any or all of their respective representations and warranties (and making specific reference to the Section of this Agreement to which they relate), other than Section 2.3(g) and Section 2.4(g); provided, that (a) no such fact, circumstance or event is required to be set forth in the Disclosure Letter as an exception to a representation or warranty if its absence is not reasonably likely to result in the related representation or warranty being deemed untrue or incorrect under the standards established by Section 2.2 and (b) the mere inclusion of a fact, circumstance or event in a Disclosure Letter shall not be deemed an admission by a party that such item represents a material exception or that such item is reasonably likely to result in a Material Adverse Effect (as defined in Section 2.2(b)). Section 2.2. Standards. (a) No representation or warranty of JSB or NFB contained in Sections 2.3 or 2.4, respectively, shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, on account of the existence of any fact, circumstance or event unless, as a direct or indirect consequence of such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with any paragraph of Sections 2.3 or 2.4, as applicable, there is reasonably likely to exist a Material Adverse Effect. JSB's representations, warranties and covenants contained in this Agreement shall not be deemed to be untrue or breached as a result of effects arising solely from actions taken in compliance with a written request of NFB. (b) As used in this Agreement, the term "Material Adverse Effect" means either: (i) an effect which is material and adverse to the business, financial condition or results of operations of JSB or NFB, as the context may dictate, and its Subsidiaries taken as a whole; provided, however, that any such effect resulting from any (A) changes in laws, rules or regulations or generally accepted accounting principles or interpretations thereof that apply to both NFB and NFB Bank and JSB and JSB Bank, as the case may be, or (B) changes in the general level of market interest rates shall not be considered in determining if a Material Adverse Effect has occurred; or (ii) the failure of (x) a representation or warranty contained in Section 2.3(a)(i) and (iv), Section 2.3(d), Section 2.3(g)(iii), Section 2.4(a)(i) and (iv), Section 2.4(d), Section 2.4(g)(ii) or Section 2.4(l) to be true and correct or (y) a representation or warranty contained in Section 2.3(b)(i), Section 2.3(c), clause (ii) of Section 2.3(e), the last sentence of Section 2.3(e), Section 2.3(f), Section 2.3(j), the first sentence of Section 2.3(m), Section 2.3(q), Section 2.3(u), Section 2.3(v), the first two sentences of Section 2.3(bb), Section 2.4(b)(i), Section 2.4(c), clause (ii) of Section 2.4(e), the last sentence of Section 2.4(e), Section 2.4(f), Section 2.4(j), the first sentence of Section 2.4(n), Section 2.4(q), Section 2.4(t) and the first two sentences of 2.4(w) to be true and correct in all material respects. (c) For purposes of this Agreement, "knowledge" shall mean, with respect to a party hereto, actual knowledge of the members of the Board of Directors of that party, its counsel, any officer of that party with the title ranking not less than senior vice president and, with respect to JSB, any Vice President of JSB whose name is listed in Section 4.13(d) hereof. Section 2.3. Representations and Warranties of JSB. Subject to Sections 2.1 and 2.2, JSB represents and warrants to NFB that, except as disclosed in JSB's Disclosure Letter: (a) Organization. (i) JSB is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly registered as a savings and loan holding company under the Home Owners' Loan Act of 1933, as amended ("HOLA"). JSB Bank is a savings association duly organized, validly existing and in good standing under the laws of the United States of America and is a wholly owned Subsidiary (as defined below) of JSB. Each Subsidiary of JSB, other than JSB Bank, is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of JSB and its Subsidiaries has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. As used in this Agreement, unless the context requires otherwise, the term "Subsidiary" when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes or which is controlled, directly or indirectly, by such party. (ii) JSB and each of its Subsidiaries has the requisite corporate power and authority, and is duly qualified and is in good standing, to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. (iii) JSB's Disclosure Letter sets forth all of JSB's Subsidiaries and all entities (whether corporations, partnerships or similar organizations), including the corresponding percentage ownership, in which JSB owns, directly or indirectly, 5% or more of the ownership interests as of the date of this Agreement and indicates for each of JSB's Subsidiaries, as of such date, its jurisdiction of organization and the jurisdiction(s) wherein it is qualified to do business. All such Subsidiaries and ownership interests are in compliance with all applicable laws, rules and regulations relating to direct investments in equity ownership interests. JSB owns, either directly or indirectly, all of the outstanding capital stock of each of its Subsidiaries. No Subsidiary of JSB other than JSB Bank is an "insured depository institution" as defined in the Federal Deposit Insurance Act, as amended ("FDIA"), and the applicable regulations thereunder. All of the shares of capital stock of each of the Subsidiaries of JSB are duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights and are owned by JSB or a Subsidiary of JSB free and clear of any claims, liens, encumbrances or restrictions (other than those imposed by applicable federal and state securities laws), and there are no agreements or understandings with respect to the voting or disposition of any such shares. (iv) The deposits of JSB Bank are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC") to the extent provided in the FDIA. JSB Bank is a member of the Federal Home Loan Bank of New York. (b) Capital Structure. (i) The authorized capital stock of JSB consists of 65,000,000 shares of JSB Common Stock and 15,000,000 shares of preferred stock, par value $.01 per share ("JSB Preferred Stock"). As of the date of this Agreement: (A) 9,286,897 shares of JSB Common Stock were issued and outstanding, (B) no shares of JSB Preferred Stock were issued and outstanding, (C) no shares of JSB Common Stock were reserved for issuance, except that 952,676 shares of JSB Common Stock were reserved for issuance pursuant to the JSB Option Plans, which includes 810,676 shares reserved for issuance upon the exercise of options that have already been granted under the JSB Option Plans, plus 142,000 shares reserved for issuance upon the exercise of options that will be automatically granted pursuant to the terms of the JSB 1996 Option Plan as a result of the execution of this Agreement, (D) no shares of JSB Preferred Stock were reserved for issuance and (E) 6,713,103 shares of JSB Common Stock were held by JSB in its treasury or by its Subsidiaries. The authorized capital stock of JSB Bank consists of 40,000,000 shares of common stock, par value $1.00 per share, and 20,000,000 shares of preferred stock, par value $1.00 per share. As of the date of this Agreement, 1,000 shares of such common stock were outstanding, no shares of such preferred stock were outstanding and all outstanding shares of such common stock were, and as of the Effective Time will be, owned by JSB. All outstanding shares of capital stock of JSB and JSB Bank are duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights and, with respect to shares held by JSB in its treasury or by its Subsidiaries, are free and clear of all claims, liens, encumbrances or restrictions (other than those imposed by applicable federal or state securities laws) and there are no agreements or understandings with respect to the voting or disposition of any such shares. JSB's Disclosure Letter sets forth a complete and accurate list of all outstanding options to purchase JSB Common Stock that have been granted pursuant to the JSB Option Plans, including the dates of grant, exercise prices, dates of vesting, dates of termination and shares subject to each grant, and all options to purchase JSB Common Stock that will be automatically granted as a result of the execution of this Agreement. (ii) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which stockholders may vote ("Voting Debt") of JSB are issued or outstanding. (iii) As of the date of this Agreement, except for this Agreement, the JSB Option Agreement, the JSB Option Plans and as set forth in JSB's Disclosure Letter, neither JSB nor any of its Subsidiaries has or is bound by any outstanding options, warrants, calls, rights, convertible securities, commitments or agreements of any character obligating JSB or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, any additional shares of capital stock of JSB or any of its Subsidiaries or obligating JSB or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, convertible security, commitment or agreement. As of the date hereof, there are no outstanding contractual obligations of JSB or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of JSB or any of its Subsidiaries. (c) Authority. Each of JSB and JSB Bank has the requisite corporate power and authority to enter into this Agreement and the Plan of Bank Merger, respectively, and, subject to approval of this Agreement by the requisite vote of JSB's stockholders and receipt of all required regulatory or governmental approvals, as contemplated by Section 5.1(b) of this Agreement, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, and, subject to the approval of this Agreement by JSB's stockholders, the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate actions on the part of JSB and JSB Bank. This Agreement has been duly executed and delivered by JSB and constitutes a valid and binding obligation of JSB, enforceable in accordance with its terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, whether applied in a court of law or a court of equity. (d) Stockholder Approval; Fairness Opinion. The affirmative vote of the holders of a majority of the outstanding shares of JSB Common Stock entitled to vote on this Agreement is the only vote of the stockholders of JSB required for approval of this Agreement by JSB and the consummation by JSB of the Merger and the related transactions contemplated hereby. JSB has received the written opinion of Northeast Capital & Advisory, Inc. to the effect that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to JSB's stockholders. (e) No Violations. The execution, delivery and performance of this Agreement by JSB do not, and the consummation of the transactions contemplated hereby will not, constitute (i) assuming receipt of all Requisite Regulatory Approvals (as defined below) and requisite stockholder approvals, a breach or violation of, or a default under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of JSB or any of its Subsidiaries, or to which JSB or any of its Subsidiaries (or any of their respective properties) is subject, (ii) a breach or violation of, or a default under, the certificate of incorporation or bylaws of JSB or the similar organizational documents of any of its Subsidiaries or (iii) a breach or violation of, or a default under (or an event which, with due notice or lapse of time or both, would constitute a default under), or result in the termination of, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the properties or assets of JSB or any of its Subsidiaries, under, any of the terms, conditions or provisions of any note, bond, indenture, deed of trust, loan agreement or other agreement, instrument or obligation to which JSB or any of its Subsidiaries is a party, or to which any of their respective properties or assets may be subject; and the consummation of the transactions (including the Bank Merger) contemplated hereby (exclusive of the effect of any changes effected pursuant to Section 1.7) will not require any approval, consent or waiver under any such law, rule, regulation, judgment, decree, order, governmental permit or license or the approval, consent or waiver of any other party to any such agreement, indenture or instrument, other than (x) the approval of the holders of a majority of the outstanding shares of JSB Common Stock and the approval of JSB as the sole stockholder of JSB Bank and (y) the provision of notice to or the approval of, if required, the Office of Thrift Supervision ("OTS") under HOLA, the approval, if required, of the Federal Deposit Insurance Corporation under Section 18(c) of the FDIA, the approval of the Board of Governors of the Federal Reserve System ("FRB") under the Bank Holding Company Act of 1956, as amended, and the approval of the New York State Banking Department ("NYSBD") under the Banking Law of the State of New York (collectively, the "Requisite Regulatory Approvals"), and (z) such approvals, consents or waivers as are required under the federal and state securities or "blue sky" laws in connection with the transactions contemplated by this Agreement. As of the date hereof, the executive officers of JSB know of no reason pertaining to JSB why any of the approvals referred to in this Section 2.3(e) should not be obtained. (f) Reports. (i) As of their respective dates, none of the reports or other statements filed by JSB or JSB Bank on or subsequent to December 31, 1997 with the Securities and Exchange Commission ("SEC") (collectively, "JSB's Reports"), contained, or will contain, any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements of JSB included in JSB's Reports complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP") (except as may be indicated in the notes thereto or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC). Each of the consolidated statements of condition, consolidated statements of operations, consolidated statements of cash flows and consolidated statements of changes in stockholders' equity contained or incorporated by reference in JSB's Reports (including in each case any related notes and schedules) fairly presented, or will fairly present, as the case may be, the financial position, results of operations, cash flows and stockholders' equity, as the case may be, of the entity or entities to which it relates for the periods set forth therein (subject, in the case of unaudited interim statements, to normal year-end audit adjustments that are not material in amount or effect), in each case in accordance with GAAP, except as may be noted therein. (ii) JSB and its Subsidiaries have each timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 1996 with (A) the OTS, (B) the FDIC, (C) the SEC, (D) the NYSE and (E) any other self-regulatory organization ("SRO"), and have paid all fees and assessments due and payable in connection therewith. (g) Absence of Certain Changes or Events. Except as disclosed in JSB's Reports filed on or prior to the date of this Agreement, since December 31, 1998, (i) JSB and its Subsidiaries have not incurred any liability, except in the ordinary course of their businesses consistent with past practice, (ii) JSB and its Subsidiaries have conducted their respective businesses only in the ordinary and usual course of such businesses and (iii) there has not been any Material Adverse Effect with respect to JSB. (h) Absence of Claims. Except as disclosed in JSB's Disclosure Letter, no litigation, proceeding, controversy, claim or action before any court or any federal, state, local or foreign governmental or regulatory body (each, a "Governmental Entity") is pending against JSB or any of its Subsidiaries and, to the best of JSB's knowledge, no such litigation, proceeding, controversy, claim or action has been threatened. (i) Absence of Regulatory Actions. Neither JSB nor any of its Subsidiaries is a party to any cease and desist order, written agreement or memorandum of understanding with, or any commitment letter or similar written undertaking to, or is subject to any action, proceeding, order or directive by, or is a recipient of any extraordinary supervisory letter from any federal or state governmental authority charged with the supervision or regulation of depository institutions or depository institution holding companies or engaged in the insurance of bank and/or savings and loan deposits (each, a "Bank Regulator"), or has adopted any board resolutions at the request of any Bank Regulator, nor has it been advised by any Bank Regulator that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such action, proceeding, order, directive, written agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter, board resolutions or similar written undertaking. (j) Taxes. All federal, state, local and foreign tax returns required to be filed by or on behalf of JSB or any of its Subsidiaries have been timely filed or requests for extensions have been timely filed and any such extension shall have been granted and not have expired, and all such filed returns are complete and accurate in all material respects. All taxes shown on such returns, all taxes required to be shown on returns for which extensions have been granted and all other taxes required to be paid by JSB or any of its Subsidiaries have been paid in full or adequate provision has been made for any such taxes on JSB's balance sheet (in accordance with GAAP). For purposes of this Section 2.3(j), the term "taxes" shall include all federal, state, local or foreign taxes, charges or other assessments, including, without limitation, income, franchise, gross receipts, real and personal property, real property transfer and gains, wage and employment taxes, and the term "tax return" shall mean any return or other report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be filed with respect to any tax. Except as disclosed in JSB's Disclosure Letter, as of the date of this Agreement, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of JSB or any of its Subsidiaries, and no claim has been made by any authority in a jurisdiction where JSB or any of its Subsidiaries do not file tax returns that JSB or any such Subsidiary is subject to taxation in that jurisdiction. All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation relating to JSB or any of its Subsidiaries have been paid in full or adequate provision has been made for any such taxes on JSB's balance sheet (in accordance with GAAP). JSB and its Subsidiaries have not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. JSB and each of its Subsidiaries has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and JSB and each of its Subsidiaries has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements. Neither JSB nor any of its Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii) has issued or assumed any obligation under Section 279 of the Code, any high yield discount obligation as described in Section 163(i) of the Code or any registration-required obligation within the meaning of Section 163(f)(2) of the Code that is not in registered form or (iii) is or has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. (k) Agreements. (i) Except for the JSB Option Agreement and arrangements made in the ordinary course of business, and except as disclosed in JSB's Disclosure Letter, JSB and its Subsidiaries are not bound by any material contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed after the date hereof that has not been filed with or incorporated by reference in JSB's Reports. Except as disclosed in JSB's Reports filed prior to the date of this Agreement or as disclosed in JSB's Disclosure Letter, neither JSB nor any of its Subsidiaries is a party to an oral or written (A) consulting agreement (other than data processing, software programming and licensing contracts entered into in the ordinary course of business) not terminable on 60 days' or less notice, (B) agreement with any executive officer or other key employee of JSB or any of its Subsidiaries the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving JSB or any of its Subsidiaries of the nature contemplated by this Agreement or the JSB Option Agreement, (C) agreement with respect to any employee or director of JSB or any of its Subsidiaries providing any term of employment or compensation guarantee extending for a period longer than 60 days or for the payment of in excess of $50,000 per annum, (D) agreement or plan, including any stock option plan, phantom stock or stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting or payment of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the JSB Option Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement or the JSB Option Agreement or (E) agreement containing covenants that limit the ability of JSB or any of its Subsidiaries to compete in any line of business or with any person, or that involve any restriction on the geographic area in which, or method by which, JSB (including any successor thereof) or any of its Subsidiaries may carry on its business (other than as may be required by law or any regulatory agency). (ii) Neither JSB nor any of its Subsidiaries is in default under or in violation of any provision of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or other agreement to which it is a party or by which it is bound or to which any of its respective properties or assets is subject. (iii) JSB and each of its Subsidiaries owns or possesses valid and binding licenses and other rights to use without payment all patents, copyrights, trade secrets, trade names, servicemarks and trademarks used in its businesses, and neither JSB nor any of its Subsidiaries has received any notice of conflict with respect thereto that asserts the right of others. Each of JSB and its Subsidiaries has performed all the obligations required to be performed by it and are not in default under any contact, agreement, arrangement or commitment relating to any of the foregoing. (l) Labor Matters. Neither JSB nor any of its Subsidiaries is or has ever been a party to, or is or has ever been bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization with respect to its employees, nor is JSB or any of its Subsidiaries the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages and conditions of employment, nor is there any strike, other labor dispute or organizational effort involving JSB or any of its Subsidiaries pending or, to the best of JSB's knowledge, threatened. JSB and its Subsidiaries are in compliance with applicable laws regarding employment of employees and retention of independent contractors and are in compliance with applicable employment tax laws. (m) Employee Benefit Plans. JSB's Disclosure Letter contains a complete and accurate list of all pension, retirement, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, deferred compensation, consulting, bonus, group insurance, severance and other benefit plans, contracts, agreements and arrangements, including, but not limited to, "employee benefit plans," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and welfare policies, contracts, plans and arrangements and all trust agreements related thereto with respect to any present or former directors, officers or other employees of JSB or any of its Subsidiaries (hereinafter collectively referred to as the "JSB Employee Plans"). Except as disclosed in JSB's Disclosure Letter: (i) all of the JSB Employee Plans comply in all material respects with all applicable requirements of ERISA, the Code and other applicable laws; there has occurred no "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) which is likely to result in the imposition of any penalties or taxes under Section 502(i) of ERISA or Section 4975 of the Code upon JSB or any of its Subsidiaries. (ii) no liability to the Pension Benefit Guaranty Corporation ("PBGC") has been or is expected by JSB or any of its Subsidiaries to be incurred with respect to any JSB Employee Plan which is subject to Title IV of ERISA ("JSB Pension Plan"), or with respect to any "single-employer plan" (as defined in Section 4001(a) of ERISA) currently or formerly maintained by JSB or any entity which is considered one employer with JSB under Section 4001(b)(1) of ERISA or Section 414 of the Code (a "JSB ERISA Affiliate"); (iii) no JSB Pension Plan had an "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of the last day of the end of the most recent plan year ending prior to the date hereof; the fair market value of the assets of each JSB Pension Plan exceeds the present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such JSB Pension Plan as of the end of the most recent plan year with respect to the respective JSB Pension Plan ending prior to the date hereof, calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such JSB Pension Plan as of the date hereof; and no notice of a "reportable event" (as defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived has been required to be filed for any JSB Pension Plan within the 12-month period ending on the date hereof; (iv) neither JSB nor any of its Subsidiaries has provided, or is required to provide, security to any JSB Pension Plan or to any single-employer plan of a JSB ERISA Affiliate pursuant to Section 401(a)(29) of the Code; (v) neither JSB, its Subsidiaries, nor any JSB ERISA Affiliate has contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980; (vi) each JSB Employee Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be qualified under Section 401(a) of the Code ("JSB Qualified Plan") has received a favorable determination letter from the Internal Revenue Service ("IRS"), and JSB and its Subsidiaries are not aware of any circumstances likely to result in revocation of any such favorable determination letter; (vii) there is no pending or, to JSB's knowledge, threatened litigation, administrative action or proceeding relating to any JSB Employee Plan; (viii) there has been no announcement or commitment by JSB or any of its Subsidiaries to create an additional JSB Employee Plan, or to amend any JSB Employee Plan, except for amendments required by applicable law which do not materially increase the cost of such JSB Employee Plan; and, except as specifically identified in JSB's Disclosure Letter, JSB and its Subsidiaries do not have any obligations for post-retirement or post-employment benefits under any JSB Employee Plan that cannot be amended or terminated upon 60 days' notice or less without incurring any liability thereunder, except for coverage required by Part 6 of Title I of ERISA or Section 4980B of the Code, or similar state laws, the cost of which is borne by the insured individuals; (ix) neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any payment or series of payments by JSB or any of its Subsidiaries to any person which is an "excess parachute payment" (as defined in Section 280G of the Code), increase or secure (by way of a trust or other vehicle) any benefits payable under any JSB Employee Plan or accelerate the time of payment or vesting of any such benefit; and (x) with respect to each JSB Employee Plan, JSB has made available to NFB a true and correct copy of (A) the annual report on the applicable form of the Form 5500 series filed with the IRS for the most recent three plan years, if required to be filed, (B) such JSB Employee Plan, including amendments thereto, (C) each trust agreement, insurance contract or other funding arrangement relating to such JSB Employee Plan, including amendments thereto, (D) the most recent summary plan description and summary of material modifications thereto for such JSB Employee Plan, if the JSB Employee Plan is subject to Title I of ERISA, (E) the most recent actuarial report or valuation if such JSB Employee Plan is a JSB Pension Plan and any subsequent changes to the actuarial assumptions contained therein and (F) the most recent determination letter issued by the IRS if such JSB Employee Plan is a Qualified Plan. (n) Termination Benefits. JSB's Disclosure Letter contains a schedule identifying the types of benefits and other payments due under the Specified Compensation and Benefit Programs (as defined herein) for each Named Individual (as defined herein) individually and for all persons other than the Named Individuals as a group. For purposes hereof, "Specified Compensation and Benefit Programs" shall include all employment agreements, change in control agreements, severance or special termination agreements, severance plans, pension, retirement or deferred compensation plans for non-employee directors, supplemental executive retirement programs, tax indemnification agreements, outplacement programs, cash bonus programs, deferred compensation plans, all performance and/or bonus plans, stock appreciation right, phantom stock or stock unit plan, and health, life, disability and other insurance or welfare plans, but shall not include any tax-qualified pension, profit-sharing or employee stock ownership plan or any JSB Option Plans. For purposes hereof, "Named Individual" shall include each non-employee director of JSB or any of its Subsidiaries and each executive officer of JSB. (o) Title to Assets. JSB and each of its Subsidiaries has good and marketable title to its properties and assets (including any intellectual property asset such as any trademark, servicemark, trade name or copyright) and property acquired in a judicial foreclosure proceeding or by way of a deed in lieu of foreclosure or similar transfer, other than property as to which it is lessee, in which case the related lease is valid and in full force and effect. Each lease pursuant to which JSB or any of its Subsidiaries is lessor is valid and in full force and effect and no lessee under any such lease is in material default or violation of any provisions of any such lease. All material tangible properties of JSB and each of its Subsidiaries are in a good state of maintenance and repair, conform with all applicable ordinances, regulations and zoning laws and are considered by JSB to be adequate for the current business of JSB and its Subsidiaries. (p) Compliance with Laws. JSB and each of its Subsidiaries has all permits, licenses, certificates of authority, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities that are required in order to permit it to carry on its business as it is presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect, and, to the best knowledge of JSB, no suspension or cancellation of any of them is threatened. Since the date of its incorporation, the corporate affairs of JSB have not been conducted in violation of any law, ordinance, regulation, order, writ, rule, decree or approval of any Governmental Entity. The businesses of JSB and its Subsidiaries are not being conducted in violation of any law, ordinance, regulation, order, writ, rule, decree or condition to approval of any Governmental Entity. (q) Fees. Other than financial advisory services performed for JSB by Northeast Capital & Advisory, Inc. pursuant to an agreement dated May 27, 1999, a true and complete copy of which has been previously delivered to NFB, neither JSB nor any of its Subsidiaries, nor any of their respective officers, directors, employees or agents, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted directly or indirectly for JSB or any of its Subsidiaries in connection with this Agreement or the transactions contemplated hereby. (r) Environmental Matters. (i) With respect to JSB and each of its Subsidiaries, except as disclosed in JSB's Disclosure Letter: (A) each of JSB and its Subsidiaries and, to JSB's knowledge, the Participation Facilities (as defined herein) and the Loan Properties (as defined herein) are, and have been, in substantial compliance with, and are not liable under, all Environmental Laws (as defined herein); (B) there is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or, to the best of JSB's knowledge, threatened, before any court, Governmental Entity or board or other forum against it or any of its Subsidiaries or any Participation Facility (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Hazardous Material (as defined herein), whether or not occurring at or on a site owned, leased or operated by it or any of its Subsidiaries or any Participation Facility; (C) to the best of JSB's knowledge, there is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or threatened before any court, Governmental Entity or board or other forum relating to or against any Loan Property (or JSB or any of its Subsidiaries in respect of such Loan Property) (x) relating to alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Hazardous Material, whether or not occurring at or on a site owned, leased or operated by a Loan Property; and (D) to the best of JSB's knowledge, during the period of (l) JSB's or any