AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BETWEEN

MELLON FINANCIAL CORPORATION

AND

THE BANK OF NEW YORK COMPANY, INC.

DATED

DECEMBER 3, 2006

Table of Contents

 

 

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LIST OF EXHIBITS*

 

*	The exhibits and schedules to this agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish copies of any of the exhibits and schedules to the U.S. Securities and Exchange Commission upon request.

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated December 3, 2006, is between MELLON FINANCIAL CORPORATION, a Pennsylvania corporation (“Mellon”), and THE BANK OF NEW YORK COMPANY, INC., a New York corporation (“BNY”).

RECITALS

A. Approvals . The Boards of Directors of Mellon and BNY have determined that the transactions described herein are consistent with, and will further, their respective business strategies and goals, and are in the best interests of Mellon and BNY, respectively, and their respective shareholders.

B. The Merger . This Agreement provides for a strategic business combination through the merger of BNY with and into a newly-formed Subsidiary of BNY and Mellon to be named “The Bank of New York Mellon Corporation” and organized under Delaware law (“Newco”) with Newco as the surviving corporation, followed immediately thereafter by the merger of Mellon with and into Newco with Newco as the surviving corporation.

C. Intention of the Parties . It is the intention of the Parties that (i) the First Step Merger shall qualify for all tax purposes as a reincorporation of BNY in Delaware and for federal income Tax purposes as a “reorganization” within the meaning of Section 368(a)(1)(A) and 368(a)(1)(F) of the Internal Revenue Code, (ii) the Second Step Merger shall qualify for federal income Tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (iii) this Agreement shall constitute a “plan of reorganization” for purposes of Sections 354 and 361 of the Internal Revenue Code.

D. Reciprocal Stock Options . Concurrently with the execution and delivery of this Agreement, (i) as a condition and inducement to BNY’s willingness to enter into this Agreement and the BNY Stock Option Agreement referred to below, BNY and Mellon are entering into a Stock Option Agreement, dated as of the date hereof, in the form of Exhibit 1-A (the “Mellon Stock Option Agreement”) pursuant to which Mellon is granting to BNY an option to purchase shares of Mellon Common Stock and (ii) as a condition and inducement to Mellon’s willingness to enter into this Agreement and the Mellon Stock Option Agreement referred to below, BNY and Mellon are entering into a Stock Option Agreement, dated as of the date hereof, in the form of Exhibit 1-B (the “BNY Stock Option Agreement”) pursuant to which BNY is granting to Mellon an option to purchase shares of BNY Common Stock.

E. Defined Terms . Certain capitalized terms used in this Agreement are defined in Section 8.1 of this Agreement. All references in this Agreement to the “transactions contemplated hereby” shall include the execution, delivery and performance of the Stock Option Agreements.

NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE 1

TERMS OF FIRST STEP MERGER

1.1. First Step Merger . Subject to the terms and conditions of this Agreement, at the First Effective Time, BNY shall be merged with and into Newco in accordance with the provisions of the NYBCL and the DGCL (the “First Step Merger”). Newco shall be the surviving corporation in the First Step Merger and shall be governed by the laws of the State of Delaware. Upon consummation of the First Step Merger, the separate corporate existence of BNY shall cease.

1.2. First Effective Time . Subject to the terms and conditions of this Agreement, on or before the Closing Date, the Parties will cause a certificate of merger to be filed with the Department of State of the State of New York (the “New York Department of State”) as provided in Section 907 of the NYBCL and a certificate of merger to be filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) as provided in Section 252 of the DGCL to effect the First Step Merger. The First Step Merger shall take effect when such certificates of merger are filed, or at such other time as may be agreed by the Parties and specified therein (the “First Effective Time”). Subject to the terms and conditions hereof, unless otherwise mutually agreed upon by the duly authorized officers of each Party, the Parties shall cause the First Effective Time to occur on the second business day following the date on which satisfaction or waiver of the last of the conditions set forth in Article 6 has occurred (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), or such other date mutually agreed upon in writing by the Parties.

1.3. Conversion of BNY Common Stock . At the First Effective Time, in each case subject to Sections 1.3(c) and 1.5, by virtue of the First Step Merger and without any action on the part of the Parties, Newco or the holder of any of the following securities:

(a) Each share of BNY Common Stock that is Outstanding immediately prior to the First Effective Time (other than shares of BNY Common Stock held by BNY (in each case other than (i) shares held in trust, managed, custodial, nominee or similar accounts and shares held by mutual funds or other pooled investment vehicles for which BNY or any of its Subsidiaries acts as investment advisor or in a similar capacity (collectively, “Trust Account Shares”) or (ii) shares held as a result of debts previously contracted)) shall be converted into the right to receive the number of shares of Newco Common Stock equal to the BNY Exchange Ratio.

(b) All shares of BNY Common Stock converted pursuant to this Section 1.3 shall no longer be Outstanding and shall automatically be cancelled and retired and shall cease to exist as of the First Effective Time, and each certificate previously representing any such shares of BNY Common Stock (the “Old BNY Certificates”) shall cease to have any rights except it shall thereafter represent the right to receive with respect to each underlying share of BNY Common Stock (i) a certificate representing the number of whole shares of Newco Common Stock into which the shares of BNY Common Stock represented by such Old BNY Certificate have been converted pursuant to this Section

 

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1.3, (ii) in accordance with Section 1.3(c), cash in lieu of fractional shares of Newco Common Stock represented by such Old BNY Certificate which have been converted pursuant to this Section 1.3, and (iii) any dividends or distributions which the holder thereof has the right to receive pursuant to Section 3.1(a).

(c) Notwithstanding any other provision of this Agreement, each holder of shares of BNY Common Stock exchanged pursuant to the First Step Merger who would otherwise have been entitled to receive a fraction of a share of Newco Common Stock (after taking into account all Old BNY Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest and rounded to the nearest cent) in an amount equal to the product obtained by multiplying (i) such fractional part of a share of Newco Common Stock, by (ii) the closing sale price of Mellon Common Stock on the NYSE Composite Transaction Tape on the trading day immediately preceding the Closing Date as reported by The Wall Street Journal or, if not reported therein, in another authoritative source.

(d) If, following the date of this Agreement and prior to the First Effective Time, the Outstanding shares of BNY Common Stock or Mellon Common Stock shall have, except as provided herein, been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, then an appropriate and proportionate adjustment shall be made to the BNY Exchange Ratio.

1.4. Cancellation of Newco Common Stock . At and after the First Effective Time, each share of Newco Common Stock held by BNY immediately prior to the First Effective Time shall be cancelled and retired and shall resume the status of authorized and unissued shares of Newco Common Stock, and no shares of Newco Common Stock or other securities of Newco shall be issued in respect thereof.

1.5. Cancellation of Shares Held by BNY . Each of the shares of BNY Common Stock held by BNY (in each case other than Trust Account Shares or shares held as a result of debts previously contracted) shall be cancelled and retired and shall cease to exist at the First Effective Time and no consideration shall be issued in exchange therefor.

