AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated as of December
1, 1998, by and between D&N Financial Corporation, a Delaware corporation
("D&N"), and Republic Bancorp Inc., a Michigan corporation ("Republic"). Each of
D&N and Republic is sometimes individually referred to herein as a "party," and
D&N and Republic are sometimes collectively referred to herein as the "parties."
RECITALS
WHEREAS, D&N, a unitary savings and loan holding company, with
principal offices in Hancock, Michigan, owns, among other things, all of the
issued and outstanding capital stock of D&N Bank, a federally chartered savings
bank ("D&N Bank"). As of the date hereof, D&N has 25,000,000 authorized shares
of common stock, par value $0.01 per share ("D&N Common Stock"), of which
9,165,011 shares are outstanding, and 1,000,000 authorized shares of preferred
stock, par value $.01 per share, none of which is outstanding.
WHEREAS, Republic, a bank holding company, with principal offices in
Owosso, Michigan, owns, among other things, 100% of the issued and outstanding
capital stock of Republic Bank ("Republic Bank"). As of the date hereof,
Republic has 30,000,000 authorized shares of common stock, par value $5.00 per
share ("Republic Common Stock"), of which 23,697,383 shares are outstanding,
5,000,000 authorized shares of preferred stock, no par value per share
("Republic Preferred Stock"), of which no shares are outstanding.
WHEREAS, D&N and Republic desire to combine their respective holding
companies through a tax-free, stock-for-stock merger so that the respective
stockholders of D&N and Republic will have an equity ownership in the combined
holding company.
WHEREAS, neither the Board of Directors of D&N nor the Board of
Directors of Republic seeks to sell its respective holding company at this time
but both Boards desire to merge their respective holding companies in a
transaction structured as a merger of equals.
WHEREAS, it is intended that to accomplish this result, D&N will be
merged with and into Republic, with Republic as the surviving corporation. Such
merger is referred to herein as the "Merger." Republic after the Merger is
sometimes referred to herein as the "Surviving Corporation."
WHEREAS, as an inducement to and condition of Republic's willingness to
enter into this Agreement, D&N will grant to Republic concurrently with the
execution and delivery of this Agreement an option pursuant to the D&N Stock
Option Agreement (the "D&N Stock Option Agreement"). The D&N Stock Option
Agreement is attached hereto as Exhibit A.
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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.
WHEREAS, the Boards of Directors of D&N and Republic (at meetings duly
called and held) have determined that this Agreement and the transactions
contemplated hereby are in the best interests of D&N and Republic, respectively,
and their respective stockholders and have approved this Agreement and the D&N
Stock Option Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger. Subject to the terms and conditions of this Agreement and
pursuant to applicable law, at the Effective Time (as hereinafter defined), (i)
D&N shall be merged with and into Republic pursuant to the terms and conditions
set forth herein, (ii) the separate corporate existence of D&N shall cease, and
(iii) Republic as the Surviving Corporation shall continue to be governed by the
laws of the State of Michigan. This Agreement is intended to constitute the
"plan of merger" contemplated by Section 701 of the Michigan Business
Corporation Act, as amended (the "MBCA"), and the "agreement of merger"
contemplated by Section 251 of the Delaware General Corporation Law, as amended
("DGCL").
1.2 Effective Time. As soon as practicable after each of the conditions
set forth in Article IV hereof has been satisfied or waived, D&N and Republic
will file, or cause to be filed, a certificate of merger and articles of merger
with the appropriate authorities of Delaware and Michigan, respectively, for the
Merger, which certificate of merger and articles of merger shall in each case be
in the form required by and executed in accordance with the provisions of
applicable law. The Merger shall become effective at the time and date which is
the later of the time at which (i) the Delaware certificate of merger is filed
with the appropriate authorities of Delaware and (ii) the Michigan articles of
merger are filed with the appropriate authorities of Michigan ("Effective
Time"), which shall be immediately following the Closing (as defined in Section
1.11 hereof) and on the same day as the Closing if practicable, or at such other
date and time as may be agreed to by the parties and specified in the
certificate of merger and articles of merger in accordance with applicable law.
1.3 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of D&N or Republic or the holders of shares of D&N or
Republic Common Stock:
(i) Each outstanding share of D&N Common Stock issued
and outstanding at the Effective Time subject to clause (a)(ii) of this Section
1.3 and Section 1.6 hereof, shall cease to be outstanding, shall cease to exist
and shall be converted into and represent solely
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1.82 shares of Republic Common Stock (the "Conversion Number") and shall no
longer be a share of D&N Common Stock.
(ii) Any shares of D&N Common Stock which are owned or
held by either party hereto or any of their respective Subsidiaries (as defined
in Section 2.1 hereof) (other than in a fiduciary capacity) at the Effective
Time shall cease to exist, the certificates for such shares shall as promptly as
practicable be cancelled, such shares shall not be converted into or represent
any shares of Republic Common Stock, and no shares of capital stock of Republic
shall be issued or exchanged therefor. At the Effective Time, all shares of D&N
Common Stock that are owned by D&N as treasury stock and all shares of D&N
Common Stock that are owned, directly or indirectly, by D&N or Republic or any
of their respective wholly-owned Subsidiaries (other than shares of D&N Common
Stock held, directly or indirectly, in trust accounts, managed accounts and the
like or otherwise held in a fiduciary capacity that are beneficially owned by
third parties (any such shares, and shares of Republic Common Stock which are
similarly held, whether held directly or indirectly by D&N or Republic, as the
case may be, being referred to herein as "Trust Account Shares") and other than
any shares of D&N Common Stock held by D&N or Republic or any of their
respective wholly-owned Subsidiaries in respect of a debt previously contracted
(any such shares of D&N Common Stock, and shares of Republic Common Stock which
are similarly held, whether held directly or indirectly by D&N or Republic or
any of their respective Subsidiaries, being referred to herein as "DPC Shares")
and as set forth in the D&N Disclosure Schedule) shall be cancelled and shall
cease to exist and no stock of Republic or other consideration shall be
delivered in exchange therefor.
(iii) Each share of Republic Common Stock issued and
outstanding immediately before the Effective Time shall remain an outstanding
share of Common Stock of Republic as the Surviving Corporation. All shares of
Republic Common Stock that are owned by D&N or any of its wholly-owned
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of Republic.
(iv) The holders of certificates representing shares of
D&N Common Stock shall cease to have any rights as stockholders of D&N, except
such rights, if any, as they may have pursuant to the DGCL.
1.4 Surviving Corporation in the Merger.
(a) The name of the Surviving Corporation in the Merger shall be
"Republic". At the Effective Time, the headquarters and principal executive
offices of Republic immediately prior to the Effective Time shall be the
headquarters and principal executive offices of the Surviving Corporation. At
the Effective Time, the headquarters and principal executive offices of Republic
Bank immediately prior to the Effective Time shall be the headquarters and
principal executive offices of Republic Bank. At the Effective Time, the
headquarters and principal executive offices of D&N Bank immediately prior to
the Effective Time shall be the headquarters and principal executive offices of
D&N Bank.
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(b) At the Effective Time, the Articles of Incorporation of
Republic, as amended by the Republic Charter Amendment (as defined in Section
1.5(a) hereof) and as then in effect, shall be the Articles of Incorporation of
Republic as the Surviving Corporation until amended as provided therein or as
otherwise permitted by the MBCA.
(c) At the Effective Time, the Bylaws of Republic as then in
effect shall be the Bylaws of Republic as the Surviving Corporation until
amended as provided therein or as otherwise permitted by the MBCA.
(d) The directors and certain executive officers of Republic as
the Surviving Corporation following the Merger shall be as provided in Section
6.2 herein until such directors or officers are replaced or additional directors
or officers are elected or appointed in accordance with the provisions of this
Agreement and the Articles of Incorporation and Bylaws of the Surviving
Corporation.
(e) From and after the Effective Time the Merger shall have the
effects set forth in this Agreement and in the MBCA and the DGCL, including
without limitation the following:
(i) Republic as the Surviving Corporation shall possess
all assets and property of every description, and every interest in the assets
and property, wherever located, and the rights, privileges, immunities, powers,
franchises, and authority, of a public as well as of a private nature, of each
of D&N and Republic, and all obligations belonging or due to each of D&N and
Republic, all of which shall vest in Republic as the Surviving Corporation
without further act or deed. Title to any real estate or any interest in the
real estate vested in D&N or Republic shall not revert or in any way be impaired
by reason of the Merger.
(ii) Republic as the Surviving Corporation will be
liable for all the obligations of each of D&N and Republic. Any claim existing,
or action or proceeding pending, by or against D&N or Republic, may be
prosecuted to judgment, with right of appeal, as if the Merger had not taken
place, or Republic as the Surviving Corporation may be substituted in its place.
(iii) All the rights of creditors of each of D&N and
Republic will be preserved unimpaired, and all liens upon the property of D&N
and Republic will be preserved unimpaired only on the property affected by such
liens immediately before the Effective Time.
1.5 Authorization for Issuance of Republic Common Stock; Exchange of
Certificates.
(a) Subject to the approval by Republic's stockholders of an
amendment to the Articles of Incorporation of Republic increasing the number of
authorized shares of Republic Common Stock to not less than 75,000,000 (the
"Republic Charter Amendment"), prior to the Closing Republic shall reserve for
issuance a sufficient number of shares of its common stock for the purpose of
issuing its shares to D&N's stockholders in accordance with this Article I.
(b) After the Effective Time, holders of certificates
theretofore representing outstanding shares of D&N Common Stock (other than as
provided in Section 1.3(a)(ii) hereof),
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upon surrender of such certificates to State Street Bank and Trust
Company/Boston EquiServe, or another exchange agent appointed jointly by D&N and
Republic on behalf of Republic as the Surviving Corporation (the "Exchange
Agent"), shall be entitled to receive certificates for the number of whole
shares of Republic Common Stock into which shares of D&N Common Stock
theretofore evidenced by the certificates so surrendered shall have been
converted, as provided in Section 1.3 hereof, and cash payments in lieu of
fractional shares, if any, as provided in Section 1.6 hereof. As soon as
practicable after the Effective Time, the Exchange Agent will send a notice and
transmittal form to each D&N stockholder of record at the Effective Time whose
D&N Common Stock shall have been converted into Republic Common Stock advising
such stockholder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly
representing D&N Common Stock in exchange for new certificates for Republic
Common Stock. Upon surrender, each certificate representing D&N Common Stock
shall be cancelled.
(c) Until surrendered as provided in this Section 1.5 hereof,
all outstanding certificates of a holder which, before the Effective Time,
represented D&N Common Stock (other than those representing shares cancelled at
the Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed for all
corporate purposes to represent the number of whole shares of Republic Common
Stock into which the shares of D&N Common Stock formerly represented thereby
were converted and the right to receive cash in lieu of a fractional share
interest. However, until such outstanding certificates formerly representing D&N
Common Stock are so surrendered, no dividend or distribution payable to holders
of record of Republic Common Stock shall be paid to any holder of such
outstanding certificates, but upon surrender of such outstanding certificates by
such holder there shall be paid to such holder the amount of any dividends or
distribution, without interest, theretofore paid with respect to such whole
shares of Republic Common Stock, but not paid to such holder, and which
dividends or distribution had a record date occurring on or after the Effective
Time and the amount of any cash, without interest, payable to such holder in
lieu of a fractional share interest pursuant to Section 1.6 hereof. After the
Effective Time, there shall be no further registration of transfers on the
records of D&N of outstanding certificates formerly representing shares of D&N
Common Stock and, if a certificate formerly representing such shares is
presented to Republic or D&N, it shall be forwarded to the Exchange Agent for
cancellation and exchanged for a certificate representing shares of Republic
Common Stock and cash for any fractional share interest (if any), as herein
provided. Following six months after the Effective Time, the Exchange Agent
shall return to Republic any certificates for Republic Common Stock and cash
remaining in the possession of the Exchange Agent (together with any dividends
in respect thereof) and thereafter shareholders of D&N shall look exclusively to
Republic for shares of Republic Common Stock and cash to which they are entitled
hereunder. Notwithstanding the foregoing, none of D&N, Republic, the Exchange
Agent or any other Person shall be liable to any former holder of shares of D&N
Common Stock for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) All shares of Republic Common Stock and cash in lieu of any
fractional share issued or paid upon the conversion of D&N Common Stock in
accordance with the above terms and conditions shall be deemed to have been
issued or paid in full satisfaction of all rights pertaining to such D&N Common
Stock.
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(e) If any new certificate for Republic Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange thereof is registered, it shall be a condition of the issuance therefor
that the certificate surrendered in exchange shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of a new certificate representing shares of Republic
Common Stock in any name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(f) In the event any certificate representing D&N Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed certificate, upon the making of an
affidavit of that fact by the holder thereof, such shares of Republic Common
Stock and cash for any fractional share interest, as may be required pursuant
hereto; provided, however, that Republic as the Surviving Corporation or
Exchange Agent may, in its discretion and as a condition precedent to the
issuance or payment thereof, require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Republic as the Surviving Corporation, D&N,
the Exchange Agent or any other person with respect to the certificate alleged
to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof,
no fractional shares of Republic Common Stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued upon the
conversion of or in exchange for any shares of D&N Common Stock; no dividend or
distribution with respect to Republic Common Stock shall be payable on or with
respect to any fractional share interest; and no such fractional share interest
shall entitle the owner thereof to vote or to any other rights of a stockholder
of Republic as the Surviving Corporation. In lieu of such fractional share
interest, any holder of D&N Common Stock who would otherwise be entitled to a
fractional share of Republic Common Stock will, upon surrender of his
certificate or certificates representing D&N Common Stock outstanding
immediately before the Effective Time, be paid the applicable cash value of such
fractional share interest, which shall be equal to the product of the fraction
of the share to which such holder would otherwise have been entitled and the
closing price of Republic Common Stock on the trading day immediately prior to
the date of the Effective Time. For the purposes of determining any such
fractional share interest, all shares of D&N Common Stock owned by a D&N
stockholder shall be combined so as to calculate the maximum number of whole
shares of Republic Common Stock issuable to such D&N stockholder.
1.7 Stockholders' Meetings.
(a) D&N shall, at the earliest practicable date, hold a meeting
of its stockholders (the "D&N Stockholders' Meeting") to submit this Agreement
for adoption by its stockholders. The affirmative vote of a majority of the
issued and outstanding shares of D&N Common Stock entitled to vote shall be
required for such adoption.
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(b) Republic shall, at the earliest practicable date, hold a
meeting of its stockholders (the "Republic Stockholders' Meeting") to (i) submit
this Agreement for stockholder approval and (ii) submit the Republic Charter
Amendment for stockholder approval. The affirmative vote of a majority of the
issued and outstanding shares of Republic Common Stock entitled to vote shall be
required for such approval of this Agreement and for such approval of the
Republic Charter Amendment.
1.8 D&N Stock Options.
(a) The Disclosure Schedule delivered by D&N to Republic
pursuant to Section 2.2 herein sets forth a list of each stock option
outstanding on the date of this Agreement (collectively, the "D&N Stock
Options") to purchase D&N Common Stock heretofore granted pursuant to the D&N
Amended and Restated Stock Option and Incentive Plan (as amended February 27,
1995) and the D&N Amended and Restated 1994 Management Stock Incentive Plan
(collectively, the "D&N Option Plans"). The Disclosure Schedule delivered by D&N
to Republic pursuant to Section 2.2 herein also sets forth with respect to each
D&N Stock Option the option exercise price, the number of shares subject to the
option, the dates of grant, vesting, exercisability and expiration of the option
and that the option is either an incentive or a nonqualified stock option.
Except as otherwise expressly provided in Section 3.14(b) hereof, without the
written consent of Republic, no additional stock options shall, after the date
of this Agreement, be granted under the D&N Option Plans.