of its Subsidiaries' ownership or operation of any of their respective current properties or (m) JSB's or any of its Subsidiaries' participation in the management of any Participation Facility, there has been no contamination by or release of Hazardous Materials in, on, under or affecting such properties. (ii) The following definitions apply for purposes of this Section 2.3(r) and Section 2.4(r): (w) "Loan Property" means any property in which the applicable party (or any of its Subsidiaries) holds a security interest, and, where required by the context, includes the owner or operator of such property, but only with respect to such property; (x) "Participation Facility" means any facility in which the applicable party (or any of its Subsidiaries) participates in the management (including all property held as trustee or in any other fiduciary capacity) and, where required by the context, includes the owner or operator of such property, but only with respect to such property; (y) "Environmental Law" means (i) any federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, legal doctrine, order, directive, executive or administrative order, judgment, decree, injunction, legal requirement or agreement with any Governmental Entity relating to (A) the protection, preservation or restoration of the environment (which includes, without limitation, air, water vapor, surface water, groundwater, drinking water supply, structures, soil, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety as it relates to Hazardous Materials, or (B) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of, Hazardous Materials, in each case as amended and as now in effect. The term Environmental Law includes all federal, state and local laws, rules, regulations or requirements relating to the protection of the environment or health and safety, including, without limitation, (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including, but not limited to, the Hazardous and Solid Waste Amendments thereto and Subtitle I relating to underground storage tanks), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of 1970 as it relates to Hazardous Materials, the Federal Hazardous Substances Transportation Act, the Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water Act, the Endangered Species Act, the National Environmental Policy Act, the Rivers and Harbors Appropriation Act or any so-called "Superfund" or "Superlien" law, each as amended and as now or hereafter in effect, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Material; and (z) "Hazardous Material" means any substance (whether solid, liquid or gas) which is or could be detrimental to human health or safety or to the environment, currently or hereafter listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any Environmental Law, whether by type or by quantity, including any substance containing any such substance as a component. Hazardous Material includes, without limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance, oil or petroleum, or any derivative or by-product thereof, radon, radioactive material, asbestos, asbestos-containing material, urea formaldehyde foam insulation, lead and polychlorinated biphenyl. (s) Loan Portfolio; Allowance; Asset Quality. (i) With respect to each loan owned by JSB or its Subsidiaries in whole or in part (each, a "Loan"), to the best knowledge of JSB: (A) the note and the related security documents are each legal, valid and binding obligations of the maker or obligor thereof, enforceable against such maker or obligor in accordance with their terms; (B) neither JSB nor any of its Subsidiaries, nor any prior holder of a Loan, has modified the note or any of the related security documents in any material respect or satisfied, canceled or subordinated the note or any of the related security documents except as otherwise disclosed by documents in the applicable Loan file; (C) JSB or a Subsidiary is the sole holder of legal and beneficial title to each Loan (or JSB's applicable participation interest, as applicable), except as otherwise referenced on the books and records of JSB; (D) the note and the related security documents, copies of which are included in the Loan files, are true and correct copies of the documents they purport to be and have not been suspended, amended, modified, canceled or otherwise changed, except as otherwise disclosed by documents in the applicable Loan file; (E) there is no pending or threatened condemnation proceeding or similar proceeding affecting the property that serves as security for a Loan, except as otherwise referenced on the books and records of JSB; (F) there is no litigation or proceeding pending or threatened relating to the property that serves as security for a Loan that would have a material adverse effect upon the related Loan; and (G) with respect to a Loan held in the form of a participation, the participation documentation is legal, valid, binding and enforceable. (ii) The allowance for possible losses reflected in JSB's audited statement of condition at December 31, 1998 was, and the allowance for possible losses shown on the balance sheets in JSB's Reports for periods ending after December 31, 1998 will be, adequate, as of the dates thereof, under GAAP. (iii) JSB's Disclosure Letter sets forth by category the amounts of all loans, leases, advances, credit enhancements, other extensions of credit, commitments and interest-bearing assets of JSB and its Subsidiaries that have been classified by any bank examiner (whether regulatory or internal) as "Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import, and JSB and its Subsidiaries shall promptly after the end of any month inform NFB of any such classification arrived at any time after the date hereof. The other real estate owned ("OREO") included in any non-performing assets of JSB or any of its Subsidiaries is carried net of reserves at the lower of cost or fair value, less estimated selling costs, based on current management appraisals or evaluations to the extent material; provided, however, that "current" shall mean within the past 12 months. JSB's Disclosure Letter sets forth a list of the unsold cooperative shares owned by JSB or its Subsidiaries. (t) Deposits. None of the deposits of JSB or any of its Subsidiaries is a "brokered" deposit. (u) Accounting Matters. Except as disclosed in JSB's Disclosure Letter, neither JSB nor any of its Subsidiaries or, to the best of its knowledge, any of its other affiliates has, through the date hereof, taken or agreed to take any action that would prevent NFB from accounting for the business combination to be effected by the Merger as a pooling-of-interests, and JSB has no knowledge of any fact or circumstance that would prevent such accounting treatment. (v) Antitakeover Provisions Inapplicable. JSB and its Subsidiaries have taken all actions required to exempt JSB, the Agreement, the Plan of Bank Merger, the Merger, the Bank Merger and the JSB Option Agreement from any provisions of an antitakeover nature in their organization certificates and bylaws, including Article Eighth of JSB's certificate of incorporation, and the provisions of any federal or state "antitakeover," "fair price," "moratorium," "control share acquisition" or similar laws or regulations. (w) Material Interests of Certain Persons. Except as disclosed in JSB's Proxy Statement for its 1999 Annual Meeting of Stockholders, no officer or director of JSB, or any "associate" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended ("Exchange Act")) of any such officer or director, has any material interest in any material contract or property (real or personal), tangible or intangible, used in or pertaining to the business of JSB or any of its Subsidiaries. No such interest has been created or modified since the date of the last regulatory examination of JSB or its Subsidiaries. (x) Insurance. JSB and its Subsidiaries are presently insured, and since December 31, 1996, have been insured, for reasonable amounts with financially sound and reputable insurance companies, against such risks as companies engaged in a similar business would, in accordance with good business practice, customarily be insured. All of the insurance policies and bonds maintained by JSB and its Subsidiaries are in full force and effect, JSB and its Subsidiaries are not in default thereunder and all material claims thereunder have been filed in due and timely fashion. (y) Investment Securities; Borrowings. (i) Except for investments in Federal Home Loan Bank ("FHLB") stock and pledges to secure FHLB borrowings and reverse repurchase agreements entered into in arms-length transactions pursuant to normal commercial terms and conditions and entered into in the ordinary course of business and restrictions that exist for securities to be classified as "held to maturity," none of the investments reflected in the consolidated balance sheet of JSB included in JSB's Report on Form 10-K for the year ended December 31, 1998, and none of the investment securities held by it or any of its Subsidiaries since December 31, 1998, is subject to any restriction (contractual or statutory) that would materially impair the ability of the entity holding such investment freely to dispose of such investment at any time. (ii) Neither JSB nor any Subsidiary is a party to 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 consolidated statements of condition and is a derivative 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 practices and regulatory guidance, and listed (as of the date hereof) in JSB's Disclosure Letter or disclosed in JSB's Reports filed on or prior to the date hereof. (iii) Set forth in JSB's Disclosure Letter is a true and complete list of JSB's borrowed funds (excluding deposit accounts) as of the date hereof. (z) Indemnification. Except as provided in JSB's Disclosure Letter, JSB's Employment Agreements or the organization certificate or bylaws of JSB and its Subsidiaries, neither JSB nor any Subsidiary is a party to any indemnification agreement with any of its present or future directors, officers, employees, agents or other persons who serve or served in any other capacity with any other enterprise at the request of JSB (a "Covered Person"), and, except as disclosed in JSB's Disclosure Letter, to the best knowledge of JSB, there are no claims for which any Covered Person would be entitled to indemnification under the organization certificate or bylaws of JSB or any of its Subsidiaries, under any applicable law or regulation or under any indemnification agreement. (aa) Books and Records. The books and records of JSB and its Subsidiaries on a consolidated basis have been, and are being, maintained in accordance with applicable legal and accounting requirements and reflect in all material respects the substance of events and transactions that should be included therein. (bb) Corporate Documents. JSB has made available to NFB true and complete copies of its certificate of incorporation and bylaws and of JSB Bank's organization certificate and bylaws. The minute books of JSB and JSB Bank constitute a complete and correct record of all actions taken by their respective boards of directors (and each committee thereof) and their stockholders. The minute books of each of JSB's Subsidiaries constitutes a complete and correct record of all actions taken by the respective boards of directors (and each committee thereof) and the stockholders of each such Subsidiary. (cc) Liquidation Account. Neither the Merger nor the Bank Merger will result in any payment or distribution payable out of the liquidation account of JSB Bank established in connection with JSB Bank's conversion from mutual to stock form. (dd) Tax Treatment of the Merger. As of the date hereof, JSB has no knowledge of any fact or circumstance that would prevent the Merger or the Bank Merger, if effected, from qualifying as a reorganization under Section 368(a) of the Code. (ee) Beneficial Ownership of NFB Common Stock. As of the date hereof, JSB does not beneficially own any shares of NFB Common Stock and does not have any option, warrant or right of any kind to acquire the beneficial ownership of any shares of NFB Common Stock. (ff) Year 2000 Matters. (i) JSB's Disclosure Letter sets forth a true and complete copy of JSB's plan to cause all of the Date-Sensitive Systems owned, leased or used by JSB or any of its Subsidiaries intended and necessary for use after December 31, 1999, or licensed to JSB or any of its Subsidiaries for use by JSB or any of its Subsidiaries, and all of the Date Data of JSB or any of its Subsidiaries to be Year 2000 Compliant (the "JSB Y2K Plan"). JSB believes that the JSB Y2K Plan can be substantially achieved on or before September 30, 1999, with aggregate expenditures under the JSB Y2K Plan not materially in excess of $200,000. (ii) The following definitions apply for purposes of this Section 2.3(ff) and Section 2.4(z): (x) "Date Data" means any data of any type that includes date information or that is otherwise derived from, dependent on or related to date information; (y) "Date-Sensitive System" means, with respect to a particular entity, any software, microcode or hardware system or component, including any electronic or electronically controlled system or component, that processes any Date Data and that is installed in a development or on order by such entity or any Subsidiary of such entity for its internal use; and (z) "Year 2000 Compliance" means, (A) with respect to Date Data, that such data are in proper format for all dates in the twentieth and twenty-first centuries and (B) with respect to Date-Sensitive Systems, that such system accurately processes all Date Data, including for the twentieth and twenty-first centuries, without loss of any functionality or performance, including calculating, comparing, sequencing, storing and displaying such Date Data (including all leap-year considerations), when used as a stand-alone system or in combination with other software or hardware. (gg) Registration Statement. The information regarding JSB to be supplied by JSB for inclusion in (i) the Registration Statement on Form S-4 and/or such other form(s) as may be appropriate to be filed under the Securities Act of 1933, as amended ("Securities Act"), with the SEC by NFB for the purpose of, among other things, registering the NFB Common Stock to be issued to JSB's stockholders in the Merger (as amended or supplemented from time to time, the "Registration Statement"), or (ii) the joint proxy statement to be filed with the SEC by JSB and NFB under the Exchange Act and distributed in connection with JSB's and NFB's respective meeting of stockholders to vote upon this Agreement (together with the prospectus included in the Registration Statement, the "Joint Proxy Statement-Prospectus") will not, at the time such Registration Statement becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 2.4. Representations and Warranties of NFB. Subject to Sections 2.1 and 2.2, NFB represents and warrants to JSB that, except as disclosed in NFB's Disclosure Letter: (a) Organization. (i) NFB is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended ("BHCA"). NFB Bank is a bank duly organized, validly existing and in good standing under the laws of the State of New York and is a wholly owned Subsidiary of NFB. Each Subsidiary of NFB, other than NFB Bank, is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of NFB and its Subsidiaries has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (ii) NFB and each of its Subsidiaries has the requisite corporate power and authority, and is duly qualified and is in good standing, to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. (iii) NFB's Disclosure Letter sets forth all of NFB's Subsidiaries and all entities (whether corporations, partnerships or similar organizations), including the corresponding percentage ownership, in which NFB owns, directly or indirectly, 5% or more of the ownership interests as of the date of this Agreement and indicates for each of NFB's Subsidiaries, as of such date, its jurisdiction of organization and the jurisdiction(s) wherein it is qualified to do business. All such Subsidiaries and ownership interests are in compliance with all applicable laws, rules and regulations relating to direct investments in equity ownership interests. NFB owns, either directly or indirectly, all of the outstanding capital stock of each of its Subsidiaries. No Subsidiary of NFB other than NFB Bank and Superior Savings of New England is an "insured depository institution" as defined in the FDIA and the applicable regulations thereunder. All of the shares of capital stock of each of the Subsidiaries of NFB are duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights and are owned by NFB or a Subsidiary of NFB free and clear of any claims, liens, encumbrances or restrictions (other than those imposed by applicable federal and state securities laws) and there are no agreements or understandings with respect to the voting or disposition of any such shares. (iv) The deposits of NFB Bank are insured by the BIF or the Savings Association Insurance Fund of the FDIC to the extent provided in the FDIA. (b) Capital Structure. (i) The authorized capital stock of NFB consists of 200,000,000 shares of NFB Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per share ("NFB Preferred Stock"). As of the date of this Agreement, (A) 135,767,087 shares of NFB Common Stock were issued and outstanding, (B) no shares of NFB Preferred Stock were issued and outstanding, (C) no shares of NFB Common Stock were reserved for issuance, except that 2,000,000 shares of NFB Common Stock were reserved for issuance pursuant to the NFB Dividend Reinvestment and Stock Purchase Plan and 1,973,140 shares of NFB Common Stock were reserved for issuance pursuant to the NFB 1985 Incentive Stock Option Plan, the NFB 1987 Long-Term Incentive Plan, the NFB 1989 Executive Management and Compensation Plan, the NFB 1994 Key Employee Stock Plan, the NFB 1997 Non-Officer Stock Plan and the NFB 1998 Stock Compensation Plan (the "NFB Stock Plans"), (D) no shares of NFB Preferred Stock were reserved for issuance and (E) 9,359,435 shares of NFB Common Stock were held by NFB in its treasury or by its Subsidiaries. The authorized capital stock of NFB Bank consists of 5,500,000 shares of common stock, par value $1.00 per share, and no shares of preferred stock. As of the date of this Agreement, 5,500,000 shares of such common stock were outstanding, no shares of such preferred stock were outstanding and all outstanding shares of such common stock were, and as of the Effective Time will be, owned by NFB. All outstanding shares of capital stock of NFB and NFB Bank are duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights and, with respect to shares held by NFB in its treasury or by its Subsidiaries, are free and clear of all claims, liens, encumbrances or restrictions (other than those imposed by applicable federal or state securities laws) and there are no agreements or understandings with respect to the voting or disposition of any such shares. (ii) No Voting Debt of NFB is issued or outstanding. (iii) As of the date of this Agreement, except for this Agreement, the NFB Stock Plans and as set forth in NFB's Disclosure Letter, neither NFB nor any of its Subsidiaries has or is bound by any outstanding options, warrants, calls, rights, convertible securities, commitments or agreements of any character obligating NFB or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, any additional shares of capital stock of NFB or any of its Subsidiaries or obligating NFB or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, convertible security, commitment or agreement. As of the date hereof, there are no outstanding contractual obligations of NFB or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of NFB or any of its Subsidiaries. (c) Authority. Each of NFB and NFB Bank has the requisite corporate power and authority to enter into this Agreement and the Plan of Bank Merger, respectively and, subject to approval of this Agreement by the requisite vote of NFB's stockholders and receipt of all required regulatory or governmental approvals, as contemplated by Section 5.1(b) of this Agreement, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, and, subject to the approval of this Agreement by NFB's stockholders, the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate actions on the part of NFB and NFB Bank. This Agreement has been duly executed and delivered by NFB and constitutes a valid and binding obligation of NFB, enforceable in accordance with its terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, whether applied in a court of law or a court of equity. (d) Stockholder Approval; Fairness Opinion. The affirmative vote of the holders of a majority of the outstanding shares of NFB Common Stock entitled to vote on this Agreement is the only vote of the stockholders of NFB required for approval of this Agreement by NFB and the consummation by NFB of the Merger and the related transactions contemplated hereby. NFB has received the written opinion of Donaldson, Lufkin & Jenrette Securities Corporation to the effect that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to NFB's stockholders. (e) No Violations. The execution, delivery and performance of this Agreement by NFB do not, and the consummation of the transactions contemplated hereby will not, constitute (i) assuming receipt of all Requisite Regulatory Approvals and requisite stockholder approvals, a breach or violation of, or a default under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of NFB or any of its Subsidiaries, or to which NFB or any of its Subsidiaries (or any of their respective properties) is subject, (ii) a breach or violation of, or a default under, the certificate of incorporation or bylaws of NFB or the similar organizational documents of any of its Subsidiaries or (iii) a breach or violation of, or a default under (or an event which, with due notice or lapse of time or both, would constitute a default under), or result in the termination of, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the properties or assets of NFB or any of its Subsidiaries, under, any of the terms, conditions or provisions of any note, bond, indenture, deed of trust, loan agreement or other agreement, instrument or obligation to which NFB or any of its Subsidiaries is a party, or to which any of their respective properties or assets may be subject; and the consummation of the transactions (including the Bank Merger) contemplated hereby (exclusive of the effect of any changes effected pursuant to Section 1.7) will not require any approval, consent or waiver under any such law, rule, regulation, judgment, decree, order, governmental permit or license or the approval, consent or waiver of any other party to any such agreement, indenture or instrument, other than (x) the approval of the holders of a majority of the outstanding shares of NFB Common Stock, (y) the Requisite Regulatory Approvals and (z) such approvals, consents or waivers as are required under the federal and state securities or "blue sky" laws in connection with the transactions contemplated by this Agreement. As of the date hereof, the executive officers of NFB know of no reason pertaining to NFB why any of the approvals referred to in this Section 2.4(e) should not be obtained. (f) Reports. (i) As of their respective dates, none of the reports or other statements filed by NFB or NFB Bank on or subsequent to December 31, 1997 with the SEC (collectively, "NFB's Reports"), contained, or will contain, any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements of NFB included in NFB's Reports complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and have been prepared in accordance with GAAP (except as may be indicated in the notes thereto or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC). Each of the consolidated statements of condition, consolidated statements of operations, consolidated statements of cash flows and consolidated statements of changes in stockholders' equity contained or incorporated by reference in NFB's Reports (including in each case any related notes and schedules) fairly presented, or will fairly present, as the case may be, the financial position, results of operations, cash flows and stockholders' equity, as the case may be, of the entity or entities to which it relates for the periods set forth therein (subject, in the case of unaudited interim statements, to normal year-end audit adjustments that are not material in amount or effect), in each case in accordance with GAAP, except as may be noted therein. (ii) NFB and its Subsidiaries have each timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 1996 with (A) the NYSBD, (B) FRB (C) the FDIC, (D) the SEC, (E) the NYSE and (F) any other SRO, and have paid all fees and assessments due and payable in connection therewith. (g) Absence of Certain Changes or Events. Except as disclosed in NFB's Reports filed on or prior to the date of this Agreement, since December 31, 1998, (i) NFB and its Subsidiaries have not incurred any liability, except in the ordinary course of their businesses consistent with past practice and (ii) there has not been any Material Adverse Effect with respect to NFB. (h) Absence of Claims. Except as disclosed in NFB's Disclosure Letter, no litigation, proceeding, controversy, claim or action before any court or Governmental Entity is pending against NFB or any of its Subsidiaries, and, to the best of NFB's knowledge, no such litigation, proceeding, controversy, claim or action has been threatened. (i) Absence of Regulatory Actions. Neither NFB nor any of its Subsidiaries is a party to any cease and desist order, written agreement or memorandum of understanding with, or any commitment letter or similar written undertaking to, or is subject to any action, proceeding, order or directive by, or is a recipient of any extraordinary supervisory letter from any Bank Regulator, or has adopted any board resolutions at the request of any Bank Regulator, nor has it been advised by any Bank Regulator that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such action, proceeding, order, directive, written agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter, board resolutions or similar written undertaking. (j) Taxes. All federal, state, local and foreign tax returns required to be filed by or on behalf of NFB or any of its Subsidiaries have been timely filed or requests for extensions have been timely filed and any such extension shall have been granted and not have expired, and all such filed returns are complete and accurate in all material respects. All taxes shown on such returns, all taxes required to be shown on returns for which extensions have been granted and all other taxes required to be paid by NFB or any of its Subsidiaries have been paid in full or adequate provision has been made for any such taxes on NFB's balance sheet (in accordance with GAAP). For purposes of this Section 2.4(j), the terms "taxes" and "tax return" shall have the meanings assigned to such terms in Section 2.3(j) of this Agreement. Except as disclosed in NFB's Disclosure Letter, as of the date of this Agreement, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of NFB or any of its Subsidiaries, and no claim has been made by any authority in a jurisdiction where NFB or any of its Subsidiaries do not file tax returns that NFB or any such Subsidiary is subject to taxation in that jurisdiction. All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation relating to NFB or any of its Subsidiaries have been paid in full or adequate provision has been made for any such taxes on NFB's balance sheet (in accordance with GAAP). NFB and its Subsidiaries have not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. NFB and each of its Subsidiaries has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and NFB and each of its Subsidiaries has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements. Neither NFB nor any of its Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii) has issued or assumed any obligation under Section 279 of the Code, any high yield discount obligation as described in Section 163(i) of the Code or any registration-required obligation within the meaning of Section 163(f)(2) of the Code that is not in registered form or (iii) is or has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. (k) Agreements. (i) Except for arrangements made in the ordinary course of business, and except as disclosed in NFB's Disclosure Letter, NFB and its Subsidiaries are not bound by any material contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed after the date hereof that has not been filed with or incorporated by reference in NFB's Reports. Except as disclosed in NFB's Reports filed prior to the date of this Agreement or as disclosed in NFB's Disclosure Letter, neither NFB nor any of its Subsidiaries is a party to an oral or written agreement containing covenants that limit the ability of NFB or any of its Subsidiaries to compete in any line of business or with any person, or that involve any restriction on the geographic area in which, or method by which, NFB (including any successor thereof) or any of its Subsidiaries may carry on its business (other than as may be required by law or any regulatory agency). (ii) Neither NFB nor any of its Subsidiaries is in default under or in violation of any provision of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or other agreement to which it is a party or by which it is bound or to which any of its respective properties or assets is subject. (iii) NFB and each of its Subsidiaries owns or possesses valid and binding licenses and other rights to use without payment all patents, copyrights, trade secrets, trade names, servicemarks and trademarks used in its businesses, and neither NFB nor any of its Subsidiaries has received any notice of conflict with respect thereto that asserts the right of others. Each of NFB and its Subsidiaries has performed all the obligations required to be performed by it and are not in default under any contact, agreement, arrangement or commitment relating to any of the foregoing. (l) NFB Common Stock. The shares of NFB Common Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights. (m) Labor Matters. Neither NFB nor any of its Subsidiaries is or has ever been a party to, or is or has ever been bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization with respect to its employees, nor is NFB or any of its Subsidiaries the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages and conditions of employment, nor is there any strike, other labor dispute or organizational effort involving NFB or any of its Subsidiaries pending or, to the best of NFB's knowledge, threatened. NFB and its Subsidiaries are in compliance with applicable laws regarding employment of employees and retention of independent contractors and are in compliance with applicable employment tax laws. (n) Employee Benefit Plans. NFB's Disclosure Letter contains a complete and accurate list of all pension, retirement, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, deferred compensation, consulting, bonus, group insurance, severance and other benefit plans, contracts, agreements and arrangements, including, but not limited to, "employee benefit plans," as defined in Section 3(3) of ERISA, incentive and welfare policies, contracts, plans and arrangements and all trust agreements related thereto with respect to any present or former directors, officers or other employees of NFB or any of its Subsidiaries (hereinafter collectively referred to as the "NFB Employee Plans"). Except as disclosed in NFB's Disclosure Letter: (i) all of the NFB Employee Plans comply in all material respects with all applicable requirements of ERISA, the Code and other applicable laws; there has occurred no "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) which is likely to result in the imposition of any penalties or taxes under Section 502(i) of ERISA or Section 4975 of the Code upon NFB or any of its Subsidiaries; (ii) no liability to the PBGC has been or is expected by NFB or any of its Subsidiaries to be incurred with respect to any NFB Employee Plan which is subject to Title IV of ERISA ("NFB Pension Plan"), or with respect to any "single-employer plan" (as defined in Section 4001(a) of ERISA) currently or formerly maintained by NFB or any entity which is considered one employer with NFB under Section 4001(b)(1) of ERISA or Section 414 of the Code (a "NFB ERISA Affiliate"); (iii) no NFB Pension Plan had an "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of the last day of the end of the most recent plan year