1.6. BNY Stock Options and Other Equity-Based Awards .

(a) Each option to purchase shares of BNY Common Stock (a “BNY Stock Option”) granted under an equity compensation plan of BNY (a “BNY Stock Plan”), whether vested or unvested, that is outstanding and unexercised immediately prior to the First Effective Time shall cease, at the First Effective Time, to represent a right to acquire shares of BNY Common Stock and shall be converted at the First Effective Time, without any action on the part of any holder of any BNY Stock Option, into an option to purchase shares of Newco Common Stock (a “Newco Stock Option”) on the same terms and conditions as were applicable under such BNY Stock Option prior to the Effective Time. The number of shares of Newco Common Stock subject to each such Newco Stock Option shall be equal to the number of shares of BNY Common Stock subject to each such BNY Stock Option multiplied by the BNY Exchange Ratio, rounded, if

 

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necessary, to the nearest whole share of Newco Common Stock, and such BNY Stock Option shall have an exercise price per share (rounded to the nearest cent) equal to the per share exercise price specified in such BNY Stock Option divided by the BNY Exchange Ratio; provided that, in the case of any BNY Stock Option to which Section 421 of the Internal Revenue Code applies as of the First Effective Time (after taking into account the effect of any accelerated vesting thereof, if applicable) by reason of its qualification under Section 422 or Section 423 of the Internal Revenue Code, the exercise price, the number of shares of Newco Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Internal Revenue Code; and provided, further, that in any event, the conversion of each BNY Stock Option shall be effected in a manner consistent with the requirements of Section 409A of the Internal Revenue Code.

(b) At the First Effective Time, each Right consisting of, based on or relating to shares of BNY Common Stock granted under a BNY Stock Plan, other than BNY Stock Options (each, a “BNY Stock-Based Award”), whether vested or unvested, contingent or accrued, which is outstanding immediately prior to the First Effective Time shall cease, at the First Effective Time, to represent a Right with respect to shares of BNY Common Stock and shall be converted without any action on the part of any holder of a Right, at the First Effective Time, into a Right consisting of, based on or relating to shares of Newco Common Stock (a “Newco Stock-Based Award”), on the same terms and conditions as were applicable under the BNY Stock-Based Awards prior to the Effective Time. The number of shares of Newco Common Stock subject to each such Newco Stock-Based Award shall be equal to the number of shares of BNY Common Stock subject to the BNY Stock-Based Award multiplied by the BNY Exchange Ratio, rounded, if necessary, to the nearest whole share of Newco Common Stock and, if applicable, such Newco Stock-Based Award shall have an exercise price per share (rounded to the nearest cent) equal to the per share exercise price specified in the BNY Stock Based Award divided by the BNY Exchange Ratio; provided that in any event, the conversion of each BNY Stock-Based Award shall be effected in a manner consistent with the requirements of Section 409A of the Internal Revenue Code. Any dividend equivalents credited to the account of each holder of a BNY Stock-Based Award as of the First Effective Time shall remain credited to such holder’s account immediately following the First Effective Time, subject to adjustment in accordance with the foregoing.

(c) As soon as practicable after the First Effective Time, Newco shall deliver to the holders of BNY Stock Options and BNY Stock-Based Awards any required notices setting forth such holders’ rights pursuant to the relevant BNY Stock Plans and award documents and stating that such BNY Stock Options and BNY Stock-Based Awards have been assumed by Newco and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 1.6 after giving effect to the Merger and the terms of the relevant BNY Stock Plans).

(d) Following the First Effective Time, Newco may maintain the BNY Stock Plans for purposes of granting future awards to individuals who were employees or directors of BNY at the First Effective Time. If so, the provisions of the BNY Stock Plans, including the respective terms of such plans, will be unchanged, except that all Rights issued by Newco pursuant to the BNY Stock Plans following the First Effective Time shall be Rights in respect of Newco Common Stock, and the number of shares of Newco Common Stock available for future issuance pursuant to each BNY Stock Plan following the First Effective Time (the “Available

 

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BNY Stock Plan Shares”) shall be equal to the number of shares of BNY Common Stock so available immediately prior to the First Effective Time, multiplied by the BNY Exchange Ratio, rounded, if necessary, to the nearest whole share of Newco Common Stock.

(e) Prior to the First Effective Time, BNY shall take all necessary action and make all necessary arrangements for the adjustment of BNY Stock Options and BNY Stock-Based Awards under this Section 1.6. Newco shall reserve for future issuance a number of shares of Newco Common Stock at least equal to the number of shares of Newco Common Stock that will be subject to Newco Stock Options and Newco Stock-Based Awards as a result of the actions contemplated by this Section 1.6, plus the number of Available BNY Stock Plan Shares in the event that Newco maintains the BNY Stock Plans as contemplated by this Section 1.6. As soon as practicable following the Effective Time, Newco shall file a registration statement on Form S-8 or S-3, as the case dictates (or any successor form, or if Form S-8 or S-3 is not available, other appropriate forms), with respect to the shares of Newco Common Stock subject to such Newco Stock Options and Newco Stock-Based Awards (and the Available BNY Stock Plan Shares, as the case dictates) and shall maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such Newco Stock Options and Newco Stock-Based Awards remain outstanding. The Mellon, BNY and/or Newco Shareholder Approvals shall include such approvals as may be necessary to maintain the qualification of any BNY Stock Plans under section 422 or section 423 of the Internal Revenue Code.

(f) BNY shall take such action as is necessary to provide that as of no later than three business days prior to the Closing Date no further shares of BNY Common Stock will be purchased under the BNY Dividend Reinvestment and Direct Stock Purchase and Sale Plan (the “BNY DRIP”); provided, that such cessation of further purchases following the Closing Date shall be conditioned upon the consummation of the Merger. Immediately prior to and effective as of the First Effective Time and subject to the consummation of the Merger, BNY shall terminate the BNY DRIP. BNY shall take such action as is necessary to cause suspension of the BNY Employee Stock Purchase Plan for the purchase period during which the Closing Date is scheduled to occur. BNY shall take such action as is necessary to cause suspension of the BNY Employee Stock Purchase Plan (the “BNY ESPP”) for the purchase period during which the Closing Date is scheduled to occur.

1.7. Organization of Newco . Prior to the Effective Time, Newco will be duly organized by BNY and Mellon under Delaware Law as a direct subsidiary of BNY and Mellon. The Organizational Documents of Newco in effect at the First Effective Time shall be as agreed by the Parties, but in any event shall include the by-law provisions set forth in Exhibit 2 and shall not include any Organizational Document provision inconsistent with the by-law provisions set forth in Exhibit 2. Prior to the Effective Time, the Board of Directors of Newco shall consist of one BNY officer designated by BNY and one Mellon officer designated by Mellon, and at and following the Effective Time, the Board of Directors of Newco shall be constituted as provided in Section 5.19 below. Promptly following the execution of this Agreement, the Parties will take such actions as may be required to ensure that (a) Newco is duly incorporated and validly existing in good standing under the Laws of the State of Delaware and (b) Newco will enter into an agreement or other instrument adopting this Agreement, agreeing to perform any and all obligations assigned to Newco by the provisions of this Agreement and to become a constituent

 

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corporation in the Merger. At or prior to the Effective Time, the Parties will take such actions as may be required to ensure that: (i) Newco has the requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business; (ii) Newco is duly qualified or licensed to do business and (to the extent applicable) in good standing in the States and territories of the United States and foreign jurisdictions where the character of its assets or the nature of the conduct of its business requires it to be so qualified or licensed; and (iii) Newco will have engaged in no business and incurred no liabilities or obligations other than as necessary to consummate the Merger. The authorized capital stock of Newco shall be as agreed by the Parties, of which, as of the First Effective Time, two shares of Newco Common Stock will be Outstanding, one of which shares will be held by BNY and one of which shares will be held by Mellon. The authorized capital stock of Newco immediately following consummation of the First Step Merger (and prior to the Effective Time) will be as set forth in the form of Newco Certificate of Incorporation. No change in such capitalization will occur prior to the Effective Time except as provided in or contemplated by this Agreement. At the Effective Time, no capital stock of Newco (and no Rights to acquire any such capital stock) will be Outstanding, except as contemplated by this Agreement. The shares of Newco Common Stock to be issued in the Merger, when so issued in accordance with this Agreement, will have been duly authorized and validly issued and will be fully paid and nonassessable and not subject to any preemptive rights. The Parties agree to cause Newco to comply with all of Newco’s agreements, covenants and obligations under this Agreement and to promptly effect the Newco Shareholder Approval.