(b) At the Effective Time, each D&N Stock Option which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of D&N Common Stock and shall be converted automatically
into an option to purchase shares of Republic Common Stock in an amount and at
an exercise price determined as provided below (and otherwise, in the case of
options, subject to the terms of the D&N Option Plans under which they were
issued and the agreements evidencing grants thereunder):
(i) The number of shares of Republic Common Stock to be
subject to the new option shall be equal to the product of the number
of shares of D&N Common Stock subject to the original D&N Stock Option
and the Conversion Number, provided that any fractional shares of
Republic Common Stock resulting from such multiplication shall be
rounded down to the nearest whole share; and
(ii) The exercise price per share of Republic Common Stock
under the new option shall be equal to the exercise price per share of
D&N Common Stock under the original D&N Stock Option divided by the
Conversion Number, provided that such exercise price shall be rounded
down to the nearest whole cent.
(c) The adjustment provided herein with respect to any D&N Stock
Options which are "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended ("Internal Revenue Code")) shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Internal Revenue Code. The vesting, duration and other
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terms of the new option shall be the same as the original D&N Stock Option
except that all references to D&N shall be deemed to be references to Republic.
(d) At all times after the Effective Time, Republic as the
Surviving Corporation shall reserve for issuance such number of shares of
Republic Common Stock as necessary so as to permit the exercise of options
granted under the D&N Option Plans in the manner contemplated by this Agreement
and, subject to Section 1.8(e) hereof, the instruments pursuant to which such
options were granted. Republic shall make all filings required under federal and
state securities laws promptly after the Effective Time so as to permit the
exercise of such options and the sale of the shares received by the optionee
upon such exercise at and after the Effective Time and Republic as the Surviving
Corporation shall continue to make such filings thereafter as may be necessary
to permit the continued exercise of options and sale of such shares.
(e) Notwithstanding anything to the contrary express or
implied in any of the D&N Option Plans or any of the D&N Stock Options, D&N and
Republic, as applicable, shall: (i) neither approve nor allow any holder of any
stock option granted under any of the D&N Option Plans (including, without
limitation, the D&N Stock Options) to elect or receive a cash payment in lieu of
the right to receive or exercise such stock option; and (ii) not allow any
holder of any stock option granted under any D&N Option Plan (including, without
limitation, the D&N Stock Options) to exercise his or her right to receive cash
pursuant to such D&N Option Plan, and shall institute a procedure to effect the
issuance of D&N or Republic Common Stock, as applicable, in lieu thereof, with
the right of the holder to sell such D&N or Republic Common Stock, as
applicable.
1.9 Registration Statement; Prospectus/Joint Proxy Statement.
(a) For the purposes (i) of holding the Republic Stockholders'
Meeting, (ii) of registering with the Securities and Exchange Commission ("SEC")
and with applicable state securities authorities the Republic Common Stock to be
issued to holders of D&N Common Stock in connection with the Merger and (iii) of
holding the D&N Stockholders' Meeting, the parties shall cooperate in the
preparation of an appropriate registration statement (such registration
statement, together with all and any amendments and supplements thereto, is
referred to herein as the "Registration Statement"), including the
Prospectus/Joint Proxy Statement satisfying all applicable requirements of
applicable state laws, and of the Securities Act of 1933 (the "Securities Act")
and the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder (such Prospectus/Joint Proxy Statement, together with any
and all amendments or supplements thereto, is referred to herein as the
"Prospectus/Joint Proxy Statement").
(b) D&N shall furnish such information concerning D&N and its
Subsidiaries as is necessary in order to cause the Prospectus/Joint Proxy
Statement, insofar as it relates to such entities, to comply with Section 1.9(a)
hereof. D&N agrees promptly to advise Republic if at any time before the
Republic or D&N Stockholders' Meeting any information provided by D&N in the
Prospectus/Joint Proxy Statement (through incorporation by reference or
otherwise) becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy or omission. D&N shall
furnish Republic with such supplemental information as may
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be necessary in order to cause such Prospectus/Joint Proxy Statement, insofar as
it relates to D&N and its Subsidiaries, to comply with Section 1.9(a) hereof.
(c) Republic shall furnish D&N with such information concerning
Republic and its Subsidiaries as is necessary in order to cause the
Prospectus/Joint Proxy Statement, insofar as it relates to such entities, to
comply with Section 1.9(a) hereof. Republic agrees promptly to advise D&N if at
any time before the D&N or Republic Stockholders' Meeting any information
provided by Republic in the Prospectus/Joint Proxy Statement (through
incorporation by reference or otherwise) becomes incorrect or incomplete in any
material respect and to provide D&N with the information needed to correct such
inaccuracy or omission. Republic shall furnish D&N with such supplemental
information as may be necessary in order to cause the Prospectus/Joint Proxy
Statement, insofar as it relates to Republic and its Subsidiaries, to comply
with Section 1.9(a).
(d) Republic shall promptly file the Registration Statement with
the SEC and applicable state securities agencies. D&N and Republic shall use all
reasonable efforts to cause the Registration Statement to become effective under
the Securities Act and applicable state securities laws at the earliest
practicable date. D&N authorizes Republic to utilize in the Registration
Statement the information concerning D&N and its Subsidiaries incorporated by
reference in, and provided to Republic for the purpose of inclusion in, the
Prospectus/Joint Proxy Statement. Republic shall advise D&N promptly when the
Registration Statement has become effective and of any supplements or amendments
thereto, and Republic shall furnish D&N with copies of all such documents.
Before the Effective Time or the termination of this Agreement, each party shall
consult with the other with respect to any material (other than the
Prospectus/Joint Proxy Statement) that might constitute a "prospectus" relating
to the Merger within the meaning of the Securities Act.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate,
and shall cause each of their respective affiliates and Subsidiaries to
cooperate, in the preparation and submission by them, as promptly as reasonably
practicable, of such applications, petitions, and other filings as any of them
may reasonably deem necessary or desirable to or with thrift and bank regulatory
authorities, Federal Trade Commission, Department of Justice, SEC, Secretary of
State of Delaware and Michigan, other regulatory or governmental authorities,
holders of the voting shares of common stock of D&N and Republic, and any other
persons for the purpose of obtaining any approvals or consents necessary to
consummate the transactions contemplated hereby. Each party will have the right
to review and comment on such applications, petitions and filings in advance and
shall furnish to the other copies thereof promptly after submission thereof. Any
such materials must be acceptable to both D&N and Republic prior to submission
to any regulatory or governmental entity or authority or transmission to
stockholders or other third parties, except to the extent that D&N or Republic
is legally required to proceed prior to obtaining the acceptance of the other
party hereto. Each party agrees to consult with the other with respect to
obtaining all necessary consents and approvals, and each will keep the other
apprised of the status of matters relating to such approvals and consents and
the consummation of the transactions contemplated hereby. At the date hereof, no
party is aware of any reason that any regulatory approval required to be
obtained by it would not be obtained or would be obtained subject to conditions
that would have or result in a material adverse effect on Republic as the
Surviving Corporation.
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1.11 Closing. If (i) this Agreement has been duly approved by the
stockholders of D&N and Republic, (ii) the Republic Charter Amendment has been
duly approved by the stockholders of Republic, and (iii) all relevant conditions
of this Agreement have been satisfied or waived, a closing (the "Closing") shall
take place as promptly as practicable thereafter at the principal office of
Miller, Canfield, Paddock and Stone, P.L.C., Detroit, Michigan, or at such other
place as the parties agree, at which the parties will exchange certificates,
letters and other documents as required hereby and will make the filings
described in Section 1.2 hereof. Such Closing will take place within 30 days
after the satisfaction or waiver of all conditions and/or obligations precedent
to Closing contained in Article IV of this Agreement, or at such other time as
the parties agree. The parties shall use their respective best efforts to cause
the Closing to occur on or prior to June 30, 1999.
1.12 Tax Consequences; Accounting Treatment. It is intended that (i)
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, (ii) this Agreement shall constitute a
"plan of reorganization" for the purposes of Section 368 of the Internal Revenue
Code, and (iii) the Merger shall qualify for "pooling of interests" accounting
treatment under Accounting Principles Board Opinion No. 16 and SEC Accounting
Series Releases 130 and 135, as amended.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
D&N represents and warrants to Republic, and Republic represents and
warrants to D&N, except as disclosed in the Disclosure Schedule delivered by
each party to the other pursuant to Section 2.23 hereof, as follows:
2.1 Organization, Good Standing, Authority, Insurance, Etc. It is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Section 2.1 of its Disclosure Schedule
lists each "subsidiary" (the term "subsidiary" when used with respect to any
party means any entity (including without limitation any corporation,
partnership, joint venture or other organization, whether incorporated or
unincorporated) which is consolidated with such party for financial reporting
purposes (individually a "Subsidiary" and collectively the "Subsidiaries"). Each
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction under which it is organized, as set forth in
Section 2.1 of its Disclosure Schedule. It and each of its Subsidiaries have all
requisite power and authority and to the extent required by applicable law are
licensed to own, lease and operate their respective properties and conduct their
respective businesses as they are now being conducted. It has delivered or made
available to the other party a true, complete and correct copy of the articles
of incorporation, certificate of incorporation or other organizing document and
of the bylaws, as in effect on the date of this Agreement, of it and each of its
Subsidiaries. It and each of its Subsidiaries are qualified to do business as
foreign corporations or entities and are in good standing in each jurisdiction
in which qualification is necessary under applicable law, except to the extent
that any failures to so qualify would not, in the aggregate, have a material
adverse effect on it. All eligible accounts of each of its Subsidiaries that is
a depositary institution are insured by the Federal Deposit Insurance
Corporation (the "FDIC") to the maximum extent permitted under applicable law.
In the case of the representations and warranties of D&N, D&N is duly registered
as a savings and loan holding
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company under the Home Owners' Loan Act of 1933, as amended, and the D&N Common
Stock is registered under the Exchange Act. In the case of the representations
and warranties of Republic, Republic is duly registered as a bank holding
company registered under the Bank Holding Company Act of 1956, as amended, and
the Republic Common Stock is registered under the Exchange Act. Its minute books
and those of each of its Subsidiaries contain complete and accurate records of
all meetings and other corporate actions taken by their respective stockholders
and Boards of Directors (including the committees of such Boards).
2.2 Capitalization.
(a) Its authorized capital stock and the number of issued and
outstanding shares of its capital stock as of the date hereof are accurately set
forth in the recitals in this Agreement. All outstanding shares of its common
stock are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except (i) as set forth in Section 2.2 of its Disclosure
Schedule or (ii) with respect to the D&N Stock Option Agreement, as of the date
of this Agreement, there are no options, convertible securities, warrants or
other rights (preemptive or otherwise) to purchase or acquire any of its capital
stock from it and no oral or written agreement, contract, arrangement,
understanding, plan or instrument of any kind to which it or any of its
Subsidiaries is subject with respect to the issuance, voting or sale of issued
or unissued shares of its capital stock. A true and complete copy of each plan
and agreement pursuant to which such options, convertible securities, warrants
or other rights have been granted or issued, as in effect on the date of this
Agreement, is included in Section 2.2 of its Disclosure Schedule. Only the
holders of its common stock have the right to vote at meetings of its
stockholders on matters to be voted thereat (including this Agreement).
(b) Subject to stockholder approval of the Republic Charter
Amendment, and with respect to the shares of Republic Common Stock to be issued
in the Merger, Republic represents and warrants that such shares when so issued
in accordance with this Agreement will be duly authorized, validly issued, fully
paid and nonassessable and not subject to any preemptive rights or other liens.
2.3 Ownership of Subsidiaries. All outstanding shares or ownership
interests of its Subsidiaries are validly issued, fully paid, nonassessable and
owned beneficially and of record by it or one of its Subsidiaries free and clear
of any lien, claim, charge, restriction, rights of third parties, or encumbrance
(collectively, "Encumbrance"), except as set forth in Section 2.3 of its
Disclosure Schedule. There are no options, convertible securities, warrants or
other rights (preemptive or otherwise) to purchase or acquire any capital stock
or ownership interests of any of its Subsidiaries and no contracts to which it
or any of its Subsidiaries is subject with respect to the issuance, voting or
sale of issued or unissued shares of the capital stock or ownership interests of
any of its Subsidiaries. Neither it nor any of its Subsidiaries owns more than
2% of the capital stock or other equity securities (including securities
convertible or exchangeable into such securities) of or more than 2% of the
aggregate profit participations in any entity other than a Subsidiary or as
otherwise set forth in Section 2.3 of its Disclosure Schedule.
11
2.4 Financial Statements and Reports.
(a) No registration statement, offering circular, proxy
statement, schedule or report filed by it or any of its Subsidiaries under
various securities and financial institution laws and regulations ("Regulatory
Reports"), on the date of its effectiveness in the case of such registration
statements, or on the date of filing in the case of such reports or schedules,
or on the date of mailing in the case of such proxy statements, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. For the past five
years, it and its Subsidiaries have timely filed all Regulatory Reports required
to be filed by them under various securities and financial institution laws and
regulations except to the extent that all failures to so file, in the aggregate,
would not have a material adverse effect on it; and all such documents, as
finally amended, complied in all material respects with applicable requirements
of law and, as of their respective date or the date as amended, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except to
the extent stated therein, all financial statements and schedules included in
the Regulatory Reports (or to be included in Regulatory Reports to be filed
after the date hereof) (i) were or will be (with respect to financial statements
in respect of periods ending after September 30, 1998), prepared in accordance
with its books and records and those of its consolidated Subsidiaries, and (ii)
present (and in the case of financial statements in respect of periods ending
after September 30, 1998, will present) fairly the consolidated financial
position and the consolidated results of operations or income, changes in
stockholders' equity and cash flows of it and its Subsidiaries as of the dates
and for the periods indicated in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods (except for the
omission of notes to unaudited statements and in the case of unaudited
statements to recurring year-end adjustments normal in nature and amounts). Its
audited consolidated financial statements at December 31, 1997 and for the year
then ended and the consolidated financial statements for all periods thereafter
up to the Closing reflect or will reflect, as the case may be, all liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and regardless of when asserted) as of such date of it and its
Subsidiaries required to be reflected in such financial statements in accordance
with generally accepted accounting principles and contain or will contain (as
the case may be) adequate reserves for losses on loans and properties acquired
in settlement of loans, taxes and all other material accrued liabilities and for
all reasonably anticipated material losses, if any, as of such date in
accordance with generally accepted accounting principles. There exists no set of
circumstances that could reasonably be expected to result in any liability or
obligation material to it or its Subsidiaries, taken as a whole, except as
disclosed in such consolidated financial statements at December 31, 1997 or for
transactions effected or actions occurring or omitted to be taken after December
31, 1997 (i) in the ordinary course of business, (ii) as permitted by this
Agreement or (iii) as disclosed in its Regulatory Reports filed after December
31, 1997 and before the date of this Agreement. A true and complete copy of such
December 31, 1997 financial statements has been delivered by it to the other
party. The books and records of it and its Subsidiaries have been, and are
being, maintained in all material respects in accordance with generally accepted
accounting principles and any other applicable legal and accounting
requirements.
12
(b) To the extent permitted under applicable law, it has
delivered or made available to the other party each Regulatory Report filed,
used or circulated by it with respect to periods since January 1, 1995 through
the date of this Agreement and will promptly deliver to the other party each
such Regulatory Report filed, used or circulated after the date hereof, each in
the form (including exhibits and any amendments thereto) filed with the
applicable regulatory or governmental entity or authority (or, if not so filed,
in the form used or circulated).
2.5 Absence of Changes.
(a) Since September 30, 1998, there has been no material adverse
change affecting it. There is no occurrence, event or development of any nature
existing or, to its best knowledge, threatened which may reasonably be expected
to have a material adverse effect upon it.
(b) Except as set forth in Section 2.5 of its Disclosure Schedule
or in its Regulatory Reports filed after December 31, 1997 and before the date
of this Agreement, since December 31, 1997, each of it and its Subsidiaries has
owned and operated its respective assets, properties and businesses in the
ordinary course and consistent with past practice.