ending prior to the date hereof; the fair market value of the assets of each NFB Pension Plan exceeds the present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such NFB Pension Plan as of the end of the most recent plan year with respect to the respective NFB Pension Plan ending prior to the date hereof, calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such NFB Pension Plan as of the date hereof; and no notice of a "reportable event" (as defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived has been required to be filed for any NFB Pension Plan within the 12-month period ending on the date hereof; (iv) neither NFB nor any of its Subsidiaries has provided, or is required to provide, security to any NFB Pension Plan or to any single-employer plan of a NFB ERISA Affiliate pursuant to Section 401(a)(29) of the Code; (v) neither NFB, its Subsidiaries, nor any NFB ERISA Affiliate has contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980; (vi) each NFB Employee Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be qualified under Section 401(a) of the Code ("NFB Qualified Plan") has received a favorable determination letter from the IRS, and NFB and its Subsidiaries are not aware of any circumstances likely to result in revocation of any such favorable determination letter; (vii) there is no pending or, to NFB's knowledge, threatened litigation, administrative action or proceeding relating to any NFB Employee Plan; (viii) there has been no announcement or commitment by NFB or any of its Subsidiaries to create an additional NFB Employee Plan, or to amend any NFB Employee Plan, except for amendments required by applicable law which do not materially increase the cost of such NFB Employee Plan; and, except as specifically identified in NFB's Disclosure Letter, NFB and its Subsidiaries do not have any obligations for post-retirement or post-employment benefits under any NFB Employee Plan that cannot be amended or terminated upon 60 days' notice or less without incurring any liability thereunder, except for coverage required by Part 6 of Title I of ERISA or Section 4980B of the Code, or similar state laws, the cost of which is borne by the insured individuals; (ix) neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any payment or series of payments by NFB or any of its Subsidiaries to any person which is an "excess parachute payment" (as defined in Section 280G of the Code), increase or secure (by way of a trust or other vehicle) any benefits payable under any NFB Employee Plan or accelerate the time of payment or vesting of any such benefit; and (x) with respect to each NFB Employee Plan, NFB has made available to JSB a true and correct copy of (A) the annual report on the applicable form of the Form 5500 series filed with the IRS for the most recent three plan years, if required to be filed, (B) such NFB Employee Plan, including amendments thereto, (C) each trust agreement, insurance contract or other funding arrangement relating to such NFB Employee Plan, including amendments thereto, (D) the most recent summary plan description and summary of material modifications thereto for such NFB Employee Plan, if the NFB Employee Plan is subject to Title I of ERISA, (E) the most recent actuarial report or valuation if such NFB Employee Plan is an NFB Pension Plan and any subsequent changes to the actuarial assumptions contained therein and (F) the most recent determination letter issued by the IRS if such NFB Employee Plan is a Qualified Plan. (o) Title to Assets. NFB and each of its Subsidiaries has good and marketable title to its properties and assets (including any intellectual property asset such as any trademark, servicemark, trade name or copyright) and property acquired in a judicial foreclosure proceeding or by way of a deed in lieu of foreclosure or similar transfer, other than property as to which it is lessee, in which case the related lease is valid and in full force and effect. Each lease pursuant to which NFB or any of its Subsidiaries is lessor is valid and in full force and effect and no lessee under any such lease is in material default or violation of any provisions of any such lease. All material tangible properties of NFB and each of its Subsidiaries are in a good state of maintenance and repair, conform with all applicable ordinances, regulations and zoning laws and are considered by NFB to be adequate for the current business of NFB and its Subsidiaries. (p) Compliance with Laws. NFB and each of its Subsidiaries has all permits, licenses, certificates of authority, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities that are required in order to permit it to carry on its business as it is presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect, and, to the best knowledge of NFB, no suspension or cancellation of any of them is threatened. Since the date of its incorporation, the corporate affairs of NFB have not been conducted in violation of any law, ordinance, regulation, order, writ, rule, decree or approval of any Governmental Entity. The businesses of NFB and its Subsidiaries are not being conducted in violation of any law, ordinance, regulation, order, writ, rule, decree or condition to approval of any Governmental Entity. (q) Fees. Other than financial advisory services performed for NFB by Donaldson, Lufkin & Jenrette Securities Corporation pursuant to an agreement dated July 29, 1999, a true and complete copy of which has been previously delivered to JSB, neither NFB nor any of its Subsidiaries, nor any of their respective officers, directors, employees or agents, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted directly or indirectly for NFB or any of its Subsidiaries in connection with this Agreement or the transactions contemplated hereby. (r) Environmental Matters. With respect to NFB and each of its Subsidiaries, except as disclosed in NFB's Disclosure Letter: (i) each of NFB and its Subsidiaries and, to NFB's knowledge, the Participation Facilities and the Loan Properties are, and have been, in substantial compliance with, and are not liable under, all Environmental Laws; (ii) there is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or, to the best of NFB's knowledge, threatened, before any court, Governmental Entity or board or other forum against it or any of its Subsidiaries or any Participation Facility (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Hazardous Material, whether or not occurring at or on a site owned, leased or operated by it or any of its Subsidiaries or any Participation Facility; (iii) to the best of NFB's knowledge, there is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or threatened before any court, Governmental Entity or board or other forum relating to or against any Loan Property (or NFB or any of its Subsidiaries in respect of such Loan Property) (x) relating to alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Hazardous Material, whether or not occurring at or on a site owned, leased or operated by a Loan Property; and (iv) to the best of NFB's knowledge, during the period of (l) NFB's or any of its Subsidiaries' ownership or operation of any of their respective current properties or (m) NFB's or any of its Subsidiaries' participation in the management of any Participation Facility, there has been no contamination by or release of Hazardous Materials in, on, under or affecting such properties. (s) Loan Portfolio; Allowance; Asset Qua(i)y. With respect to each Loan owned by NFB or its Subsidiaries in whole or in part, to the best knowledge of NFB: (A) the note and the related security documents are each legal, valid and binding obligations of the maker or obligor thereof, enforceable against such maker or obligor in accordance with their terms; (B) neither NFB nor any of its Subsidiaries nor any prior holder of a Loan has modified the note or any of the related security documents in any material respect or satisfied, canceled or subordinated the note or any of the related security documents except as otherwise disclosed by documents in the applicable Loan file; (C) NFB or a Subsidiary is the sole holder of legal and beneficial title to each Loan (or NFB Bank's applicable participation interest, as applicable); except as otherwise referenced on the books and records of NFB; (D) the note and the related security documents, copies of which are included in the Loan files, are true and correct copies of the documents they purport to be and have not been suspended, amended, modified, canceled or otherwise changed, except as otherwise disclosed by documents in the applicable Loan file; (E) there is no pending or threatened condemnation proceeding or similar proceeding affecting the property that serves as security for a Loan, except as otherwise referenced on the books and records of NFB; (F) there is no litigation or proceeding pending or threatened, relating to the property that serves as security for a Loan that would have a material adverse effect upon the related Loan; and (G) with respect to a Loan held in the form of a participation, the participation documentation is legal, valid, binding and enforceable. (ii) The allowance for possible losses reflected in NFB's audited statement of condition at December 31, 1998 was, and the allowance for possible losses shown on the balance sheets in NFB's Reports for periods ending after December 31, 1998 will be, adequate, as of the dates thereof, under GAAP. (iii) NFB's Disclosure Letter sets forth by category the amounts of all loans, leases, advances, credit enhancements, other extensions of credit, commitments and interest-bearing assets of NFB and its Subsidiaries that have been classified by any bank examiner (whether regulatory or internal) as "Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import, and NFB and its Subsidiaries shall promptly after the end of any month inform JSB of any such classification arrived at any time after the date hereof. The OREO included in any non-performing assets of NFB or any of its Subsidiaries is carried net of reserves at the lower of cost or fair value, less estimated selling costs, based on current independent appraisals or evaluations or current management appraisals or evaluations; provided, however, that "current" shall mean within the past 12 months. (t) Accounting Matters. Except as disclosed in NFB's Disclosure Letter, neither NFB nor any of its Subsidiaries or, to the best of its knowledge, any of its other affiliates has, through the date hereof, taken or agreed to take any action that would prevent NFB from accounting for the business combination to be effected by the Merger as a pooling-of-interests, and NFB has no knowledge of any fact or circumstance that would prevent such accounting treatment. (u) Insurance. NFB and its Subsidiaries are presently insured, and since December 31, 1996, have been insured, for reasonable amounts with financially sound and reputable insurance companies, against such risks as companies engaged in a similar business would, in accordance with good business practice, customarily be insured. All of the insurance policies and bonds maintained by NFB and its Subsidiaries are in full force and effect, NFB and its Subsidiaries are not in default thereunder and all material claims thereunder have been filed in due and timely fashion. (v) Investment Securities; Borrowings. (i) Except for investments in FHLB Stock and pledges to secure FHLB borrowings and reverse repurchase agreements entered into in arms-length transactions pursuant to normal commercial terms and conditions and entered into in the ordinary course of business and restrictions that exist for securities to be classified as "held to maturity," none of the investments reflected in the consolidated balance sheet of NFB included in NFB's Report on Form 10-K for the year ended December 31, 1998, and none of the investment securities held by it or any of its Subsidiaries since December 31, 1998 is subject to any restriction (contractual or statutory) that would materially impair the ability of the entity holding such investment freely to dispose of such investment at any time. (ii) Neither NFB nor any Subsidiary is a party to or has agreed to enter into any 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 practices and regulatory guidance, and listed (as of the date hereof) in NFB's Disclosure Letter or disclosed in NFB's Reports filed on or prior to the date hereof. (iii) Set forth in NFB's Disclosure Letter is a true and complete list of NFB's borrowed funds (excluding deposit accounts) as of the date hereof. (w) Corporate Documents. NFB has made available to JSB true and complete copies of its certificate of incorporation and bylaws and of NFB Bank's organization certificate and bylaws. The minute books of NFB and NFB Bank constitute a complete and correct record of all actions taken by their respective boards of directors (and each committee thereof) and their stockholders. The minute books of each of NFB's Subsidiaries constitutes a complete and correct record of all actions taken by the respective boards of directors (and each committee thereof) and the stockholders of each such Subsidiary. (x) Tax Treatment of the Merger. As of the date hereof, NFB has no knowledge of any fact or circumstance that would prevent the Merger or the Bank Merger, if effected, from qualifying as a reorganization under Section 368(a) of the Code. (y) Beneficial Ownership of JSB Common Stock. As of the date hereof, NFB does not beneficially own any shares of JSB Common Stock and, other than as contemplated by the JSB Option Agreement, does not have any option, warrant or right of any kind to acquire the beneficial ownership of any shares of JSB Common Stock. (z) Year 2000 Matters. NFB's Disclosure Letter sets forth a true and complete copy of NFB's plan to cause all of the Date-Sensitive Systems owned, leased or used by NFB or any of its Subsidiaries intended and necessary for use after December 31, 1999, or licensed to NFB or any of its Subsidiaries for use by NFB or any of its Subsidiaries, and all of the Date Data of NFB or any of its Subsidiaries to be Year 2000 Compliant (the "NFB Y2K Plan"). NFB believes that the NFB Y2K Plan can be substantially achieved on or before September 30, 1999, with aggregate expenditures under the NFB Y2K Plan not materially in excess of $2 million. (aa) Registration Statement. The information to be supplied by NFB for inclusion in (i) the Registration Statement or (ii) the Joint Proxy Statement-Prospectus will not, at the time such Registration Statement becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. ARTICLE III CONDUCT PENDING THE MERGER Section 3.1. Conduct of JSB's Business Prior to the Effective Time. Except as expressly provided in this Agreement, during the period from the date of this Agreement to the Effective Time, JSB shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to (i) conduct its business in the regular, ordinary and usual course consistent with past practice; (ii) maintain and preserve intact its business organization, properties, leases, employees and advantageous business relationships and retain the services of its officers and key employees, (iii) take no action which would materially adversely affect or delay the ability of JSB or NFB to perform their respective covenants and agreements on a timely basis under this Agreement, (iv) take no action which would adversely affect or delay the ability of JSB, JSB Bank, NFB or NFB Bank to obtain any necessary approvals, consents or waivers of any governmental authority required for the transactions contemplated hereby or which would reasonably be expected to result in any such approvals, consents or waivers containing any material condition or restriction, and (v) take no action that results in or is reasonably likely to have a Material Adverse Effect on JSB or JSB Bank. Section 3.2. Forbearance by JSB. Without limiting the covenants set forth in Section 3.1 hereof, except as otherwise provided in this Agreement and except to the extent required by law or regulation or any Bank Regulators, during the period from the date of this Agreement to the Effective Time, JSB shall not, and shall not permit any of its Subsidiaries to, without the prior consent of NFB, which consent shall not be unreasonably withheld: (a) change any provisions of the certificate of incorporation or bylaws of JSB or the similar governing documents of its Subsidiaries; (b) issue any shares of capital stock or change the terms of any outstanding stock options or warrants or issue, grant or sell any option, warrant, call, commitment, stock appreciation right, right to purchase or agreement of any character relating to the authorized or issued capital stock of JSB, except pursuant to (i) the exercise of stock options or warrants outstanding as of the date of this Agreement, (ii) the automatic grant of 142,000 stock options under the JSB 1996 Stock Option Plan as a result of the execution of this Agreement or (iii) the JSB Option Agreement; adjust, split, combine or reclassify any capital stock; make, declare or pay any dividend (except for JSB's regular quarterly dividend, which shall not be increased by more than $.05 per share from the current level) or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock. As promptly as practicable following the date of this Agreement, the Board of Directors of JSB shall cause its regular quarterly dividend record dates and payment dates to be the same as NFB's regular quarterly dividend record dates and payments dates for NFB Common Stock, and JSB shall not thereafter change its regular dividend payment dates and record dates. Nothing contained in this Section 3.2(b) or in any other Section of this Agreement shall be construed to permit holders of shares of JSB Common Stock to receive two dividends from either JSB or from JSB and NFB in any one quarter or to deny or prohibit such holders from receiving one dividend from either JSB or NFB in any quarter. Subject to applicable regulatory restrictions, if any, JSB Bank may pay a cash dividend that is, in the aggregate, sufficient to fund any dividend by JSB permitted hereunder and to allow JSB to make the payments required under Section 4.13(d) of this Agreement; (c) other than in the ordinary course of business consistent with past practice and pursuant to policies currently in effect, sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties, leases or assets to any individual, corporation or other entity other than a direct or indirect wholly owned Subsidiary of JSB or cancel, release or assign any indebtedness of any such individual, corporation or other entity, except pursuant to contracts or agreements in force at the date of this Agreement and which have been disclosed to NFB and except for the sale of unsold cooperative shares owned by JSB or its Subsidiaries, as disclosed in JSB's Disclosure Letter; (d) except to the extent required by law or as disclosed in JSB's Disclosure Letter or specifically provided for elsewhere herein, (i) increase the compensation or fringe benefits of any of its employees or directors, other than general increases in compensation in the ordinary course of business consistent with past practice and, upon consultation with NFB, the payment of reasonable "stay in place" pay where necessary or appropriate to retain key employees in an amount not to exceed $500,000 in the aggregate; (ii) pay any pension or retirement allowance not required by any existing plan or agreement to any such employees or directors, or become a party to, amend or commit itself to fund or otherwise establish any trust or account related to any JSB Employee Plan (as defined in Section 2.3(m)) with or for the benefit of any employee or director; or (iii) voluntarily accelerate the vesting of any stock options or other compensation or benefit; (e) except as contemplated by Section 4.2, change its method of accounting as in effect at December 31, 1998, except as required by changes in GAAP as concurred in by JSB's independent auditors; (f) settle any claim, action or proceeding involving any liability of JSB or any of its Subsidiaries for money damages in excess of $500,000 or impose material restrictions upon the operations of JSB or any of its Subsidiaries; (g) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in each case which are material, individually or in the aggregate, to JSB, except in satisfaction of debts previously contracted; (h) except pursuant to commitments existing at the date hereof which have previously been disclosed to NFB, make any real estate loans secured by undeveloped land or real estate located outside the States of New York, New Jersey or Connecticut (other than real estate secured by one-to-four family homes) or make any construction loan (other than construction loans secured by one-to-four family homes) outside the States of New York, New Jersey or Connecticut; (i) establish or commit to the establishment of any new branch or other office facilities other than those for which all regulatory approvals have been obtained; (j) take, fail to take, or cause to be taken or not taken any action that would prevent or impede the Merger from qualifying (A) for pooling-of-interests accounting treatment or (B) as a reorganization within the meaning of Section 368(a) of the Code; or (k) make any capital expenditures other than those which (i) are made in the ordinary course of business or are necessary to maintain existing assets in good repair and (ii) in any event are in an amount of no more than $500,000 in the aggregate; (l) enter into any new line of business; (m) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or any of the conditions to the Merger set forth in Article V not being satisfied; (n) other than in the ordinary course of business consistent with prudent banking practices, incur any indebtedness for borrowed money or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity; (o) make any equity investment or commitment to make such an investment in real estate or in any real estate development project, other than in connection with foreclosures, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business consistent with prudent banking practices; (p) other than in prior consultation with NFB, restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; or (q) agree or commit to take any action that is prohibited by this Section 3.2. In the event that NFB does not respond in writing to JSB within five business days of receipt by NFB of a written request for JSB to engage in any of the actions for which NFB's prior written consent is required pursuant to this Section 3.2, NFB shall be deemed to have consented to such action. Any request by JSB or response thereto by NFB shall be made in accordance with the notice provisions of Section 8.7, shall note that it is a request pursuant to this Section 3.2 and shall state that a failure to respond within five business days shall constitute consent. Section 3.3. Conduct of NFB's Business Prior to the Effective Time. Except as expressly provided in this Agreement, during the period from the date of this Agreement to the Effective Time, NFB shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to (i) conduct its business in the regular, ordinary and usual course consistent with past practice; (ii) maintain and preserve intact its business organization, properties, leases, employees and advantageous business relationships and retain the services of its officers and key employees, (iii) take no action which would materially adversely affect or delay the ability of JSB or NFB to perform their respective covenants and agreements on a timely basis under this Agreement, (iv) take no action which would adversely affect or delay the ability of JSB, NFB, JSB Bank or NFB Bank to obtain any necessary approvals, consents or waivers of any Governmental Entity required for the transactions contemplated hereby and (v) take no action that results in or is reasonably likely to have a Material Adverse Effect on NFB. Section 3.4. Forbearance by NFB. Without limiting the covenants set forth in Section 3.3 hereof, except as otherwise provided in this Agreement and except to the extent required by law or regulation or any Bank Regulators, during the period from the date of this Agreement to the Effective Time, NFB shall not, and shall not permit any of its Subsidiaries to, without the prior consent of JSB, which consent shall not be unreasonably withheld: (a) change any provisions of the certificate of incorporation of NFB or the organization certificate of NFB Bank, other than to increase the authorized capital stock of NFB or to change the par value of NFB Common Stock; (b) issue any shares of capital stock or change the terms of any outstanding stock options or warrants or issue, grant or sell any option, warrant, call, commitment, stock appreciation right, right to purchase or agreement of any character relating to the authorized or issued capital stock of NFB except (i) in transactions permitted under Section 3.4(e), (ii) pursuant to the exercise of stock options or warrants outstanding as of the date of this Agreement or granted in accordance with this Section 3.4(b), (iii) for the grant of options under the NFB Stock Plans consistent with NFB's past practice or (iv) for the issuance of such number of shares of NFB Common Stock as is necessary to permit the Merger to be accounted for as a pooling-of-interests; adjust, split, combine or reclassify any capital stock; or, solely in the case of NFB, make, declare or pay any dividend (except for NFB's regular quarterly cash dividend) or make any other distribution on any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock; provided, however, that nothing contained herein shall prohibit NFB from increasing the quarterly cash dividend on NFB Common Stock; (c) make any acquisition or take any other action that individually or in the aggregate could materially adversely affect the ability of NFB to consummate the transactions contemplated hereby, or enter into any agreement providing for, or otherwise participate in, any merger, consolidation or other transaction in which NFB or any surviving corporation may be required not to consummate the Merger or any of the other transactions contemplated hereby in accordance with the terms of this Agreement; (d) take, fail to take, or cause to be taken or not taken any action that would prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; provided, however, that nothing contained herein shall limit the ability of NFB to exercise its rights under the JSB Option Agreement; (e) enter into an agreement with respect to an Acquisition Transaction (as defined below) with a third party; provided, that the foregoing shall not prevent NFB or any of its Subsidiaries from entering into any agreement with respect to an Acquisition Transaction if such action is, in the reasonable judgment of NFB, desirable in the conduct of the business of NFB and its Subsidiaries and would not, in the reasonable judgment of NFB, likely delay the Effective Time to a date subsequent to the date set forth in Section 6.1(d) of this Agreement or adversely affect the Merger Consideration to be received by JSB's stockholders pursuant to this Agreement. For purposes of this Agreement, "Acquisition Transaction" shall mean (x) a merger or consolidation, or any similar transaction, involving NFB, (y) a purchase, lease or other acquisition of all or substantially all of the assets of NFB or (z) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of NFB; provided, that the term "Acquisition Transaction" does not include (i) any internal merger or consolidation involving only NFB and its Subsidiaries or (ii) any acquisition or acquisitions by NFB subsequent to August 15, 1999 involving in the aggregate, for all such acquisitions, the issuance of up to the difference between (1) 10% of the shares of NFB Common Stock outstanding as of the date hereof and (2) the number of shares, if any, issued pursuant to Section 3.4(b)(iv), or cash consideration equal to such number of shares multiplied by $20.44 per share; (f) change its method of accounting as in effect at December 31, 1998, except as required by changes in GAAP as concurred in by JSB's independent auditors; (g) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or any of the conditions to the Merger set forth in Article V not being satisfied; or (h) agree or commit to take any action that is prohibited by this Section 3.4. ARTICLE IV COVENANTS Section 4.1. Acquisition Proposals. JSB agrees that neither it nor any of its Subsidiaries, nor any of the respective officers and directors of JSB or any of its Subsidiaries, shall, and JSB shall not authorize or permit any of its employees, agents or representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any of its Subsidiaries) to, (a) initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to JSB's stockholders) with respect to a merger, consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or any equity securities of, JSB or any of its material Subsidiaries (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal") or (b) engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent JSB or its Board of Directors from (i) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal or (ii) (A) providing information in response to a request therefor by a person who has made an unsolicited bona fide written Acquisition Proposal (an "Unsolicited Acquisition Proposal") if the Board of Directors receives from the person so requesting such information an executed confidentiality agreement on terms substantially equivalent to those contained in the confidentiality agreement between NFB and JSB, dated as of July 13, 1999; or (B) engaging in any negotiations or discussions with any person who has made an Unsolicited Acquisition Proposal, if and only to the extent that, in each such case referred to in clause (A) or (B) above, (x) the Board of Directors of JSB, after consultation with and based upon the written opinion of outside legal counsel, in good faith deems such action to be legally necessary for the proper discharge of its fiduciary duties under applicable law and (y) the Board of Directors of JSB, after consultation with its financial advisor, determines in good faith that such Unsolicited Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the person making the proposal and would, if consummated, result in a more favorable transaction than the transaction contemplated by this Agreement, taking into account the prospects and interests of JSB and its stockholders. JSB will notify NFB immediately orally (within one day) and in writing (within three days) if any such Unsolicited Acquisition Proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with JSB after the date hereof, the identity of the person making such inquiry, proposal or offer and the substance thereof and will keep NFB informed of any developments with respect thereto immediately upon the occurrence thereof. Subject to the foregoing, JSB will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. JSB will take the necessary steps to inform the appropriate individuals or entities referred to in the first sentence hereof of the obligations undertaken in this Section 4.1. JSB will promptly request each person (other than NFB) that has executed a confidentiality agreement prior to the date hereof in connection with its consideration of a business combination with JSB or any of its Subsidiaries to return or destroy all confidential information previously furnished to such person by or on behalf of JSB or any of its Subsidiaries. JSB shall take all steps necessary to enforce all such confidentiality agreements. Section 4.2. Certain Policies of JSB. (a) At the request of NFB, JSB shall cause JSB Bank to modify and change its loan, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) and investment and asset/liability management policies and practices after the date on which all Requisite Regulatory Approvals and stockholder approvals are received, and after receipt of written confirmation from NFB that it is not aware of any fact or circumstance that would prevent completion of the Merger, and prior to the Effective Time so as to be consistent on a mutually satisfactory basis with those of NFB Bank; provided, however, that JSB shall not be required to take such action more than 30 days prior to the Effective Date; and provided, further, that such policies and procedures are not prohibited by GAAP or any applicable laws and regulations. (b) JSB's representations, warranties and covenants contained in this Agreement shall not be deemed to be untrue or breached in any respect for any purpose as a consequence of any modifications or changes undertaken solely on account of this Section 4.2. NFB agrees to