ARTICLE 2

TERMS OF SECOND STEP MERGER

2.1. Second Step Merger . Subject to the terms and conditions of this Agreement, at the Effective Time, Mellon shall be merged with and into Newco in accordance with the provisions of the PBCL and the DGCL (the “Second Step Merger” and, together with the First Step Merger, the “Merger”). Newco shall be the surviving corporation in the Second Step Merger and shall continue to be governed by the Laws of the State of Delaware. Upon consummation of the Second Step Merger, the separate corporate existence of Mellon shall cease.

2.2. Time and Place of Closing . The closings of the First Step Merger and the Second Step Merger (the “Closing”) shall take place sequentially (with the Second Step Merger occurring immediately after the First Step Merger), on the same day when the First Effective Time and the Effective Time (as defined in Section 2.3) are to occur (the “Closing Date”), unless another time is agreed to in writing by the Parties. The Parties shall coordinate filing to ensure the timing of the foregoing. The Closing shall be held at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, unless another place is agreed to in writing by the Parties.

2.3. Effective Time . Subject to the terms and conditions of this Agreement, on or before the Closing Date, the Parties will cause articles of merger to be filed with the Department of State of the Commonwealth of Pennsylvania (the “Pennsylvania Department of State”) as provided in Section 1927 of the PBCL and a certificate of merger to be filed with the Delaware Secretary of State as provided in Section 252 of the DGCL to effect the Second Step Merger.

 

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The Second Step Merger shall take effect when such articles of merger are filed, or at such other time as may be agreed by the Parties and specified therein (the “Effective Time”).

2.4. Conversion of Mellon Common Stock . At the Effective Time, in each case subject to Section 2.5, by virtue of the Second Step Merger and without any action on the part of the Parties, Newco or the holder of any of the following securities:

(a) Each share of Mellon Common Stock that is Outstanding immediately prior to the Effective Time (other than shares of Mellon Common Stock held by either Mellon or Newco (in each case other than Trust Account Shares or shares held as a result of debts previously contracted)) shall be converted into the right to receive the number of shares of Newco Common Stock equal to the Mellon Exchange Ratio.

(b) All shares of Mellon Common Stock converted pursuant to this Section 2.4 shall no longer be Outstanding and shall automatically be cancelled and retired and shall cease to exist as of the Effective Time, and each certificate previously representing any such shares of Mellon Common Stock (the “Old Mellon Certificates” and together with the Old BNY Certificates, the “Old Certificates”) shall cease to have any rights except it shall thereafter represent the right to receive with respect to each underlying share of Mellon Common Stock (i) a certificate representing the number of whole shares of Newco Common Stock into which the shares of Mellon Common Stock represented by such Old Mellon Certificate have been converted pursuant to this Section 2.4, and (ii) any dividends or distributions which the holder thereof has the right to receive pursuant to Section 3.1(a).

(c) If, following the date of this Agreement and prior to the Effective Time, the Outstanding shares of BNY Common Stock or Mellon Common Stock shall have, except as provided for herein, been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, then an appropriate and proportionate adjustment shall be made to the Mellon Exchange Ratio.

2.5. Effects on Common Stock .

(a) At and after the Effective Time, each share of Newco Common Stock Outstanding immediately prior to the Closing Date shall remain an Outstanding share of common stock of the Surviving Corporation and shall not be affected by the Second Step Merger; provided that any shares of Newco Common Stock held by Mellon (other than any Trust Account Shares or shares held as a result of debts previously contracted) prior to the Effective Time shall be cancelled and retired and shall resume the status of authorized and unissued shares of Newco Common stock, and no shares of Newco Common Stock or other securities of Newco shall be issued in respect thereof.

(b) Each of the shares of Mellon Common Stock held by either Mellon or Newco (in each case other than Trust Account Shares or shares held as a result of debts previously contracted) shall be cancelled and retired and shall cease to exist at the Effective Time and no consideration shall be issued in exchange therefor.

 

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2.6. Mellon Stock Options and Other Equity-Based Awards .

(a) Each option to purchase shares of Mellon Common Stock (a “Mellon Stock Option”) granted under an equity compensation plan of Mellon (a “Mellon Stock Plan”), whether vested or unvested, that is outstanding and unexercised immediately prior to the Effective Time shall cease, at the Effective Time, to represent a right to acquire shares of Mellon Common Stock and shall be converted at the Effective Time, without any action on the part of any holder of any Mellon Stock Option, into a Newco Stock Option on the same terms and conditions, including any reload feature (but taking into account any changes thereto, including any acceleration thereof, provided for in the relevant Mellon Stock Plan, or in the related award document by reason of the transactions contemplated hereby) as were applicable under such Mellon Stock Option prior to the Effective Time. The number of shares of Newco Common Stock subject to each such Newco Stock Option shall be equal to the number of shares of Mellon Common Stock subject to each such Mellon Stock Option multiplied by the Mellon Exchange Ratio, rounded, if necessary, to the nearest whole share of Newco Common Stock, and such Newco Stock Option shall have an exercise price per share (rounded to the nearest cent) equal to the per share exercise price specified in such Mellon Stock Option divided by the Mellon Exchange Ratio; provided that, in the case of any Mellon Stock Option to which Section 421 of the Internal Revenue Code applies as of the Effective Time (after taking into account the effect of any accelerated vesting thereof, if applicable) by reason of its qualification under Section 422 or Section 423 of the Internal Revenue Code, the exercise price, the number of shares of Newco Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Internal Revenue Code; and provided further, that in any event, the conversion of each Mellon Stock-Based Award shall be effected in a manner consistent with the requirements of Section 409A of the Internal Revenue Code.

(b) At the Effective Time, each Right consisting of, based on or relating to shares of Mellon Common Stock granted under a Mellon Stock Plan, other than Mellon Stock Options (each, a “Mellon Stock-Based Award”), whether vested or unvested, contingent or accrued, which is outstanding immediately prior to the Effective Time shall cease, at the Effective Time, to represent a Right with respect to shares of Mellon Common Stock and shall be converted without any action on the part of any holder of a Right, at the Effective Time, into a Newco Stock-Based Award, on the same terms and conditions as were applicable under the Mellon Stock-Based Awards, including any reload feature (but taking into account any changes thereto, including any acceleration thereof, provided for in the relevant Mellon Stock Plan or in the related award document by reason of the transactions contemplated hereby), as were applicable under such Mellon Stock Option prior to the Effective Time; provided that in any event, the conversion of each Mellon Stock-Based Award shall be effected in a manner consistent with the requirements of Section 409A of the Internal Revenue Code. The number of shares of Newco Common Stock subject to each such Newco Stock-Based Award shall be equal to the number of shares of Mellon Common Stock subject to the Mellon Stock-Based Award multiplied by the Mellon Exchange Ratio, rounded, if necessary, to the nearest whole share of Newco Common Stock and, if applicable, such Newco Stock-Based Award shall have an exercise price per share

 

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(rounded to the nearest cent) equal to the per share exercise price specified in the Mellon Stock-Based Award divided by the Mellon Exchange Ratio. Any dividend equivalents credited to the account of each holder of a Mellon Stock-Based Award as of the Effective Time shall remain credited to such holder’s account immediately following the Effective Time, subject to adjustment in accordance with the foregoing.