(c) In the case of D&N: since December 31, 1997 neither it nor
any of its Subsidiaries has (i) except for such actions as are in the ordinary
course of business consistent with past practice or except as required by
applicable law, (A) 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 December 31, 1997, or (B)
granted any severance or termination pay or entered into any contract to make or
grant any severance or termination pay, or (ii) suffered any strike, work
stoppage, slowdown, or other labor disturbance which, in its reasonable
judgment, is likely, either individually or in the aggregate, to have a material
adverse effect on it.
2.6 Prospectus/Joint Proxy Statement. At the time the Prospectus/Joint
Proxy Statement is mailed to the stockholders of D&N and Republic for the
solicitation of proxies for the approvals referred to in Section 1.7 hereof and
at all times after such mailings up to and including the times of such
approvals, such Prospectus/Joint Proxy Statement (including any supplements
thereto), with respect to all information set forth therein relating to it
(including its Subsidiaries) and its stockholders, its common stock, this
Agreement, the Merger and the other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations under such
Acts; and
(b) Not 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 contained therein, in light of the circumstances under
which it is made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment
banker, person or firm acting on behalf or under authority of it or any of
its Subsidiaries is or will be entitled to any broker's
13
or finder's fee or any other commission or similar fee directly or indirectly in
connection with the Merger or any other transaction contemplated hereby, except
as set forth in Section 2.7 of its Disclosure Schedule transactions contemplated
by this Agreement, other than (i) in the case of Republic, Xxxxx Capital
Markets, a division of First Chicago Capital Markets, Inc. ("Xxxxx") (a copy of
which engagement agreement has been disclosed by Republic to D&N) whose fees,
commissions and expenses shall be paid by Republic, and (ii) in the case of D&N,
Xxxxx Financial, Inc. ("Xxxxx") (a copy of which engagement agreement has been
disclosed by D&N to Republic) whose fees, commissions and expenses shall be paid
by D&N.
2.8 Litigation and Other Proceedings. Except for matters which would
not have a material adverse effect on it, or except as set forth in Section 2.8
of its Disclosure Schedule, neither it nor any of its Subsidiaries is a
defendant in, nor is any of its property subject to, any pending or, to its best
knowledge, threatened claim, action, suit, investigation or proceeding or
subject to any judicial order, judgment or decree. There is no injunction,
order, judgment, decree, or regulatory restriction (other than (i) in the case
of Republic, those that apply to similarly situated bank holding companies
and/or banks, and (ii) in the case of D&N, those that apply to similarly
situated savings and loan holding companies and/or savings banks) imposed upon
it , any of its Subsidiaries or the assets of it or any of its Subsidiaries
which has had, or might reasonably be expected to have, a material adverse
effect on it.
2.9 Compliance with Law. Except as set forth in Section 2.9 of its
Disclosure Schedule:
(a) It and each of its Subsidiaries are in compliance in all
material respects with all laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to their respective operations or businesses,
including without limitation the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Owners' Disclosure Act and all
other applicable fair lending laws or other laws relating to discrimination.
Neither it nor any of its Subsidiaries has received notice from any federal,
state or local government or governmental or regulatory agency or body of any
material violation of, and does not know of any material violations of, any of
the above.
(b) It and each of its Subsidiaries have all permits,
licenses, certificates of authority, franchises, orders and approvals of, and
have made all filings, applications and registrations with, all federal, state,
local and foreign government or governmental or regulatory agency or body that
are required in order to permit them to carry on their respective businesses as
they are presently being conducted.
(c) It and each of its Subsidiaries have received since
January 1, 1995 no notification or communication from any government or
governmental or regulatory agency or body or the staff thereof (A) asserting
that it or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances that such government or governmental or
regulatory agency or body administers or enforces; (B) threatening to revoke any
license, franchise, permit or authorization; or (C) threatening or contemplating
any enforcement action by or supervisory or other written agreement with a state
or federal banking regulator, or any revocation or limitation of, or action
which would have the effect of revoking or limiting, the FDIC deposit insurance
of any
14
Subsidiary (nor, to the knowledge of its executive officers, do any grounds
for any of the foregoing exist); and
(d) It and each of its Subsidiaries are not required to give
prior notice to any government or governmental or regulatory agency or body of
the proposed addition of an individual to their respective board of directors or
the employment of an individual as a senior executive officer.
(e) Each of its Subsidiaries which is a federally insured bank
or savings institution currently performs all personal trust, corporate trust
and other fiduciary activities ("Trust Activities") with requisite authority
under applicable law and in accordance in all material respects with the
agreed-upon terms of the agreements and instruments governing such Trust
Activities, sound fiduciary principles and applicable law and regulation
(specifically including, but not limited to, Section 9 of Title 12 of the Code
of Federal Regulations) where the failure to so perform would have a material
adverse effect on it; there is no investigation or inquiry of a material nature
by any governmental entity or authority pending, or to its knowledge,
threatened, against or affecting it, or any "Significant Subsidiary" (as defined
in Rule 1-02(u) of Regulation S-X of the SEC) of it relating to the compliance
by it or any such Significant Subsidiary with sound fiduciary principles and
applicable regulations; and except where any such failure would not have a
material adverse effect on it, each employee of its Subsidiaries had the
authority to act in the capacity in which he or she acted with respect to Trust
Activities, in each case, in which such employee held himself or herself out as
a representative of a Subsidiary of it; and each of its Subsidiaries has
established policies and procedures for the purpose of complying with applicable
laws relating to Trust Activities, has followed such policies and procedures in
all material respects and has performed appropriate internal audit reviews of,
and has engaged independent accountants to perform audits of, Trust Activities,
which audits since December 31, 1995 have disclosed no material violations of
applicable laws or such policies and procedures.
2.10 Corporate Actions.
(a) Its Board of Directors (at a meeting duly called and held)
has by the requisite vote (i) determined that the Merger is advisable and in the
best interests of it and its stockholders, (ii) duly approved the Merger, this
Agreement and the D&N Stock Option Agreement, and authorized its officers to
execute and deliver this Agreement, the D&N Stock Option Agreement and to take
all action necessary to consummate the Merger and the other transactions
contemplated hereby and thereby, (iii) in the case of Republic, duly approved
the Republic Charter Amendment and authorized its officers to take all action
necessary to obtain stockholder approval of the Republic Charter Amendment and,
following such stockholder approval, to effect the Republic Charter Amendment
and the other transactions contemplated thereby, (iv) authorized and directed
the submission for stockholders' approval or adoption of this Agreement, and (v)
in the case of Republic, authorized and directed the submission for
stockholders' approval or adoption of the Republic Charter Amendment. Its Board
of Directors has been provided with an opinion of its financial advisor (Xxxxx
in the case of Republic, and Xxxxx in the case of D&N), that, as of the date of
such duly called and held meeting of its Board of Directors, the Conversion
Number is fair, from a financial point of view, to its stockholders.
15
(b) Its Board of Directors has taken all necessary action to
exempt this Agreement, and the D&N Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the D&N Stock Option
Agreement and the transactions contemplated hereby and thereby are exempt from,
(i) any applicable state takeover laws, (ii) any state laws limiting or
restricting the voting rights of stockholders, (iii) any state laws requiring a
stockholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
stockholder" or person or entity of similar type and (iv) any provision in its
or any of its Subsidiaries' articles of incorporation, certificate of
incorporation, charter or bylaws, (A) restricting or limiting stock ownership or
the voting rights of stockholders or (B) requiring a stockholder approval vote
in excess of the vote normally required in transactions of similar type not
involving a "related person," interested stockholder" or person or entity of
similar type.
2.11 Authority. Except as set forth in Section 2.11 of its Disclosure
Schedule, neither the execution and delivery of and performance of its
obligations under this Agreement and the D&N Stock Option Agreement by it nor
the consummation of the Merger will violate any of the provisions of, or
constitute a breach or default under or give any person the right to terminate
or accelerate payment or performance under, (i) its articles of incorporation,
certificate of incorporation or bylaws, or the articles of incorporation,
certificate of incorporation, charter or bylaws of any of its Subsidiaries, (ii)
any regulatory restraint on the acquisition of it or control thereof, (iii) 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 or (iv) any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation or instrument ("Contract") to which
it or any of its Subsidiaries is a party or is subject or by which any of its or
their properties or assets is bound and which provides for payments by, on
behalf of, or to it and/or any of its Subsidiaries in excess of either $50,000
per annum or $100,000 over the term of such Contract. The parties acknowledge
that the consummation of the Merger and the other transactions contemplated
hereby is subject to stockholder approval and to various governmental or
regulatory approvals. It has all requisite corporate power and authority to
enter into this Agreement and the D&N Stock Option Agreement, and to perform its
obligations hereunder and thereunder, subject, in the case of Republic, to the
approval or adoption of the Republic Charter Amendment by the stockholders of
Republic and, in the case of the Merger, to the approval or adoption of this
Agreement by its stockholders under applicable law. Other than (x) the receipt
of Governmental Approvals (as defined in Section 4.1(c) hereof), (y) the
approval or adoption of this Agreement by its stockholders, and (z) in the case
of Republic, the approval or adoption of the Republic Charter Amendment by its
stockholders, and except as set forth in Section 2.11 of its Disclosure Schedule
with respect to any Contract, no consents or approvals are required on its
behalf or on behalf of any of its Subsidiaries in connection with the
consummation of the transactions contemplated by this Agreement. This Agreement
and the D&N Stock Option Agreement have been duly executed and delivered on
behalf of it (and assuming due authorization, execution and delivery by every
other party to this Agreement and the D&N Stock Option Agreement), and each of
them constitutes a valid and binding obligation of it, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
laws relating to bankruptcy, insolvency or creditors rights generally and
general principles of equity.
16
2.12 Employment Arrangements.
(a) Except as set forth in Section 2.12 of its Disclosure
Schedule: (i) all employees of it and its Subsidiaries are employees-at-will,
may be terminated at any time for any lawful reason or no reason and have no
entitlement to employment by virtue of any oral or written contract, employer
policy, or otherwise, except for any employees, individually or in the
aggregate, the termination of whom without cause would not impose any material
liability on it or its Subsidiaries or require any material payments by it or
any of its Subsidiaries; (ii) there are no agreements, plans or other
arrangements with respect to employment, severance or other benefits with any
current or former directors, officers or employees of it or any of its
Subsidiaries which may not be terminated without penalty or expense (including
any augmentation or acceleration of benefits) on 30 days' or less notice to any
such person; (iii) no payments and benefits (including any augmentation or
acceleration of benefits) to current or former directors, officers or employees
of it or any of its Subsidiaries resulting from the transactions contemplated
hereby or the termination of such person's service or employment within two
years after completion of the Merger will cause the imposition of excise taxes
under Section 4999 of the Internal Revenue Code or the disallowance of a
deduction to it, Republic as the Surviving Corporation, or any of their
respective Subsidiaries pursuant to Section 162, 280G, or any other section of
the Internal Revenue Code; and (iv) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (A)
constitute a stated "triggering event" under any "Employee Plan" (as defined in
Section 2.13(a) hereof) or "Benefit Arrangement" (as defined in Section 2.13(a)
hereof) of it or any of its Subsidiaries that will result in any material
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director, officer,
stockholder, or employee of it or any of its Subsidiaries, or any dependent or
affiliate of any of the foregoing, from it or any of its Subsidiaries under any
Employee Plan or Benefit Arrangement of it or any of its Subsidiaries or
otherwise, (B) materially increase any benefits otherwise payable under any
Employee Plan or Benefit Arrangement of it or any of its Subsidiaries or (C)
result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
(b) Neither it nor any of its Subsidiaries is a party to any
collective bargaining agreement or labor union contract. To the best of its
knowledge, (i) no grievance procedure, arbitration proceeding or other labor
controversy is pending against it or any of its Subsidiaries under any
collective bargaining agreement or otherwise that would result in a material
liability, (ii) it and each of its Subsidiaries has complied in all material
respects with all laws relating to the employment of labor, including, without
limitation, any provision thereof relating to wages, hours, equal employment,
safety, collective bargaining and the payment of social security and similar
taxes and neither it nor any of its Subsidiaries is liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing,
except, in each case, any of the foregoing which, individually or in the
aggregate would not have a material adverse effect on it, and (iii) there is no
unfair labor practice or similar complaint against it or any of its Subsidiaries
pending before the National Labor Relations Board or similar authority or
strike, dispute, slowdown, work stoppage or lockout pending or threatened
against it or any of its Subsidiaries or any complaint pending before the Equal
Employment Opportunity Commission or any comparable federal, state or local fair
employment practices agency and none has existed during the past three years
that was not dismissed
17
without liability on the part of it or any of its Subsidiaries.
2.13 Employee Benefits.
(a) None of it, or any of its Subsidiaries, or any trade or
business, whether or not incorporated, required to be treated as a "single
employer" (within the meaning of Section 4001 of the Employment Retirement
Income Security Act of 1974 ("ERISA")) with it under Section 414(b) or (c) of
the Internal Revenue Code (an "ERISA Affiliate"), maintains any funded deferred
compensation plans (including profit sharing, pension, retirement savings or
stock bonus plans), unfunded deferred compensation arrangements or employee
benefit plans as defined in Section 3(3) of ERISA, other than any plans
("Employee Plans") set forth in Section 2.13 of its Disclosure Schedule (true
and correct copies of which it has delivered to the other party). None of the
Employee Plans of it or any of its Subsidiaries is, and none of it, or any of
its Subsidiaries, or any ERISA Affiliate has ever sponsored, participated in, or
contributed to, a "multi-employer plan" as defined in Section 3(37) of ERISA, or
a "multiple employer plan" as covered in Section 413(c) of the Internal Revenue
Code or any plan which is subject to Title IV of ERISA or Section 412 of the
Internal Revenue Code. Neither it nor any of its Subsidiaries has incurred or
reasonably expects to incur any liability to the Pension Benefit Guaranty
Corporation except for required premium payments which, to the extent due and
payable, have been paid. The Employee Plans intended to be qualified under
Section 401(a) of the Internal Revenue Code are so qualified, and it is not
aware of any fact which would adversely affect the qualified status of such
plans. Except as set forth in Section 2.13 of its Disclosure Schedule, neither
it nor any of its Subsidiaries (a) provides health, medical, death or survivor
benefits to any former employee or beneficiary thereof or (b) maintains any form
of current (exclusive of base salary and base wages) or deferred compensation,
bonus, stock option, stock appreciation right, benefit, severance pay,
retirement, employee stock ownership, incentive, group or individual health
insurance, welfare or similar plan or arrangement for the benefit of any single
or class of directors, officers or employees, whether active or retired
(collectively "Benefit Arrangements"). There are no restrictions on the rights
of it or any of its Subsidiaries or any ERISA Affiliate to amend or terminate
any of the Employee Plans or Benefit Arrangements without incurring any
liability thereunder.
(b) Except as disclosed in Section 2.13 of its Disclosure
Schedule, all Employee Plans and Benefit Arrangements which are in effect were
in effect for substantially all of calendar year 1997 and there has been no
material amendment thereof (other than amendments required to comply with
applicable law) or increase in the cost thereof or benefits payable thereunder
on or after January 1, 1998.