hold harmless, indemnify and defend JSB and its Subsidiaries, and their respective directors, officers and employees, for any loss, claim, liability or other damage caused by or resulting from compliance with this Section 4.2. Section 4.3. Access and Information. (a) Upon reasonable notice, JSB and NFB shall (and shall cause their respective Subsidiaries to) afford to the other and their respective representatives (including, without limitation, directors, officers and employees of such party and its affiliates and counsel, accountants and other professionals retained by such party) such reasonable access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, tax returns and work papers of independent auditors), properties, personnel and to such other information as either party may reasonably request; provided, however, that no investigation pursuant to this Section 4.3 shall affect or be deemed to modify any representation or warranty made herein. In furtherance, and not in limitation of the foregoing, JSB shall make available to NFB all information necessary or appropriate for the preparation and filing of all real property and real estate transfer tax returns and reports required by reason of the Merger or the Bank Merger. NFB and JSB will not, and will cause their respective representatives not to, use any information obtained pursuant to this Section 4.3 for any purpose unrelated to the consummation of the transactions contemplated by this Agreement. Subject to the requirements of applicable law, each of NFB and JSB will keep confidential, and will cause their respective representatives to keep confidential, all information and documents obtained pursuant to this Section 4.3 unless such information (i) was already known to such party or an affiliate of such party, other than pursuant to a confidentiality agreement or other confidential relationship, (ii) becomes available to such party or an affiliate of such party from other sources not known by such party to be bound by a confidentiality agreement or other obligation of secrecy, (iii) is disclosed with the prior written approval of the other party or (iv) is or becomes readily ascertainable from published information or trade sources. In the event that this Agreement is terminated or the transactions contemplated by this Agreement shall otherwise fail to be consummated, each party shall promptly cause all copies of documents or extracts thereof containing information and data as to another party hereto (or an affiliate of any party hereto) to be returned to the party that furnished the same. (b) During the period of time beginning on the day application materials to obtain the Requisite Regulatory Approvals for the Merger are initially filed and continuing to the Effective Time, including weekends and holidays, JSB shall cause JSB Bank to provide NFB, NFB Bank and their authorized agents and representatives full access to JSB Bank's offices after normal business hours for the purpose of installing necessary wiring and equipment to be utilized by NFB Bank after the Effective Time; provided, that: (i) reasonable advance notice of each entry shall be given to JSB Bank and JSB Bank approves of each entry, which approval shall not be unreasonably withheld; (ii) JSB Bank shall have the right to have its employees or contractors present to inspect the work being done; (iii) to the extent practicable, such work shall be done in a manner that will not interfere with JSB Bank's business conducted at any affected branch offices; (iv) all such work shall be done in compliance with all applicable laws and government regulations, and NFB Bank shall be responsible for the procurement, at NFB Bank's expense, of all required governmental or administrative permits and approvals; (v) NFB Bank shall maintain appropriate insurance satisfactory to JSB Bank in connection with any work done by NFB Bank's agents and representatives pursuant to this Section 4.3; (vi) NFB Bank shall reimburse JSB Bank for any material out-of-pocket costs or expenses incurred by JSB Bank in connection with this undertaking; and (vii) in the event this Agreement is terminated in accordance with Article VI hereof, NFB Bank, within a reasonable time period and at its sole cost and expense, will restore such offices to their condition prior to the commencement of any such installation. Section 4.4. Certain Filings, Consents and Arrangements. NFB and JSB shall (a) as soon as practicable (and in any event within 45 days after the date hereof) make, or cause to be made, any filings and applications and provide any notices required to be filed or provided in order to obtain all approvals, consents and waivers of Governmental Entities and third parties necessary or appropriate for the consummation of the transactions contemplated hereby or by the JSB Option Agreement; (b) cooperate with one another in promptly (i) determining what filings and notices are required to be made or approvals, consents or waivers are required to be obtained under any relevant federal or state law or regulation or under any relevant agreement or other document and (ii) making any such filings and notices, furnishing information required in connection therewith and seeking timely to obtain any such approvals, consents or waivers; and (c) deliver to the other copies of the publicly available portions of all such filings, notices and applications promptly after they are filed. Section 4.5. Antitakeover Provisions. JSB and its Subsidiaries shall take all steps required by any relevant federal or state law or regulation or under any relevant agreement or other document to exempt or continue to exempt NFB, the Agreement, the Plan of Bank Merger, the Merger, the Bank Merger and the JSB Option Agreement from any provisions of an antitakeover nature in JSB's or its Subsidiaries' organization certificates and bylaws and the provisions of any federal or state antitakeover laws. Section 4.6. Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take promptly, or cause to be taken promptly, all actions and to do promptly, or cause to be done promptly, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement (including, if the Plan of Bank Merger is executed, the Bank Merger) as expeditiously as possible, including using efforts to obtain all necessary actions or non-actions, extensions, waivers, consents and approvals from all applicable Governmental Entities, effecting all necessary registrations, applications and filings (including, without limitation, filings under any applicable state securities laws) and obtaining any required contractual consents and regulatory approvals. Section 4.7. Publicity. The initial press release announcing this Agreement shall be a joint press release and thereafter JSB and NFB shall consult with each other in issuing any press releases or otherwise making public statements with respect to the Merger and any other transaction contemplated hereby and in making any filings with any Governmental Entity or with any national securities exchange with respect thereto. Section 4.8. Stockholders Meetings. JSB and NFB each shall take all action necessary, in accordance with applicable law and its respective corporate documents, to convene a meeting of its respective stockholders (each, a "Stockholder Meeting") as promptly as practicable for the purpose of considering and voting on approval and adoption of the transactions provided for in this Agreement. Except to the extent legally required for the discharge by the Board of Directors of its fiduciary duties as advised by such Board's counsel in writing, the Board of Directors of each of JSB and NFB shall (a) recommend at its Stockholder Meeting that the stockholders vote in favor of and approve the transactions provided for in this Agreement and (b) use its best efforts to solicit such approvals. JSB and NFB, in consultation with the other, shall each employ professional proxy solicitors to assist in contacting stockholders in connection with soliciting favorable votes on the Merger. JSB and NFB shall coordinate and cooperate with respect to the timing of their respective Stockholder Meetings. Section 4.9. Proxy Statements; Comfort Letters. (i) As soon as practicable after the date hereof, NFB and JSB shall cooperate with respect to the preparation of a Joint Proxy Statement-Prospectus for the purpose of taking stockholder action on the Merger and this Agreement and file the Joint Proxy Statement-Prospectus with the SEC, respond to comments of the staff of the SEC and, promptly after the Registration Statement is declared effective by the SEC, mail the Joint Proxy Statement-Prospectus to the respective holders of record (as of the applicable record date) of shares of voting stock of each of JSB and NFB. NFB and JSB each represents and covenants to the other that the Joint Proxy Statement-Prospectus, and any amendment or supplement thereto, with respect to the information pertaining to it or its Subsidiaries at the date of mailing to its stockholders and the date of its Stockholder Meeting will be in compliance with the Exchange Act and all relevant rules and regulations of the SEC and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (ii) NFB shall cause KPMG LLP, its independent public accounting firm, to deliver to JSB, and JSB shall cause KPMG LLP, its independent public accounting firm, to deliver to NFB and to its officers and directors who sign the Registration Statement for this transaction, a "comfort letter" or "agreed upon procedures" letter, in the form customarily issued by such accountants at such time in transactions of this type, dated (a) the date of the mailing of the Joint Proxy Statement-Prospectus for the Stockholders Meeting of JSB and the date of mailing of the Joint Proxy Statement-Prospectus for the Stockholders meeting of NFB, respectively, and (b) a date not earlier than five business days preceding the date of the Closing (as defined in Section 7.1). Section 4.10. Registration of NFB Common Stock. (a) NFB shall, as promptly as practicable following the preparation thereof, file the Registration Statement (including any pre-effective or post-effective amendments or supplements thereto) with the SEC under the Securities Act in connection with the transactions contemplated by this Agreement, and NFB and JSB shall use all reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing. NFB will advise JSB promptly after NFB receives notice of the time when the Registration 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 the shares of capital stock issuable pursuant to the Registration Statement, or the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information. NFB will provide JSB with as many copies of such Registration Statement and all amendments thereto promptly upon the filing thereof as JSB may reasonably request. (b) NFB shall use its reasonable best efforts to obtain, prior to the effective date of the Registration Statement, all necessary state securities laws or "blue sky" permits and approvals required to carry out the transactions contemplated by this Agreement. (c) NFB shall use its reasonable best efforts to list, prior to the Effective Time, on the NYSE, or on such other exchange as NFB Common Stock shall then be trading, subject only to official notice of issuance, the shares of NFB Common Stock to be issued by NFB in exchange for the shares of JSB Common Stock. Section 4.11. Affiliate Letters. Promptly, but in any event within two weeks after the execution and delivery of this Agreement, JSB shall deliver to NFB a letter identifying all persons who, to the knowledge of JSB, may be deemed to be "affiliates" of JSB under Rule 145 of the Securities Act and the pooling-of-interests accounting rules, including, without limitation, all directors and executive officers of JSB. Within two weeks after delivery of such letter, JSB shall deliver executed letter agreements, each substantially in the form attached hereto as Exhibit B, executed by each such person so identified as an affiliate of JSB agreeing (i) to comply with Rule 145, (ii) to refrain from transferring shares as required by the pooling-of-interests accounting rules and (iii) to be present in person or by proxy and vote in favor of the Merger at the JSB Stockholders Meeting. Within four weeks after the date hereof, NFB shall cause its directors and executive officers to enter into letter agreements, in the form attached hereto as Exhibit C, with NFB concerning the pooling-of-interests accounting rules. NFB hereby agrees to publish, or file a Form 8-K, Form 10-K or Form 10-Q containing, financial results covering at least 30 days of post-Merger combined operations of NFB and JSB as soon as practicable, but in no event later than 30 days following the end of the first calendar month ending at least 30 days after the Effective Time, in form and substance sufficient to remove the restrictions in connection with the pooling-of-interests accounting rules contained therein. Section 4.12. Notification of Certain Matters. Each party shall give prompt notice to the others of: (a) any event or notice of, or other communication relating to, a default or event that, with notice or lapse of time or both, would become a default, received by it or any of its Subsidiaries subsequent to the date of this Agreement and prior to the Effective Time, under any contract material to the financial condition, properties, businesses or results of operations of each party and its Subsidiaries taken as a whole to which each party or any Subsidiary is a party or is subject; and (b) any event, condition, change or occurrence which individually or in the aggregate has, or which, so far as reasonably can be foreseen at the time of its occurrence, is reasonably likely to result in a Material Adverse Effect. Each of JSB and NFB shall give prompt notice to the other party of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with any of the transactions contemplated by this Agreement. Section 4.13. Directors and Officers. (a) NFB agrees to cause Park T. Adikes (the "New NFB Director") to be elected or appointed as a director of NFB and NFB Bank at, or as promptly as practicable after, the Effective Time; provided, however, that if Mr. Adikes does not become a director of NFB or NFB Bank because of death, disability or otherwise, or if Mr. Adikes shall cease to be a director of NFB or NFB Bank at any time before the third anniversary of the Effective Time, NFB agrees to cause a person who is a member of the Board of Directors of JSB as of the date hereof to be elected or appointed as the New NFB Director. (b) At the Effective Time, NFB shall cause NFB Bank, or, if the Bank Merger is not effected, JSB Bank, to assume and honor the JSB Bank Outside Directors' Consultation and Retirement Plan ("JSB Bank Outside Directors' Plan") in accordance with the terms and conditions of such plan as of the date hereof; provided, however, that, notwithstanding any provision of such plan to the contrary, (i) effective immediately prior to the Effective Time, the references to "fifteen (15) years" in Section 3 of the JSB Bank Outside Directors' Plan regarding eligibility shall be amended so as to refer to "one (1) year" for the purpose of making all eight outside directors of JSB Bank participants under such plan and (ii) any outside member of the JSB Bank Board of Directors who does not become a member of the Board of Directors of NFB Bank from and after the Effective Time shall have the right to commence receiving benefits under the JSB Bank Outside Directors' Plan effective as of the Effective Time and shall not be required to provide consulting services in order to receive such benefits; provided, further, that in no event shall any amendment or termination of the JSB Bank Outside Directors' Plan on or after the Effective Time adversely affect the right of any plan participant, former participant or beneficiary thereof to receive any benefits under such plan in respect of participation for any period ending on or before the date on which such amendment or termination is adopted or, if later, the date on which it is made effective. NFB Bank and JSB Bank also agree that all individuals who, prior to the Effective Time, were receiving benefits under the JSB Bank Outside Directors' Plan shall continue to receive all such benefits from this plan on the same terms and conditions from and after the Effective Time. (c) NFB shall use all reasonable efforts to identify and offer employment opportunities to qualified, satisfactorily performing officers and employees of JSB and its Subsidiaries in positions within the business operations of NFB and its Subsidiaries for which such officers and employees are qualified. NFB shall give, and shall cause its Subsidiaries to give, priority consideration to all such officers and employees of JSB and its Subsidiaries vis-a-vis all individuals other than current officers and employees of NFB; provided, however, that officers and employees of JSB and its Subsidiaries who become employed by NFB or its Subsidiaries shall then be treated on an equal basis with the officers and employees of NFB and its Subsidiaries. (d) NFB shall honor (i) the Employment Agreements between JSB and, respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan, Thomas R. Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy, Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe, Daniel J. Huber and Laurel M. Romito, each as amended and restated as of June 22, 1999 and (ii) the Employment Agreements between JSB Bank and, respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan, Thomas R. Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy, Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe, Daniel J. Huber and Laurel M. Romito, each as amended and restated as of June 22, 1999, by permitting JSB to pay to each such individual on the Closing Date the lump sum amounts that are due under each agreement and by providing any additional payments or benefits in accordance with the terms of such Employment Agreements, regardless of whether or not the individual officer continues employment with NFB or NFB Bank. NFB and JSB have delivered to each other a good faith reasonable estimate of the amounts payable on the Closing Date under the Employment Agreements, based upon procedures and information available at the date of this Agreement, and the procedures used in preparing such estimates shall be followed in determining the actual amounts payable under the Employment Agreements on the Closing Date, which estimate is attached hereto as Schedule 4.13(d). Section 4.14. Indemnification; Directors' and Officers' Insurance. (a) From and after the Effective Time through the sixth anniversary of the Effective Date, NFB agrees to indemnify and hold harmless each present and former director and officer of JSB and its Subsidiaries and each officer or employee of JSB and its Subsidiaries that is serving or has served as a director or trustee of another entity expressly at JSB's request or direction (each, an "Indemnified Party"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement, including the entering into of the JSB Option Agreement), whether asserted or claimed prior to, at or after the Effective Time, and to advance any such Costs to each Indemnified Party as they are from time to time incurred, in each case to the fullest extent such Indemnified Party would have been indemnified as a director, officer or employee of JSB and its Subsidiaries and as then permitted under applicable law. (b) Any Indemnified Party wishing to claim indemnification under Section 4.14(a), upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify NFB thereof, but the failure to so notify shall not relieve NFB of any liability it may have hereunder to such Indemnified Party if such failure does not materially prejudice the indemnifying party. In the event of any such claim, action, suit, proceeding or investigation, (i) NFB shall have the right to assume the defense thereof with counsel reasonably acceptable to the Indemnified Party and NFB shall not be liable to such Indemnified Party for any legal expenses of other counsel subsequently incurred by such Indemnified Party in connection with the defense thereof, except that if NFB does not elect to assume such defense within a reasonable time or counsel for the Indemnified Party at any time advises that there are issues which raise conflicts of interest between NFB and the Indemnified Party (and counsel for NFB does not disagree), the Indemnified Party may retain counsel satisfactory to such Indemnified Party, and NFB shall remain responsible for the reasonable fees and expenses of such counsel as set forth above, to be paid promptly as statements therefor are received; provided, however, that NFB shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in any one jurisdiction with respect to any given claim, action, suit, proceeding or investigation unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest; (ii) the Indemnified Party will reasonably cooperate in the defense of any such matter; and (iii) NFB shall not be liable for any settlement effected by an Indemnified Party without its prior written consent, which consent may not be withheld unless such settlement is unreasonable in light of such claims, actions, suits, proceedings or investigations against, or defenses available to, such Indemnified Party. (c) NFB shall pay all reasonable Costs, including attorneys' fees, that may be incurred by any Indemnified Party in successfully enforcing the indemnity and other obligations provided for in this Section 4.14 to the fullest extent permitted under applicable law. The rights of each Indemnified Party hereunder shall be in addition to any other rights such Indemnified Party may have under applicable law. (d) For a period of six years after the Effective Time, NFB shall cause the former directors and officers of JSB to be covered by the policy of directors and officers liability insurance currently maintained by JSB; provided, however, that NFB may substitute therefor a policy of at least the same coverage and containing terms no less advantageous to the beneficiaries thereof than such policies (including, without limitation, by providing coverage under its existing policy); provided, however, that in no event shall NFB be obligated to expend, in order to maintain or provide insurance coverage pursuant to this Section 4.14(d), any premium per annum in excess of 175% of the amount of the annual premiums paid as of the date hereof by JSB for such insurance ("Maximum Agreement"); provided, further, that if the amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, NFB shall obtain the most advantageous coverage of directors' and officers' insurance obtainable for an annual premium equal to the Maximum Amount; and provided, further, that officers and directors of JSB may be required to make application and provide customary representations and warranties to NFB's insurance carrier for the purpose of obtaining such insurance. Section 4.15. Employees; Benefit Plans and Programs. (a) Each person who is employed by JSB or JSB Bank immediately prior to the Effective Time (a "JSB Employee") shall, at the Effective Time, become an employee of NFB or NFB Bank (unless the Bank Merger is not effected, in which case the references in this Section 4.15 to NFB Bank shall mean JSB Bank). Beginning at the Effective Time, each of the JSB Employees shall serve NFB or NFB Bank in the same capacity in which he or she served immediately prior to the Effective Time and upon the same terms and conditions generally applicable to other employees of NFB or NFB Bank with comparable positions, with the following special provisions: (i) No JSB Employee shall be, or have or exercise the authority of, an officer of NFB or NFB Bank unless and until elected or appointed an officer of NFB or NFB Bank in accordance with NFB's or NFB Bank's bylaws. (ii) At or as soon as practicable following the Effective Time, NFB and NFB Bank shall establish and implement a program of compensation and benefits designed to cover all similarly situated employees on a uniform basis ("New Compensation and Benefits Program"). The New Compensation and Benefits Program may contain any combination of new plans, continuations of plans maintained by NFB or NFB Bank immediately prior to the Effective Time and continuation of plans maintained by JSB or JSB Bank immediately prior to the Effective Time as NFB, in its discretion, may determine. To the extent that it is not practicable to implement any constituent part of the New Compensation and Benefits Program at the Effective Time, NFB and NFB Bank shall continue in effect any comparable plan maintained immediately prior to the Effective Time for the respective employees of NFB, JSB, NFB Bank and JSB Bank for a transition period. During the transition period, the persons who were employees of JSB or JSB Bank immediately prior to the Effective Time who become employees of NFB or NFB Bank at the Effective Time shall continue to participate in the plans of JSB and JSB Bank that are continued for transitional purposes, and all other employees of NFB or NFB Bank will participate only in the comparable plans of NFB and NFB Bank that are continued for transitional purposes. (iii) Each constituent part of the New Compensation and Benefits Program shall recognize, in the case of persons employed by NFB, NFB Bank, JSB or JSB Bank immediately prior to the Effective Time who are also employed by NFB or NFB Bank immediately after the Effective Time, all service with NFB, NFB Bank, JSB or JSB Bank as service with NFB and NFB Bank for all purposes, including eligibility, vesting, benefit accrual and level of matching contributions; provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefit; provided further, however, that in no event will such recognition result in any current or former employees of JSB or any of its Subsidiaries being covered under the post-retirement medical benefits plan of NFB or any of its Subsidiaries to the extent such coverage is provided at the expense of NFB or any of its Subsidiaries. (iv) In the case of any constituent part of the New Compensation and Benefits Program which is a life or health insurance plan: (A) such plan shall not apply any preexisting condition limitations for conditions covered under the applicable life or health insurance plans maintained by NFB, NFB Bank, JSB and JSB Bank as of the Effective Time, (B) each such plan which is a life or health insurance plan shall honor any deductible and out of pocket expenses incurred under the applicable life or health insurance plans maintained by NFB, NFB Bank, JSB and JSB Bank as of the Effective Time and (C) each such plan which is a life insurance plan shall waive any medical certification otherwise required in order to assure the continuation of coverage at a level not less than that in effect immediately prior to the implementation of such plan (but subject to any overall limit on the maximum amount of coverage under such plans). (b) NFB shall assume the obligations of JSB and JSB Bank with respect to any severance plans or agreements identified in JSB's Disclosure Letter, as they may be in effect at the Effective Time, and shall pay amounts thereunder when due; provided, however, that in the event of the termination of employment of officers and employees of JSB or JSB Bank within 15 months following the Effective Time, such persons shall be provided severance benefits equal to the greater of those provided under the JSB Bank Severance Plan or those provided by NFB or NFB Bank under any severance plan maintained by NFB or NFB Bank. (c) Notwithstanding any other provision in this Agreement to the contrary, officers and employees of JSB and its Subsidiaries who are covered under the JSB Pension Plan immediately prior to the Effective Time and who continue to be employed by NFB or its Subsidiaries on and after the Effective Time shall, if, as of the Effective Time, they either: (i) are within 10 years of their normal retirement age (as defined in the JSB Pension Plan) and have a period of service (as defined in the JSB Pension Plan) of at least 10 years with JSB or its Subsidiaries, or (ii) have a period of service (as defined in the JSB Pension Plan) of at least 25 years with JSB or its Subsidiaries, have the right to elect to continue to accrue benefits under the benefit accrual formula under the JSB Pension Plan rather than having their benefits be determined under the NFB Cash Balance Retirement Plan. (d) Notwithstanding any other provision in this Agreement to the contrary, if the Closing Date occurs after December 31, 1999, the amounts payable to any officer or employee of JSB under the Benefit Restoration Plan of Jamaica Savings Bank FSB ("JSB Bank BRP") shall be determined under the actuarial factors and interest rate assumptions in effect on December 31, 1999 even if such factors and assumptions would otherwise have changed by the express terms of the JSB Bank BRP, the JSB Pension Plan, by changes in the law (such as the pension and benefit provisions of the Uruguay Round Agreements Act of the General Agreement on Tariffs and Trade ("GATT")), or otherwise, the purpose of this Section 4.15(d) being that any benefits payable under the JSB Bank BRP shall be determined under the actuarial factors and interest rate assumptions in effect on December 31, 1999. JSB shall, and shall cause JSB Bank to, take all actions as shall be necessary to provide that no change-in-control, termination or severance payments or benefits (including without limitation any amounts paid under the agreements listed in Section 4.13(d)) will be taken into account for purposes of determining any amounts payable under the JSB Bank BRP. (e) In the event that the Closing Date occurs on or before December 31, 1999, the employees of JSB Bank shall receive bonuses in accordance with JSB Bank's past practices (and the amount of such bonuses shall be based upon such employees' compensation for the entire year of 1999), and such bonuses shall be paid at least five business days prior to the Closing Date. In the event that the Closing Date occurs on or after January 1, 2000, (i) the employees of JSB Bank shall be paid bonuses in accordance with JSB Bank's past practices (and the amount of such bonuses shall be based upon such employees' compensation for the entire year of 1999) for 1999, which shall be paid in December 1999 in accordance with JSB Bank's past practices, and (ii) the employees of JSB Bank shall be paid additional bonuses equal to the amounts payable to each such employee as a bonus for 1999 multiplied by a fraction, the numerator of which is the number of days in 2000 through and including the Closing Date and the denominator of which is 366, and such additional bonuses shall be paid at least five business days prior to the Closing Date. A schedule showing the aggregate bonus estimates for 1999 is attached hereto as Schedule 4.15(e). (f) Employees of JSB Bank who have obtained or who have received approval to obtain, at any time prior to the Closing Date, a loan or a mortgage loan under the existing JSB Bank employee loan program shall continue to receive the benefits of such employee loan program, subject to the terms and conditions of such program; provided, however, that if the employment of any such employee with JSB Bank or, after the Closing Date, NFB Bank, shall terminate for any reason other than cause, the interest rate reduction under the employee loan shall continue in effect notwithstanding such termination of employment. (g) Employees of JSB Bank (other than officers) shall be entitled to receive attendance bonuses in accordance with JSB Bank's past practices for 1999, and, if the Closing Date occurs after December 31, 1999, such persons shall be entitled to attendance bonuses in accordance with JSB Bank's past practices for 2000, pro-rated through the Closing Date in the manner described in Section 4.15(e). (h) Employees of JSB Bank shall be entitled to receive payment for accrued but unused vacation days in accordance with JSB Bank's past practices, and any accrued but unused vacation days of employees of JSB Bank as of the Closing Date shall, at the employee's option, either be paid immediately prior to the Closing Date or taken as vacation time as soon as practicable following the Closing Date; provided, however, that JSB shall deliver to NFB, not later than 15 business days after the date of this Agreement, a schedule of employees indicating their accrued but unused vacation days as of the most recent date practicable. Life insurance and continued health insurance for retirees of JSB Bank shall be continued in accordance with JSB Bank's past practices, to the extent that such continued coverage does not result in a material increase