(c) As soon as practicable after the Effective Time, Newco shall deliver to the holders of Mellon Stock Options and Mellon Stock-Based Awards any required notices setting forth such holders’ rights pursuant to the relevant Mellon Stock Plans and award documents and stating that such Mellon Stock Options and Mellon Stock-Based Awards have been assumed by Newco and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 2.6 after giving effect to the Merger and the terms of the relevant Mellon Stock Plans).

(d) Following the Effective Time, Newco may maintain the Mellon Stock Plans for purposes of granting future awards to individuals who were employees or directors of Mellon at the Effective Time. If so, the provisions of the Mellon Stock Plans, including the respective terms of such plans, will be unchanged, except that all Rights issued by Newco pursuant to the Mellon Stock Plans following the Effective Time shall be Rights in respect of Newco Common Stock, and the number of shares of Newco Common Stock available for future issuance pursuant to each Mellon Stock Plan following the Effective Time (the “Available Mellon Stock Plan Shares”) shall be equal to the number of shares of Mellon Common Stock so available immediately prior to the Effective Time, multiplied by the Mellon Exchange Ratio, rounded, if necessary, to the nearest whole share of Newco Common Stock.

(e) Prior to the Effective Time, Mellon shall take all necessary action for the adjustment of Mellon Stock Options and Mellon Stock-Based Awards under this Section 2.6. Newco shall reserve for future issuance in respect thereof a number of shares of Newco Common Stock at least equal to the number of shares of Newco Common Stock that will be subject to Newco Stock Options and Newco Stock-Based Awards as a result of the actions contemplated by this Section 2.6, plus the number of Available Mellon Stock Plan Shares in the event that Newco maintains the Mellon Stock Plans as contemplated by this Section 2.6. As soon as practicable following the Effective Time, Newco shall file a registration statement on Form S-8 or S-3, as the case dictates (or any successor form, or if Form S-8 or S-3 is not available, other appropriate forms), with respect to the shares of Newco Common Stock subject to such Newco Stock Options and Newco Stock-Based Awards (and the Available Mellon Stock Plan Shares, as the case dictates) and shall maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such Newco Stock Options and Newco Stock-Based Awards remain outstanding. The Mellon, BNY and/or Newco Shareholder Approvals shall include such approvals as may be necessary to maintain the qualification of any Mellon Stock Plans under section 422 or section 423 of the Internal Revenue Code.

(f) Mellon shall take such action as is necessary to provide that as of no later than three business days prior to the Closing Date no further shares of Mellon Common Stock will be purchased under the Mellon Direct Stock Purchase and Dividend Reinvestment Plan (the “Mellon DRIP”); provided, that such cessation of further purchases following the Closing Date

 

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shall be conditioned upon the consummation of the Merger. Immediately prior to and effective as of the First Effective Time and subject to the consummation of the Merger, Mellon shall terminate the Mellon DRIP. Mellon shall take such action as is necessary to cause suspension of the Mellon Employee Stock Purchase Plan (the “Mellon ESPP”) for the purchase period during which the Closing Date is scheduled to occur.

ARTICLE 3

EXCHANGE OF SHARES

3.1. Exchange Procedures .

(a) At or prior to the First Effective Time, Newco shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of Old Certificates, for exchange in accordance with Article 1 and Article 2 and this Article 3, certificates or evidence of shares in book entry form representing Newco Common Stock (collectively, “New Certificates”) (together with any dividends or distributions with respect thereto and any cash to be paid hereunder in lieu of fractional shares of Newco Common Stock (without any interest thereon), the “Exchange Fund”) to be paid pursuant to Article 1 and Article 2 and this Article 3 in exchange for Outstanding shares of Mellon Common Stock and BNY Common Stock.

(b) As promptly as practicable after the Effective Time, Newco shall send or cause to be sent to each former holder of record of shares of Mellon Common Stock and BNY Common Stock immediately prior to the Effective Time or the First Effective Time, as applicable (each, a “Holder”), transmittal materials for use in exchanging such Holder’s Old Certificates for the consideration set forth in Article 1 and Article 2 (which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing such shares of Mellon Common Stock and BNY Common Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent, and which shall be in such form and have such other provisions as Mellon and BNY may reasonably specify). Newco shall cause the New Certificates for shares of Newco Common Stock into which shares of a Holder’s Mellon Common Stock or BNY Common Stock, as the case may be, are converted at the Effective Time or the First Effective Time, if applicable, or dividends or distributions which such Person shall be entitled to receive and any fractional share interests (in the case of BNY Holders only), to be delivered to such Person upon delivery to the Exchange Agent of Old Certificates representing such shares of Mellon Common Stock or BNY Common Stock, as the case may be, together with the transmittal materials, duly executed and completed in accordance with the instructions thereto. No interest will accrue or be paid on any such cash to be paid pursuant to Article 1 and Article 2 and this Article 3 upon such delivery. If any New Certificate is to be issued or any cash payment is to be made in a name other than that in which the Old Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person requesting such exchange shall pay any transfer or other Taxes required by reason of the issuance of such New Certificate or the making of such cash payment in a name other than that of the registered Holder of the Old Certificate surrendered, or shall establish to the satisfaction of Newco and the Exchange Agent that any such Taxes have been paid or are not applicable. Any Person whom the Parties reasonably believe to be an “affiliate” of Mellon or BNY for purposes of Rule 145 of the 1933 Act shall not be entitled to receive any New Certificate or payment pursuant to Article 1 or Article 2 or this Article 3 until such Person shall have duly executed and delivered an appropriate agreement as described in Section 5.16.

 

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(c) Notwithstanding the foregoing, none of the Exchange Agent, Newco, any of the Parties or any of their respective Subsidiaries shall be liable to any former Holder of Mellon Common Stock or BNY Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

(d) If any Old Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Old Certificate to be lost, stolen or destroyed and, if required by Newco or the Exchange Agent, the posting by such Person of a bond in such reasonable amount as Newco or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Old Certificate, Newco or the Exchange Agent shall, in exchange for the shares of Mellon Common Stock or BNY Common Stock represented by such lost, stolen or destroyed Old Certificate, issue or cause to be issued a New Certificate and pay or cause to be paid the amounts, if any, deliverable in respect to the shares of Mellon Common Stock or BNY Common Stock, as the case may be, formerly represented by such Old Certificate pursuant to this Agreement.

(e) Any portion of the Exchange Fund that remains unclaimed by the Holders of Mellon and BNY for six months after the Effective Time shall be returned to Newco (together with any dividends or earnings in respect thereof). Any Holders of Mellon or BNY who have not theretofore complied with this Article 3 shall thereafter be entitled to look only to Newco, and only as a general creditor thereof, for payment of the consideration deliverable in respect of each share of Mellon Common Stock or BNY Common Stock such Holder holds as determined pursuant to this Agreement, in each case, without any interest thereon.