(c) To its best knowledge, with respect to all Employee Plans
and Benefit Arrangements, it and each of its Subsidiaries are in substantial
compliance with the requirements prescribed by any and all statutes,
governmental or court orders or rules or regulations currently in effect,
including but not limited to ERISA and the Internal Revenue Code, applicable to
such Employee Plans or Benefit Arrangements. To its best knowledge, no condition
exists that could constitute grounds for the termination of any Employee Plan
under Section 4042 of ERISA; no "prohibited transaction," as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code, has occurred with
respect to any Employee Plan, or any other employee benefit plan
18
maintained by it or any of its Subsidiaries which is covered by Title I of
ERISA, which could subject any person to liability under Title I of ERISA or to
the imposition of any tax under Section 4975 of the Internal Revenue Code; to
its best knowledge, no Employee Plan subject to Part III of Subtitle B of Title
I of ERISA or Section 412 of the Internal Revenue Code, or both, has incurred
any "accumulated funding deficiency," as defined in Section 412 of the Internal
Revenue Code, whether or not waived; neither it nor any of its Subsidiaries has
failed to make any contribution or pay any amount due and owing as required by
the terms of any Employee Plan or Benefit Arrangement. To its best knowledge,
neither it nor any of its Subsidiaries has incurred or expects to incur,
directly or indirectly, any liability under Title IV of ERISA arising in
connection with the termination of, or a complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA which could
constitute a liability of Republic as the Surviving Corporation or any of its
Subsidiaries at or after the Effective Time.
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether before, on or after the date of
this Agreement) or to be furnished in writing by or on behalf of it to the other
party pursuant to this Agreement contains or will contain any untrue statement
of a material fact or any material omission. To its best knowledge, no
information which is material to the Merger and necessary to make the
representations and warranties herein not misleading has been withheld from the
other party.
2.15 Property and Assets. Either it or one of its Subsidiaries is the
sole and absolute owner of all of the assets (real and personal, tangible and
intangible) reflected in the financial statements at December 31, 1997 referred
to in Section 2.4 hereof or acquired subsequent thereto (other than assets which
are leased under leases capitalized in accordance with generally accepted
accounting principles and assets which have been disposed of since the date of
such financial statements). It and its Subsidiaries have good and marketable
title to all such assets free and clear of any and all Encumbrances, except for
(x) the Encumbrances, if any, listed in Section 2.15 of its Disclosure Schedule,
(y) in each case for any assets the failure to have such good and marketable
title or the existence of such Encumbrances which, individually or in the
aggregate, would not have a material adverse effect on it, and (z) in the case
of any real property, (I) such items as are shown in such financial statements
or in the notes thereto, (II) liens for current real estate taxes not yet
delinquent, (III) customary easements, restrictions of record and title
exceptions that are not material to the value or use of such property, (IV)
property sold or transferred in the ordinary course of business since the date
of such financial statements, and (V) as otherwise specifically indicated in its
Regulatory Reports filed after December 31, 1997 and before the date of this
Agreement or in Section 2.15 of its Disclosure Schedule. No one has any written
or oral agreement, option, understanding, or commitment, or any right or
privilege capable of becoming an agreement, for the purchase from it or any of
its Subsidiaries of any of the material assets owned or leased by any of them.
It and its Subsidiaries enjoy peaceful and undisturbed possession under all
material leases for the use of real property or personal property under which
they are the lessee; all of such leases are valid and binding and in full force
and effect, and neither it nor any of its Subsidiaries is in default in any
material respect under any such lease. No default will arise under any material
real property, material personal property lease or material intellectual
property license by reason of the consummation of the Merger without the
lessor's or licensor's consent except as set forth in Section 2.15 of its
Disclosure Schedule. There has been no material physical loss, damage or
destruction, whether or
19
not covered by insurance, affecting any of the real properties or material
personal property of it and its Subsidiaries since December 31, 1997. All fixed
assets material to its or any of its Subsidiaries' respective business and
currently used by it or any of its Subsidiaries are, in all material respects,
in good operating condition and repair.
2.16 Agreements and Instruments. Except as set forth in its Regulatory
Reports filed after December 31, 1997 and before the date of this Agreement or
in Section 2.16 of its Disclosure Schedule and, in the case of Republic, except
as otherwise contemplated by Section 3.14 hereof, neither it nor any of its
Subsidiaries is a party to (a) any material agreement, arrangement or commitment
not made in the ordinary course of business, (b) any agreement, indenture or
other instrument relating to the borrowing of money by it or any of its
Subsidiaries or the guarantee by it or of its Subsidiaries of any such
obligation (other than (I) Federal Home Loan Bank advances with a maturity of
one year or less from the date hereof and (II) in the case of Republic, its
6.75% Senior Debentures due January 15, 2001, its 6.95% Senior Debentures due
January 15, 2003, and its 7.17% Senior Debentures due April 1, 2001), (c) any
agreements to make loans or for the provision, purchase or sale of goods,
services or property between it or any of its Subsidiaries and any director or
officer of it or any of its Subsidiaries or any affiliate or member of the
immediate family of any of the foregoing, (d) any agreements with or concerning
any labor or employee organization to which it or any of its Subsidiaries is a
party, (e) any agreements between it or any of its Subsidiaries and any 5% or
more stockholder of it and (f) any agreements, directives, orders or similar
arrangements between or involving it or any of its Subsidiaries and any state or
regulatory authority.
2.17 Material Contract Defaults. Neither it or any of its Subsidiaries
nor the other party thereto is in default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it or any Subsidiary of it is a party or by which its respective
assets, business or operations may be bound or affected or under which it or its
respective assets, business or operations receives benefits, which default is
reasonably expected to have either individually or in the aggregate a material
adverse effect on it, and there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute such a default.
2.18 Tax Matters.
(a) It and each of its Subsidiaries have duly and properly
filed all federal, state, local and other tax returns and reports required to be
filed by them and have made timely payments of all taxes shown thereon to be due
and payable, whether disputed or not; the current status of audits of such
returns or reports by the Internal Revenue Service and other applicable tax
authorities is as set forth in Section 2.18 of its Disclosure Schedule; and,
except as set forth in Section 2.18 of its Disclosure Schedule, there is no
agreement by it or any of its Subsidiaries for the extension of time for the
assessment or payment of any taxes payable. Except as set forth in Section 2.18
of its Disclosure Schedule, neither the Internal Revenue Service nor any other
taxing authority is now asserting or, to its best knowledge, threatening to
assert any deficiency or claim for additional taxes (or interest thereon or
penalties in connection therewith), nor is it aware of any basis for any such
assertion or claim. It and each of its Subsidiaries have complied in all
material respects with applicable Internal Revenue Service backup withholding
requirements. It and each of its Subsidiaries have complied with all applicable
state law tax collection and reporting requirements.
20
(b) Adequate provision for any unpaid federal, state, local or
foreign taxes due or to become due from it or any of its Subsidiaries for all
periods through and including September 30, 1998 has been made and is reflected
in its September 30, 1998 financial statements referred to in Section 2.4 hereof
and has been or will be made with respect to periods ending after September 30,
1998.
2.19 Environmental Matters.
(a) To its best knowledge, neither it nor any of its
Subsidiaries owns, leases, or otherwise controls any property affected by toxic
waste, radon gas or other hazardous conditions or constructed in part with the
use of asbestos which requires removal or encapsulation. Neither it nor any of
its Subsidiaries is aware of, nor has it or any of its Subsidiaries received
written notice from any governmental or regulatory body of, any past, present or
future conditions, activities, practices or incidents which may interfere with
or prevent compliance or continued compliance with hazardous substance or other
environmental laws or any regulation, order, decree, judgment or injunction,
issued, entered, promulgated or approved thereunder or which may give rise to
any common law or legal liability or otherwise form the basis of any claim,
action, suit, proceeding, hearing, investigation or remediation activity based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant, chemical
or industrial, toxic or hazardous substance or waste. There is no civil,
criminal or administrative claim, action, suit, proceeding, hearing or
investigation pending or, to its knowledge, threatened against it or any of its
Subsidiaries relating in any way to such hazardous substance laws or any
regulation, order, decree, judgment or injunction issued, entered, promulgated
or approved thereunder. To its knowledge, there is no reasonable basis for any
such claim, action, suit, proceeding, hearing, investigation or remediation
activity that would impose any material liability or that could reasonably be
expected to have a material adverse effect on it.
(b) None of its "Loan Portfolio Properties, Trust Properties
and Other Properties" (as defined in this Section 2.19(b)) is in violation of or
has any liability absolute or contingent, under any environmental laws or
regulation, except any such violations or liabilities which, individually or in
the aggregate would not have a material adverse effect on it. There are no
actions, suits, demands, notices, claims, investigations or proceedings pending
or threatened relating to any of its Loan Portfolio Properties, Trust Properties
and Other Properties (including, without limitation, any notices, demand letters
or requests for information from any federal or state environmental agency
relating to any such liability under or violation of environmental laws or
regulation), which would impose a liability upon it or its Subsidiaries pursuant
to any environmental laws or regulation, except such as would not, individually
or in the aggregate, have a material adverse effect on it. "Loan Portfolio
Properties, Trust Properties and Other Properties" means, with respect to each
party, any real property, interest in real property, improvements,
appurtenances, rights and personal property attendant thereto, which is owned,
leased as a landlord or a tenant, licensed as a licensor or licensee, managed or
operated or upon which is held a mortgage, deed of trust, deed to secure debt or
other security interest by it or any of its Subsidiaries whether directly, as an
agent, as trustee or other fiduciary or otherwise.
21
2.20 Loan Portfolio; Portfolio Management.
(a) All evidences of indebtedness reflected as assets in its
financial statements at December 31, 1997 referred to in Section 2.4 hereof, or
originated or acquired since such date, are (except with respect to those assets
which are no longer assets of it or any of its Subsidiaries) binding obligations
of the respective obligors named therein except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except as to the availability of equitable
remedies, including specific performance, which are subject to the discretion of
the court before which a proceeding is brought, and the payment of no material
amount thereof (either individually or in the aggregate with other evidences of
indebtedness) is subject to any defenses or offsets which have been threatened
or asserted against it or any Subsidiary. All such indebtedness which is secured
by an interest in real property is secured by a valid and perfected mortgage
lien having the priority specified in the loan documents. All such indebtedness
which is secured by an interest in personal property is secured by a valid and
perfected security interest having the priority specified in the loan documents,
except in each case in which, individually or in the aggregate, the failure to
have such a security interest would not have a material adverse effect on it.
All loans originated, directly or indirectly, or purchased by it or any of its
Subsidiaries were at the time entered into and at all times owned by it or its
Subsidiaries in compliance in all material respects with all applicable laws and
regulations (including, without limitation, all consumer protection laws and
regulations). It and its Subsidiaries (as applicable) administer their loan and
investment portfolios (including, but not limited to, adjustments to adjustable
mortgage loans) in accordance with all applicable laws and regulations and the
terms of applicable instruments. The records of it and any of its Subsidiaries
(as applicable) regarding all loans outstanding on its books are accurate in all
material respects.
(b) Section 2.20 of its Disclosure Schedule sets forth a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit and other assets of it and its Subsidiaries that
have been adversely designated, criticized or classified by it as of September
30, 1998, separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated, classified or criticized as of the date
hereof by any representative of any governmental or regulatory authority as
"Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import
are excluded from the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were charged off by
it or any of its Subsidiaries before the date hereof.
2.21 Real Estate Loans; Investments.
(a) Except for properties acquired in settlement of loans,
there are no facts, circumstances or contingencies known to it which exist and
would require a material reduction under generally accepted accounting
principles in the present carrying value of any of the real estate investments,
joint ventures, construction loans, other investments or other loans of it or
any of its Subsidiaries (either individually or in the aggregate with other
loans and investments).
22
(b) It and its Subsidiaries have good and marketable title to
all securities held by it (except securities sold under repurchase agreements or
held in any fiduciary or agency capacity), free and clear of any Encumbrance,
except to the extent such securities are pledged in the ordinary course of
business consistent with prudent banking practices to secure obligations of it
or any of its Subsidiaries. Such securities are valued on its books in
accordance with generally accepted accounting principles. No investment material
to it or any of its Subsidiaries is subject to any restrictions, contractual,
statutory or other, that would materially impair the ability of it or any of its
Subsidiaries to dispose freely of any such investment at any time, except
restriction on the public distribution or transfer of any such investments under
the Securities Act and the regulations thereunder or state securities laws and
pledges or security interests given to secure public funds on deposit with any
of its Subsidiaries.
2.22 Derivatives Contracts. Neither it nor any of its Subsidiaries is a
party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract or any
other contract not included in its financial statement as of September 30, 1998
which is a derivatives contract (including various combinations thereof) (each,
a "Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 2.22 of its Disclosure Schedule, including a list, as
applicable, of any of its or any of its Subsidiaries' assets pledged as security
for a Derivatives Contract.
2.23 Exceptions to Representations and Warranties.
(a) On or before the date hereof, D&N has delivered to
Republic and Republic has delivered to D&N its respective Disclosure Schedule
setting forth, among other things, exceptions to any and all of its
representations and warranties in Article II, provided that each exception set
forth in a Disclosure Schedule shall be deemed disclosed for purposes of all
representations and warranties if such exception is contained in a section of
the Disclosure Schedule corresponding to a Section in Article II and provided
further that (i) no such exception is required to be set forth in a 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 2.23(b) and (ii) the mere inclusion of an exception in a Disclosure
Schedule shall not be deemed an admission by a party that such exception
represents a material fact, event or circumstance or would result in a material
adverse effect or material adverse change.
(b) None of the representations or warranties of D&N or
Republic contained in Article II shall be deemed untrue or incorrect, and no
party shall be deemed to have breached its representations or warranties
contained herein, as a consequence of the existence of any fact, circumstance or
event if such fact, circumstance or event, individually or taken together with
all other facts, circumstances or events, would not, or in the case of Section
2.8 is not reasonably likely to, have a material adverse effect or material
adverse change on such party.
As used in this Agreement, the term "material adverse effect"
or "material adverse change" means an effect or change which (i) is materially
adverse to the financial condition of a party and its respective Subsidiaries
taken as a whole, (ii) significantly and adversely affects the
23
ability of D&N or Republic to consummate the transactions contemplated hereby or
to perform its material obligations hereunder or (iii) enables any person to
prevent the consummation of the transactions contemplated hereby, provided
however that any effect or change resulting from (A) actions or omissions of D&N
or Republic contemplated by this Agreement or taken with the prior consent of
the other party in contemplation of the transactions provided for herein
(including, without limitation, conforming accounting adjustments and, in the
case of Republic, the entering into and/or consummation of the "Contemplated
Permitted Transaction" (as defined in Section 3.14 hereof)), or (B)
circumstances affecting the financial institutions industry generally (including
changes in laws or regulations, accounting principles or general levels of
interest rates) which do not adversely affect a party and its Subsidiaries,
taken as a whole, in a manner significantly different than the other party
hereto, shall be deemed not to be or have a material adverse effect or result in
a material adverse change.
2.24 Intellectual Property.
(a) It and its Subsidiaries owns or has the right to use
pursuant to license, sublicense, agreement or permission all intellectual
property necessary for the operation of its business as presently conducted and
as presently proposed to be conducted. The term "intellectual property" means
all trademarks, service marks, logos, trade names and corporate names and
registrations and applications for registration thereof, copyrights and
registrations and applications for registration thereof, computer software, data
and documentation, trade secrets and confidential business information
(including financial, marketing and business data, pricing and cost information,
business and marketing plans, and customer and supplier lists and information),
other proprietary rights, and copies and tangible embodiments thereof (in
whatever form or medium).
(b) To the best of its knowledge, neither it nor any of its
Subsidiaries has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any intellectual property rights of third parties and
none of it, its Subsidiaries and their respective directors and officers (and
employees with responsibility for intellectual property matters) has ever
received any charge, complaint, claim or notice alleging any such interference,
infringement, misappropriation or violation. To its knowledge, no third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any intellectual property rights of it or any of its Subsidiaries.
(c) Each item of intellectual property that any third party
owns and that it and each of its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission: (i) the license, sublicense, agreement or
permission covering the item is legal, valid, binding, enforceable and in full
force and effect; (ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding and enforceable and in full force and
effect on identical terms on and after the Closing Date; (iii) no party to the
license, sublicense, agreement or permission is in breach or default, and no
event of default has occurred which with notice or lapse of time, or both, would
constitute a breach or default or permit termination, modification or
acceleration thereunder; (iv) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof; and (vi) neither it nor any of
its Subsidiaries has granted any sublicense or similar right with respect to the
license, sublicense, agreement or permission.