in the costs of such continued coverage to NFB Bank over the costs of such coverage to JSB Bank. JSB and NFB agree to use all reasonable efforts to review the tax-qualified defined benefit plans of both banks with a view towards, effective as of the Closing Date, continuing, to the extent practicable, the types and forms of benefits under the JSB Pension Plan for participants in such JSB Pension Plan whose employment is terminated upon or within one-year following the Closing Date, particularly with respect to the 100% joint and survivor form of benefits provided in the event that the participant dies prior to the commencement of the participant's benefit payments. JSB Bank shall make a contribution to the JSB Bank Employee Stock Ownership Plan ("JSB Bank ESOP") for 1999 in accordance with its past practices and such contribution shall be allocated in accordance with the terms of the JSB Bank ESOP. A pro-rated JSB Bank contribution shall be made to the JSB Bank ESOP for the portion of the year 2000 through the Closing Date. Section 4.16. Advisory Board. NFB shall, promptly following the Effective Time, cause all of the members of JSB's Board of Directors as of the date of this Agreement, other than the New NFB Director, who are willing to so serve to be elected or appointed as members of NFB's advisory board ("Advisory Board"), the function of which shall be to advise NFB with respect to deposit and lending activities in JSB's former market area and to maintain and develop customer relationships. The members of the Advisory Board who are willing to so serve shall be elected to serve an initial term of three years beginning on the Effective Date. Each member of the Advisory Board shall receive an annual retainer fee for such service of $25,000, payable in monthly installments or in one lump sum at any time in advance at the option of NFB, notwithstanding that such Advisory Board members are receiving benefits under the JSB Bank Outside Directors' Plan. Service on the Advisory Board shall be considered service as a director of NFB for purposes of any stock option plan of JSB or NFB. ARTICLE V CONDITIONS TO CONSUMMATION Section 5.1. Conditions to Each Party's Obligations. The respective obligations of each party to effect the Merger , the Bank Merger and any other transactions contemplated by this Agreement shall be subject to the satisfaction of the following conditions: (a) this Agreement shall have been approved by (i) the requisite vote of JSB's stockholders in accordance with applicable law and regulations and (ii) the requisite vote of NFB's stockholders in accordance with applicable law and regulations; (b) the Requisite Regulatory Approvals and any necessary regulatory consents and waivers with respect to this Agreement and the transactions contemplated hereby shall have been obtained and shall remain in full force and effect, and all statutory waiting periods shall have expired; (c) no party hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits the consummation of the Merger or the Bank Merger; (d) no statute, rule or regulation shall have been enacted, entered, promulgated, interpreted, applied or enforced by any Governmental Entity which prohibits, restricts or makes illegal consummation of the Merger or the Bank Merger; (e) the Registration Statement shall have been declared effective by the SEC and no proceedings shall be pending or threatened by the SEC to suspend the effectiveness of the Registration Statement; all required approvals by state securities or "blue sky" authorities with respect to the transactions contemplated by this Agreement shall have been obtained; and (f) NFB shall have caused to be listed on the NYSE, or on such other market on which shares of NFB Common Stock shall then be trading, subject only to official notice of issuance, the shares of NFB Common Stock to be issued by NFB in exchange for the shares of JSB Common Stock. Section 5.2. Conditions to the Obligations of NFB and NFB Bank. The obligations of NFB and NFB Bank to effect the Merger, the Bank Merger and any other transactions contemplated by this Agreement shall be further subject to the satisfaction of the following additional conditions, any one or more of which may be waived by NFB: (a) each of the obligations of JSB and JSB Bank, respectively, required to be performed by it at or prior to the Closing pursuant to the terms of this Agreement shall have been duly performed and complied with in all material respects and the representations and warranties of JSB and JSB Bank contained in this Agreement shall be true and correct, subject to Sections 2.1 and 2.2, as of the date of this Agreement and as of the Effective Time as though made at and as of the Effective Time (except as to any representation or warranty which specifically relates to an earlier date). NFB shall have received a certificate to the foregoing effect signed by the chief executive officer and the chief financial or principal accounting officer of JSB; (b) all action required to be taken by, or on the part of, JSB and JSB Bank to authorize the execution, delivery and performance of this Agreement and the consummation by JSB and JSB Bank of the transactions contemplated hereby shall have been duly and validly taken by the Board of Directors and stockholders of JSB or JSB Bank, as the case may be, and NFB shall have received certified copies of the resolutions evidencing such authorization; (c) JSB shall have obtained the consent, waiver or approval of each person (other than the regulatory approvals or consents referred to in Section 5.1(b)) whose consent, waiver or approval shall be required in order to consummate the Merger or the Bank Merger or to permit the succession by the surviving corporation pursuant to the Merger to any obligation, right or interest of JSB or its Subsidiaries under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument to which JSB or its Subsidiaries is a party or is otherwise bound, except those for which failure to obtain such consents, waivers and approvals would not, individually or in the aggregate, have a Material Adverse Effect on NFB (after giving effect to the consummation of the transactions contemplated hereby) or upon the consummation of the transactions contemplated hereby; (d) NFB shall have received certificates (such certificates to be dated as of a day as close as practicable to the Closing Date) from appropriate authorities as to the corporate existence and good standing of JSB and JSB Bank; and (e) NFB shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden"), counsel to NFB, dated as of the Effective Date, in form and substance reasonably satisfactory to NFB, substantially to the effect that on the basis of the facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering its opinion, Skadden may require and rely upon, in addition to the review of such matters of fact and law as Skadden considers appropriate, representations and covenants, including those contained in certificates of officers of NFB, NFB Bank, JSB, JSB Bank and others, reasonably satisfactory in form and substance to Skadden. Section 5.3. Conditions to the Obligations of JSB and JSB Bank. The obligations of JSB and JSB Bank to effect the Merger, the Bank Merger and any other transactions contemplated by this Agreement shall be further subject to the satisfaction of the following additional conditions, any one or more of which may be waived by JSB: (a) each of the obligations of NFB and NFB Bank, respectively, required to be performed by it at or prior to the Closing pursuant to the terms of this Agreement shall have been duly performed and complied with in all material respects and the representations and warranties of NFB and NFB Bank contained in this Agreement shall be true and correct, subject to Sections 2.1 and 2.2, as of the date of this Agreement and as of the Effective Time as though made at and as of the Effective Time (except as to any representation or warranty which specifically relates to an earlier date). JSB shall have received a certificate to the foregoing effect signed by the chief executive officer and the chief financial or principal accounting officer of NFB; (b) all action required to be taken by, or on the part of, NFB and NFB Bank to authorize the execution, delivery and performance of this Agreement and the consummation by NFB and NFB Bank of the transactions contemplated hereby shall have been duly and validly taken by the Board of Directors and stockholders of NFB or NFB Bank, as the case may be, and JSB shall have received certified copies of the resolutions evidencing such authorization; (c) NFB shall have obtained the consent, waiver or approval of each person (other than the governmental approvals or consents referred to in Section 5.1(b)) whose consent, waiver or approval shall be required in connection with the transactions contemplated hereby under any loan or credit agreement, note, mortgage, indenture, lease, license or other agreement or instrument to which NFB or its Subsidiaries is a party or is otherwise bound, except those for which failure to obtain such consents, waivers and approvals would not, individually or in the aggregate, have a Material Adverse Effect on NFB (after giving effect to the transactions contemplated hereby) or upon the consummation of the transactions contemplated hereby; (d) JSB shall have received certificates (such certificates to be dated as of a day as close as practicable to the Closing Date) from appropriate authorities as to the corporate existence and good standing of NFB and NFB Bank; and (e) JSB shall have received an opinion of Thacher Proffitt & Wood ("Thacher Proffitt"), counsel to JSB, dated as of the Effective Date, in form and substance reasonably satisfactory to JSB, substantially to the effect that on the basis of the facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering its opinion, Thacher Proffitt may require and rely upon, in addition to the review of such matters of fact and law as Thacher Proffitt considers appropriate, representations and covenants, including those contained in certificates of officers of NFB, NFB Bank, JSB, JSB Bank and others, reasonably satisfactory in form and substance to Thacher Proffitt. ARTICLE VI TERMINATION Section 6.1. Termination. This Agreement may be terminated, and the Merger abandoned, at or prior to the Effective Date, either before or after its approval by the stockholders of JSB and NFB: (a) by the mutual consent of NFB and JSB, if the Board of Directors of each so determines by vote of a majority of the members of its entire Board; (b) by NFB or JSB, if its Board of Directors so determines by vote of a majority of the members of its entire Board, in the event of (i) the failure of the stockholders of JSB or NFB to approve the Agreement at its Stockholder Meeting called to consider such approval; provided, however, that JSB or NFB, as the case may be, shall only be entitled to terminate the Agreement pursuant to this clause (i) if it has complied in all material respects with its obligations under Sections 4.8 and 4.9, or (ii) a material breach by the other party hereto of any representation, warranty, covenant or agreement contained herein which causes the conditions set forth in Section 5.2(a) (in the case of termination by NFB) and Section 5.3(a) (in the case of the termination by JSB) not to be satisfied and such breach is not cured within 25 business days after written notice of such breach is given to the party committing such breach by the other party or which breach is not capable of being cured by the date set forth in Section 6.1(d) or any extension thereof; (c) by NFB or JSB, by written notice to the other party, if either (i) any approval, consent or waiver of a Governmental Entity required to permit consummation of the transactions contemplated hereby shall have been denied or (ii) any governmental authority of competent jurisdiction shall have issued a final, unappealable order enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement; (d) by NFB or JSB, if its Board of Directors so determines by vote of a majority of the members of its entire Board, in the event that the Merger is not consummated by February 29, 2000 ("Initial Termination Date"), unless the failure to so consummate by such time is due to the breach of any representation, warranty or covenant contained in this Agreement by the party seeking to terminate; provided, that if, as of such date, all necessary regulatory or governmental approvals, consents or waivers required to consummate the transactions contemplated hereby shall not have been obtained but all other conditions to the consummation of the Merger (other than the delivery of executed documents at the Closing) shall be fulfilled, the Initial Termination Date shall be extended to April 30, 2000; (e) by NFB or JSB, if the Board of Directors of the other party does not publicly recommend in the Joint Proxy Statement-Prospectus that its stockholders approve and adopt this Agreement or if, after recommending in the Joint Proxy Statement-Prospectus that its stockholders approve and adopt this Agreement, the Board of Directors of the other party shall have withdrawn, qualified or revised such recommendation in any respect materially adverse to the party seeking to terminate this Agreement; or (f) by JSB, if its Board of Directors so determines by a majority vote of the members of its entire Board, if both of the following conditions are satisfied: (i) the NFB Market Value on the Valuation Date is less than $16.35; and (ii) (A) the number obtained by dividing the NFB Market Value as of the Valuation Date by the Initial NFB Market Value ("NFB Ratio") shall be less than (B) the number obtained by dividing the Final Index Price by the Initial Index Price and subtracting 0.10 from the quotient in this clause (ii)(B) ("Index Ratio"); subject, however, to the following three sentences. If JSB elects to exercise its termination right pursuant to this Section 6.1(f), it shall give written notice thereof to NFB at any time during the five business day period commencing on the day following the Valuation Date; provided, that such notice of election to terminate may be withdrawn at any time during the 15 business day period commencing on the day such notice is received by NFB. During the five business day period commencing with its receipt of such notice, NFB shall have the option to increase the consideration to be received by the holders of JSB Common Stock hereunder by increasing the Exchange Ratio from 3.0 to a number equal to the lesser of (1) the product of (x) the Index Ratio plus 0.10 and (y) 3.0, divided by the NFB Ratio or (2) the quotient obtained by dividing $61.31 by the NFB Market Value. If NFB so elects, it shall give, within such five business day period, written notice to JSB of such election and the revised Exchange Ratio, whereupon no termination shall be deemed to have occurred pursuant to this Section 6.1(f) and this Agreement shall remain in full force and effect in accordance with its terms (except as the Exchange Ratio shall have been so modified). For purposes of this Section 6.1(f), the following terms shall have the meanings indicated below: "Acquisition Transaction" shall have the meaning set forth in Section 3.4(e), without regard to subsection (ii) of the proviso set forth therein. "Final Index Price" means the sum of the Final Prices for each company comprising the Index Group multiplied by the weighting set forth opposite such company's name in the definition of Index Group below. "Final Price," with respect to any company belonging to the Index Group, means the average of the daily closing sales prices of a share of common stock of such company (and if there is no closing sales price on any such day, then the mean between the closing bid and the closing asked prices on that day), as reported on the consolidated transaction reporting system for the market or exchange on which such common stock is principally traded, for the 15 consecutive trading days immediately preceding the Valuation Date. "Index Group" means the 25 financial institution holding companies listed below, the common stock of all of which shall be publicly traded and as to which there shall not have been an Acquisition Transaction involving any of such companies publicly announced at any time during the period beginning on the date of this Agreement and ending on the day immediately preceding the Valuation Date. In the event that: (i) the common stock of any of such companies ceases to be publicly traded, or (ii) an Acquisition Transaction involving any of such companies is announced at any time during the period beginning on the date of this Agreement and ending on the day immediately preceding the Valuation Date, or (iii) any such company shall announce at any time during the period beginning on the date of this Agreement and ending on the day immediately preceding the Valuation Date that it has entered into a definitive agreement to acquire insured deposits from another financial institution in excess of 20% of its deposit base as of the most recent quarter end for which information is available or intends to issue additional capital securities in excess of 10% of the total value of its Tier 1 capital securities outstanding as of the most recent quarter end for which information is available, then such company or companies will be removed from the Index Group, and the weights attributed to the remaining companies will be adjusted proportionately for purposes of determining the Final Index Price and the Initial Index Price; provided, however, that, in the event an Acquisition Transaction is publicly announced which involves only companies that are listed below, none of such companies shall be removed from the Index Group. The 25 financial institution holding companies and the weights attributed to them are as follows: Holding Company Symbol Weighting - --------------- ------ --------- Astoria Financial Corporation ASFC 4.71% CCB Financial Corporation CCB 4.90% Charter One Financial, Inc. COFI 10.43% Chittenden Corporation CHZ 1.96% City National Corporation CYN 3.73% Dime Bancorp, Inc. DME 5.57% Dime Community Bancshares, Inc. DCOM 0.73% First Commonwealth Financial Corporation FCF 1.77% FirstMerit Corporation FMER 6.07% Fulton Financial Corporation FULT 3.38% GreenPoint Financial Corp. GPT 8.19% Independence Community Bank Corp. ICBC 2.06% Keystone Financial, Inc. KSTN 3.31% M & T Bank Corporation MTB 9.24% Peoples Heritage Financial Group, Inc. PHBK 4.58% Queens County Bancorp, Inc. QCSB 1.53% Reliance Bancorp, Inc. RELY 0.60% Richmond County Financial Corp. RCBK 1.50% State Bancorp, Inc. STB 0.29% Staten Island Bancorp, Inc. SIB 1.81% Suffolk Bancorp SUBK 0.41% Summit Bancorp SUB 15.22% Susquehanna Bancshares, Inc. SUSQ 1.52% Valley National Bancorp VLY 4.01% Webster Financial Corporation WBST 2.48% ------- 100.00% "Initial Index Price" means the sum of the per share closing sales price of the common stock of each company comprising the Index Group multiplied by the applicable weighting, as such prices are reported on the consolidated transaction reporting system for the market or exchange on which such common stock is principally traded on the trading day immediately preceding the public announcement of this Agreement. "Initial NFB Market Value" means the closing sales price of a share of NFB Common Stock, as reported on the NYSE, on the trading day immediately preceding the public announcement of this Agreement, adjusted as indicated in the last sentence of this Section 6.1(f). "NFB Market Value" shall have the meaning set forth in Section 1.2(b) hereof. "Valuation Date" shall have the meaning set forth in Section 1.2(c) hereof. If NFB or any company belonging to the Index Group declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the date of this Agreement and the Valuation Date, the prices for the common stock of such company shall be appropriately adjusted for the purposes of applying this Section 6.1(f). Section 6.2. Effect of Termination. In the event of the termination of this Agreement by either NFB or JSB, as provided above, this Agreement shall thereafter become void and, subject to Section 6.3, there shall be no liability on the part of any party hereto or their respective officers or directors, except that (a) any such termination shall be without prejudice to the rights of any party hereto arising out of the breach by any other party of any covenant, representation or obligation contained in this Agreement and (b) the obligations of the parties under the last three sentences in Section 4.3(a) and under Section 8.6 shall survive. Section 6.3 Termination Fee. In recognition of the efforts, expenses and other opportunities foregone by NFB and JSB, respectively, while structuring the Merger, the parties hereto agree that: (a) NFB shall pay to JSB a termination fee of Twelve Million, Five Hundred Thousand Dollars ($12,500,000) plus JSB's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) in cash on demand if, within 12 months after the date of this Agreement, after a written bona fide proposal is made after the date of this Agreement by a third party to NFB or its stockholders to engage in an Acquisition Transaction (as defined in Section 3.4(e)), other than any Acquisition Transaction permitted pursuant to the terms of this Agreement, including without limitation Section 3.4(e) (a "Permitted Transaction"), any of the following occur: (i) NFB shall have willfully breached any covenant or obligation contained in this Agreement and such breach would entitle JSB to terminate the Agreement; (ii) the stockholders of NFB shall not have approved the Agreement at the meeting of such stockholders held for the purpose of voting on the Agreement, such meeting shall not have been held or shall have been canceled prior to termination of the Agreement; or (iii) NFB's Board of Directors shall have withdrawn or modified in a manner adverse to JSB the recommendation of NFB's Board of Directors with respect to the Agreement; and (b) NFB shall pay to JSB a termination fee of Twenty-Five Million Dollars ($25,000,000) plus JSB's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) in cash on demand if, during a period of 18 months after the date hereof, NFB or any of its Subsidiaries, without having received JSB's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as defined in Section 3.4(e)), other than a Permitted Transaction, with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations thereunder) other than JSB or any of its Subsidiaries or the Board of Directors of NFB shall have recommended that the stockholders of NFB approve or accept an Acquisition Transaction other than a Permitted Transaction with any person other than JSB or any of its Subsidiaries. Any fee payable to JSB pursuant to Section 6.3(b) shall be reduced dollar for dollar to the extent that any fee is actually paid pursuant to Section 6.3(a). Notwithstanding the foregoing, NFB shall not be obligated to pay to JSB the termination fee described in Section 6.3(a) or Section 6.3(b) in the event that at or prior to such time as such fee becomes payable (i) NFB and JSB validly terminate this Agreement pursuant to Section 6.1(a), (ii) NFB or JSB validly terminates this Agreement pursuant to Sections 6.1(c) or 6.1(d), (iii) NFB validly terminates this Agreement pursuant to Section 6.1(b) or Section 6.1(e) or (iv) JSB validly terminates this Agreement pursuant to Section 6.1(f). (c) JSB shall pay to NFB a termination fee of Twelve Million, Five Hundred Thousand Dollars ($12,500,000) plus NFB's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) in cash on demand if, within 12 months after the date of this Agreement, after a bona fide proposal is made after the date of this Agreement by a third party to JSB or its stockholders to engage in an Acquisition Transaction (as defined in the JSB Option Agreement), any of the following occur: (i) JSB shall have willfully breached any covenant or obligation contained in this Agreement and such breach would entitle NFB to terminate the Agreement; (ii) the stockholders of JSB shall not have approved the Agreement at the meeting of such stockholders held for the purpose of voting on the Agreement, such meeting shall not have been held or shall have been canceled prior to termination of the Agreement; or (iii) JSB's Board of Directors shall have withdrawn or modified in a manner adverse to NFB the recommendation of JSB's Board of Directors with respect to the Agreement; and (d) JSB shall pay to NFB a termination fee of Twenty-Five Million Dollars ($25,000,000) plus NFB's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) in cash on demand if, during a period of 18 months after the date hereof, JSB or any of its Subsidiaries, without having received NFB's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as defined in the JSB Option Agreement) with any person other than NFB or any of its Subsidiaries or the Board of Directors of JSB shall have recommended that the stockholders of JSB approve or accept an Acquisition Transaction (as defined in the JSB Option Agreement) with any person other than NFB or any of its Subsidiaries. Any fee payable to NFB pursuant to this Section 6.3(d) shall be reduced dollar for dollar to the extent that any fee is actually paid pursuant to Section 6.3(c). Notwithstanding the foregoing, JSB shall not be obligated to pay to NFB the termination fee described in Section 6.3(c) or Section 6.3(d) in the event that at or prior to such time as such fee becomes payable (i) NFB and JSB validly terminate this Agreement pursuant to Section 6.1(a), (ii) NFB or JSB validly terminates this Agreement pursuant to Sections 6.1(c) or 6.1(d) or (iii) JSB validly terminates this Agreement pursuant to Section 6.1(b), Section 6.1(e) or Section 6.1(f). ARTICLE VII CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME Section 7.1. Effective Date and Effective Time. The closing of the transactions contemplated hereby ("Closing") shall take place at the offices of Thacher Proffitt & Wood, Two World Trade Center, New York, New York 10048, on a date ("Closing Date") that is no later than five business days following the date on which the expiration of the last applicable waiting period in connection with notices to and approvals of regulatory and governmental authorities shall occur and all conditions to the consummation of this Agreement are satisfied or waived, or on such other date as may be agreed to by the parties. Prior to the Closing Date, NFB and JSB shall execute a Certificate of Merger in accordance with all appropriate legal requirements, which shall be filed as required by law on the Closing Date, and the Merger provided for therein shall become effective upon such filing or on such date as may be specified in such Certificate of Merger. The date of such filing or such later effective date as specified in the Certificate of Merger is herein referred to as the "Effective Date." The "Effective Time" of the Merger shall be as set forth in the Certificate of Merger. Section 7.2. Deliveries at the Closing. Subject to the provisions of Articles V and VI, on the Closing Date there shall be delivered to NFB and JSB the documents and instruments required to be delivered under Article V. ARTICLE VIII CERTAIN OTHER MATTERS Section 8.1. Certain Definitions; Interpretation. As used in this Agreement, the following terms shall have the meanings indicated: "material" means material to NFB or JSB (as the case may be) and its respective Subsidiaries, taken as a whole. "person" includes an individual, corporation, limited liability company, partnership, association, trust or unincorporated organization. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for ease of reference only and shall not affect the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed followed by the words "without limitation." Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Any reference to gender in this Agreement shall be deemed to include any other gender. Section 8.2. Survival. Only those agreements and covenants of the parties that are by their terms applicable in whole or in part after the Effective Time, including Sections 4.3(a), 4.13, 4.14, 4.15, 4.16, 4.17 and 8.6 of this Agreement, shall survive the Effective Time. All other representations, warranties, agreements and covenants shall not survive the Effective Time. If the Agreement shall be terminated, the agreements of the parties in the last three sentences of Section 4.3(a) and in Section 8.6 shall survive such termination. Section 8.3. Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be: (i) waived in writing by the party benefitted by the provision or (ii) amended or modified at any time (including the structure of the transaction) by an agreement in writing between the parties hereto except that, after the vote by the stockholders of JSB or NFB, no amendment or modification may be made that would reduce the Merger Consideration or contravene any provision of the Delaware General Corporation Law or the federal banking laws, rules and regulations. Section 8.4. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same instrument. Section 8.5. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of New York, without regard to conflicts of laws principles. Section 8.6. Expenses. Each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby. Section 8.7. Notices. All notices, requests, acknowledgments and other communications hereunder to a party shall be in writing and shall be deemed to have been duly given when delivered by hand, overnight courier or facsimile transmission (confirmed in writing) to such party at its address or facsimile number set forth below or such other address or facsimile transmission as such party may specify by notice to the other party hereto. If to JSB, to: JSB Financial, Inc. 303 Merrick Road Lynbrook, New York 11563 Facsimile: (516) 887-6007 Attention: Mr. Park T. Adikes Chairman of the Board and With copies to: JSB Financial, Inc. 303 Merrick Road Lynbrook, New York 11563 Facsimile: (516) 887-6007 Attention: Mr. Lawrence J. Kane Executive Vice President and Douglas J. McClintock, Esq. Thacher Proffitt & Wood Two World Trade Center New York, New York 10048 Facsimile: 212-432-2898 If to NFB, to: North Fork Bancorporation, Inc. 275 Broad Hollow Road Melville, New York 11747 Facsimile: (516) 844-1471 Attention: Mr. John Adam Kanas Chairman, President and Chief Executive Officer With copies to: North Fork Bancorporation, Inc. 275 Broad Hollow Road Melville, New York 11747 Facsimile: (516) 844-1471 Attention: Mr. Daniel M. Healy Executive Vice President and Chief Financial Officer and William S. Rubenstein, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Facsimile: (212) 735-2000 Section 8.8. Entire Agreement; etc. This Agreement, together with the Plan of Bank Merger, the JSB Option Agreement and the Disclosure Letters, represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made. All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Except for Section 4.13 (other than Section 4.13(c)) and Section 4.14, which confer rights on the parties described therein, nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 8.9. Assignment. This Agreement may not be assigned by either party hereto without the written consent of the other party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the 16th day of August, 1999. NORTH FORK BANCORPORATION, INC. /s/ John Adam Kanas ------------------------------------ John Adam Kanas Chairman of the Board, President and Chief Executive Officer JSB FINANCIAL, INC. By: /s/ Park T. Adikes -------------------------------- Park T. Adikes Chairman of the Board and Chief Executive Officer EX-99 4 EXHIBIT 99.1 - STOCK OPTION AGREEMENT THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED STOCK OPTION AGREEMENT, dated August 30, 1999, between Reliance Bancorp, Inc., a Delaware corporation ("Issuer"), and North Fork Bancorporation, Inc., a Delaware corporation ("Grantee"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto immediately prior to this Stock Option Agreement (this "Agreement"); and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined); NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 1,708,297 fully paid and nonassessable shares of Issuer's Common Stock, par value $0.01 per share ("Common Stock"), at a price of $29.00 per share (the "Option Price"); provided, however, that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock without giving effect to any shares subject to or issued pursuant to the Option. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are either (i) issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding after the date of this Agreement, the number of shares of Common Stock subject to the Option shall be increased or decreased, as appropriate, so that, after such issuance, such number 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 Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined) and the Holder is not in material beach of the agreements or covenants contained in this Agreement or the Merger Agreement, provided that the Holder shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) within six months following such Subsequent Triggering Event (or such longer period as provided in Section 10), provided further, however, that if the Option cannot be exercised on any day because of any injunction, order or similar restraint issued by a court of competent jurisdiction, the period during which the Option may be exercised shall be extended so that the Option shall expire no earlier than on the tenth business day after such injunction, order or restraint shall have been dissolved or when such injunction, order or restraint shall have become permanent and no longer subject to appeal, as the case may be. Each of the following shall be an "Exercise Termination Event": (i) the Effective Time (as defined in the Merger Agreement) of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event except a termination by Grantee pursuant to Section 9.1(f) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional); or (iii) the passage of 15 months after termination of the Merger Agreement if such termination follows the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 9.1(f) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional). Notwithstanding any other provision of this Agreement, in no event shall any of Issuer's obligations under this Agreement continue six months beyond an Exercise Termination Event. The term "Holder" shall mean the holder or holders of the Option. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction with any person other than Grantee or a Subsidiary of Grantee. For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other acquisition or assumption of all or a substantial portion of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer, or (z) any substantially similar transaction; provided, however, that in no event shall any merger, consolidation, purchase or similar transaction involving only the Issuer and one or more of its Subsidiaries or involving only two or more of such Subsidiaries, be deemed to be an Acquisition Transaction, provided that any such transaction is not entered into in violation of the terms of the Merger Agreement; (ii) Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed or publicly announced its intention to authorize, recommend or propose, an Acquisition Transaction with any person other than Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its intent to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement; (iii) Any person, other than Grantee, any Grantee Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business, shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iv) Any person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to engage in an Acquisition Transaction; (v) After a proposal is made by a third party to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or (vi) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, the Office of Thrift Supervision or any other federal or state bank regulatory authority for approval to engage in an Acquisition Transaction. (c) The term "Subsequent Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) The acquisition by any person of beneficial ownership of 20% or more of the then outstanding shares of Common Stock; or (ii) The occurrence of the Initial Triggering Event described in paragraph (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) shall be 20%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event of which it has notice (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board, the Office of Thrift Supervision (the "OTS") or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. (g) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder, and the Holder shall deliver to Issuer this Agreement and a letter agreeing that the Holder will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. section 18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended, the Change in Bank Control Act of 1978, as amended, or any other federal or state banking law, prior approval of or notice to the Federal Reserve Board, the OTS or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board, the OTS or such state regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of shares of Common Stock purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for such proper adjustment and the full satisfaction of the Issuer's obligations hereunder. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto) delivered within six months of such Subsequent Triggering Event (or such longer period as provided in Section 10), promptly prepare, file and keep current a shelf registration statement under the 1933 Act covering this Option and any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of this Option and any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Holder's Option or Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practicable and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in secondary offering underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement. 7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below) and prior to twelve months thereafter, (i) following a request of the Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such longer period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term "Market/Offer Price" shall mean the highest of (i) the price per share of Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to Issuer, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the Market/Offer Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Within the latter to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Stock Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred (i) upon the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer's obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (1) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets. (2) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (3) "Assigned Value" shall mean the Market/ Offer Price, as defined in Section 7. (4) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised, and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to the Highest Closing Price multiplied by the number of Substitute Shares so designated. The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or, in either case, the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer following a request for repurchase pursuant to this Section 9 shall immediately so notify the Substitute Option Holder and/ or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Common Shares it is then so prohibited from repurchasing. 10. The 90-day or six-month period for exercise of certain rights under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights, and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) Issuer has taken all action (including if required redeeming all of the Rights or amending or terminating the Rights Agreement) so that the entering into of this Option Agreement, the acquisition of shares of Common Stock hereunder and the other transactions contemplated hereby do not and will not result in the grant of any rights to any person under the Rights Agreement or enable or require the Rights to be exercised, distributed or triggered. 12. Grantee hereby represents and warrants to Issuer that: (a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee. (b) The Option is not being, and any shares of Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the 1933 Act. 13. (a) Grantee may, at any time following a Repurchase Event and prior to the occurrence of an Exercise Termination Event (or such later period as provided in Section 10), relinquish the Option (together with any Option Shares issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal to the Surrender Price (as defined below); provided, however, that Grantee may not exercise its rights pursuant to this Section 13 if Issuer has repurchased the Option (or any portion thereof) or any Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to $13,880,000 (i) plus, if applicable, Grantee's purchase price with respect to any Option Shares and (ii) minus, if applicable, the sum of (A) the excess of (1) the net cash amounts, if any, received by Grantee pursuant to the arms' length sale of Option Shares (or any other securities into which such Option Shares were converted or exchanged) to any unaffiliated party, over (2) Grantee's purchase price of such Option Shares and (B) the net cash amounts, if any, received by Grantee pursuant to an arms' length sale of a portion of the Option to any unaffiliated party. (b) Grantee may exercise its right to relinquish the Option and any Option Shares pursuant to this Section 13 by surrendering to Issuer, at its principal office, this Agreement together with certificates for Option Shares, if any, accompanied by a written notice stating (i) that Grantee elects to relinquish the Option and Option Shares, if any, in accordance with the provisions of this Section 13 and (ii) the Surrender Price. The Surrender Price shall be payable in immediately available funds on or before the second business day following receipt of such notice by Issuer. (c) To the extent that Issuer is prohibited under applicable law or regulation, or as a consequence of administrative policy, from paying the Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee and thereafter deliver or cause to be delivered, from time to time, to Grantee, the portion of the Surrender Price that it is no longer prohibited from paying, within five business days after the date on which Issuer is no longer so prohibited, provided, however, that if Issuer at any time after delivery of a notice of surrender pursuant to paragraph (b) of this Section 13 is prohibited under applicable law or regulation, or as a consequence of administrative policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to make such payments, (B) within five days of the submission or receipt of any documents relating to any such regulatory and legal approvals, provide Grantee with copies of the same, and (c) keep Grantee advised of both the status of any such request for regulatory and legal approvals, as well as any discussions with any relevant regulatory or other third party reasonably related to the same and (ii) Grantee may revoke such notice of surrender by delivery of a notice of revocation to Issuer and, upon delivery of such notice of revocation, the Exercise Termination Date shall be extended to a date six months from the date on which the Exercise Termination Date would have occurred if not for the provisions of this Section 13(c) (during which period Grantee may exercise any of its rights hereunder, including any and all rights pursuant to this Section 13). 14. Neither of the parties hereto may assign any of its rights or obligations under this Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such longer period as provided in Section 10); provided, however, that until the date 15 days following the date on which the Federal Reserve Board or the OTS, as applicable, approves an application by Grantee to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board or the OTS, as applicable. 15. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list the shares of Common Stock issuable hereunder on the National Association of Securities Dealers Automated Quotation/National Market Securities (NASDAQ/NMS) upon official notice of issuance and applying to the Federal Reserve Board and/or the OTS, as applicable, for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 16. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $17,350,000 and, if it otherwise would exceed such amount, the Grantee, at its sole election, shall either (i) reduce the number of shares of Common Stock subject to this Option, (ii) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv) any combination thereof, so that Grantee's actually realized Total Profit shall not exceed $17,350,000 after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of shares as would, as of the date of exercise, result in a Notional Total Profit (as defined below) of more than $17,350,000; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date. (c) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant to Section 7 of this Agreement, (ii)(x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the Grantee's purchase price for such Option Shares, (iii)(x) the net cash amounts received by Grantee pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of such Option Shares, (iv) any amounts received by Grantee on the transfer of the Option (or any portion thereof) to any unaffiliated party, and (v) any equivalent amount with respect to the Substitute Option. (d) As used herein, the term "Notional Total Profit" with respect to any number of shares as to which Grantee may propose to exercise this Option shall be the Total Profit determined as of the date of such proposed exercise assuming that this Option were exercised on such date for such number of shares and assuming that such shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). 17. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 18. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 19. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by cable, telegram, telecopy or telex, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 20. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 21. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 22. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 23. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 24. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. RELIANCE BANCORP, INC. By: /s/ Raymond A. Nielsen -------------------------------- Raymond A. Nielsen President and Chief Executive Officer NORTH FORK BANCORPORATION, INC. By: /s/ John Adam Kanas -------------------------------- John Adam Kanas Chairman of the Board, President and Chief Executive Officer EX-99 5 EXHIBIT 99.2 - PRESS RELEASE NORTH FORK BANCORP 275 BROAD HOLLOW RD., MELVILLE, NY 11747 (516) 844-1004 FAX (516) 694-1536 PRESS RELEASE FOR IMMEDIATE RELEASE NORTH FORK BANCORPORATION, INC. TO PURCHASE RELIANCE BANCORP, INC. IN A COMMON STOCK TRANSACTION VALUED AT APPROXIMATELY $352 MILLION MELVILLE, N.Y. - AUGUST 30, 1999 - NORTH FORK BANCORPORATION, INC. (NYSE: NFB) AND RELIANCE BANCORP, INC. (NASDAQ/NMS: RELY) jointly announced today that they have signed a definitive merger agreement whereby North Fork Bancorporation, Inc. ("North Fork") would acquire Reliance Bancorp, Inc. ("Reliance") in a stock-for-stock merger valued at approximately $352 million. Reliance is the holding company for Reliance Federal Savings Bank, a savings institution with banking locations in Queens, Nassau and Suffolk, all of which are located within North Fork's existing marketplace. Under the terms of the agreement, each share of Reliance will be converted into North Fork common stock at a fixed exchange ratio of 2 shares of North Fork for each share of Reliance. In connection with this transaction, North Fork simultaneously announced that its Board of Directors approved the repurchase of up to fifty percent (50%) of the common shares issuable in the acquisition or 8.5 million North Fork shares. Purchases will be made from time to time in open market or in privately negotiated transactions preceding the closing of the Reliance transaction, which is expected to occur in the first quarter of 2000. The acquisition will be treated as a purchase for financial reporting purposes and will be a tax-free reorganization for Reliance shareholders. Approximately 17 million common shares of North Fork will be issued. The exchange ratio was based upon the price of North Fork's stock utilizing its closing price on August 27, 1999 of $19.06 for a total value to Reliance shareholders of $38.12 per share. The closing price of Reliance stock on that date was $33.88. The merger is subject to customary regulatory approvals, the approval from Reliance shareholders and will close immediately preceding North Fork's pending acquisition of JSB Financial, Inc. (NYSE: JSB), the parent of Jamaica Savings Bank, FSB, that was announced on August 16, 1999. Due diligence by both companies has been completed. The agreement provides that North Fork receives an option to acquire up to 19.9% of Reliance's outstanding shares at $29.00 per share should certain events occur. Also, Reliance has a right to terminate the agreement should the closing price of North Fork's shares decline beyond a specified price and index, unless North Fork elects to increase the exchange ratio. At June 30, 1999, Reliance, with 29 banking offices, had total assets of $2.5 billion, deposits of $1.6 billion and shareholders' equity of $172 million. In the pending JSB transaction, North Fork indicated that it expected that it would account for that acquisition as a pooling-of-interests. The Reliance purchase allows North Fork to utilize the pooling-of-interests method of accounting in the JSB transaction. At June 30, 1999, JSB, with locations in Metropolitan New York, had total assets of $1.6 billion, deposits of $1.2 billion and shareholders' equity of $375 million. The JSB acquisition is expected to close in the first quarter of 2000 immediately following Reliance. "The excess capital created with the JSB merger allowed us to formulate a capital efficient Reliance transaction immediately accretive to North Fork's earnings," stated John Adam Kanas, Chairman, President and Chief Executive Officer of North Fork. Raymond A. Nielsen, President and Chief Executive Officer of Reliance will join North Fork's Board of Directors. "Our primary motivation has always been directed toward building shareholder value. The opportunity to merge with North Fork, a company dedicated to creating and building shareholder value, was a compelling reason for our decision to merge with North Fork. We see nothing but greater opportunities for our shareholders, customers and the communities we serve," said Mr. Nielsen. On a pro forma basis, North Fork will have total assets of $15.5 billion, deposits of $9.2 billion and shareholders' equity of $1.2 billion. The pro forma stated and tangible book value will be approximately $7.21 and $5.16, respectively which assumes the aforementioned 50% share repurchase in the Reliance transaction. The pro forma leverage ratio will be approximately 7.47%. At June 30, 1999 North Fork, on a separate company basis, had total assets of $11.5 billion, deposits of $6.5 billion and shareholders' equity of $804 million. On that date, its stated and tangible book value and leverage ratio were $5.79, $5.20 and 8.50%, respectively. The Reliance transaction is expected to be earnings per share ("EPS") accretive for North Fork in excess of the previously announced estimates of accretion in the JSB acquisition from both a generally accepted accounting principal (GAAP) basis and from a cash basis of reporting EPS. North Fork anticipates a 5% rise in GAAP EPS and 9% rise in cash EPS over year 2000 estimates from the combined NFB and JSB merger. The accretion from the Reliance merger will come from anticipated cost savings and revenue enhancements. "In combination, JSB and Reliance bring us nearly 300,000 new customers within our existing marketplace with unsurpassed opportunities for revenue growth," said Mr. Kanas. NORTH FORK PLANS AN ANALYST CONFERENCE CALL FOR TUESDAY, AUGUST 31, 1999 AT 2:00 P.M. EDT, to elaborate on the strategic rational and financial implications of the acquisition. THE TELEPHONE NUMBER TO CALL IN THE UNITED STATES IS 800-288-8967. An international telephone number is also available for this conference. THE INTERNATIONAL TELEPHONE NUMBER IS 612-288-0337. The presentation that will be used during the conference call may be obtained on Tuesday, August 31, 1999 by logging on to WWW.NORTHFORKBANK.COM. This press release contains certain forward looking statements with respect to the financial condition, results of operations and business of North Fork following the consummation of the merger that are subject to various factors, which could cause actual results to differ materially from such projections or estimates. Such factors include, but are not limited to, the possibility that anticipated cost savings and revenue enhancements might not be realized and that adverse general economic conditions or an adverse interest rate environment could develop. North Fork's current report on Form 8K to be filed August 31, 1999 with the Securities and Exchange Commission discloses more fully these factors. North Fork, with total assets of approximately $11.5 billion, operates over 110 branch locations throughout the New York Metropolitan area and Connecticut. It is ranked among the Top 50 Commercial Bank Holding Companies in the United States, and its profitability and efficiency are routinely ranked among the industry's best. CONTACTS: NORTH FORK BANCORP DANIEL M. HEALY EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER (516) 844-1258 RELIANCE BANCORP, INC. PAUL D. HAGAN SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER (516) 222-9300 EXT. 215 EX-99 6 EXHIBIT 99.3 - PRESENTATION North Fork Bancorporation, Inc. (NYSE: NFB) [NFB LOGO] Acquisition of Reliance Bancorp, Inc. - Parent Company of - Reliance Federal Savings Bank August 30, 1999 Conference Call Logistics North Fork Bancorporation, Inc. will host a conference call at 2:00 p.m. E.D.T. tomorrow, Tuesday, August 31. The number to call in the United States is 800-288-8967 and Internationally (612) 288-0337. Persons who find this time inconvenient can call after 6:00 p.m. E.D.T. at 800-475-6701 for the USA, or Internationally at (320) 365-3844 Access Code#468397 for a taped rebroadcast that will be continuously played for 30 hours. A copy of this presentation can be accessed on the Internet at www.northforkbank.com, RELY ACQUISITION icon. North Fork Bancorp This presentation contains certain forward looking statements with respect to the financial condition, results of operations and business of North Fork following the consummation of the merger with Reliance Bancorp, Inc. that are subject to various factors which could cause actual results to differ materially from such projections or estimates. Such factors include, but are not limited to, the possibility that the anticipated cost savings, revenue enhancements and timing might not be realized. Additionally, a deterioration in economic conditions adversely effecting the interest rate environment could develop that may effect these forward looking statements. North Fork's current report on Form 8-K filed on August 31, 1999 discloses more fully these factors. For more information regarding North Fork's pending acquisition of JSB Financial, Inc. the parent of Jamaica Savings Bank. The August 17, 1999 investor presentation can be accessed on the Internet at www.NorthForkBank.com, JSB ACQUISITION icon, and a Form 8-K was filed on August 16, 1999 discussing the acquisition. DESCRIPTION OF RELIANCE BANCORP [NFB LOGO] Principal subsidiary is Reliance Federal Savings Bank with 29 locations in Queens (7), Nassau (13), and Suffolk (9) counties of New York. RELY Summary Financial Highlights as of June 30, 1999 Total Assets $2.5 billion Loans, net $1.0 billion Securities $1.3 billion Deposits $1.6 billion Shareholders' Equity $172 million Equity to Assets 7.0% THE MERGER TRANSACTION [NFB LOGO] Fixed Exchange Ratio 2.0 shares of NFB for each share of RELY Acquisition Price Per Share $38.12 (based on the 8/27/99 closing price of NFB) Aggregate Price $352 million, including options Price to RELY Book Value 190% Price to RELY 2000 EPS Multiple 15.2 x Premium to Market 12% Pro forma Ownership NFB: 74%, JSB: 16%, RELY: 10% Anticipated Closing First Quarter 2000, prior to pending JSB acquisition Accounting Treatment Purchase, 100% stock, tax free exchange, NFB share repurchase up to 50% of consideration Approvals Regulatory and Reliance Shareholders' Lockup Option 19.9% of RELY Walk away Double trigger walk away - 15% absolute price decline for NFB and a 15% relative price decline from the selected index. NFB has option to top-up. Due Diligence Completed, including Y2K RATIONALE FOR TRANSACTION [NFB LOGO] Immediately accretive to GAAP and cash earnings per share. o In-market transaction that leverages off the JSB Financial acquisition both in terms of capital utilization and branch redundancies. o Provides $1.6 billion of additional core deposits. o Provides significant cost savings and exceptional returns to shareholders. o Adds 160,000 retail customers with new markets for commercial banking products. o Significantly enhances our Long Island market penetration. o Very low execution risk. MARKETSHARE PENETRATION [NFB LOGO] Nassau County Rank Institution Deposits (millions) %County - ------------------------------------------------------------------------------- 1 Chase Manhattan $3,821 11.61% 2 ABN Ambro 3,374 10.25% 3 Astoria Financial 3,095 9.40% 4 Greenpoint Financial 3,933 11.95% 5 Dime Bancorp 2,702 8.21% 6 Fleet Boston 2,692 8.18% 7 Roslyn Bancorp 2,674 8.12% 8 Citigroup 2,230 6.77% NFB / RELY 2,003 6.08% 9 Bank of New York 1,634 4.96% 10 HSBC Holdings 1,612 4.90% 11 North Fork Bancorp 1,246 3.79% 12 Reliance Bancorp 757 2.30% 13 Apple Bank 599 1.82% 14 Emigrant Bancorp 580 1.76% 15 Ridgewood Savings 536 1.63% 30 Institutions - Total Nassau $32,915 Suffolk County Rank Institution Deposits (millions) %County - ------------------------------------------------------------------------------ 1 Fleet Boston $4,612 19.74% 2 Chase Manhattan 3,724 15.94% NFB / RELY 2,937 12.57% 3 North Fork Bancorp 2,505 10.72% 4 Astoria Financial 1,963 8.40% 5 Dime Bancorp 1,669 7.14% 6 ABN Amro 1,542 6.60% 7 Bank of New York 1,298 5.56% 8 HSBC Holdings 1,058 4.53% 9 Greenpoint Financial 805 3.45% 10 Suffolk Bancorp 790 3.38% 11 Apple Bank 715 3.06% 12 Citigroup 566 2.42% 13 Roslyn Bancorp 440 1.88% 14 Reliance Bancorp 432 1.85% 15 Haven Bancorp 282 1.21% 23 Institutions - Total Suffolk $23,364 Queens County Rank Institution Deposits (millions) %County - ------------------------------------------------------------------------------ 1 Chase Manhattan $4,102 14.54% 2 Citigroup 3,044 10.78% 3 Astoria Financial 2,977 10.55% NFB / RELY 2,685 9.51% 4 North Fork Bankcorp 2,245 7.96% 5 Greenpoint Financial 2,062 7.30% 6 HSBC Holdings 2,009 7.12% 7 Haven Bankcorp 1,132 4.01% 8 Ridgewood Savings 1,125 3.98% 9 Queens County Bancorp 1,033 3.66% 10 Independence Community 830 2.94% 11 Maspeth Federal S&L 735 2.61% 12 Roslyn Bancorp 692 2.45% 13 Dime Bancorp 646 2.29% 14 Fleet Boston 567 2.01% 15 Emigrant Bancorp 527 1.87% 18 Reliance Bancorp 440 1.56% 46 Institutions - Total Queens $28,222 Significantly enhances marketshare on Long Island. Source: SNL Branch Migration DataSource North Fork Bancorp includes the effect of the pending acquisition of JSB Financial. ACCRETIVE TO NFB EARNINGS [NFB LOGO]
2000 After 2000 GAAP EPS 2000 Cash EPS Tax Earnings NFB/JSB Pro Forma Pooling Transaction $304,672 $1.78 $1.82 LESS: Share Issuance Proceeds (1) ($7,118) Earnings on Cash Proceeds for Deal (2) ($8,904) RELIANCE BANCORP $21,586 Estimated Benefits of Merger: Cost Savings $ 14,860 Revenue Enhancements $ 3,250 Tax Efficiencies (3) $ 2,070 Goodwill Amortization ($8,974) Pro Forma Combined $321,442 $1.86 $1.99 %Accretion 5% 9%
This earnings model assumes no leverage on the balance sheet. If leverage were added in the future, add $0.06 per share for every $1 billion at 150 basis points. (1) Earnings on cash proceeds from tainted shares reissuance for JSB transaction no longer necessary. (2) Foregone earnings on cash proceeds for share repurchase, options and restructure charge for Reliance transaction. (3) Benefit derived from NFB's lower effective tax rate. PRO FORMA BALANCE SHEET [NFB LOGO]
June 30, 1999, in NFB NFB / JSB Reliance Pro Forma millions, except per Stand Alone Pro Forma Bancorp Combined* share amounts Assets $11,522 $13,189 $2,452 $15,574 Investments $4,856 $5,222 $1,342 $6,284 Loans, net $6,064 $7,248 $983 $8,237 Total Deposits $6,489 $7,599 $1,556 $9,198 Total Borrowings $3,850 $3,900 $652 $4,552 Capital Securities $199 $199 $50 $244 Stockholders' Equity $804 $1,226 $172 $1,242 Intangibles $82 $82 $54 $353 Stated Book Value $5.79 $7.18 $19.99 $7.21 Tangible Book Value $5.20 $6.70 $13.66 $5.16 Estimated EPS 2000 $1.75 $1.78 $1.86 Cash EPS 2000 $1.79 $1.82 $1.99 * Includes the effect of the share repurchase and restructure charge. MERGER AND RESTRUCTURE CHARGE [NFB LOGO]
($ in millions) Pre tax After tax Merger Expense $6.2 $6.0 Restructure Charges: Contracts and Severance $37.4 $29.1 Facility and Equipment 6.7 3.8 Other 0.9 0.5 ----- ----- Total Restructure Charge $45.0 $33.4 Tax Bad Debt Recapture $3.0 $2.0 Total Merger and Restructure Charge $54.2 $41.4 The charge is included in goodwill for financial reporting purposes. COMPARABLE M&A TRANSACTION PRICING [NFB LOGO]
($ in millions) Price as a Multiple of: ----------------------- Announce Acquiror Target Announced Premium Book Tang Date Value to Value Book Forward Market Value EPS 8/16/99 North Fork Bancorp JSB Financial $569.4 4.4% 1.52 x 1.52 x 18.0 x 1999 YTD 07/28/99 BB&T Corporation Premier $597.7 (3.3%) 3.27 x 3.35 x 21.5 x Bancshares 06/29/99 Hudson United Bncp JeffBanks Inc. 386.9 18.5 2.74 2.85 19.9 06/07/99 Sky Financial Group Mahoning Natl 306.6 54.5 3.16 3.16 18.6 Bncp 06/02/99 Peoples Heritage Banknorth 776.9 22.8 2.35 3.06 14.2 Group Inc. 05/07/99 Zions Bancorp Pioneer 346.5 NM 5.13 5.13 22.7 Bankcorp. 05/19/99 U.S. Bancorp Western 958.0 13.8 2.61 4.37 22.1 Bankcorp 04/19/99 Citizens Bkng Corp. F&M Bncp 822.5 27.8 3.27 3.42 21.1 Inc. 02/22/99 Union Planters Corp. Republic Bkng 412.0 10.8 2.42 2.60 19.3 Corp. 02/18/99 U.S. Bancorp Bank of 306.3 15.9 4.55 4.55 19.6 Commerce 02/18/99 Summit Bancorp Prime Bancorp 302.5 0.5 3.25 3.35 21.4 Inc. 1999 Median: 15.9% 3.20 x 3.35 x 20.5 x 8/30/99 North Fork Bancorp Reliance $352.1 12.5% 1.90 x 2.79 x 15.2 x Bancorp
IN SHORT THIS TRANSACTION... ...adds to GAAP and cash earnings immediately. ...adds over $1.6 billion in core deposits. ...adds 160,000 more customers. ...is capital efficient. ...is simple to execute. EX-99 7 EXHIBIT 99.4 - PRO FORMA FINANCIAL STATEMENTS PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of North Fork Bancorporation, Inc. ("North Fork"), Reliance Bancorp, Inc. ("Reliance"), and JSB Financial, Inc. ("JSB"), under the assumptions and adjustments set forth in the accompanying notes to the unaudited pro forma condensed combined financial statements. The Pro Forma Condensed Combined Balance Sheets give effect to the pending mergers of Reliance and JSB as if such transactions had become effective as of June 30, 1999. The Pro Forma Condensed Combined Statements of Income give effect to the Reliance transaction as if the pending merger had become effective as of January 1, 1998 and to the JSB transaction as if the pending merger had become effective as of the beginning of each of the periods for which information is presented. The pro forma information assumes that the pending Reliance merger is accounted for under the purchase method of accounting and the pending JSB merger is accounted for using the pooling-of-interests method of accounting. Reliance's annual reporting periods are as of and for the year ended June 30, whereas North Fork and JSB utilize a calendar year basis. Reliance's financial results for the six months ended June 30, 1999 and the twelve months ended December 31, 1998 have been conformed to the calendar year reporting period of North Fork. The pro forma condensed combined financial statements should be read in conjunction with, and are qualified in their entirety by, the historical financial statements, including the notes thereto, of North Fork, Reliance and JSB. Certain Reliance and JSB financial information has been reclassified to conform with North Fork. The pro forma condensed combined financial statements do not give effect to the anticipated cost savings and revenue enhancement opportunities that could result from the mergers. The pro forma information is not necessarily indicative of the combined financial position or the results of operations in the future or of the combined financial position or the results of operations which would have been realized had the mergers been consummated during the periods or as of the dates for which the pro forma information is presented. Pro forma per share amounts for the combined pro forma North Fork, Reliance, and JSB entity are based on the respective exchange ratios and the assumed share repurchase.