(f) Newco and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Holder of shares of BNY Common Stock or shares of Mellon Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld by Newco or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder of the shares of BNY Common Stock or shares of Mellon Common Stock in respect of which such deduction and withholding was made by Newco or the Exchange Agent.

3.2. Rights of Holders . At the First Effective Time, in the case of BNY, and the Effective Time, in the case of Mellon, the stock transfer books of such Party shall be closed and no transfer by any Holder shall thereafter be made or recognized. At the Effective Time, Old Certificates presented to BNY or Mellon for transfer shall be cancelled and exchanged for the consideration provided for in Sections 1.3 and 2.4, as the case may be. Until surrendered for exchange in accordance with the provisions of Section 3.1, each Old Certificate (other than shares to be cancelled pursuant to Sections 1.5 or 2.5(b)) shall from and after the Effective Time or the First Effective Time, as the case may be, represent for all purposes only the right to receive the consideration provided in Sections 1.3 and 2.4, as the case may be, and any dividends or any other distributions with a record date prior to the Effective Time which have been

 

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declared or made by Mellon in respect of such shares of Mellon Common Stock or BNY in respect of BNY Common Stock in accordance with the terms of this Agreement and which remain unpaid at the Effective Time. To the extent permitted by Law, Holders shall be entitled to vote after the Effective Time at any meeting of Newco shareholders the number of whole shares of Newco Common Stock into which their respective shares of Mellon Common Stock or BNY Common Stock, as the case may be, are converted, regardless of whether such Holders have exchanged their certificates representing Mellon Common Stock or BNY Common Stock, as the case may be, for New Certificates representing Newco Common Stock in accordance with the provisions of this Agreement, but beginning 30 days after the Effective Time no such Holder shall be entitled to vote on any matter until such Holder surrenders such Old Certificate for exchange as provided in Section 3.1. Whenever a dividend or other distribution is declared by Newco on Newco Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of Newco Common Stock issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of Newco Common Stock as of any time subsequent to the Effective Time shall be delivered to the Holder of an Old Certificate until such Holder surrenders such Old Certificate for exchange as provided in Section 3.1. However, upon surrender of the Old Certificate, both the New Certificate, together with all such undelivered dividends or other distributions (without interest) and any undelivered cash payments to be paid for fractional share interests (without interest), shall be delivered and paid with respect to each share represented by such New Certificate.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1. Disclosure Letters . Prior to the execution and delivery of this Agreement, each Party has delivered to the other Party a letter (its “Disclosure Letter”) 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 Section 4.3 or to one or more of its covenants contained in Article 5; provided, that (i) no such item is required to be set forth in a Party’s Disclosure Letter as an exception to any representation or warranty of such Party if its absence would not result in the related representation or warranty being deemed untrue or incorrect under the standard established by Section 4.2, and (ii) the mere inclusion of an item in a Party’s Disclosure Letter as an exception to a representation or warranty shall not be deemed an admission by that Party that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect with respect to such Party. Any disclosures made with respect to a subsection of Section 4.3 shall be deemed to qualify (a) any subsections of Section 4.3 specifically referenced or cross-referenced and (b) other subsections of Section 4.3 to the extent it is reasonably apparent (notwithstanding the absence of a specific cross reference) from a reading of the disclosure that such disclosure (i) applies to such other subsections and (ii) contains sufficient detail to enable a reasonable person to recognize the relevance of such disclosure to such other subsections.

 

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4.2. Standards .

(a) No representation or warranty of any Party hereto or Newco contained in Section 4.3 (other than the representations and warranties in (i) Sections 4.3(c)(i) and (ii), which shall be true and correct in all material respects with respect to it, and (ii) Section 4.3(e) which shall be true and correct in all respects with respect to it) shall be deemed untrue or incorrect, and no Party hereto or Newco shall be deemed to have breached a representation or warranty, as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with any representation or warranty contained in Section 4.3, has had or is reasonably likely to have a Material Adverse Effect on such Party or Newco.

(b) The term “Material Adverse Effect,” as used with respect to a Party or Newco, means an effect which (i) is materially adverse to the business, properties, financial condition or results of operations of such Party and its Subsidiaries, or Newco (including, from and after the Effective Time, its Subsidiaries), taken as a whole, or (ii) materially impairs the ability of such Party or Newco to consummate the Merger and the transactions contemplated hereby on a timely basis; provided that, in determining whether a Material Adverse Effect has occurred with respect to such Party or Newco, there shall be excluded (with respect to each of clause (A), (B) and (C), to the extent that the effect of a change on it is not materially different than the effect on comparable banking organizations) any effect to the extent attributable to or resulting from (A) any changes in Laws, regulations or interpretations of Laws or regulations generally affecting the financial services industries in which the Parties operate, (B) any change in GAAP or regulatory accounting requirements generally affecting the financial services industries in which the Parties operate, (C) events, conditions or trends in economic, business or financial conditions generally affecting the financial services industries in which the Parties operate, including changes in prevailing interest rates, currency exchange rates and price levels or trading volumes in the United States or foreign securities markets, (D) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (E) the effects of the actions expressly required by this Agreement or that are taken with the prior written consent of the other Party and Newco in connection with the transactions contemplated hereby, and (F) the announcement of this Agreement and the transactions contemplated hereby; and provided, further, that in no event shall a change in the trading prices of a Party’s common stock, by itself, constitute a Material Adverse Effect.

4.3. Representations and Warranties of the Parties . Subject to and giving effect to Sections 4.1 and 4.2 and except as set forth in the relevant Disclosure Letter, BNY hereby represents and warrants to Mellon, and Mellon hereby represents and warrants to BNY, that:

(a) Organization, Standing, and Power; Subsidiaries . It, and each of its Subsidiaries, is duly organized, validly existing, and (to the extent applicable) in good standing under the Laws of the jurisdiction in which it is organized. It, and each of its Subsidiaries, has the requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as now conducted. It, and each of its Subsidiaries, is duly qualified or licensed to do business and (to the extent applicable) in good standing in the States and territories of the United States and foreign jurisdictions

 

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where the character of its assets or the nature or conduct of its business requires it to be so qualified or licensed. It has made available to the other Party a complete and correct copy of its Organizational Documents, each as amended to the date hereof and as in full force and effect as of the date hereof. A true and complete list of its direct and indirect Subsidiaries that would constitute Significant Subsidiaries of such Party within the meaning of Rule 1-02 of Regulation S-X of the SEC as of the date hereof is set forth in Section 4.3(a) of its Disclosure Letter.

(b) Authority; No Breach of Agreement .