24
2.25 No Investment Company. Neither it nor any of its Subsidiaries is
an "investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
2.26 Tax Treatment; Pooling of Interests. It knows of no reason why the
Merger will fail to qualify as a reorganization under Section 368(a) of the
Internal Revenue Code. It has no reason to believe that the Merger will not
qualify as a "pooling of interests" for accounting purposes. All share
repurchase programs previously authorized by its Board of Directors, except to
the extent that it is advised by the SEC that such purchases would not adversely
affect the ability of the parties to account for the Merger as a "pooling of
interests" for accounting purposes, have been revoked by resolution duly adopted
on or prior to the date hereof.
2.27 Year 2000 Compliance. It and each of its Significant Subsidiaries
has conducted an inventory of the hardware, software and embedded
microcontrollers in non-computer equipment (the "Computer Systems") used by it
and its Significant Subsidiaries in its or their business, in order to determine
which parts of the Computer Systems are not Year 2000 compliant (as defined in
Section 2.27) and to estimate the cost of rendering such Computer Systems Year
2000 compliant prior to January 1, 2000 or such earlier date on which such
Computer Systems may shut down (a "hard crash") or produce incorrect
calculations or otherwise malfunction without becoming totally inoperable (a
"soft crash"). Based on such inventory, the estimated total cost of rendering
the Computer Systems used by Republic and its Significant Subsidiaries Year 2000
compliant is $1,500,000. Based on such inventory, the estimated total cost of
rendering the Computer Systems used by D&N and its Significant Subsidiaries Year
2000 compliant is $500,000. As used in this Agreement, the term "Year 2000
compliant" means that all of the hardware, software, and embedded
microcontrollers in non-computer equipment comprising the Computer Systems will
correctly differentiate between years, in different centuries, that end in the
same two digits, and will accurately process date/time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and between the
twentieth and twenty-first centuries, including leap year calculations. The
consummation of the Merger and the other transactions contemplated by this
Agreement will not result in the loss by it or any of its Subsidiaries of any
rights to use computer and telecommunications software (including, without
limitation, source and object code and documentation and any other media
(including, without limitation, manuals, journals and reference books))
necessary to carry on its business substantially as currently conducted and the
loss of which would have a material adverse effect on it. None of it or any of
its Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). It has disclosed to the other party a complete and accurate copy of its
plan for addressing the issues set forth in the statements of the Federal
Financial Institutions Examination Council, dated May 5, 1997, entitled "Year
2000 Project Management Awareness," and December 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect it and its Subsidiaries.
25
ARTICLE III
COVENANTS
3.1 Investigations; Access and Copies. Between the date of this
Agreement and the Effective Time, each party agrees to give to the other party
and its respective representatives and agents full access (to the extent lawful)
to all of the premises, books, records and employees of it and its Subsidiaries
at all reasonable times and to furnish and cause its Subsidiaries to furnish to
the other party and its respective agents or representatives access to and true
and complete copies of such financial and operating data, all documents with
respect to matters to which reference is made in Article II of this Agreement or
on any list, schedule or certificate delivered or to be delivered in connection
herewith and such other documents, records, or information with respect to the
businesses and properties of it and its Subsidiaries as the other party or its
respective agents or representative shall from time to time reasonably request;
provided however, that any such inspection (a) shall be conducted in such manner
as not to interfere unreasonably with the operation of the business of the
entity inspected and (b) shall not affect any of the representations and
warranties hereunder. Each party will also give prompt written notice to the
other party of any event or development which, (x) had it existed or been known
on the date of this Agreement, would have been required to be disclosed under
this Agreement, (y) would cause any of its representations and warranties
contained herein to be inaccurate or otherwise materially misleading or (z)
materially relates to the satisfaction of the conditions set forth in Article IV
of this Agreement. Notwithstanding anything to the contrary herein, neither
party hereto nor any of its Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would jeopardize the
attorney-client privilege of the entity in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement or, in the event of any litigation or threatened litigation between
the parties over the terms of this Agreement, where access to information may be
adverse to the interests of such party. To the extent reasonably practicable,
the parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence apply.
3.2 Conduct of Business. Between the date of this Agreement and the
Effective Time or the termination of this Agreement, each party agrees, on
behalf of itself and each of its respective Subsidiaries, except as otherwise
contemplated by Section 3.14 hereof, or except insofar as the President of D&N
or the Chief Executive Officer or the President of Republic shall otherwise
consent in writing (which consent shall not be unreasonably withheld):
(a) That it and its Subsidiaries shall (i) except as
contemplated in this Agreement conduct their business only in the ordinary
course consistent with past practices, (ii) maintain their books and records in
accordance with past practices and (iii) use all reasonable efforts to preserve
intact their business organizations and assets, to maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates and to take no action that would (A) adversely affect the
ability of any of them to obtain any Governmental Approvals (as defined in
Section 4.1(c) hereof) or which would reasonably be expected to hinder or delay
receipt of such Governmental Approvals or (B) adversely affect its ability to
perform its obligations under this Agreement or the D&N Stock Option Agreement;
26
(b) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries, it and its Subsidiaries shall not: (i)
declare, set aside or pay any dividend or make any other distribution with
respect to its capital stock, except for dividends or distributions by a wholly
owned Subsidiary of such party to such party or in accordance with past
practice; (ii) reacquire or buy any of its outstanding shares; (iii) issue or
sell any shares of capital stock of it or any of its Subsidiaries, except shares
of its common stock issued pursuant to the D&N Stock Option Agreement and shares
issued pursuant to exercise of stock options previously issued and identified in
Section 2.2 of its Disclosure Schedule; (iv) effect any stock split, stock
dividend, reverse stock split or other reclassification or recapitalization of
its common stock; or (v) except with respect to the D&N Stock Option Agreement,
grant any options or issue any warrants exercisable for or securities
convertible or exchangeable into capital stock of it or any of its Subsidiaries
or grant any stock appreciation or other rights with respect to shares of
capital stock of it or of any of its Subsidiaries.
(c) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries, it and its Subsidiaries shall not: (i)
sell, dispose of or pledge any significant assets of it or of any of its
Subsidiaries other than in the ordinary course of business consistent with past
practices or to borrow funds consistent with the provisions hereinafter
contained; (ii) merge or consolidate it or any of its Subsidiaries into another
entity or acquire any other entity or except in accordance with its written
business plan in effect on the date hereof, acquire any significant assets;
(iii) sell or pledge or agree to sell or pledge or permit any lien to exist on
any stock of any of its Subsidiaries owned by it; (iv) change the articles of
incorporation or certificate of incorporation, charter, bylaws or other
governing instruments of it or any of its Subsidiaries, except as contemplated
by this Agreement; (v) engage in any lending activities other than in the
ordinary course of business consistent with past practices; (vi) form any new
subsidiary or cause or permit a material change in the activities presently
conducted by any Subsidiary or make additional investments in subsidiaries in
excess of $100,000; (vii) except to hedge interest rate risk on certificates of
deposits or mortgage servicing rights, or to hedge interest rate risk and/or
credit risk on commitments to extend consumer credit secured by residential
mortgage loans, engage in any off balance sheet interest rate swap arrangement,
(viii) engage in any activity not contemplated by its written business plan in
effect on the date hereof (ix) purchase any equity securities other than Federal
Home Loan Bank stock or incur or assume any indebtedness except in the ordinary
and usual course of business; (x) authorize capital expenditures other than in
the ordinary and usual course of business; or (xi) implement or adopt any change
in its accounting principles, practices or methods other than as may be required
by generally accepted accounting principles. The limitations contained in this
Section 3.2(c) shall also be deemed to constitute limitations as to the making
of any commitment with respect to any of the matters set forth in this Section
3.2(c).
(d) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries it and its Subsidiaries shall not: (i)
grant any general increase in compensation or benefits to its employees or
officers or pay any bonuses to its employees or officers except in accordance
with policies in effect on the date hereof; (ii) enter into, extend, renew,
modify, amend or otherwise change any employment or severance agreements with
any of its directors, officers or employees except as consistent with past
practice for Republic; (iii) grant any increase in fees or
27
other increases in compensation or other benefits to any of its present or
former directors in such capacity; (iv) in the case of D&N, involuntarily
terminate any officer of it or any of its Subsidiaries without the prior
consultation with Republic; or (v) establish or sponsor any new Employee Plan or
Benefit Arrangement or effect any material change in its Employee Plans or
Benefit Arrangements (unless such change is contemplated by this Agreement or is
required by applicable law or, in the opinion of its counsel, is necessary to
maintain continued qualification of any tax-qualified plan that provides for
retirement benefits).
3.3 No Solicitation. Each party agrees, on behalf of itself and each of
its Subsidiaries, that it will not authorize or permit any officer, director,
employee, investment banker, financial consultant, attorney, accountant or other
representative of it or any of its Subsidiaries, directly or indirectly, to
initiate contact with any person or entity in an effort to solicit, initiate or
encourage any "Takeover Proposal" (as defined in this Section 3.3). Except as
the fiduciary duties of its Board of Directors may otherwise require (as
determined in good faith after consultation with its legal counsel), each party
agrees that it will not authorize or permit any officer, director, employee,
investment banker, financial consultant, attorney, accountant or other
representative of it or any of its Subsidiaries, directly or indirectly, (A) to
cooperate with, or furnish or cause to be furnished any non-public information
concerning its business, properties or assets to, any person or entity in
connection with any Takeover Proposal; (B) to negotiate any Takeover Proposal
with any person or entity; or (C) to enter into any agreement, letter of intent
or agreement in principle as to any Takeover Proposal. Each party agrees that it
shall promptly give written notice to the other upon becoming aware of any
Takeover Proposal, such notice to contain, at a minimum, the identity of the
persons submitting the Takeover Proposal, a copy of any written inquiry or other
communication, the terms of any Takeover Proposal, any information requested or
discussions sought to be initiated and the status of any requests, negotiations
or expressions of interest. As used in this Agreement, "Takeover Proposal" shall
mean any proposal, other than as contemplated by this Agreement, for a merger or
other business combination involving either party or any of their respective
financial institution Subsidiaries or for the acquisition of a 10% or greater
equity interest in either party or any of their respective Subsidiaries, or for
the acquisition of a substantial portion of the assets of either party or any of
their respective Subsidiaries.
3.4 Stockholder Approvals. The parties shall call the meetings of their
respective stockholders to be held for the purpose of voting upon this Agreement
and related matters, as referred to in Section 1.7 hereof, as soon as
practicable. In connection with the D&N and Republic Stockholders' Meetings, the
respective Boards of Directors shall recommend approval of this Agreement, and
any other matters (including without limitation the Republic Charter Amendment)
requiring stockholder action relating to the transactions contemplated herein
(and such recommendation shall be contained in the Prospectus/Joint Proxy
Statement) unless as a result of an unsolicited Takeover Proposal received by a
party after the date hereof, the Board of Directors of such party determines in
good faith after consultation with its legal counsel and investment banking firm
that to do so would constitute a breach of the fiduciary duties of such Board of
Directors to the stockholders of such party. Each of the parties shall use its
best efforts to solicit from its stockholders proxies in favor of approval and
to take all other action necessary or helpful to secure a vote of the holders of
the outstanding shares of its common stock in favor of this Agreement, except as
the fiduciary duties of its Board of Directors may otherwise require.
28
3.5 Resale Letter Agreements; Accounting and Tax Treatment.
(a) After execution of this Agreement, (i) D&N shall use its
best efforts to cause to be delivered to Republic from each person who may be
deemed to be an "affiliate" of D&N within the meaning of Rule 145 of the
Securities Act, a written letter agreement as of a date prior to the date of the
D&N Stockholders' Meeting in the form as set forth in Exhibit 3.5, regarding
restrictions on resale of shares of Republic Common Stock, to ensure compliance
with applicable restrictions imposed under the federal securities laws and prior
to the Effective Time D&N shall use its best efforts to secure such written
letter agreement from persons who become an affiliate of it subsequent to the
date hereof, and (ii) neither party shall take any action which would prevent
the Merger and the other transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Internal Revenue Code,
or which would disqualify the Merger as a "pooling of interests" for accounting
purposes, provided that nothing hereunder shall limit the ability of either
party to exercise its rights under the D&N Stock Option Agreement.
(b) Because the Merger is intended to qualify for pooling of
interests accounting treatment, the shares of Republic Common Stock received by
D&N affiliates in the Merger shall not be transferrable until such time as
financial results covering at least 30 days of post-Merger operations have been
published, and the certificates representing such shares will bear an
appropriate restrictive legend. Republic shall use its best efforts to publish
as promptly as reasonably practical but in no event later than forty-five (45)
days after the end of the first month after the Effective Time in which there
are at least thirty (30) days of post-merger combined operations (which month
may be the month in which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
3.6 Publicity. Between the date of this Agreement and the Effective
Time, neither party nor any of its Subsidiaries shall, without the prior
approval of the other party (which approval shall not be unreasonably withheld),
issue or make, or permit any of its directors, employees, officers or agents to
issue or make, any press release, disclosure or statement to the press or any
third party with respect to the Merger or the other transactions contemplated
hereby, except as required by applicable law or the rules of the National
Association of Securities Dealers, Inc. and the Nasdaq National Market. The
parties shall cooperate when issuing or making any press release, disclosure or
statement with respect to the Merger or the other transactions contemplated
hereby.
3.7 Cooperation Generally. Between the date of this Agreement and the
Effective Time, the parties and their respective Subsidiaries shall in
conformance with the provisions of this Agreement use their best efforts, and
take all actions necessary or appropriate, to consummate the Merger and the
other transactions contemplated hereby at the earliest practicable date.
3.8 Additional Financial Statements and Reports. As soon as reasonably
practicable after they become publicly available, each party shall furnish to
the other its statements of financial condition, statements of operations or
statements of income, statements of cash flows and statements of changes in
stockholders' equity at all dates and for all periods before the Closing. Such
financial statements will be prepared in conformity with generally accepted
accounting principles applied on
29
a consistent basis and fairly present the financial condition, results of
operations and cash flows of the respective parties (subject, in the case of
unaudited financial statements, to (a) normal year-end audit adjustments, (b)
any other adjustments described therein and (c) the absence of notes which, if
presented, would not differ materially from those included with its most recent
audited consolidated financial statements), and all of such financial statements
will be prepared in conformity with the requirements of Form 10-Q or Form 10-K
under the Exchange Act. As soon as reasonably practicable after they are filed,
each party shall, to the extent permitted under applicable law, furnish to the
other its Regulatory Reports.
3.9 Stock Exchange Listings. Republic agrees to use all reasonable
efforts to cause to be listed on the Nasdaq National Market, subject to official
notice of issuance, the shares of Republic Common Stock to be issued in the
Merger.
3.10 Employee Benefits and Agreements.
(a) Following the Effective Time, Republic as the Surviving
Corporation shall honor in accordance with their terms all Benefit Arrangements
and all provisions for vested benefits or other vested amounts earned or accrued
through such time period under the Employee Plans.
(b) The Employee Plans shall not be terminated by reason of
the Merger but shall continue thereafter as plans of Republic as the Surviving
Corporation until such time as the Employee Plans are integrated, subject to the
terms and conditions specified in such plans and to such changes therein as may
be necessary to reflect the consummation of the Merger. Republic as the
Surviving Corporation shall take such steps as are necessary as soon as
practicable following the Effective Time to integrate the Employee Plans, with
(i) full credit for prior service with D&N or Republic or any of the D&N or
Republic Subsidiaries for purposes of vesting and eligibility for participation
(but not benefit accruals under any Employee Plan), and co-payments and
deductibles and (ii) waiver of all waiting periods and pre-existing condition
exclusions or penalties.
(c) Employment Agreements and Related Matters.