NORTH FORK BANCORPORATION, INC. COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEETS (UNAUDITED) JUNE 30, 1999 (DOLLARS IN THOUSANDS) {PRIVATE} North Fork/ All Combined Pro Forma Reliance Pro Forma Transactions North Fork Reliance Adjustments Pro Forma JSB Adjustments Pro Forma ------------------------------------- ------------------------------------- ------------ ASSETS Cash & Due from Banks $155,247 $33,255 ($25,369) 3 $163,133 $14,393 $177,526 Money Market Investments 177,372 - 177,372 64,500 241,872 Securities: Available-for-Sale 3,515,280 1,057,206 (232,339) 5,6 4,340,147 97,530 4,437,677 Held-to-Maturity 1,340,653 284,752 1,625,405 221,364 1,846,769 ------------------------------------- -------------------------------------- ------------ Total Securities 4,855,933 1,341,958 (232,339) 5,965,552 318,894 - 6,284,446 ------------------------------------- -------------------------------------- ------------ Loans, net of Unearned Income & Fees 6,063,611 983,193 7,046,804 1,190,131 8,236,935 Allowance for Loan Losses 69,390 9,120 78,510 5,943 84,453 ------------------------------------- -------------------------------------- ------------ Net Loans 5,994,221 974,073 - 6,968,294 1,184,188 - 8,152,482 ------------------------------------- -------------------------------------- ------------ Premises & Equipment, Net 74,324 16,368 90,692 18,702 109,394 Accrued Interest Receivable 68,094 13,095 81,189 9,005 90,194 Intangible Assets 82,109 54,373 216,891 2,4 353,373 - 353,373 Other Assets 114,985 18,651 14,777 3,4 148,413 10,339 6,357 8 165,109 ------------------------------------- -------------------------------------- ------------ Total Assets $11,522,285 $2,451,773 ($26,040) $13,948,018 $1,620,021 $6,357 $15,574,396 ------------------------------------- -------------------------------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Demand Deposits $1,437,155 $70,829 $1,507,984 $80,515 $1,588,499 Savings N.O.W. & Money Market Deposits 2,864,959 642,211 3,507,170 635,275 4,142,445 Time Deposits 2,187,353 842,778 3,030,131 436,873 3,467,004 ------------------------------------- -------------------------------------- ------------ Total Deposits 6,489,467 1,555,818 - 8,045,285 1,152,663 - 9,197,948 ------------------------------------- -------------------------------------- ------------ Federal Funds Purchased & Securities Sold Under Agreements to Repurchase 3,014,796 313,716 3,328,512 - 3,328,512 Other Borrowings 835,000 338,718 1,173,718 50,000 1,223,718 Accrued Expenses & Other Liabilities 179,443 21,854 51,150 4 252,447 42,443 43,223 8 338,113 ------------------------------------- -------------------------------------- ------------ Total Liabilities $10,518,706 $2,230,106 $51,150 $12,799,962 $1,245,106 $43,223 $14,088,291 ------------------------------------- -------------------------------------- ------------ Capital Securities 199,301 50,000 (5,000) 5 244,301 - - 244,301 STOCKHOLDERS' EQUITY Preferred Stock - - - - - - - Common Stock 362,730 108 (108) 3 362,730 160 69,394 7 432,284 Additional Paid in Capital 34,468 121,037 (146,961) 3 8,544 170,072 (178,616) 7 - Retained Earnings 611,960 115,976 (115,976) 3 611,960 342,633 (108,211) 7 846,382 Accumulated Other Comprehensive Income- Unrealized (Losses)/Gains on Securities Available-for-Sale, net of taxes (40,902) (10,546) 11,120 3 (40,328) 42,617 2,289 Deferred Compensation (22,771) (4,342) 4,342 3 (22,771) (4,758) 4,758 7 (22,771) Treasury Stock (141,207) (50,566) 175,393 3,6 (16,380) (175,809) 175,809 7 (16,380) ------------------------------------- -------------------------------------- ------------ Total Stockholders' Equity 804,278 171,667 (72,190) 903,755 374,915 (36,866) 1,241,804 ------------------------------------- -------------------------------------- ------------ Total Liabilities and Stockholders' Equity $11,522,285 $2,451,773 ($26,040) $13,948,018 $1,620,021 $6,357 $15,574,396 ------------------------------------- -------------------------------------- ------------ All Combined Transactions SELECTED CAPITAL RATIOS: North Fork Pro Forma ---------- ------------ Tier 1 Capital Ratio 14.52% 12.42% Risk Adjusted Capital Ratio 15.57% 13.35% Leverage Ratio 8.50% 7.47%
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
NORTH FORK BANCORPORATION, INC. COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) {PRIVATE} North Fork/ All Combined Pro Forma Reliance Transactions North Fork Reliance Adjustments Pro Forma JSB Pro Forma ---------------------------------------------------------------------------------- Interest Income $396,224 $82,512 ($7,978) 6 $470,758 $56,324 $527,082 Interest Expense 172,735 47,567 220,302 18,741 239,043 ---------------------------------------------------------------------------------- Net Interest Income 223,489 34,945 (7,978) 250,456 37,583 288,039 Provision for Loan Losses 2,500 150 2,650 12 2,662 ---------------------------------------------------------------------------------- Net Interest Income after Provision for Loan Losses 220,989 34,795 (7,978) 247,806 37,571 285,377 Non-Interest Income 28,976 4,036 33,012 1,904 34,916 Net Securities Gains 9,720 112 9,832 - 9,832 Non-Interest Expense 87,489 20,692 4,501 2 112,682 14,312 126,994 ---------------------------------------------------------------------------------- Income before Income Taxes 172,196 18,251 (12,479) 177,968 25,163 203,131 Provision for Income Taxes 60,268 8,090 (2,792) 6 65,566 10,791 76,357 ---------------------------------------------------------------------------------- Net Income $111,928 $10,161 ($9,687) $112,402 $14,372 $126,774 ---------------------------------------------------------------------------------- Earnings Per Share-Basic $0.81 $0.79 $0.75 Earnings Per Share-Diluted $0.80 $0.78 $0.74 Weighted Average Shares Outstanding-Basic 138,794 141,952 169,963 Weighted Average Shares Outstanding-Diluted 139,690 143,750 172,370
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
NORTH FORK BANCORPORATION, INC. COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) {PRIVATE} North Fork/ All Combined Pro Forma Reliance Transactions North Fork Reliance Adjustments Pro Forma JSB Pro Forma ---------------------------------------------------------------------------------- Interest Income $753,100 $163,762 ($19,718) 6 $897,144 $117,813 $1,014,957 Interest Expense 328,456 95,020 423,476 38,476 461,952 ---------------------------------------------------------------------------------- Net Interest Income 424,644 68,742 (19,718) 473,688 79,337 553,005 Provision for Loan Losses 15,500 950 16,450 51 16,501 ---------------------------------------------------------------------------------- Net Interest Income after Provision for Loan Losses 409,144 67,792 (19,718) 457,218 79,286 536,504 Non-Interest Income 54,885 7,563 62,448 5,848 68,296 Net Securities Gains 9,433 (1) 9,432 - 9,432 Non-Interest Expense 230,381 40,975 9,001 2 280,357 27,458 307,815 ---------------------------------------------------------------------------------- Income before Income Taxes 243,081 34,379 (28,719) 248,741 57,676 306,417 Provision for Income Taxes 75,106 15,288 6,901 6 83,493 13,288 96,781 ---------------------------------------------------------------------------------- Net Income $167,975 $19,091 ($21,818) $165,248 $44,388 $209,636 ---------------------------------------------------------------------------------- Earnings Per Share-Basic $1.19 $1.16 $1.22 Earnings Per Share-Diluted $1.18 $1.15 $1.20 Weighted Average Shares Outstanding-Basic 140,706 141,972 171,351 Weighted Average Shares Outstanding-Diluted 141,766 144,066 174,288
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
NORTH FORK BANCORPORATION, INC. COMBINED WITH JSB FINANCIAL, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) {PRIVATE} North Fork/ Pro Forma JSB North Fork JSB Adjustments Pro Forma ----------------------------------------------------------- Interest Income $724,424 $109,611 $834,035 Interest Expense 326,803 39,874 366,677 ----------------------------------------------------------- Net Interest Income 397,621 69,737 - 467,358 Provision for Loan Losses 8,100 648 8,748 ----------------------------------------------------------- Net Interest Income after Provision for Loan Losses 389,521 69,089 - 458,610 Non-Interest Income 50,915 13,069 63,984 Net Securities Gains 8,407 6,991 15,398 Non-Interest Expense 173,709 27,434 201,143 ----------------------------------------------------------- Income before Income Taxes 275,134 61,715 - 336,849 Provision for Income Taxes 104,613 24,625 129,238 ----------------------------------------------------------- Net Income $170,521 $37,090 - $207,611 ----------------------------------------------------------- Earnings Per Share-Basic $1.24 $1.25 Earnings Per Share-Diluted $1.22 $1.22 Weighted Average Shares Outstanding-Basic 136,761 166,335 Weighted Average Shares Outstanding-Diluted 139,333 169,903
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
NORTH FORK BANCORPORATION, INC. COMBINED WITH JSB FINANCIAL, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) {PRIVATE} North Fork/ Pro Forma JSB North Fork JSB Adjustments Pro Forma ----------------------------------------------------------- Interest Income $613,762 $108,345 $722,107 Interest Expense 281,107 40,217 321,324 ----------------------------------------------------------- Net Interest Income 332,655 68,128 - 400,783 Provision for Loan Losses 8,000 (1,400) 6,600 ----------------------------------------------------------- Net Interest Income after Provision for Loan Losses 324,655 69,528 - 394,183 Non-Interest Income 38,602 4,345 42,947 Net Securities Gains 6,224 2 6,226 Non-Interest Expense 200,427 27,598 228,025 Income before Income Taxes 169,054 46,277 - 215,331 Provision for Income Taxes 74,606 19,552 94,158 ----------------------------------------------------------- Net Income $94,448 $26,725 - $121,173 ----------------------------------------------------------- Earnings Per Share-Basic $0.69 $0.73 Earnings Per Share-Diluted $0.68 $0.71 Weighted Average Shares Outstanding-Basic 136,504 166,690 Weighted Average Shares Outstanding-Diluted 138,707 170,015
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS Note (1) Basis of Presentation The pro forma information presented is not necessarily indicative of the results of operations or the combined financial position that would have resulted had the pending merger with Reliance become effective as of January 1, 1998 and the pending merger with JSB become effective at the beginning of each of the periods indicated. The pro forma information presented is not necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. It is anticipated that the mergers will be completed during the first quarter of 2000. The Reliance transaction will be accounted for under the purchase method of accounting, and the assets and liabilities of Reliance will be recorded at their estimated fair values. However, for purposes of the pro forma financial statements these adjustments have not been made as management is still in the process of quantifying the required adjustments. The JSB transaction will be accounted for as a pooling-of-interests and, as such, the assets and liabilities of JSB will be combined with those of North Fork at their historical values, accordingly, the financial statements of JSB will be combined with the financial statements of North Fork as of the earliest period presented. The Pro Forma Condensed Combined Balance Sheet gives effect to the pending mergers of Reliance and JSB as if such transactions had become effective as of June 30, 1999. The Pro Forma Condensed Combined Statements of Income give effect to the Reliance transaction as if the pending merger had become effective as of January 1, 1998 and to the JSB transaction as if the pending merger had become effective as of the beginning of each of the periods for which information is presented. Reliance's annual reporting periods are as of and for the year ended June 30, whereas North Fork and JSB utilize a calendar year basis. Reliance's financial results for the six months ended June 30, 1999 and the twelve months ended December 31, 1998 have been conformed to the calendar year reporting period of North Fork and JSB. RELIANCE PRO FORMA ADJUSTMENTS ------------------------------ Note (2) The excess consideration paid for Reliance by North Fork over of the net assets acquired, is as follows: North Fork Common Stock (17,061,420 shares at $19.0625 per share) $325,233 North Fork investment in Reliance, at cost (55,500 shares at $36.21 per share) 2,010 Cash payments for exercise of options, net of tax benefit 19,849 Transaction Costs, net of taxes 41,466 -------- Total Consideration Paid $388,558 Less: Reliance Tangible Value at June 30, 1999 117,294 -------- Intangible Asset $271,264 Less: Reliance Historical Intangible Asset 54,373 -------- Net Intangible Asset Recognized $ 216,891 ======== The intangible asset of $271.3 million will be amortized on a straight-line basis over a 20 year period. Included as a pro forma adjustment to non-interest expense for the six month period ended June 30, 1999 and for the year ended December 31, 1998 is $4.5 million and $9.0 million, respectively, of intangible amortization expense. Note (3) Pro forma adjustments to stockholders' equity at June 30, 1999 reflect the merger accounted for as a purchase transaction through: (a) the assumed repurchase of an additional 8,500,000 shares of North Fork common stock at $19.0625 per share, (North Fork's market price as of August 27, 1999) and purchases completed subsequent to June 30, 1999 of 3,085,000 shares at $20.84 per share. (b) the issuance of 17,061,420 shares of North Fork's treasury stock at $19.0625 (held at an average per share cost of $20.58) , for 8,530,710 outstanding common shares of Reliance based on the Exchange Ratio of 2.0 (which excludes 55,500 shares of Reliance common stock held by North Fork at an average per share cost of $36.21, which are assumed to be retired at cost), (c) a cash payment of $25,368,850, offset by $5,521,130 in related tax benefits for the satisfaction of all Reliance stock options outstanding at June 30, 1999. Note (4) An adjustment to the intangible asset of $41.5 million net of taxes has been recorded in the Pro Forma Condensed Combined Balance Sheet to reflect North Fork's and Reliance's best estimate of the transaction costs to be incurred upon consummation of the transaction and reflected as part of the purchase price for financial reporting purposes. A summary of the estimated transaction costs are as follows: Type of Cost Expected Costs ------------ -------------- (in thousands) Transaction Costs $ 6,226 Merger Related Compensation and Severance Costs 37,360 Facilities and System Costs 6,689 Other Merger Related Costs 875 --------------- Total Pre-Tax Transaction Costs 51,150 Less: Related Tax Benefit (11,634) Add: State and Local Tax Bad Debt Recapture, Net of Federal Benefit 1,950 --------------- Total Transaction Costs, Net of Taxes $ 41,466 =============== Transaction costs consist primarily of investment banking, legal fees, other professional fees and expenses associated with shareholder and customer notifications. Merger related compensation and severance costs consist primarily of employee severance, compensation arrangements, transitional staffing and related employee benefit expenses. Facility and system costs consist primarily of lease termination charges and equipment write-offs resulting from the consolidation of overlapping branch locations, duplicate headquarters and operational facilities. Also reflected are the costs associated with the cancellation of certain data and item processing contracts and the deconversion of Reliance's computer systems. Other merger related costs arise primarily from the application of North Fork's accounting practices to the accounts of Reliance and other expenses associated with the integration of operations. Refinements to the foregoing estimates may occur subsequent to the completion of the Reliance merger. Although no assurance can be given, North Fork expects that cost savings will be achieved at an annual rate of approximately $14.9 million on an after tax basis by the end of 2000 as a result of steps to be taken to integrate operations and to achieve efficiencies in certain combined lines of businesses. These anticipated merger cost savings were determined based upon preliminary estimates. The pro forma financial information does not give effect to these expected cost savings, nor does it include any estimates of revenue enhancements that could be realized with the Reliance merger. Note (5) Reflects the elimination of $5.0 million of Reliance Capital Securities which were held by North Fork in its securities available-for-sale portfolio. Note (6) Treasury shares previously acquired and reissued in order to fund the Reliance transaction are assumed to have been acquired as of January 1, 1999 and January 1, 1998, with the cash outlays for such purposes being obtained from the liquidation of securities held in the available-for-sale portfolio, yielding 6.25%, at par. JSB FINANCIAL, INC. PRO FORMA ADJUSTMENTS ----------------------------------------- Note (7) Pro forma adjustments to stockholders equity, at June 30, 1999, reflect the JSB merger accounted for as a pooling-of-interest through the exchange of 27,821,526 shares of North Fork common stock (using an Exchange Ratio of 3.0) for 9,273,842 actual outstanding shares of JSB, (reflecting the retirement of 6,726,158 shares of JSB treasury stock, at an average cost of $26.14 per share). Pro forma adjustments do not include any shares of North Fork Common Stock to be received upon consummation of the JSB merger by holders of JSB Options. Note (8) The pro forma condensed combined balance sheet reflects a non-recurring merger and restructuring charge of $36.9 million, net of taxes, which will be recognized upon consummation of the JSB merger. Such charge will reduce diluted earnings per share for the period in which such charge is recognized by approximately $.20 (based on pro forma weighted average shares outstanding of 185,762,000 as of June 30,1999). A summary of the estimated merger and restructuring charges are as follows: Type of Cost Expected Costs ------------ -------------- (in thousands) Merger Expense $ 4,148 Restructuring Charge: Merger Related Compensation and Severance Costs 32,566 Facility and System Costs 5,635 Other Merger Related Costs 875 -------------- Total Pre-Tax Merger and Restructuring Charge 43,224 Less: Related Tax Benefit (13,858) Add: State and Local Tax Bad Debt Recapture, Net of Federal Benefit 7,500 -------------- Total After-Tax Merger and Restructuring Charge $ 36,866 ============== Merger expenses consist primarily of investment banking, legal and other professional fees and expenses associated with shareholder notification. Restructure related compensation and severance costs consist primarily of employee severance, compensation arrangements, transitional staffing and the related employee benefits expenses. Facility and system costs consist primarily of lease termination charges and equipment write-offs resulting from the consolidation of overlapping branch locations and duplicate headquarters and operational facilities. Also reflected are the costs associated with the cancellation of certain data and item processing contracts and the deconversion of existing JSB computer systems. Refinements to the foregoing estimates may occur subsequent to the completion of the JSB merger. The effect of the proposed charge has been reflected in the pro forma condensed combined balance sheet as of June 30, 1999; however, it has not been reflected in the pro forma combined statements of income. Although no assurance can be given, North Fork expects that cost savings will be achieved at an annual rate of approximately $13.2 million on a net of taxes basis by the end of 2000 as a result of steps to be taken to integrate operations and to achieve efficiencies in certain combined lines of business. These anticipated cost savings were determined based upon preliminary estimates. The pro forma financial information does not give effect to these expected cost savings, nor does it include any estimates of revenue enhancements that could be realized with the JSB merger. Note (9). Pro Forma Weighted Average Shares Outstanding The pro forma weighted average shares outstanding for the six month period ended June 30, 1999 and for the year ended 1998 reflect the assumed issuance of 2.0 shares of North Fork Common Stock for each average equivalent share of Reliance Common Stock outstanding during such periods (all Reliance options are assumed to have been settled for cash in accordance with the provisions of the Limited Rights), and the pro forma weighted average shares outstanding for all periods presented reflect the assumed issuance of 3.0 shares of North Fork Common Stock for each average equivalent share of JSB Common Stock outstanding during such periods. EX-99 8 EXHIBIT 99.5 - STOCK OPTION AGREEMENT JSB FINANCIAL, INC. STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of August 16, 1999 ("Agreement"), by and between JSB Financial, Inc., a Delaware corporation ("Issuer"), and North Fork Bancorporation, Inc., a Delaware corporation ("Grantee"). RECITALS A. The Agreement and Plan of Merger. Grantee and Issuer have entered into an Agreement and Plan of Merger, dated as of August 16, 1999 ("Merger Agreement"), providing for, among other things, the merger of Issuer with and into Grantee, with Grantee being the surviving corporation. B. Condition to Agreement and Plan of Merger. As a condition and an inducement to Grantee's execution and delivery of the Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee the Option (as hereinafter defined). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as follows: 1. Defined Terms. Capitalized terms which are used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement. 2. Grant of Option. Subject to the terms and conditions set forth herein, Issuer hereby grants to Grantee an irrevocable option ("Option") to purchase up to 1,848,092 shares of common stock, par value $.01 per share ("Issuer Common Stock"), of Issuer (as adjusted as set forth herein, the "Option Shares," which shall include the Option Shares before and after any transfer of such Option Shares, but in no event shall the number of Option Shares for which this Option is exercisable exceed 19.9% of the issued and outstanding shares of Issuer Common Stock), at a purchase price per Option Share (as adjusted as set forth herein, the "Purchase Price") equal to $58.75. 3. Exercise of Option. (a) Provided that (i) Grantee or Holder (as hereinafter defined), as applicable, shall not be in material breach of the agreements or covenants contained in this Agreement or the Merger Agreement, 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, the Holder may exercise the Option, in whole or in part, at any time and from time to time, following the occurrence of a Purchase Event (as hereinafter defined); provided, that, the Option shall terminate and be of no further force or effect upon the earliest to occur of (A) the Effective Time, (B) termination of the Merger Agreement in accordance with the terms thereof prior to the occurrence of a Purchase Event or a Preliminary Purchase Event other than a termination thereof by Grantee pursuant to Section 6.1(b)(ii) of the Merger Agreement (a termination of the Merger Agreement by Grantee pursuant to Section 6.1(b)(ii) of the Merger Agreement, being referred to herein as a "Default Termination"), (C) 18 months after a Default Termination or (D) 18 months after termination of the Merger Agreement (other than a Default Termination) following the occurrence of a Purchase Event or a Preliminary Purchase Event; provided, however, that any purchase of shares upon exercise of the Option shall be subject to compliance with applicable law; provided further, however, that if the Option cannot be exercised on any day because of an injunction, order or similar restraint issued by a court of competent jurisdiction, the period during which the Option may be exercised shall be extended so that the Option shall expire no earlier than the tenth business day after such injunction, order or restraint shall have been dissolved or when such injunction, order or restraint shall have become permanent and no longer subject to appeal, as the case may be. The term "Holder" shall mean the holder or holders of the Option from time to time, and which initially is Grantee. The rights set forth in Sections 8 and 9 of this Agreement shall terminate when the right to exercise the Option and Substitute Option terminate (other than as a result of a complete exercise of the Option) as set forth herein. (b) As used herein, a "Purchase Event" means any of the following events: (i) Without Grantee's prior written consent, Issuer shall have authorized, recommended, publicly proposed or publicly announced an intention to authorize, recommend or propose, or Issuer shall have entered into an agreement with any person (other than Grantee or any subsidiary of Grantee) to effect (A) a merger, consolidation or similar transaction involving Issuer or any of its significant subsidiaries, (B) the disposition, by sale, lease, exchange or otherwise, of assets or deposits of Issuer or any of its significant subsidiaries representing in either case 10% or more of the consolidated assets or deposits of Issuer and its subsidiaries, other than in the ordinary course of business, or (C) the issuance, sale or other disposition by Issuer of (including by way of merger, consolidation, share exchange or any similar transaction) securities representing 10% or more of the voting power of Issuer or any of its significant subsidiaries (each of (A), (B) or (C), an "Acquisition Transaction"); or (ii) Any person (other than Grantee or any subsidiary of Grantee) shall have acquired beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Exchange Act")) of, or the right to acquire beneficial ownership of, or any "group" (as such term is defined in Section 13(d)(3) of the Exchange Act), other than a group of which Grantee or any subsidiary of Grantee is a member, shall have been formed which beneficially owns, or has the right to acquire beneficial ownership of, 10% or more of the voting power of Issuer or any of its significant subsidiaries. (c) As used herein, a "Preliminary Purchase Event" means any of the following events: (i) Any person (other than Grantee or any subsidiary of Grantee) shall have commenced (as such term is defined in Rule 14d-2 under the Exchange Act) or shall have filed a registration statement under the Securities Act of 1933, as amended, ("Securities Act"), with respect to, a tender offer or exchange offer to purchase any shares of Issuer Common Stock such that, upon consummation of such offer, such person would own or control 10% or more of the then outstanding shares of Issuer Common Stock (such an offer being referred to herein as a "Tender Offer" or an "Exchange Offer," respectively); or (ii) The stockholders of Issuer shall not have approved the Merger Agreement by the requisite vote at the meeting of the stockholders of the Issuer required to be called to approve the Merger Agreement ("Issuer Meeting"), the Issuer Meeting shall not have been held or shall have been canceled prior to termination of the Merger Agreement or Issuer's Board of Directors shall have withdrawn or modified in a manner adverse to Grantee the recommendation of Issuer's Board of Directors with respect to the Merger Agreement, in each case after it shall have been publicly announced that any person (other than Grantee or any subsidiary of Grantee) shall have (A) made, or disclosed an intention to make, a bona fide proposal to engage in an Acquisition Transaction, (B) commenced a Tender Offer or filed a registration statement under the Securities Act with respect to an Exchange Offer or (C) filed an application (or given a notice), whether in draft or final form, under the Bank Holding Company Act of 1956, as amended ("BHC Act"), the Home Owners' Loan Act of 1933, as amended ("HOLA"), the Bank Merger Act, as amended ("BMA") or the Change in Bank Control Act of 1978, as amended ("CBCA"), for approval to engage in an Acquisition Transaction; or (iii) Any person (other than Grantee or any subsidiary of Grantee) shall have made a bona fide proposal to Issuer or its stockholders by public announcement, or written communication that is or becomes the subject of public disclosure, to engage in an Acquisition Transaction; or (iv) After a proposal is made by a third party to Issuer or its stockholders to engage in an Acquisition Transaction, or such third party states its intention to the Issuer to make such a proposal if the Merger Agreement terminates, and thereafter Issuer shall have breached any representation, warranty, covenant or agreement contained in the Merger Agreement and such breach would entitle Grantee to terminate the Merger Agreement under Section 6.1(b) thereof (without regard to the cure period provided for therein unless such cure is promptly effected without jeopardizing consummation of the Merger pursuant to the terms of the Merger Agreement). As used in this Agreement, the term "person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Preliminary Purchase Event or Purchase Event of which it has knowledge, it being understood that the giving of such notice by Issuer shall not be a condition to the right of Holder to exercise the Option. (e) In the event Holder wishes to exercise the Option, it shall send to Issuer a written notice (the "Option Notice," the date of which being herein referred to as the "Notice Date") specifying (i) the total number of Option Shares it intends to purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 15 business days from the Notice Date for the closing ("Closing") of such purchase ("Closing Date"); provided, that the first Option Notice shall be sent to Issuer within 180 days after the first Purchase Event of which Grantee has been notified. If prior notification to or approval of any Governmental Entity is required in connection with any such purchase, Issuer shall cooperate with the Holder in the filing of the required notice of application for approval and the obtaining of such approval, and the Closing shall occur promptly following such regulatory approvals and any mandatory waiting periods. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. 4. Payment and Delivery of Certificates. (a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately available funds by wire transfer to a bank account designated by Issuer, an amount equal to the Purchase Price multiplied by the number of Option Shares to be purchased on such Closing Date and (ii) present and surrender this Agreement to the Issuer at the address of the Issuer specified in Section 13(f) of this Agreement. (b) At each Closing, simultaneously with the delivery of immediately available funds and surrender of this Agreement as provided in Section 4(a) of this Agreement, (i) Issuer shall deliver to Holder (A) a certificate or certificates representing the Option Shares to be purchased at such Closing, which Option Shares shall be free and clear of all liens (as defined in the Merger Agreement) and subject to no preemptive rights, and (B) if the Option is exercised in part only, an executed new agreement with the same terms as this Agreement evidencing the right to purchase the balance of the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing that Holder shall not offer to sell or otherwise dispose of such Option Shares in violation of applicable federal and state law or of the provisions of this Agreement. (c) In addition to any other legend that is required by applicable law, certificates for the Option Shares delivered at each Closing shall be endorsed with a restrictive legend which shall read substantially as follows: THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF AUGUST 16, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR. It is understood and agreed that the portion of the above legend relating to the Securities Act shall be removed by delivery of substitute certificate(s) without such legend if Holder shall have delivered to Issuer a copy of a letter from the staff of the Securities and Exchange Commission ("SEC"), or an opinion of counsel in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the Securities Act. (d) Upon the giving by Holder to Issuer of an Option Notice, the tender of the applicable purchase price in immediately available funds and the tender of this Agreement to Issuer, Holder shall be deemed to be the holder of record of the shares of Issuer Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Issuer Common Stock shall not then be actually delivered to Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issuance and delivery of stock certificates under this Section 4 in the name of Holder or its assignee, transferee or designee. (e) Issuer agrees (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Issuer Common Stock so that the Option may be exercised without additional authorization of Issuer Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Issuer Common Stock, (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer, (iii) promptly to take all action as may from time to time be required (including (A) complying with all premerger notification, reporting and waiting period requirements and (B) in the event prior approval of or notice to any Governmental Entity is necessary before the Option may be exercised, cooperating fully with Holder in preparing such applications or notices and providing such information to such Governmental Entity as it may require) in order to permit Holder to exercise the Option and Issuer duly and effectively to issue shares of Issuer Common Stock pursuant hereto and (iv) promptly to take all action provided herein to protect the rights of Holder against dilution. 5. Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee (and Holder, if different than Grantee) as follows: (a) Corporate Authority. Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer, and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by Issuer. (b) Beneficial Ownership. To the best knowledge of Issuer, as of the date of this Agreement, no person or group has beneficial ownership of more than 10% of the issued and outstanding shares of Issuer Common Stock. (c) Shares Reserved for Issuance; Capital Stock. Issuer has taken all necessary corporate action to authorize and reserve and permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms, will have reserved for issuance upon the exercise of the Option, that number of shares of Issuer Common Stock equal to the maximum number of shares of Issuer Common Stock at any time and from time to time purchasable upon exercise of the Option, and all such shares, upon issuance pursuant to the Option, will be duly authorized, validly issued, fully paid and nonassessable, and will be delivered free and clear of all claims, liens, encumbrances and security interests (other than those created by this Agreement) and not subject to any preemptive rights. (d) No Violations. The execution, delivery and performance of this Agreement does not and will not, and the consummation by Issuer of any of the transactions contemplated hereby will not, constitute or result in (i) a breach or violation of, or a default under, its Certificate of Incorporation or By-Laws, or the comparable governing instruments of any of its subsidiaries, or (ii) a breach or violation of, or a default under, any agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation of it or any of its subsidiaries (with or without the giving of notice, the lapse of time or both) or under any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which it or any of its subsidiaries is subject, that would, in any case, give any other person the ability to prevent or enjoin Issuer's performance under this Agreement in any material respect. 6. Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that Grantee has full corporate power and authority to enter into this Agreement and, subject to obtaining the approvals referred to in this Agreement, to consummate the transactions contemplated by this Agreement; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee; and this Agreement has been duly executed and delivered by Grantee. 