(i) It has, and Newco will have, the corporate power and authority necessary to execute, deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the Stock Option Agreements, and the consummation of the transactions contemplated hereby, including the Merger, by it, have been duly and validly authorized by all necessary corporate action (including valid authorization and unanimous adoption of this Agreement by its duly constituted Board of Directors), subject only to the receipt of (A) in the case of Mellon, the adoption of this Agreement by the holders of a majority of the votes cast by all holders of shares of Mellon Common Stock (the “Mellon Shareholder Approval”), (B) in the case of BNY, the adoption of this Agreement by the holders of two-thirds of the Outstanding shares of BNY Common Stock (the “BNY Shareholder Approval”) and (C) in the case of Newco, the authorization, execution and delivery of this Agreement by the Board of Directors of Newco and the adoption of this Agreement by Mellon and BNY, as the sole shareholders of Newco (the “Newco Shareholder Approval”). Subject to the Mellon Shareholder Approval in the case of Mellon, the BNY Shareholder Approval in the case of BNY, and the Newco Shareholder Approval in the case of Newco and assuming due authorization, execution, and delivery of this Agreement and the Stock Option Agreements by the other Party and this Agreement by Newco, each of this Agreement and the Stock Option Agreements represent a legal, valid, and binding obligation of it, enforceable against it in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

(ii) Neither the execution and delivery of this Agreement or the Stock Option Agreements by it, nor the consummation by it of the transactions contemplated hereby, nor compliance by it with any of the provisions hereof, will (A) conflict with or result in a breach or violation of any provision of its Organizational Documents, (B) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation or acceleration of any Lien (with or without the giving of notice, the lapse of time or both) on any material asset of it or its Subsidiaries under, any Contract or Permit of it or its Subsidiaries, or any

 

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change in its rights or obligations under any Contract, or (C) subject to receipt of the Regulatory Consents and the expiration of any waiting period required by Law, violate any Law, Order or governmental license applicable to it or its Subsidiaries or any of their respective material assets.

(iii) Other than (A) the filing with the SEC of (1) the Joint Proxy Statement/Prospectus and (2) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of the 1934 Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such Consents as may be required in connection therewith, (B) the filing of the certificate of merger with the New York Department of State and the certificate of merger with the Delaware Secretary of State with respect to the First Step Merger and the filing of the articles of merger with the Pennsylvania Department of State and the certificate of merger with the Delaware Secretary of State with respect to the Second Step Merger, (C) the filing of applications and notices with the Board of Governors of the Federal Reserve System under the BHC Act and the Federal Reserve Act and approval of same, (D) such applications, filings and Consents as may be required under the banking laws of any state, and approval thereof, (E) Consents, filings or exemptions required under Securities Laws relating to the regulation of broker-dealers, investment companies and investment advisors and federal commodities laws relating to the regulation of futures commission merchants and the rules and regulations of the SEC and the Commodity Futures Trading Commission thereunder and of any applicable industry self-regulatory organization and the rules of the NYSE, or which are required under consumer finance, mortgage banking and other similar laws of the various states in which it or any of its Subsidiaries is licensed or regulated, (F) notices or filings under the HSR Act, (G) such filings and Consents as may be required pursuant to applicable antitrust or competition laws of any foreign Governmental Entity (the “Foreign Antitrust Approvals”), (H) such other filings, Consents and exemptions as may be required under foreign banking and similar laws in connection with the transactions contemplated hereby, (I) such filings, notifications and Consents as are required under the Small Business Investment Act of 1958 and the rules and regulations of the Small Business Administration thereunder, and (J) Consent of the Commissioner of Insurance of the State of Delaware or other state insurance regulators (clauses (C) through (J) collectively, the “Regulatory Consents”), no notice to, application or filing with, or Consent of, any Governmental Authority is necessary in connection with the execution, delivery or performance of this Agreement and the Stock Option Agreements and the consummation by it of the Merger and the other transactions contemplated hereby.

(c) Common Stock .

(i) In the case of Mellon only, the authorized capital stock of Mellon consists of 800,000,000 shares of Mellon Common Stock and 50,000,000 shares of Mellon Preferred Stock, of which, as of November 30, 2006, (A) 415,284,706 shares of Mellon Common Stock were Outstanding, and (B) no shares of Mellon Preferred Stock were Outstanding. As of the date of this Agreement, no more than

 

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32,000,000 shares of Mellon Common Stock were subject to Mellon Stock Options granted under Mellon Stock Plans. As of the date of this Agreement, there were no more than 302,000 shares of Mellon Common Stock subject to outstanding Rights under the Mellon Stock Plans. Except for (1) Permitted Issuances, (2) as set forth above in this Section 4.3(c)(i), or (3) as set forth in Section 4.3(c)(i) of Mellon’s Disclosure Letter, there are no shares of Mellon Capital Stock or other equity securities of Mellon outstanding and no outstanding Rights relating to the Mellon Capital Stock, and no Person has any Contract or any right or privilege (whether pre-emptive or contractual) capable of becoming a Contract or Right for the purchase, subscription or issuance of any securities of Mellon or any Subsidiary of Mellon. All of the Outstanding shares of Mellon Capital Stock are duly and validly authorized, Outstanding and are fully paid and nonassessable. None of the Outstanding shares of Mellon Capital Stock has been issued in violation of any preemptive or similar rights of the current or past shareholders of Mellon. As of the date of this Agreement, Mellon has no contractual obligation to redeem, repurchase, or otherwise acquire, or to register with the SEC, any shares of Mellon Common Stock or any capital stock of its Subsidiaries.

(ii) In the case of BNY only, the authorized capital stock of BNY consists of 2,400,000,000 shares of BNY Common Stock, 5,000,000 shares of Preferred Stock, and 5,000,000 shares of Class A Preferred Stock, of which, as of November 30, 2006, (A) 751,867,066 shares of BNY Common Stock were Outstanding, (B) 3,000 shares of Class A Preferred Stock were Outstanding, and (C) no shares of BNY Preferred Stock were Outstanding. As of the date of this Agreement, no more than 70,000,000 shares of BNY Common Stock were subject to BNY Stock Options granted under the BNY Stock Plans. As of the date of this Agreement, there were no more than 9,000,000 shares of BNY Common Stock subject to outstanding Rights under the BNY Stock Plans. Except for (1) Permitted Issuances, (2) as set forth above in this Section 4.3(c)(ii), or (3) as set forth in Section 4.3(c)(ii) of BNY’s Disclosure Letter, there are no shares of BNY Capital Stock or other equity securities of BNY outstanding and no outstanding Rights relating to the BNY Capital Stock, and no Person has any Contract or any right or privilege (whether pre-emptive or contractual) capable of becoming a Contract or Right for the purchase, subscription or issuance of any securities of BNY or any Subsidiary of BNY. All of the Outstanding shares of BNY Capital Stock are duly and validly authorized and Outstanding and are fully paid and nonassessable. None of the Outstanding shares of BNY Capital Stock has been issued in violation of any preemptive or similar rights of the current or past shareholders of BNY. As of the date of this Agreement, BNY has no contractual obligation to redeem, repurchase or otherwise acquire, or to register with the SEC, any shares of BNY Capital Stock or any capital stock of its Subsidiaries.

(iii) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which its shareholders may Vote (“Voting Debt”) are issued or outstanding.

 

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(iv) All the outstanding shares of capital stock of each of its Subsidiaries owned by it or a Subsidiary of it have been duly authorized and validly issued and are fully paid and (except, with respect to bank Subsidiaries, as provided under 12 U.S.C. §55 or any comparable provision of applicable state or foreign Law) nonassessable, and are owned by it or a Subsidiary of it free and clear of all Liens or Rights.

(d) SEC Filings; Financial Statements; Undisclosed Liabilities .

(i) Each Party has filed all SEC Documents required to be filed by it with the SEC since December 31, 2002 (collectively, the “SEC Reports”). Its SEC Reports, including the Financial Statements, exhibits and schedules contained therein, (A) at the time filed, complied (and any SEC Reports filed after the date of this Agreement will comply) in all material respects with the applicable requirements of the Securities Laws, and (B) at the time they were filed (or if amended or superseded by another SEC Report filed prior to the date of this Agreement, then on the date of filing of such amended or superseding SEC Report), did not (and any SEC Reports filed after the date of this Agreement will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such SEC Reports or necessary in order to make the statements made in such SEC Reports, in light of the circumstances under which they were made, not misleading.