(i) Immediately prior to the Effective Time, Republic
and D&N Bank shall offer to employ Xx. Xxxxxx X. Xxxxxxxx pursuant to
the form of Employment Agreement attached hereto as Exhibit 3.10(c)(i)
(the "New Employment Agreement"). Simultaneously with the execution and
delivery of the New Employment Agreement, (x) D&N shall cause Xx.
Xxxxxxxx to execute and deliver an acknowledgment and release in the
form attached hereto as Exhibit 3.10(c)(ii) (the "Acknowledgment"), and
(y) as set forth in the Acknowledgment and upon his timely execution
and delivery of the Acknowledgement, shall pay to Xx. Xxxxxxxx the sum
provided for in the Acknowledgement. Upon and in consideration of the
execution of the Employment Agreement by Republic and the payment of
the sum provided for in the Acknowledgement, the Employment Agreement
dated as of July 31, 1997, among D&N, D&N Bank and Xx. Xxxxxxxx, shall
be deemed to be fully satisfied and terminated for all purposes.
Republic represents and warrants to D&N that the form and substance of
the New Employment Agreement is acceptable to it. D&N represents and
warrants to Republic that the form and substance of the New Employment
Agreement
30
is acceptable to D&N Bank. D&N shall provide Republic with the amount
of the sum to be paid to Xx. Xxxxxxxx pursuant to the Acknowledgement,
and the supporting calculations therefor, not later than that date that
is fifteen (15) days prior to the Closing Date.
(ii) D&N shall, in accordance with the terms of the
D&N Bank Overflow Plan (the "D&N SERP"), make the contribution required
for 1998 under the D&N SERP. At or prior to the Effective Time, D&N
shall pay all amounts contained in the D&N SERP (including all earnings
or accumulations thereon, if any, through the date of payment) to
Xxxxxx X. Xxxxxxxx. D&N covenants, represents and warrants to Republic
that Xx. Xxxxxxxx is the only person eligible to receive benefits under
the D&N SERP. D&N shall provide Republic with the amount of the sum to
be contributed by D&N to the D&N SERP pursuant to this Section
3.10(c)(ii), and the supporting calculations therefor, not later than
that date that is fifteen (15) days prior to the Closing Date.
3.11 Conforming Accounting And Reserve Policies; Restructuring
Expenses.
(a) Notwithstanding that D&N believes that it has established
all reserves and taken all provisions for possible loan losses required by
generally accepted accounting principles and applicable laws, rules and
regulations, D&N recognizes that Republic has adopted different loan, accrual
and reserve policies (including loan classifications and levels of reserves for
possible loan losses), subject to applicable laws, regulations, and the
requirements of governmental and regulatory agencies or bodies and generally
accepted accounting principles. From and after the date of this Agreement to the
Effective Time, D&N and Republic shall consult and cooperate with each other
with respect to conforming, based upon such consultation, D&N's loan, accrual
and reserve policies to those policies of Republic.
(b) In addition, from and after the date of this Agreement to
the Effective Time, D&N and Republic shall consult and cooperate with each other
with respect to determining, based upon such consultation, appropriate accruals,
reserves and charges to establish and take in respect of excess facilities and
equipment capacity, restructuring costs, severance costs, litigation matters,
write-off or write-down of various assets and other appropriate accounting
adjustments taking into account the Surviving Corporation's business plan
following the Merger.
(c) D&N and Republic shall consult and cooperate with each
other with respect to determining, based upon such consultation, the amount and
the timing for recognizing for financial accounting purposes the expenses of the
Merger and the restructuring charges related to or to be incurred in connection
with the Merger.
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(d) At the request of Republic, and in an amount and on a
basis satisfactory to D&N, D&N shall promptly establish and take such reserves
and accruals as Republic shall request to conform, on a mutually satisfactory
basis, D&N's loan, accrual and reserve policies to Republic's policies, shall
establish and take such accruals, reserves and charges in order to implement
such policies in respect of excess facilities and equipment capacity, severance
costs, litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger; provided, however, that it is the
objective of Republic and D&N that such reserves, accruals and charges be taken
on or before the Effective Time, but in no event later than immediately prior to
the Closing; and provided, further, that D&N shall not be obligated to take any
such action pursuant to this Section 3.11 unless and until (i) Republic
specifies its request in a writing delivered to D&N, (ii) all conditions to the
obligations of D&N and Republic to consummate the Merger set forth in Sections
4.1 through 4.3 hereof have been waived or satisfied by the appropriate party,
and (iii) such reserves, accruals and charges conform with generally accepted
accounting principles, applicable laws, regulations, and the requirements of
governmental entities.
3.12 Forbearances. During the period from the date of this Agreement to
the Effective Time, except as set forth in its Disclosure Schedule and, except
as expressly contemplated or permitted by this Agreement neither party shall,
without the prior written consent of the other party: (a) take any action that
would prevent or impede the Merger from qualifying (i) for "pooling of
interests" accounting treatment or (ii) as a reorganization within the meaning
of Section 368 of the Internal Revenue Code; provided, however, that nothing
contained herein shall limit the ability of Republic to exercise its rights
under the D&N Option Agreement; or (b) agree to, or make any commitment to, take
any of the actions prohibited by this Section 3.12.
3.13 Legal Conditions to Merger. Each party shall, and shall cause its
Subsidiaries to, use their 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 IV 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 or authority
and any other third party which is required to be obtained by it or any of its
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement.
3.14 Permitted Transactions.
(a) Notwithstanding anything to the contrary express or
implied herein, Republic may: (i) sell, dispose of, or "spin-off," or agree to
sell, dispose of, or "spin-off," in a public distribution or otherwise, all or
part of its equity interest in Market Street Mortgage Corporation, a subsidiary
of Republic Bank ("Republic Mortgage Corporation"); (ii) convert into, or
exchange for, indebtedness of, or another equity interest in, Republic Mortgage
Corporation, all or part of its equity interest in Republic Mortgage
Corporation; (iii) redeem, for cash and/or property, all or part of its equity
interest in Republic Mortgage Corporation; (iv) declare and pay a stock dividend
or a stock
32
split not exceeding 10% of the shares of Republic Common Stock outstanding as of
the date such stock dividend is declared; (v) merge Republic Savings Bank, a
subsidiary of Republic ("Republic Savings Bank"), with and into Republic Bank;
(vi) transfer certain assets and employees of Republic Bank and Republic Savings
Bank to Republic Bancorp Mortgage Inc., a subsidiary of Republic Bank; (vii)
amend the articles of incorporation or bylaws of Republic Mortgage, Republic
Bank and/or Republic Savings Bank to the extent necessary to effect the
transactions contemplated by clauses (i)-(iii), and (v)-(vi) of this Section
3.14(a); (viii) make awards of restricted shares of Republic Common Stock, and
grant rights or options to acquire shares of Republic Common Stock ("Republic
Options"), to directors, officers and employees of it and its Subsidiaries in
accordance with its Benefit Arrangements, as in effect on the date hereof, and
consistent with past practices (including, without limitation, awards of stock
and options pursuant to Republic's Voluntary Management Stock Accumulation
Plan); (ix) issue additional shares of Republic Common Stock pursuant to the
exercise of Republic Options outstanding as of the date hereof or issued
pursuant to clause (viii) of this sentence; and (x) merge or consolidate it or a
wholly-owned Subsidiary of it (which Subsidiary may be an existing entity or a
newly-formed entity) with another entity so long as (w) in the event it is
merged or consolidated with such other entity, it is the surviving entity in
such merger or consolidation, (x) in the event such Subsidiary is merged or
consolidated with such other entity, the surviving entity in such merger or
consolidation is a wholly-owned subsidiary of it, (y) the consideration issued
in such merger or consolidation consists solely of shares of Republic Common
Stock and cash in lieu of any fractional shares, and (z) not more than 3,200,000
shares of Republic Common Stock are issued in such merger or consolidation (the
"Contemplated Permitted Transaction").
(b) Notwithstanding anything to the contrary express or
implied herein, D&N may grant options to acquire shares of D&N Common Stock to
directors, officers and employees of it and its Subsidiaries in accordance with
the D&N Option Plans, as in effect on the date hereof, consistent with past
practices and as disclosed in Section 2.2 of the Disclosure Schedule delivered
by D&N to Republic.
(c) D&N shall not, and shall not permit any of the D&N
Subsidiaries to, declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with respect to, or
purchase or redeem, any shares of the capital stock of any of them other than
(i) D&N's regular quarterly cash dividends in the amount (subject to the last
two sentences of this paragraph) of $0.05 per share of D&N Common Stock (to the
extent legally permitted), (ii) dividends paid (to the extent legally permitted)
by any D&N Subsidiary to another D&N Subsidiary or D&N with respect to such D&N
Subsidiary's capital stock, and (iii) regular cash dividends (consistent with
past practice) on the shares of 9.0% preferred stock of D&N Capital Corporation
issued and outstanding as of the date hereof.
(d) Republic shall not, and shall not permit any of the
Republic Subsidiaries to, declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with respect to, or
purchase or redeem, any shares of the capital stock of any of them other than
(i) Republic's regular quarterly cash dividends in the amount (subject to the
last two sentences of this paragraph) of $0.08 per share of Republic Common
Stock (to the extent legally permitted), and (ii) dividends paid (to the extent
legally permitted) by any Republic Subsidiary to
33
another Republic Subsidiary or Republic with respect to such Republic
Subsidiary's capital stock.
(e) From the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement, neither party to this
Agreement, without the prior written consent of the other party to this
Agreement, make any changes in its practice of setting dividend record or
dividend payment dates. Each of Republic and D&N shall coordinate with the other
regarding the declaration and payment of dividends in respect of the Republic
Common Stock and the D&N Common Stock and the record dates and payment dates
relating thereto, it being the intention of Republic and D&N that any holder of
Republic Common Stock or D&N Common Stock shall not receive two dividends for
any single calendar quarter with respect to its shares of D&N Common Stock
and/or shares of Republic Common Stock, including shares of Republic Common
Stock that a holder received in exchange for shares of D&N Common Stock pursuant
to the Merger.
ARTICLE IV
CONDITIONS OF THE MERGER;
TERMINATION OF AGREEMENT
4.1 General Conditions. The obligations of each party to effect the
Merger shall be subject to the satisfaction (or written waiver by such party, to
the extent such condition is waivable) of the following conditions before the
Effective Time:
(a) Stockholder Approval. The holders of the outstanding
shares of D&N and Republic Common Stock shall have approved or adopted this
Agreement as specified in Section 1.7 hereof or as otherwise required by
applicable law. The holders of the outstanding shares of Republic Common Stock
shall have approved or adopted the Republic Charter Amendment as specified in
Section 1.7 hereof or as otherwise required by applicable law.
(b) No Proceedings. No order shall have been entered and
remain in force restraining or prohibiting the Merger in any legal,
administrative, arbitration, investigatory or other proceedings by any
governmental or judicial or other authority. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any governmental or regulatory authority which prohibits, materially
restricts or makes illegal consummation of the Merger.
(c) Governmental Approvals. To the extent required by
applicable law or regulation, all approvals of or filings with any governmental
or regulatory authority (collectively, "Governmental Approvals") shall have been
obtained or made, and any waiting periods shall have expired in connection with
the consummation of the Merger; provided, however, that none of the preceding
shall be deemed obtained or made if it shall be conditioned or restricted in a
manner that would have or result in a material adverse effect on Republic as the
Surviving Corporation as the parties hereto shall reasonably and in good faith
agree. All other statutory or regulatory requirements for the valid consummation
of the Merger shall have been satisfied.
34
(d) Registration Statement. The Registration Statement shall
have been declared effective and shall not be subject to a stop order of the SEC
(and no proceedings for that purpose shall have been initiated or threatened by
the SEC) and, if the offer and sale of the Surviving Corporation Common Stock in
the Merger pursuant to this Agreement is subject to the securities laws of any
state, shall not be subject to a stop order of any state securities authority.
(e) Federal Tax Opinion. Each party shall have received an
opinion of its tax counsel, dated as of the Effective Time, to the effect that
for federal income tax purposes:
(i) The Merger will qualify as a "reorganization"
under Section 368(a) of the Internal Revenue Code.
(ii) No gain or loss will be recognized by D&N or
Republic by reason of the Merger.
(iii) No gain or loss will be recognized by any
stockholder of D&N upon the exchange of D&N Common Stock
solely for Republic Common Stock in the Merger.
(iv) The basis of the Republic Common Stock received
by each stockholder of D&N who exchanges D&N Common Stock for
Republic Common Stock in the Merger will be the same as the
basis of the D&N Common Stock surrendered in exchange therefor
(subject to any adjustments required as the result of receipt
of cash in lieu of a fractional share of Surviving Corporation
Common Stock).
(v) The holding period of the Republic Common Stock
received by a stockholder of D&N in the Merger will include
the holding period of the D&N Common Stock surrendered in
exchange therefore, provided that such shares of D&N Common
Stock were held as a capital asset by such stockholders at the
Effective Time.
(vi) Cash received by a D&N shareholder in lieu of a
fractional share interest of Republic Common Stock as part of
the Merger will be treated as having been received as a
distribution in full payment in exchange for the fractional
share interest of Republic Common Stock which such stockholder
would otherwise be entitled to receive and will qualify as
capital gain or loss (assuming the D&N stock was a capital
asset in such stockholder's hands at the Effective Time).
(f) Third Party Consents. All consents or approvals of all
persons (other than the Governmental Approvals referenced in Section 4.1(c)
hereof) required for the execution, delivery and performance of this Agreement
and the consummation of the Merger shall have been obtained and shall be in full
force and effect, unless the failure to obtain any such consent or approval is
not reasonably likely to have, individually or in the aggregate, a material
adverse effect on Republic as the Surviving Corporation as the parties hereto
shall reasonably and in good faith agree.
35
(g) Listing. The shares of Republic Common Stock to be issued
in the Merger shall have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
(h) Pooling of Interests. Each party shall have received a
letter, effective as of the Effective Time, from its independent accountants
addressed to it to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
4.2 Conditions to Obligations of D&N. The obligations of D&N to effect
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction or written waiver by D&N of the following additional conditions
before the Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and the Closing, Republic shall not have been effected by any event or
change which has had or caused a material adverse effect or material adverse
change on it.
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. (i) The representations and warranties of Republic
shall be true and correct (subject to Section 2.23 hereof) as of the date hereof
and at the Effective Time with the same effect as though made at the Effective
Time (or on the date when made in the case of any representation or warranty
which specifically relates to an earlier date) except where the failure to be
true and correct would not have, or would not reasonably be expected to have, a
material adverse effect, on Republic; (ii) Republic and its Subsidiaries shall
have performed all obligations and complied with each covenant, in all material
respects, and satisfied all conditions under this Agreement on its part to be
satisfied at or before the Effective Time; and (iii) Republic shall have
delivered to D&N a certificate, dated the Effective Time and signed by its chief
executive officer and chief financial officer, certifying as to the satisfaction
of clauses (i) and (ii) hereof.
(c) No Litigation. Neither Republic nor any Republic
Subsidiary shall be subject to any pending litigation which, if determined
adversely to Republic or any Republic Subsidiary, would have a material adverse
effect on Republic.
(d) Audited Financials. Republic shall have delivered to D&N
audited consolidated financial statements at and for the year ended December 31,
1998, including an unqualified opinion of Republic's independent auditors
related thereto.
(e) Employment Matters. The instruments described in Section
3.10(c) hereof to be executed and delivered by, among others, Republic shall
have been executed and delivered by Republic as provided in Section 3.10(c)
hereof.
(f) Other Certificates. Republic shall have delivered to D&N
such other certificates and instruments as D&N and its counsel may reasonably
request. The form and substance of all certificates, instruments and other
documentation delivered to D&N under this Agreement shall be reasonably
satisfactory to D&N and its counsel.
36
4.3 Conditions to Obligations of Republic. The obligations of Republic
to effect the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction or written waiver by Republic of the following
additional conditions before the Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and Closing, D&N shall not have been effected by any event or change
which has had or caused a material adverse effect or material adverse change on
D&N.