7. Adjustment upon Changes in Issuer Capitalization, Etc. (a) In the event of any change in Issuer Common Stock by reason of a stock dividend, stock split, split-up, recapitalization, combination, exchange of shares or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price therefor, shall be adjusted appropriately, and proper provision shall be made in the agreements governing any such transaction so that Holder shall receive, upon exercise of the Option, the number and class of shares or other securities or property that Holder would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable. If any additional shares of Issuer Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the first sentence of this Section 7(a), upon exercise of any option to purchase Issuer Common Stock outstanding on the date hereof or upon conversion into Issuer Common Stock of any convertible security of Issuer outstanding on the date hereof), the number of shares of Issuer Common Stock subject to the Option shall be adjusted so that, after such issuance, the Option, together with any shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding, without giving effect to any shares subject to or issued pursuant to the Option. No provision of this Section 7 shall be deemed to affect or change, or constitute authorization for any violation of, any of the covenants or representations in the Merger Agreement. (b) In the event that Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its subsidiaries, and Issuer shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Issuer Common Stock shall be changed into or exchanged for stock or other securities of Issuer or any other person or cash or any other property, or the outstanding shares of Issuer Common Stock immediately prior to such merger shall, after such merger, represent less than 50% of the outstanding shares and share equivalents of the merged company or (iii) to sell or otherwise transfer all or substantially all of its assets or deposits to any person, other than Grantee or one of its subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provisions so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option ("Substitute Option"), at the election of Holder, to purchase shares of either (A) the Acquiring Corporation (as hereinafter defined), (B) any person that controls the Acquiring Corporation or (C) in the case of a merger described in clause (ii), Issuer (such person being referred to as "Substitute Option Issuer"). (c) The Substitute Option shall have the same terms as the Option, provided, that, if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to Holder. The Substitute Option Issuer shall also enter into an agreement with Holder in substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock (as hereinafter defined) as is equal to the Assigned Value (as hereinafter defined) multiplied by the number of shares of Issuer Common Stock for which the Option was theretofore exercisable, divided by the Average Price (as hereinafter defined). The exercise price of the Substitute Option per share of Substitute Common Stock ("Substitute Option Price") shall then be equal to the Purchase Price multiplied by a fraction in which the numerator is the number of shares of Issuer Common Stock for which the Option was theretofore exercisable and the denominator is the number of shares of the Substitute Common Stock for which the Substitute Option is exercisable. (e) The following terms have the meanings indicated: (i) "Acquiring Corporation" shall mean (A) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer is the continuing or surviving person, or (C) the transferee of all or substantially all of Issuer's assets (or a substantial part of the assets of its subsidiaries taken as a whole). (ii) "Substitute Common Stock" shall mean the shares of capital stock (or similar equity interest) with the greatest voting power in respect of the election of directors (or persons similarly responsible for the direction of the business and affairs) of the Substitute Option Issuer. (iii) "Assigned Value" shall mean the highest of (A) the price per share of Issuer Common Stock at which a Tender Offer or an Exchange Offer therefor has been made, (B) the price per share of Issuer Common Stock to be paid by any third party pursuant to an agreement with Issuer, (C) the highest closing price for shares of Issuer Common Stock within the 60-day period immediately preceding the consolidation, merger or sale in question and (D) in the event of a sale of all or substantially all of Issuer's assets or deposits, an amount equal to (x) the sum of the price paid in such sale for such assets (and/or deposits) and the current market value of the remaining assets of Issuer, as determined by a nationally recognized investment banking firm selected by Holder, divided by (y) the number of shares of Issuer Common Stock outstanding at such time. In the event that a Tender Offer or an Exchange Offer is made for Issuer Common Stock or an agreement is entered into for a merger or consolidation involving consideration other than cash, the value of the securities or other property issuable or deliverable in exchange for Issuer Common Stock shall be determined by a nationally recognized investment banking firm selected by Holder. (iv) "Average Price" shall mean the average closing price of a share of Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided, that, if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by Issuer, the person merging into Issuer or by any company which controls such person, as Holder may elect. (f) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the aggregate of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the aggregate of the shares of Substitute Common Stock outstanding but for the limitation in the first sentence of this Section 7(f), Substitute Option Issuer shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in the first sentence of this Section 7(f) over (ii) the value of the Substitute Option after giving effect to the limitation in the first sentence of this Section 7(f). This difference in value shall be determined by a nationally recognized investment banking firm selected by Holder. (g) Issuer shall not enter into any transaction described in Section 7(b) of this Agreement unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder and take all other actions that may be necessary so that the provisions of this Section 7 are given full force and effect (including, without limitation, any action that may be necessary so that the holders of the other shares of common stock issued by Substitute Option Issuer are not entitled to exercise any rights by reason of the issuance or exercise of the Substitute Option and the shares of Substitute Common Stock are otherwise in no way distinguishable from or have lesser economic value (other than any diminution in value resulting from the fact that the shares Substitute Common Stock are restricted securities, as defined in Rule 144, promulgated under the Securities Act ("Rule 144"), or any successor provision) than other shares of common stock issued by Substitute Option Issuer). 8. Repurchase at the Option of Holder. (a) Subject to the last sentence of Section 3(a) of this Agreement, at the request of Holder at any time commencing upon the first occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months immediately thereafter, Issuer shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant hereto with respect to which Holder then has beneficial ownership. The date on which Holder exercises its rights under this Section 8 is referred to as the "Request Date." Such repurchase shall be at an aggregate price ("Section 8 Repurchase Consideration") equal to the sum of: (i) The aggregate Purchase Price paid by Holder for any shares of Issuer Common Stock acquired pursuant to the Option with respect to which Holder then has beneficial ownership; (ii) The excess, if any, of (A) the Applicable Price (as defined below) for each share of Issuer Common Stock over (B) the Purchase Price (subject to adjustment pursuant to Section 7 of this Agreement), multiplied by the number of shares of Issuer Common Stock with respect to which the Option has not been exercised; and (iii) The excess, if any, of the Applicable Price over the Purchase Price (subject to adjustment pursuant to Section 7 of this Agreement) paid (or, in the case of Option Shares with respect to which the Option has been exercised but the Closing Date has not occurred, payable) by Holder for each share of Issuer Common Stock with respect to which the Option has been exercised and with respect to which Holder then has beneficial ownership, multiplied by the number of such shares. (b) If Holder exercises its rights under this Section 8, Issuer shall, within 10 business days after the Request Date, pay the Section 8 Repurchase Consideration to Holder in immediately available funds, and contemporaneously with such payment, Holder shall surrender to Issuer the Option and the certificates evidencing the shares of Issuer Common Stock purchased thereunder with respect to which Holder then has beneficial ownership, and Holder shall warrant that it has sole record and beneficial ownership of such shares and that the same are then free and clear of all Liens. Notwithstanding the foregoing, to the extent that prior notification to or approval of any Governmental Entity is required in connection with the payment of all or any portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing option to revoke its request for repurchase pursuant to this Section 8, in whole or in part, or to require that Issuer deliver from time to time that portion of the Section 8 Repurchase Consideration that it is not then so prohibited from paying and promptly file the required notice or application for approval and expeditiously process the same (and each party shall cooperate with the other in the filing of any such notice or application and the obtaining of any such approval). If any Governmental Entity disapproves of any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall promptly give notice of such fact to Holder and Holder shall have the right (i) to revoke the repurchase request or (ii) to the extent permitted by such Governmental Entity, determine whether the repurchase should apply to the Option and/or Option Shares and to what extent to each, and Holder shall thereupon have the right to exercise the Option as to the number of Option Shares for which the Option was exercisable at the Request Date less the number of shares covered by the Option in respect of which payment has been made pursuant to Section 8(a)(ii) of this Agreement. Holder shall notify Issuer of its determination under the preceding sentence within five business days of receipt of notice of disapproval of the repurchase. Notwithstanding anything herein to the contrary, in the event that Issuer delivers to the Holder written notice accompanied by a certification of Issuer's independent auditor each stating that a requested repurchase of Issuer Common Stock would result in the recapture of Issuer's bad debt reserves under the Internal Revenue Code of 1986, as amended ("Code"), Holder's repurchase request shall be deemed to be automatically revoked. Notwithstanding anything herein to the contrary, all of Holder's rights under this Section 8 shall terminate on the date of termination of this Option pursuant to Section 3(a) of this Agreement. (c) For purposes of this Agreement, the "Applicable Price" means the highest of (i) the highest price per share of Issuer Common Stock paid for any such share by the person or groups described in Section 8(d)(i) hereof, (ii) the price per share of Issuer Common Stock received by holders of Issuer Common Stock in connection with any merger, sale or other business combination transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement, or (iii) the highest closing sales price per share of Issuer Common Stock as quoted on the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX") or the National Market System of The Nasdaq Stock Market ("Nasdaq") (or if Issuer Common Stock is not quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share as quoted on the principal trading market or securities exchange on which such shares are traded as reported by a recognized source chosen by Holder) during the 40 business days preceding the Request Date; provided, however, that in the event of a sale of less than all of Issuer's assets, the Applicable Price shall be the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by Holder, divided by the number of shares of Issuer Common Stock outstanding at the time of such sale. If the consideration to be offered, paid or received pursuant to either of the foregoing clauses (i) or (ii) shall be other than in cash, the value of such consideration shall be determined in good faith by an independent nationally recognized investment banking firm selected by Holder and reasonably acceptable to Issuer, which determination shall be conclusive for all purposes of this Agreement. (d) As used herein, "Repurchase Event" shall occur if (i) any person (other than Grantee or any subsidiary of Grantee) shall have acquired beneficial ownership of (as such term is defined in Rule 13d-3, promulgated under the Exchange Act), or the right to acquire beneficial ownership of, or any "group" (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of, more than 25% of the then outstanding shares of Issuer Common Stock, or (ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement shall be consummated. 9. Repurchase of Substitute Option. (a) Subject to the last sentence of Section 3(a) of this Agreement, at the request of Holder at any time commencing upon the first occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months immediately thereafter, Substitute Option Issuer (or any successor entity thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all shares of Substitute Common Stock purchased by Holder pursuant hereto with respect to which Holder then has beneficial ownership. The date on which Holder exercises its rights under this Section 9 is referred to as the "Section 9 Request Date." Such repurchase shall be at an aggregate price ("Section 9 Repurchase Consideration") equal to the sum of: (i) The aggregate Purchase Price paid by Holder for any shares of Substitute Common Stock acquired pursuant to the Substitute Option with respect to which Holder then has beneficial ownership; (ii) The excess, if any, of (A) the Highest Closing Price (as defined below) for each share of Substitute Common Stock over (B) the Purchase Price (subject to adjustment pursuant to Section 7 of this Agreement), multiplied by the number of shares of Substitute Common Stock with respect to which the Substitute Option has not been exercised; and (iii) The excess, if any, of the Highest Closing Price over the Purchase Price (subject to adjustment pursuant to Section 7 of this Agreement) paid (or, in the case of Substitute Option Shares with respect to which the Substitute Option has been exercised but the Closing Date has not occurred, payable) by Holder for each share of Substitute Common Stock with respect to which the Substitute Option has been exercised and with respect to which Holder then has beneficial ownership, multiplied by the number of such shares. (b) If Holder exercises its rights under this Section 9, Substitute Option Issuer shall, within 10 business days after the Section 9 Request Date, pay the Section 9 Repurchase Consideration to Holder in immediately available funds, and contemporaneously with such payment, Holder shall surrender to Substitute Option Issuer the Substitute Option and the certificates evidencing the shares of Substitute Common Stock purchased thereunder with respect to which Holder then has beneficial ownership, and Holder shall warrant that it has sole record and beneficial ownership of such shares and that the same are then free and clear of all Liens. Notwithstanding the foregoing, to the extent that prior notification to or approval of any Governmental Entity is required in connection with the payment of all or any portion of the Section 9 Repurchase Consideration, Holder shall have the ongoing option to revoke its request for repurchase pursuant to this Section 9, in whole or in part, or to require that Substitute Option Issuer deliver from time to time that portion of the Section 9 Repurchase Consideration that it is not then so prohibited from paying and promptly file the required notice or application for approval and expeditiously process the same (and each party shall cooperate with the other in the filing of any such notice or application and the obtaining of any such approval). If any Governmental Entity disapproves of any part of Substitute Option Issuer's proposed repurchase pursuant to this Section 9, Substitute Option Issuer shall promptly give notice of such fact to Holder and Holder shall have the right (i) to revoke the repurchase request or (ii) to the extent permitted by such Governmental Entity, determine whether the repurchase should apply to the Substitute Option and/or Substitute Option Shares and to what extent to each, and Holder shall thereupon have the right to exercise the Substitute Option as to the number of Substitute Option Shares for which the Substitute Option was exercisable at the Section 9 Request Date less the number of shares covered by the Substitute Option in respect of which payment has been made pursuant to Section 9(a)(ii) of this Agreement. Holder shall notify Substitute Option Issuer of its determination under the preceding sentence within five business days of receipt of notice of disapproval of the repurchase. Notwithstanding anything herein to the contrary, in the event that Substitute Option Issuer delivers to the Holder written notice accompanied by a certification of Substitute Option Issuer's independent auditor each stating that a requested repurchase of Substitute Common Stock would result in the recapture of Substitute Option Issuer's bad debt reserves under the Code, Holder's repurchase request shall be deemed to be automatically revoked. Notwithstanding anything herein to the contrary, all of Holder's rights under this Section 9 shall terminate on the date of termination of this Substitute Option pursuant to Section 3(a) of this Agreement. (c) For purposes of this Agreement, the "Highest Closing Price" means the highest of the closing sales price per share of Substitute Common Stock, as quoted on the NYSE, AMEX or Nasdaq (or if the Substitute Common Stock is not quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share as quoted on the principal trading market or securities exchange on which such shares are traded as reported by a recognized source) during the six-month period preceding the Section 9 Request Date. 10. Registration Rights. (a) Demand Registration Rights. Issuer shall, subject to the conditions of Section 10(c) of this Agreement, if requested by any Holder, including Grantee and any permitted transferee ("Selling Shareholder"), as expeditiously as possible, prepare and file and keep current a registration statement under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all shares of Issuer Common Stock or other securities that have been acquired by or are issuable to the Selling Shareholder upon exercise of the Option in accordance with the intended method of sale or other disposition stated by the Selling Shareholder in such request, including without limitation a "shelf" registration statement under Rule 415, promulgated under the Securities Act, or any successor provision, and Issuer shall use its best efforts to qualify such shares or other securities for sale under any applicable state securities laws. (b) Additional Registration Rights. If Issuer at any time after the exercise of the Option proposes to register any shares of Issuer Common Stock under the Securities Act in connection with an underwritten public offering of such Issuer Common Stock, Issuer will promptly give written notice to the Selling Shareholders of its intention to do so and, upon the written request of any Selling Shareholder given within 30 days after receipt of any such notice (which request shall specify the number of shares of Issuer Common Stock intended to be included in such underwritten public offering by the Selling Shareholder), Issuer will cause all such shares for which a Selling Shareholder requests participation in such registration, to be so registered and included in such underwritten public offering; provided, however, that Issuer may elect to not cause some or all of such shares to be so registered (i) if the underwriters in the Public Offering in good faith object for valid business reasons, or (ii) in the case of a registration solely to implement an employee benefit agreement or a registration filed on Form S-4 of the Securities Act or any equivalent or successor Form. If some, but not all the shares of Issuer Common Stock, with respect to which Issuer shall have received requests for registration pursuant to this Section 10(b), shall be excluded from such registration, Issuer shall make appropriate allocation of shares to be registered among the Selling Shareholders desiring to register their shares pro rata in the proportion that the number of shares requested to be registered by each such Selling Shareholder bears to the total number of shares requested to be registered by all such Selling Shareholders then desiring to have Issuer Common Stock registered for sale. (c) Conditions to Required Registration. Issuer shall use all reasonable efforts to cause each registration statement referred to in Section 10(a) of this Agreement to become effective and to obtain all consents or waivers of other parties which are required therefor and to keep such registration statement effective, provided, however, that Issuer may delay any registration of Option Shares required pursuant to Section 10(a) of this Agreement for a period not exceeding 90 days provided Issuer shall in good faith determine that any such registration would adversely affect an offering or contemplated offering of other securities by Issuer, and Issuer shall not be required to register Option Shares under the Securities Act pursuant to Section 10(a) hereof: (i) Prior to the earliest of (A) termination of the Merger Agreement pursuant to Article VI thereof, (B) failure to obtain the requisite stockholder approval pursuant to Section 6.1(b) of the Merger Agreement, and (C) a Purchase Event or a Preliminary Purchase Event; (ii) On more than one occasion during any calendar year; (iii) Within 90 days after the effective date of a registration referred to in Section 10(b) of this Agreement pursuant to which the Selling Shareholder or Selling Shareholders concerned were afforded the opportunity to register such shares under the Securities Act and such shares were registered as requested; and (iv) Unless a request therefor is made to Issuer by Selling Shareholders that hold at least 25% or more of the aggregate number of Option Shares (including shares of Issuer Common Stock issuable upon exercise of the Option) then outstanding. In addition to the foregoing, Issuer shall not be required to maintain the effectiveness of any registration statement after the expiration of nine months from the effective date of such registration statement. Issuer shall use all reasonable efforts to make any filings, and take all steps, under all applicable state or local securities laws to the extent necessary to permit the sale or other disposition of the Option Shares so registered in accordance with the intended method of distribution for such shares; provided, however, that Issuer shall not be required to consent to general jurisdiction or qualify to do business in any state or locality where it is not otherwise required to so consent to such jurisdiction or to so qualify to do business. (d) Expenses. Except where applicable state law prohibits such payments, Issuer will pay all expenses (including without limitation registration fees, qualification fees, blue sky fees and expenses (including the fees and expenses of counsel), legal expenses, including the reasonable fees and expenses of one counsel to the holders whose Option Shares are being registered, printing expenses and the costs of special audits or "cold comfort" letters, expenses of underwriters, excluding discounts and commissions but including liability insurance if Issuer so desires or the underwriters so require, and the reasonable fees and expenses of any necessary special experts) in connection with each registration pursuant to Section 10(a) or 10(b) of this Agreement (including the related offerings and sales by holders of Option Shares) and all other qualifications, notifications or exemptions pursuant to Section 10(a) or 10(b) of this Agreement. (e) Indemnification. (i) In connection with any registration under Section 10(a) or 10(b) of this Agreement, Issuer hereby indemnifies the Selling Shareholders, and each underwriter thereof, including each person, if any, who controls such holder or underwriter within the meaning of Section 15 of the Securities Act, against all expenses, losses, claims, damages and liabilities caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such expenses, losses, claims, damages or liabilities of such indemnified party are caused by any untrue statement or alleged untrue statement that was included by Issuer in any such registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) in reliance upon and in conformity with, information furnished in writing to Issuer by such indemnified party expressly for use therein, and Issuer and each officer, director and controlling person of Issuer shall be indemnified by such Selling Shareholders, or by such underwriter, as the case may be, for all such expenses, losses, claims, damages and liabilities caused by any untrue, or alleged untrue, statement, that was included by Issuer in any such registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) in reliance upon, and in conformity with, information furnished in writing to Issuer by such holder or such underwriter, as the case may be, expressly for such use. (ii) Promptly upon receipt by a party indemnified under this Section 10(e) of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Section 10(e), such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure so to notify the indemnifying party shall not relieve it of any liability which it may otherwise have to any indemnified party under this Section 10(e). In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and satisfactory to such indemnified party. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the indemnified party unless (x) the indemnifying party either agrees to pay the same, (y) the indemnifying party fails to assume the defense of such action with counsel satisfactory to the indemnified party, or (z) the indemnified party has been advised by counsel that one or more legal defenses may be available to the indemnifying party that may be contrary to the interest of the indemnified party, in which case the indemnifying party shall be entitled to assume the defense of such action notwithstanding its obligation to bear fees and expenses of such counsel. No indemnifying party shall be liable for any settlement entered into without its consent, which consent may not be unreasonably withheld. (iii) If the indemnification provided for in this Section 10(e) is unavailable to a party otherwise entitled to be indemnified in respect of any expenses, losses, claims, damages or liabilities referred to herein, then the indemnifying party, in lieu of indemnifying such party otherwise entitled to be indemnified, shall contribute to the amount paid or payable by such party to be indemnified as a result of such expenses, losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative benefits received by Issuer, the Selling Shareholders and the underwriters from the offering of the securities and also the relative fault of Issuer, the Selling Shareholders and the underwriters in connection with the statements or omissions which resulted in such expenses, losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The amount paid or payable by a party as a result of the expenses, losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim; provided, however, that in no case shall any Selling Shareholder be responsible, in the aggregate, for any amount in excess of the net offering proceeds attributable to its Option Shares included in the offering. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any obligation by any holder to indemnify shall be several and not joint with other holders. (iv) In connection with any registration pursuant to Section 10(a) or 10(b) of this Agreement, Issuer and each Selling Shareholder (other than Grantee) shall enter into an agreement containing the indemnification provisions of Section 10(e) of this Agreement. (f) Miscellaneous Reporting. Issuer shall comply with all reporting requirements and will do all such other things as may be necessary to permit the expeditious sale at any time of any Option Shares by the Selling Shareholders thereof in accordance with and to the extent permitted by any rule or regulation promulgated by the SEC from time to time, including, without limitation, Rule 144. Issuer shall at its expense provide the Selling Shareholders with any information necessary in connection with the completion and filing of any reports or forms required to be filed by them under the Securities Act or the Exchange Act, or required pursuant to any state securities laws or the rules of any stock exchange. (g) Issue Taxes. Issuer will pay all stamp taxes in connection with the issuance and the sale of the Option Shares and in connection with the exercise of the Option, and will save the Selling Shareholders harmless, without limitation as to time, against any and all liabilities, with respect to all such taxes. 11. Quotation; Listing. If Issuer Common Stock or any other securities to be acquired in connection with the exercise of the Option are then authorized for quotation or trading or listing on the NYSE, AMEX, Nasdaq or any other securities exchange, Issuer, upon the request of Holder, will promptly file an application, if required, to authorize for quotation or trading or listing the shares of Issuer Common Stock or other securities to be acquired upon exercise of the Option on the NYSE, AMEX, Nasdaq or such other securities exchange and will use its best efforts to obtain approval, if required, of such quotation or listing as soon as practicable. 12. Division of Option. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of Holder, upon presentation and surrender of this Agreement at the principal office of Issuer for other Agreements providing for Options of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any other Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 13. Profit Limitation. (a) Notwithstanding any other provision of this agreement, in no event shall Grantee's Total Profit (as hereinafter defined) exceed $30 million, plus Grantee's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) incurred in connection with the transactions contemplated by the Merger Agreement, and, if it otherwise would exceed such amount, Grantee, at its sole election, shall either (i) deliver to Issuer for cancellation Shares previously purchased by Grantee, (ii) pay cash or other consideration to Issuer or (iii) undertake any combination thereof, so that Grantee's Total Profit shall not exceed $30 million, plus Grantee's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) incurred in connection with the transactions contemplated by the Merger Agreement, after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of Shares as would, as of the Notice Date, result in a Notional Total Profit (as defined below) of more than $30 million, plus Grantee's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) incurred in connection with the transactions contemplated by the Merger Agreement, and, if exercise of the Option otherwise would exceed such amount, Grantee, at its discretion, may increase the Purchase Price for that number of Shares set forth in the Option Notice so that the Notional Total Profit shall not exceed $30 million, plus Grantee's documented, reasonable out-of-pocket expenses (including fees and expenses of legal, financial and accounting advisors) incurred in connection with the transactions contemplated by the Merger Agreement; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date at the Purchase Price set forth in Section 2 hereof. (c) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by Grantee pursuant to Section 6.3 of the Merger Agreement and Section 8(a)(ii) hereof, (ii) (x) the amount received by Grantee pursuant to the repurchase of Option Shares pursuant to Section 8 or Section 9 hereof, less Grantee's purchase price for such Option Shares, and (iii) the net cash amounts received by Grantee pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less Grantee's purchase price for such Option Shares. (d) As used herein, the term "Notional Total Profit" with respect to any number of Option Shares as to which Grantee may propose to exercise this Option shall be the Total Profit determined as of the date of the Option Notice assuming that this Option were exercised on such date for such number of Shares and assuming that such Option Shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). 14. Miscellaneous. (a) Expenses. Except to the extent expressly provided for herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) Waiver and Amendment. Any provision of this Agreement may be waived at any time by the party that is entitled to the benefits of such provision. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. (c) Entire Agreement; No Third-Party Beneficiaries; Severability. This Agreement, together with the Merger Agreement and the other documents and instruments referred to herein and therein, between Grantee and Issuer (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto (other than the indemnified parties under Section 10(e) of this Agreement and any transferees of the Option Shares or any permitted transferee of this Agreement pursuant to Section 14(h) of this Agreement) any rights or remedies hereunder. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or Governmental Entity to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If for any reason such court or Governmental Entity determines that the Option does not permit Holder to acquire, or does not require Issuer to repurchase, the full number of shares of Issuer Common Stock as provided in Section 3 of this Agreement (as may be adjusted herein), it is the express intention of Issuer to allow Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible without any amendment or modification hereof. (d) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable conflicts of law rules. (e) Descriptive Headings. The descriptive headings contained herein are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) to the parties at the addresses set forth in the Merger Agreement (or at such other address for a party as shall be specified by like notice). (g) Counterparts. This Agreement and any amendments hereto may be executed in two counterparts, each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed, it being understood that both parties need not sign the same counterpart. (h) Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder or under the Option shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party, except that Holder may assign this Agreement to a wholly-owned subsidiary of Holder and Holder may assign its rights hereunder in whole or in part after the occurrence of a Purchase Event. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. (i) Further Assurances. In the event of any exercise of the Option by the Holder, Issuer, and the Holder shall execute and deliver all other documents and instruments and take all other action that may be reasonably necessary in order to consummate the transactions provided for by such exercise. (j) Specific Performance. The parties hereto agree that this Agreement may be enforced by either party through specific performance, injunctive relief and other equitable relief. Both parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such equitable relief and that this provision is without prejudice to any other rights that the parties hereto may have for any failure to perform this Agreement. (k) Limitation on Resale of Issuer Common Stock. Grantee agrees that no shares of Issuer Common Stock acquired by it upon exercise of the Option, if any, shall be sold, transferred or otherwise disposed by it prior to the termination of the Merger Agreement in accordance with the terms thereof, except as follows. If the Grantee shall determine to accept a bona fide offer to purchase the Issuer Common Stock then held by it or to sell any such Stock on the open market, the Grantee shall give notice thereof to the Issuer specifying (i) the Issuer Common Stock to be sold and (ii) the purchase price to be offered therefor (or in the case of open market sales, that the sales are to be at prices prevailing on the market) and any other significant terms of the proposed transaction. Upon receipt of such notice, the Issuer shall, for a period of three business days immediately following such receipt, have the right of first refusal to purchase the Issuer Common Stock then held by Grantee that is proposed to be sold at the purchase price set forth in such notice or, if such shares are to be sold in open market transaction, at a purchase price equal to the average of the closing prices therefor (and if there is no such closing price on any of such days, then the mean of the closing bid and the closing asked prices on that day) on the principal market on which Issuer Common Stock is traded for the five trading days immediately prior to the Issuer's receipt of such notice. Payment for such shares shall be made to the Grantee in immediately available funds within three business days immediately following receipt of the notice of the proposed sale. IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option Agreement to be signed by their respective officers thereunto duly authorized, all as of the day and year first written above. JSB FINANCIAL, INC. By: /s/ Park T. Adikes ----------------------------- Park T. Adikes Chairman of the Board and Chief Executive Officer NORTH FORK BANCORPORATION, INC. By: /s/ John Adam Kanas ----------------------------- John Adam Kanas Chairman of the Board, President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----