(ii) Each of its Financial Statements contained in its SEC Reports (including any SEC Reports filed after the date of this Agreement) fairly presented (or, in the case of SEC Reports filed after the date of this Agreement, will fairly present) the consolidated financial position of it and its Subsidiaries as at the respective dates and the consolidated results of its operations and cash flows for the periods indicated, in each case in accordance with GAAP consistently applied during the periods indicated, except in each case as may be noted therein, and subject to normal year-end audit adjustments and as permitted by Form 10-Q in the case of unaudited Financial Statements.

(iii) The records, systems, controls, data and information of it and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of it or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a materially adverse effect on the system of internal accounting controls described in the following sentence. As and to the extent described in the SEC Reports filed with the SEC prior to the date hereof, it and its Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. It (A) has designed disclosure controls and procedures to ensure that material information relating to

 

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it, including its consolidated Subsidiaries, is made known to its management by others within those entities, and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to its auditors and the audit committee of its Board of Directors (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect its ability to record, process, summarize and report financial data and has identified for its auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls. It has made available to the other Party a summary of any such disclosure made by management to its auditors and audit committee since January 1, 2004.

(iv) Except for (A) those liabilities that are fully reflected or reserved for in its consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, as filed prior to the date of this Agreement and (B) liabilities incurred since September 30, 2006 in the ordinary course of business, such Party and its Subsidiaries do not have, and since September 30, 2006, such Party and its Subsidiaries have not incurred (except as permitted by Section 5.2), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in its financial statements in accordance with GAAP).

(e) Absence of Certain Changes or Events . Since September 30, 2006, except as disclosed in its SEC Reports filed prior to the date of this Agreement, (i) it and its Subsidiaries have conducted their respective businesses only in the ordinary course of such businesses, (ii) there have been no events, changes, developments or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on it and (iii) it and its Subsidiaries have not taken action that, if it had been taken after the date of this Agreement, would have required the prior written Consent of the other Party under Section 5.1.

(f) Tax Matters . All Tax Returns required to be filed by or on behalf of it or any of its Subsidiaries have been timely filed or requests for extensions have been timely filed and any such extension has been granted and has not expired, and all such filed returns are complete and accurate. Except as disclosed in its SEC Reports filed prior to the date of this Agreement, all Taxes attributable to it or any of its Subsidiaries that are or were due or payable (without regard to whether such Taxes have been assessed) have been paid in full or have been adequately provided for on its consolidated balance sheet and consolidated statement of earnings or income in accordance with GAAP. Neither it nor any of its Subsidiaries is a party to a Tax sharing, indemnification or similar agreement or any agreement pursuant to which it or any of its Subsidiaries has any obligation to any Person (other than it or one of its Subsidiaries) with respect to Taxes. Neither it nor any of its Subsidiaries has been a party to any distribution occurring during the last five years in which the parties to such distribution treated the distribution as one to which Section 355 of the Internal Revenue Code applied.

 

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(g) Certain Actions . Neither it nor any of its Subsidiaries or any Affiliates thereof has taken or agreed to take any action, and it has no knowledge of any fact or circumstance, that is reasonably likely to (i) prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially impede or materially delay receipt of any Regulatory Consents. To its knowledge, as of the date hereof, there exists no fact, circumstance, or reason that would cause any Regulatory Consents not to be received in a timely manner.

(h) Environmental Matters . Except as described in the Disclosure Letter: (i) no Hazardous Material is contained in or has been used at or released from its Facilities other than in compliance with, and as would not reasonably be expected to result in liability under, any Environmental Laws; (ii) all Hazardous Materials used by it or stored on its Properties have been disposed of in accordance with, and as would not reasonably be expected to result in liability under, any Environmental Laws; (iii) neither it nor any of its Subsidiaries is potentially liable as a responsible party under any Environmental Law, including the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), or comparable state statute, arising out of events occurring prior to the Effective Time; (iv) there have not been in the past, and are not now, any Hazardous Materials that have been released on or under or are migrating to or from its Facilities or any of its Properties; (v) there have not been in the past, and are not now, any underground tanks or physical structures or vessels holding Hazardous Materials at, on or under any of its Properties including treatment or storage tanks, sumps, lagoons, basins, or water, gas or oil wells; (vi) there are no polychlorinated biphenyls (“PCBs”) deposited, stored, disposed of or located on any of its Properties or Facilities or any equipment on any of its Properties containing PCBs at levels in excess of levels permitted by Law; (vii) it and its Subsidiaries and Affiliates are not subject to any consent orders, decrees, notices of violation, injunctions, directives or orders from any Governmental Authority or any indemnity or other agreement with any third party relating to obligations, costs or liabilities arising under any Environmental Law; (viii) its Facilities and its and its Subsidiaries’ activities and operations have at all times complied with all Environmental Laws; (ix) it and its Subsidiaries have received no notice of any noncompliance with, or liability under, any Environmental Laws regarding its Facilities or any of its Properties or its past or present operations; and (x) no claims, notices, administrative actions, information requests or suits are pending or, to its knowledge, threatened relating to any actual or potential violation, liability or obligation by it or any of its Subsidiaries with respect to any Environmental Laws.

(i) Compliance with Permits, Laws and Orders .

(i) It and each of its Subsidiaries has in effect all Permits and has made all filings, applications, and registrations with Governmental Authorities that are required for it to own, lease, or operate its material assets and to carry on its business as now conducted and there has occurred no Default under any Permit applicable to its business or employees conducting its business.

(ii) Neither it nor any of its Subsidiaries is in Default under any Laws or Orders applicable to it, its business or employees conducting its business,

 

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including the Sarbanes-Oxley Act of 2002, the USA PATRIOT Act of 2001 and other applicable federal, state and foreign anti-money laundering and sanctions Laws. Each of its Subsidiaries that is an insured depository institution has a Community Reinvestment Act rating of “satisfactory” or better.

(iii) Since January 1, 2003, neither it nor any of its Subsidiaries has received any notification or communication from any Governmental Authority, (A) asserting that it or any of its Subsidiaries is in Default under any Permits, Laws or Orders, (B) threatening to revoke any Permits, (C) requiring it or any of its Subsidiaries (x) to enter into or consent to the issuance of a cease and desist order, written agreement, consent decree, directive, commitment or memorandum of understanding, or (y) to adopt any policy, procedure or resolution of its Board of Directors or similar undertaking, which restricts the conduct of its business, or relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends or any other policy or procedure, or (D) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, Federal Deposit Insurance Corporation deposit insurance, and neither it nor any of its Subsidiaries has received any notice from a Governmental Authority that it is considering issuing or requiring any of the foregoing.

(iv) There (A) is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations or inspections of it or any of its Subsidiaries and (B) have been no formal or informal inquiries by, or disagreements or disputes with, any Governmental Authority with respect to its or any of its Subsidiaries’ business, operations, policies or procedures since January 1, 2003.

(v) There is no Order, circumstance or condition relevant or applicable to it that would prevent, or is reasonably likely to prevent, Newco from satisfying the criteria for “financial holding company” status under the BHC Act or which would otherwise reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on Newco after the Effective Time.