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. (i) The representations and warranties of D&N shall be
true and correct (subject to Section 2.23 hereof) as of the date hereof and at
the Effective Time with the same effect as though made at the Effective Time (or
on the date when made in the case of any representation or warranty which
specifically relates to an earlier date) except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a material
adverse effect on D&N; (ii) D&N and its Subsidiaries shall have performed all
obligations and complied with each covenant, in all material respects, and
satisfied all conditions under this Agreement on its part to be satisfied at or
before the Effective Time; and (iii) D&N shall have delivered to Republic a
certificate, dated the Effective Time and signed by its chief executive officer
and chief financial officer, certifying as to the satisfaction of clauses (i)
and (ii) hereof.
(c) No Litigation. Neither D&N nor any D&N Subsidiary shall be
subject to any pending litigation which, if determined adversely to D&N or any
D&N Subsidiary, would have a material adverse effect on D&N.
(d) Affiliate Letters. Republic shall have received from D&N
the letter agreements from all affiliates of D&N as contemplated in Section 3.5
hereof.
(e) Audited Financials. D&N shall have delivered to Republic
audited consolidated financial statements at and for the year ended December 31,
1998, including an unqualified opinion of D&N's independent auditors related
thereto.
(f) Employment Matters. The instruments described in Section
3.10(c) hereof to be executed and delivered by, among others, persons or
entities other than Republic shall have been executed and delivered by such
other persons and entities as provided in Section 3.10(c) hereof.
(g) Other Certificates. D&N shall have delivered to Republic
such other certificates and instruments as Republic and its counsel may
reasonably request. The form and substance of all certificates, instruments and
other documentation delivered to Republic under this Agreement shall be
reasonably satisfactory to Republic and its counsel.
4.4 Termination of Agreement and Abandonment of Merger. This Agreement
may be terminated at any time before the Effective Time, whether before or after
approval thereof by the stockholders of D&N or Republic, as provided below:
37
(a) Mutual Consent. By mutual consent of the parties,
evidenced by their written agreement.
(b) Closing Delay. At the election of either party, evidenced
by written notice, if (i) the Closing shall not have occurred on or before
November 30, 1999, or such later date as shall have been agreed to in writing by
the parties, provided however that the right to terminate under this Section
4.4(b) shall not be available to any party whose failure to perform an
obligation hereunder has been the cause of, or has resulted in, the failure of
the Closing to occur on or before such date; (ii) any approval or authorization
of any governmental or regulatory authority, the lack of which would result in
the failure to satisfy the closing condition set forth in Section 4.1(c) hereof,
shall have been denied by such governmental or regulatory authority, or such
governmental or regulatory authority shall have requested the withdrawal of any
application therefor or indicated an intention to deny, or impose a condition of
a type referred to in the proviso to Section 4.1(c) hereof with respect to, such
approval or authorization, or (iii) the approval of the stockholders of D&N or
Republic referred to in Section 4.1(a) hereof shall not have been obtained,
provided that the electing party is not then in breach of its obligations under
Section 3.4 hereof.
(c) Conditions to D&N Performance Not Met. By D&N upon
delivery of written notice of termination to Republic if any event occurs which
renders impossible of satisfaction in any material respect one or more of the
conditions to the obligations of D&N to effect the Merger set forth in Sections
4.1 and 4.2 hereof and noncompliance is not waived in writing by D&N.
(d) Conditions to Republic Performance Not Met. By Republic
upon delivery of written notice of termination to D&N if any event occurs which
renders impossible of satisfaction in any material respect one or more of the
conditions to the obligations of Republic to effect the Merger set forth in
Sections 4.1 and 4.3 hereof and noncompliance is not waived in writing by
Republic.
(e) Breach. By either D&N or Republic if there has been a
material breach of the other party's representations and warranties (as
contemplated in this Agreement), covenants or agreements set forth in this
Agreement of which written notice has been given to such breaching party and
which has not been fully cured or cannot be fully cured within the earlier of
(i) 30 days of receipt of such notice or (ii) five days prior to the Closing and
which breach would, in the reasonable opinion of the non-breaching party,
individually or in the aggregate, have, or be reasonably likely to have, a
material adverse effect on the breaching party.
(f) D&N Election. By D&N if (i) the Board of Directors of
Republic shall not have publicly recommended in the Prospectus/Joint Proxy
Statement that its stockholders approve and adopt this Agreement or shall have
withdrawn, modified or changed in a manner adverse to D&N its approval or
recommendation of this Agreement, (ii) the Board of Directors of Republic shall
have authorized Republic to enter into any agreement, letter of intent or
agreement in principle with the intent to pursue or effect a Takeover Proposal
or (iii) the Board of Directors of D&N shall have failed to recommend to its
stockholders the adoption of this Agreement or shall have withdrawn, modified or
changed such recommendation pursuant to the exercise of its fiduciary
obligations under Section 3.4 hereof.
38
(g) Republic Election. By Republic if (i) the Board of
Directors of D&N shall not have publicly recommended in the Prospectus/Joint
Proxy Statement that its stockholders approve and adopt this Agreement or shall
have withdrawn, modified or changed in a manner adverse to Republic its approval
or recommendation of this Agreement, (ii) the Board of Directors of D&N shall
have authorized D&N to enter into any agreement, letter of intent or agreement
in principle with the intent to pursue or effect a Takeover Proposal or (iii)
the Board of Directors of Republic shall have failed to recommend to its
stockholders the adoption of this Agreement or shall have withdrawn, modified or
changed such recommendation pursuant to the exercise of its fiduciary
obligations under Section 3.4 hereof.
ARTICLE V
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
5.1 Termination; Lack of Survival of Representations and Warranties.
(a) In the event of the termination and abandonment of this
Agreement pursuant to Section 4.4 hereof, this Agreement shall become void and
have no effect, except (i) the provisions of Sections 2.7 (No Broker's or
Finder's Fees), 3.6 (Publicity), 5.2 (Payment of Expenses), 7.2
(Confidentiality) and 7.12 (No Employment Solicitation) hereof shall survive any
such termination and abandonment, and (ii) a termination pursuant to Section
4.4(e) hereof shall not relieve the breaching party from liability for any
uncured intentional and willful breach of a representation, warranty, covenant
or agreement giving rise to such termination. Moreover, the aggrieved party
without terminating this Agreement shall be entitled to specifically enforce the
terms hereof against the breaching party in order to cause the Merger to be
consummated. Each party acknowledges that there is not an adequate remedy at law
to compensate the other party relating to the non-consummation of the Merger. To
this end, each party, to the extent permitted by law, irrevocably waives any
defense it might have based on the adequacy of a remedy at law which might be
asserted as a bar to specific performance, injunctive relief or other equitable
relief.
(b) The representations, warranties and agreements set forth
in this Agreement shall not survive the Effective Time and shall be terminated
and extinguished at the Effective Time, and from and after the Effective Time no
party shall have any liability to the other on account of any breach or failure
of any of those representations, warranties and agreements, provided however
that the foregoing clause (i) shall not apply to agreements of the parties which
by their terms are intended to be performed after the Effective Time by the
Surviving Corporation or otherwise and (ii) shall not relieve any party or
person for liability for fraud, deception or intentional misrepresentation.
(c) At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective 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 parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by the stockholders
of D&N, there may not be, without further approval of such stockholders, any
39
extension or waiver of this Agreement or any portion hereof which reduces the
amount or changes the form of the consideration to be delivered to the holders
of D&N Common Stock hereunder other than as contemplated by this Agreement. 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.
5.2 Payment of Expenses. Each party shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereby; provided, however, that the costs and expenses of printing
and mailing the Proxy Statement/Prospectus, and all filing and other fees paid
to the SEC in connection with the Merger, shall be borne equally by Republic and
D&N.
ARTICLE VI
CERTAIN POST-MERGER AND OTHER AGREEMENTS
6.1 Indemnification.
(a) For a period of six years from and after the Effective
Time, Republic as the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or who has been at any time before the date
hereof or who becomes before the Effective Time, an officer or director of
either D&N or Republic or any of their respective Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorney's fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of
Republic as the Surviving Corporation, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each a "Claim"), in
which an Indemnified Party is, or is threatened to be made, a party based in
whole or in part on or arising in whole or in part out of the fact that such
Indemnified Party is or was a director or officer of either D&N or Republic or
any of their respective Subsidiaries if such Claim pertains to any matter or
fact arising, existing at or occurring before the Effective Time (including,
without limitation, the Merger and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, or at or after,
the Effective Time (the "Indemnified Liabilities"), to the fullest extent
permitted under applicable state or federal law in effect as of the date hereof
or as amended applicable to a time before the Effective Time and under D&N's or
Republic's governing corporation documents (as the case may be), and Republic as
the Surviving Corporation shall pay expenses in advance of the final disposition
of any such action or proceeding to each Indemnified Party to the full extent
permitted by applicable state or federal law in effect as of the date hereof or
as amended applicable to a time before the Effective Time upon receipt of any
undertaking required by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.1(a), upon learning of any Claim, shall
notify Republic as the Surviving Corporation (but the failure so to notify
Republic as the Surviving Corporation shall not relieve it from any liability
which it may have under this Section 6.1(a) except to the extent such failure
materially prejudices Republic as the Surviving Corporation) and shall deliver
to Republic as the Surviving Corporation the undertaking, if any, required by
40
applicable law. Republic as the Surviving Corporation shall insure, to the
extent permitted under applicable law, that all limitations of liability
existing in favor of the Indemnified Parties as provided in D&N's or Republic's
governing corporation documents (as the case may be), as in effect as of the
date hereof, or allowed under applicable state or federal law as in effect as of
the date hereof or as amended applicable to a time before the Effective Time,
with respect to claims or liabilities arising from facts or events existing or
occurring before the Effective Time (including, without limitation, the
transactions contemplated hereby), shall survive the Merger. The Indemnified
Parties may retain counsel reasonably satisfactory to them after consultation
with Republic as the Surviving Corporation; provided, however, that (A) Republic
as the Surviving Corporation shall have the right to assume the defense thereof
and upon such assumption Republic as the Surviving Corporation 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 Republic as the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are issues which raise conflicts of
interest between Republic as the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Republic as the Surviving Corporation, and Republic
as the Surviving Corporation shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (B) Republic as the Surviving Corporation
shall be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties, unless an Indemnified Party shall have
reasonably concluded, based on the advice of counsel, that in order to be
adequately represented, separate counsel is necessary for such Indemnified
Party, in which case, Republic as the Surviving Corporation shall be obligated
to pay for such separate counsel, (C) Republic as the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and (D) Republic as
the Surviving Corporation 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.
(b) For a period of three years from and after the Effective
Time, Republic as the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by D&N and the D&N Subsidiaries (provided that they may substitute
therefor policies from financially capable insurers of at least the same
coverage and amounts and containing terms and conditions that are carried by
Republic and its Subsidiaries in the ordinary course of business) with respect
to claims arising from facts or events which occurred before the Effective Time;
provided, however, that in no event shall Republic and its Subsidiaries be
required to expend more than 150% of the current amount expended by D&N or any
of the D&N Subsidiaries (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto; and provided, further, that if Republic is
unable to maintain or obtain the insurance called for by this Section 6.1(b),
Republic shall use its best efforts to obtain as much comparable insurance as
available for the Insurance Amount. Following consummation of the Merger, the
directors and officers of Republic as the Surviving Corporation shall be covered
by the directors' and officers' liability insurance maintained by the Surviving
Corporation.
(c) In the event Republic or any of its successors or assigns
(i) consolidates with
41
or merges into any other person or entity 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 or entity, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Republic
assume the obligations set forth in this Section 6.1.
(d) The obligations of Republic as the Surviving Corporation
provided under this Section 6.1 are intended to be enforceable against the
Surviving Corporation directly by the Indemnified Parties and shall be binding
on all respective successors and permitted assigns of Republic as the Surviving
Corporation.
6.2 Directors and Officers of the Surviving Corporation.
(a) Directors of the Surviving Corporation. The following
provisions shall, to the greatest extent practicable, apply with respect to the
Board of Directors of Republic, as the Surviving Corporation, the Board of
Directors of D&N Bank, and the Board of Directors of Republic Bank:
(i) At the Effective Time, but subject to the three
sentences that follow, the Board of Directors of Republic as the
Surviving Corporation shall consist of not less than 25 and not more
than 28 directors who shall consist of (A) all ten persons serving as
directors of D&N immediately prior to the Effective Time (each, a
"D&N-Related Director"), (B) all 16 persons serving as directors of
Republic immediately prior to the Effective Time (each, a
"Republic-Related Director"), and (C) at least one director appointed
by the Republic-Related Directors in connection with the Contemplated
Permitted Transaction (the "Permitted Additional Republic Director").
D&N shall use its best efforts to ensure that it has ten directors
immediately prior to the Effective Time consisting of those persons
named by it in regulatory applications for approval of the Merger and
in the Prospectus/Joint Proxy Statement. Republic shall use its best
efforts to ensure that it has 16 directors immediately prior to the
Effective Time consisting of those persons named by it in regulatory
applications for approval of the Merger and in the Prospectus/Joint
Proxy Statement. The membership of each D&N-Related Director, each
Republic-Related Director and each Permitted Additional Republic
Director, on the Board of Directors of Republic, as the Surviving
Corporation, shall be subject to such director's satisfaction of the
Republic Policy regarding Director Responsibilities and Criteria for
Re-election of Directors (Policy No. 201, as revised October 27, 1998)
(the "Republic Directors Policy"); provided, however, (i) that the
provision of the Republic Directors Policy prohibiting any director
from standing for election at an annual meeting of stockholders of
Republic occurring after such director's 70th birthday shall not apply
to Xx. Xxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxx, Xx. Xxxxx X. Xxxx, or
Xx. Xxxxxx X. Xxxxx with respect to any election of directors of
Republic, as the Surviving Corporation, occurring prior to the 2000
Annual Meeting of Stockholders of Republic, as the Surviving
Corporation (the "2000 Annual Meeting"), and (ii) that from and after
the 2000 Annual Meeting each of Messrs. Bromley, Seaton, Xxxx and Xxxxx
shall be a Director Emeritus of Republic, as the Surviving Corporation,
for life.
42
(ii) At the Effective Time, but subject to the three
sentences that follow, the Board of Directors of D&N Bank shall consist
of ten directors who shall consist of (A) all ten persons serving as
directors of D&N Bank immediately prior to the Effective Time and (B)
three persons selected by Republic and approved by D&N (which consent
shall not be unreasonably withheld) (each, a "Republic-Related D&N Bank
Director"). D&N shall use its best efforts to ensure that D&N Bank has
ten directors immediately prior to the Effective Time consisting of
those persons named by it in regulatory applications for approval of
the Merger and in the Prospectus/Joint Proxy Statement. Republic shall
use its best efforts to ensure that the Republic-Related D&N Bank
Directors consist of those persons named by it in regulatory
applications for approval of the Merger and in the Prospectus/Joint
Proxy Statement. At and after the Effective Time, the membership of
each director on the Board of Directors of D&N Bank shall be subject to
such director's satisfaction of the Republic Directors Policy;
provided, however, (x) that the provision of the Republic Directors
Policy prohibiting any director from standing for election at an annual
meeting of stockholders of a subsidiary of Republic occurring after
such director's 70th birthday shall not apply to Xx. Xxxxxx X. Xxxxxxx
or Xx. Xxxxxxx X. Xxxxxx with respect to any election of directors of
D&N Bank occurring prior to the 2000 Meeting, and (y) that the
provision of such Directors Tenure Policy prohibiting any director from
standing for election at an annual meeting of stockholders of a
subsidiary of Republic occurring after such director's 70th birthday
shall not apply to Xx. Xxxxxx with respect to any election of directors
of D&N Bank, occurring prior to the date of Xx. Xxxxxx'x 75th birthday.