(vi) It and each of its Subsidiaries have properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state, federal and foreign Law. None of it, any of its Subsidiaries, or any of its or its Subsidiaries’ directors, officers or employees, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account, and the accountings for each such fiduciary account are true and correct and accurately reflect the assets and results of such fiduciary account.

(j) Labor Relations . Neither it nor any of its Subsidiaries is the subject of any Litigation asserting that it or any of its Subsidiaries has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state

 

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Law) or seeking to compel it or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is it or any of its Subsidiaries a party to or bound by any collective bargaining agreement, Contract, or other agreement or understanding with a labor union or labor organization, nor is there any strike or other labor dispute involving it or any of its Subsidiaries pending or, to its knowledge, threatened, nor to its knowledge, is there any activity involving its or any of its Subsidiaries’ employees seeking to certify a collective bargaining unit or engaging in any other organization activity. It and each of its Subsidiaries has complied in all respects with all applicable Laws relating to the employment of its employees, including applicable Laws relating to equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, data privacy, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing and, to its knowledge, neither it nor its Subsidiaries is liable for the payment of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Laws.

(k) Employee Compensation and Benefit Plans .

(i) It has disclosed in Section 4.3(k) of its Disclosure Letter, and has delivered or made available, to the extent requested, to the other Party prior to the date of this Agreement correct and complete copies of, all of its Compensation and Benefit Plans, other than Compensation and Benefit Plans maintained outside of the United States primarily for the benefit of its employees working outside of the United States. Neither it nor any of its Subsidiaries has an “obligation to contribute” (as defined in ERISA Section 4212) nor have they ever had an obligation to contribute to a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)). Each “employee pension benefit plan,” as defined in Section 3(2) of ERISA, that was, within six years preceding the date of this Agreement, ever maintained by it or any of its Subsidiaries and that was intended to qualify under Section 401(a) of the Internal Revenue Code, is disclosed as such in Section 4.3(k) of its Disclosure Letter.

(ii) It has delivered or made available to the other Party, to the extent requested, prior to the date of this Agreement correct and complete copies of the following documents: (A) all trust agreements or other funding arrangements for its Compensation and Benefit Plans (including insurance Contracts), and all amendments thereto (all such trust agreements and other funding arrangements are disclosed in Section 4.3(k) of its Disclosure Letter), (B) with respect to any such Compensation and Benefit Plans or amendments, the most recent determination letters, and all material rulings, material opinion letters, material information letters, or material advisory opinions issued by the Internal Revenue Service, the United States Department of Labor, or the PBGC or any equivalent foreign taxing or regulatory authority after December 31, 1996, (C) annual reports or returns, audited or unaudited financial statements, actuarial valuations and reports, and summary annual reports prepared for any Compensation and Benefit Plans with respect to the most recent plan year, and (D) the most recent summary plan descriptions and any material modifications thereto.

 

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(iii) All of its Compensation and Benefit Plans are in substantial compliance with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws and have been administered in accordance with their terms. Except as disclosed in Section 4.3(k) of its Disclosure Letter, each of its ERISA Plans which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service covering all Tax Law changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 and, to its knowledge, there are no circumstances likely to result in revocation of any such favorable determination letter. Except as disclosed in Section 4.3(k) of its Disclosure Letter, each trust created under any of its ERISA Plans has been determined to be exempt from Tax under Section 501(a) of the Internal Revenue Code or its foreign equivalent and it is not aware of any circumstance which will or could reasonably result in revocation of such exemption. To its knowledge, each Compensation and Benefit Plan providing deferred compensation or benefits subject to Section 409A of the Internal Revenue Code, including applicable transitional guidance, has been substantially operated in good faith compliance with the applicable requirements of Section 409A of the Internal Revenue Code since January 1, 2005. Any voluntary employees’ beneficiary association within the meaning of Section 501(c)(9) of the Internal Revenue Code which provides benefits under a Compensation and Benefit Plan has (i) received an opinion letter from the Internal Revenue Service recognizing its exempt status under Section 501(c)(9) of the Internal Revenue Code and (ii) filed a timely notice with the Internal Revenue Service pursuant to Section 505(c) of the Internal Revenue Code, and it is not aware of circumstances likely to result in the loss of such exempt status under Section 501(c)(9) of the Internal Revenue Code. Each Compensation and Benefit Plan subject to regulation by any foreign tax or regulatory authority complies with such applicable foreign Law. There is no pending or, to its knowledge, threatened Litigation relating to any of its ERISA Plans.

(iv) Neither it nor any of its Subsidiaries has engaged in a transaction with respect to any of its Compensation and Benefit Plans that, assuming the Taxable Period of such transaction expired as of the date of this Agreement or the Effective Time, would subject it or any of its Subsidiaries to a Tax or penalty imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.

(v) Except as disclosed in Section 4.3(k) of its Disclosure Letter, each of its Pension Plans had, as of the date of its most recent actuarial valuation, assets measured at fair market value at least equal to its “current liability,” as that term is defined in Section 302(d)(7) of ERISA. To its knowledge, since the date of the most recent actuarial valuation, no event has occurred which would adversely change any such funded status. None of its Pension Plans nor any “single-employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently maintained by it or any of its Subsidiaries, or the single-employer plan of any entity which is considered one employer with it under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA (an

 

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“ERISA Affiliate”) has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. All required contributions with respect to any of its Pension Plans or any single-employer plan of any of its ERISA Affiliates have been timely made and there is no lien, nor is there expected to be a lien, under Internal Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section 4971. Neither it nor any of its Subsidiaries has provided, or is required to provide, security to any of its Pension Plans or to any single-employer plan of any of its ERISA Affiliates pursuant to Section 401(a)(29) of the Internal Revenue Code.

(vi) With respect to any Compensation and Benefit Plan maintained in the United Kingdom or that is otherwise subject to the Laws thereof, to its knowledge, (A) no liability, which has not been settled in full, has been imposed on it or any Subsidiary under Section 144 of the Pension Schemes Act 1993 or Section 75 of the Pensions Act 1995; (B) all death in service benefits payable in accordance with the provisions of each such plan are fully insured (apart from money purchase benefits as defined in Section 181 of the Pension Schemes Act 1993) and it is aware of no reason why such cover may be forfeited; and (C) no employee or former employee has transferred to it or to a Subsidiary as part of a transfer of an undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 applied.

(vii) With respect to any Compensation and Benefit Plan maintained in Canada or that is otherwise subject to the Laws thereof, to its knowledge, (A) no event has occurred respecting any Compensation and Benefit Plan which is a “registered pension plan” as defined under the Income Tax Act (Canada) which would entitle any Person to cause the wind-up or termination, in whole or in part, of such Compensation and Benefit Plan; (B) there has been no withdrawal, and no application to any Governmental Authority for approval of such a withdrawal, of assets from such Compensation and Benefit Plan, and any application of surplus assets in such Compensation and Benefit Plan to offset required employer contributions thereto has been permitted by applicable Law and the terms of such Compensation and Benefit Plan and its associated funding agreement; and (C) with respect to any “registered pension plan”, no transfers of assets, which required the approval of any Governmental Authority from or to such Compensation and Benefit Plan to or from another benefit plan or arrangement have occurred and there are no pending or anticipated applications to transfer assets to or from any such Compensation and Benefit Plan.

(viii) No Liability under Title IV of ERISA has been or is expected to be incurred by it or any of its Subsidiaries with respect to a