(iii) At the Effective Time, but subject to the three
sentences that follow, the Board of Directors of Republic Bank shall
consist of not less than 23 nor more than 25 directors who shall
consist of (A) three persons selected by D&N and approved by Republic
(which approval shall not be unreasonably withheld) (each, a
"D&N-Related Director"), (B) 20 of the persons serving as directors of
Republic serving in such capacity immediately prior to the Effective
Time, and (C) up to two directors appointed by the Republic in
connection with the Contemplated Permitted Transaction. D&N shall use
its best efforts to ensure that the D&N-Related Republic Bank Directors
consist of those persons named by it in regulatory applications for
approval of the Merger and in the Prospectus/Joint Proxy Statement.
Republic shall use its best efforts to ensure that Republic Bank has 13
directors immediately prior to the Effective Time consisting of those
persons named by it in regulatory applications for approval of the
Merger and in the Prospectus/Joint Proxy Statement. At and after the
Effective Time, the membership of each director on the Board of
Directors of Republic Bank shall be subject to such director's
satisfaction of the Republic Directors Policy (subject to the
exceptions set forth in this Section 6.2(a)).
(iv) The Board of Directors of Republic as the
Surviving Corporation shall have an Executive Committee and such other
committees as such Board shall establish in accordance with Section 527
of the MBCA and the Articles of Incorporation and Bylaws of Republic,
as the Surviving Corporation. At the Effective Time, but subject to the
following sentence, the Executive Committee shall consist of ten
directors who shall consist of Messrs. Xxxxx X. Xxxxxxxx, Xxxx X.
Xxxxxxx, Xxxxx X. Xxxx, Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx, Xxx X.
Xxxxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxxxx, B. Xxxxxx X. Xxxxx, Xx.
and
43
Xxxxxxx X. Xxxxxxxx. At the Effective Time, but subject to the
following sentence, every other committee of such Board shall
include at least one D&N-Related Director.
(v) The provision of the Republic Directors Policy
prohibiting any director from standing for election at an annual
meeting of stockholders of a subsidiary of Republic occurring after
such director's 70th birthday shall not apply to Xx. Xxxxxx X. Xxxxx
with respect to any election of directors of Republic Bancorp Mortgage
Inc. occurring prior to the 2000 Annual Meeting, and (ii) that from and
after the 2000 Annual Meeting Xx. Xxxxx shall be a Director Emeritus of
Republic Bancorp Mortgage Inc. for life, and may serve as Chairman of
the Board of Republic Bancorp Mortgage Inc.
(b) Chairman and Certain Officers of the Surviving
Corporation. During the three year period following the Effective Time:
(i) At the Effective Time, Xx. Xxxxx X. Xxxxxxxx
shall be the Chairman of the Board and Chief Executive Officer of
Republic, as the Surviving Corporation; Xx. Xxxxxx X. Xxxxxxxx shall be
the Vice-Chairman of the Board of Republic, as the Surviving
Corporation; and Xx. Xxxx X. Xxxxxxx shall be the President and Chief
Operating Officer of Republic, as the Surviving Corporation. Except as
otherwise provided in the preceding sentence, at the Effective Time,
those individuals who are the officers of Republic immediately prior to
the Effective Time shall be the officers of the Surviving Corporation,
serving in the same officer capacities, respectively, together with
such other individuals who may be subsequently appointed as officers of
the Surviving Corporation by the Board of Directors of the Surviving
Corporation.
(ii) At the Effective Time, those individuals who are
the officers of D&N Bank immediately prior to the Effective Time shall
be the officers of D&N Bank serving in the same officer capacities,
respectively, together with such other individuals who may be
subsequently appointed as officers of D&N Bank by the Board of
Directors of D&N Bank.
(iii) At the Effective Time, those individuals who
are the officers of Republic Bank immediately prior to the Effective
Time shall be the officers of Republic Bank serving in the same officer
capacities, respectively, together with such other individuals who may
be subsequently appointed as officers of Republic Bank by the Board of
Directors of Republic Bank.
(c) Survival of Section 6.2. The provisions of Section 6.2(a)
shall survive the Effective Time and remain in effect until the second
anniversary of the Effective Time, terminating thereafter. The provisos of
Sections 6.2(a)(i), (ii) and (v) shall survive the Effective Time and remain in
effect for the respective periods specified therein, terminating thereafter.
6.3 Additional Agreements.
(a) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement
(including, without limitation, any merger between a Subsidiary of D&N and a
Subsidiary of Republic) or to vest Republic, as the Surviving
44
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, and at the sole expense of, Republic as the Surviving Corporation.
(b) Each of Republic and D&N shall give the other the
reasonable opportunity to participate in the defense of any shareholder
litigation against Republic as the Surviving Corporation or D&N, as applicable,
and its directors relating to the transactions contemplated by this Agreement.
(c) Republic shall use all commercially reasonable efforts to
cause to be delivered to D&N and D&N's independent accountants a letter from
Republic's independent accountants addressed to D&N and Republic, dated as of
the Closing Date, stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations is appropriate if the Merger is closed and consummated in
accordance with this Agreement. D&N shall use all commercially reasonable
efforts to cause to be delivered to Republic and Republic's independent
accountants a letter from D&N's independent accountants addressed to Republic
and D&N, dated as of the Closing Date, stating that accounting for the Merger as
a pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is closed and
consummated in accordance with this Agreement.
(d) D&N and Republic intend to establish a "transition team"
(that may include employee representatives of each entity) to evaluate and make
recommendations to the Board of Directors of the Surviving Corporation regarding
the future operations of the Surviving Corporation (including issues of
integration, consolidation and staffing). It is anticipated that, as part of
such process, notice of vacant position opportunities in the Surviving
Corporation and its Subsidiaries will be provided to employees of the Surviving
Corporation and its Subsidiaries in accordance with Republic's Position
Opportunity Posting Program.
6.4 Advice of Changes. Republic and D&N 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.
45
ARTICLE VII
GENERAL
7.1 Amendments. Subject to applicable law, this Agreement may be
amended, whether before or after any stockholder approval hereof, by an
agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that after the approval of this Agreement by the stockholders of either
party hereto, no such amendment may change the amount or form of the
consideration to be delivered hereunder pursuant to Section 1.3 herein without
their approval. This Agreement may not be amended except by a written instrument
executed on behalf of each of the parties.
7.2 Confidentiality. All information disclosed by any party to any
other party, whether prior or subsequent to the date of this Agreement
including, without limitation, any information obtained pursuant to Section 3.1
hereof, shall be kept confidential by such other party and shall not be used by
such other party otherwise than as herein contemplated, all in accordance with
the terms of the confidentiality agreements between the parties dated October 6,
1998 and November 9, 1998, respectively (the "Confidentiality Agreements"). In
the event of the termination of this Agreement, each party shall use all
reasonable efforts to return upon request to the other party all documents (and
reproductions thereof) received from such other party (and, in the case of
reproductions, all such reproductions) that include information subject to the
confidentiality requirement set forth above.
7.3 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Michigan without taking into account any provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
7.4 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given if mailed by registered
or certified mail (postage prepaid and return receipt requested) addressed as
follows:
If to D&N, to: D&N Financial Corporation
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
with a copy to: Silver, Xxxxxxxx & Taff, L.L.P.
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxx, P.C.
Fax: (000) 000-0000
46
If to Republic, to: Republic Bancorp Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Fax: (000) 000-0000
with a copy to: Miller, Canfield, Paddock and Stone, P.L.C.
0000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
or such other address as shall be furnished in writing by either party to the
other, and any such notice or communication shall be deemed to have been given
two business days after the date of such mailing (except that the notice of
change of address shall not be deemed to have been given until received by the
addressee). Notices may also be sent by telegram, telex, facsimile transmission
or hand delivery and in such event shall be deemed to have been given as of the
date received by the addressee.
7.5 No Assignment. This Agreement may not be assigned by any party
hereto, by operation of law or otherwise, except as contemplated hereby.
7.6 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to each other party.
7.8 Construction and Interpretation. It is expressly acknowledged and
agreed that all parties have been represented by counsel and have participated
in the negotiation and drafting of this Agreement, and that there shall be no
presumption against any party on the ground that such party was responsible for
preparing this Agreement or any part of it. Each of the exhibits and schedules
referred to in, and/or attached to, this Agreement is an integral part of this
Agreement and is incorporated in this Agreement by this reference. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". No provision
of this Agreement shall be construed to require D&N or Republic or any of their
respective Subsidiaries or affiliates to take any action which would violate any
applicable law, rule or regulation. Except as the context otherwise requires,
all references herein to any state or federal regulatory agency shall also be
deemed to refer to any predecessor or successor agency, and all references to
state and federal statutes or regulations shall also be deemed to refer to any
successor statute or regulation.
7.9 Entire Agreement. This Agreement, together with the schedules,
lists, exhibits and certificates referred to herein or required to be
delivered hereunder, and any amendment hereafter
47
executed and delivered in accordance with Section 7.1 hereof, constitutes the
entire agreement of the parties and supersedes any prior written or oral
agreement or understanding among any parties pertaining to the Merger, except
that the Confidentiality Agreements shall remain in full force and effect as
contemplated in Section 7.2 hereof and except with respect to the D&N Stock
Option Agreement.
7.10 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law then such provision will be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
7.11 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person (other than the parties hereto and their respective
successors and assigns permitted hereby) to any claim, cause of action, remedy
or right of any kind, except for Sections 1.8, 6.1 and 6.2 (which are intended
to be for the benefit of the persons covered thereby and may be enforced by such
persons).
7.12 No Employment Solicitation. If this Agreement is terminated, the
parties hereto agree that, for a period of two years subsequent to such
termination (i) none of the parties shall, without first obtaining the prior
written consent of the other, directly or indirectly, actively solicit the
employment of any current director, officer or employee of the other party or
any Subsidiary of such other party and (ii) none of the parties will actively
solicit business relationships with clients of the other party or any Subsidiary
of such other party solely as a result of review of the information contemplated
in Section 7.2 hereof; provided, however, that neither clause (i) nor clause
(ii) shall prohibit (x) employment advertisements placed in publications of
general circulation or in trade journals, (y) contacts initiated by such
director, officer or employee, or (z) the hiring of any such director, officer,
or employee as a result of (x) or (y).
7.13 Attorney Fees. If litigation is brought concerning this Agreement,
the prevailing party shall be entitled to receive from the non-prevailing party,
and the non-prevailing party shall upon final judgment and expiration of all
appeals immediately pay upon demand all reasonable attorneys' fees and expenses
of the prevailing party.
7.14 Other Transactions. Immediately after the execution of this
Agreement, D&N and Republic shall execute and deliver the D&N Stock Option
Agreement.
7.15 Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the
jurisdiction in which Republic's principal place of business is located (i.e.,
the State of Michigan, County of Shiawassee or the United States District Court
for the Eastern District of Michigan), and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
48
7.16 Further Assurances. At the request of any party to this Agreement,
the other parties shall execute, acknowledge and deliver such other documents
and/or instruments as may be reasonably required by the requesting party to
carry out the purposes of this Agreement. In the event any party to this
Agreement shall be involved in litigation, threatened litigation or government
inquiries with respect to a matter covered by this Agreement, every other party
to this Agreement shall also make available to such party, at reasonable times
and subject to the reasonable requirements of its own businesses, such of its
personnel as may have information relevant to such matters, provided that such
party shall reimburse the providing party for its reasonable costs for employee
time incurred in connection therewith if more than one business day is required.
Following the Closing, the parties will cooperate with each other in connection
with tax audits and in the defense of any legal proceedings.
7.17 Remedies Cumulative. Unless expressly made the exclusive remedy by
the terms of this Agreement, all remedies provided for in this Agreement are
cumulative and shall be in addition to any and all other rights and remedies
provided by law and by any other agreements between the parties.
7.18 Liquidated Damages; Termination Fee. Notwithstanding anything to
the contrary contained in this Agreement, in the event that any of the following
events or circumstances shall occur, Republic shall, within ten (10) days after
notice of the occurrence thereof by D&N, pay to D&N the sum equal to the
"Termination Fee Amount" (as defined in this Section 7.18), which the parties
agree and stipulate as reasonable and full liquidated damages and reasonable
compensation for the involvement of D&N in the transactions contemplated in this
Agreement, is not a penalty or forfeiture, and will not affect the provisions of
this Section 7.18: (i) at any time prior to termination of this Agreement an
"Acquisition Event" (as defined in this Section 7.18) shall occur; or (ii) D&N
shall terminate this Agreement pursuant to Section 4.4(b)(i) (provided that the
failure of Republic to perform its obligations hereunder is the cause of, or has
resulted in, the failure of the Closing to occur on or before November 30,
1999), Section 4.4(e) or Section 4.4(f), or if Republic fails to call and hold
the meeting of its stockholders as required by Section 4.4(f) of this Agreement.
For purposes of this Section 7.18: "Acquisition Event" shall mean that Republic
shall have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement with
any person other than any of the parties to this Agreement) to effect a Takeover
Proposal or shall fail to publicly oppose a tender offer or exchange offer by
another person based on a Takeover Proposal; and "Termination Fee Amount" shall
mean a sum, in Dollars, equal to the lesser of $9,000,000 or an amount equal to
three percent (3%) of the sum derived by multiplying (x) the Conversion Number
by (y) the sum derived by multiplying the number of shares of D&N Common Stock
outstanding as of the date of termination by the closing price for D&N Common
Stock on the trading day that the execution of this Agreement is first publicly
announced. Upon the making and receipt of such payment under this Section 7.18,
Republic shall have no further obligation of any kind under this Agreement and
D&N shall not have any further obligation of any kind under this Agreement,
except in each case under Sections 7.2, 7.12 and 7.13 of this Agreement, and no
party shall have any liability for any breach or alleged breach by such party of
any provision of this Agreement.
49
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
on its behalf by its duly authorized officers as of the date first set forth
above.
D&N FINANCIAL CORPORATION REPUBLIC BANCORP INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
-------------------------- --------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Title: Chairman of the Board and
Executive Officer Chief Executive Officer
51
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 1, 1998, between
Republic Bancorp Inc., a Michigan corporation ("Grantee"), and D&N Financial
Corporation, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, and Issuer have entered into an Agreement and Plan
of Merger on even date herewith (the "Merger Agreement"); and
WHEREAS, as an inducement to the willingness of Grantee to enter into
the Merger Agreement, Issuer has agreed to grant Grantee the Option (as
hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of
the Option and the Merger Agreement.
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 an
aggregate of 1,823,837 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of Issuer ("Common Stock") at a price per share of
$21.625; provided, however, that in the event Issuer issues or agrees to issue
any shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee benefit plan prior to the date
hereof) at a price less than such price per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided, further,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. 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 without giving
effect to any shares subject to or issued pursuant to the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of 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), 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
later period as provided in Section 10). Each of the following shall be an
Exercise Termination Event: (i) the Effective Time; (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 4.4(e) of the Merger Agreement (but
only if the breach giving rise to the termination was willful) (a "Listed
Termination"); (iii) the passage of 15 months (or such longer period as provided
in Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed Termination
or (iv) the date on which the shareholders of the Grantee shall have voted and
failed to approve the Merger (unless (A) Issuer shall then be in material breach
of its covenants or agreements contained in the Merger Agreement or (B) on or
prior to such date, the stockholders of Issuer shall have also voted and failed
to approve and adopt the Merger Agreement). The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in material breach of the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section 4.4(e) thereof as
a result of a material breach and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement (x) by Issuer
pursuant to Section 4.4(e) thereof as a result of the material breach by
Grantee, or (y) by Issuer or Grantee pursuant to Section 4.4(b)(ii).
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) (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 "Exchange 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 (the
"Issuer Board") shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction other than the
Merger. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (w) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary (other than mergers,
consolidations or similar transactions involving solely Issuer and/or
one or more wholly-owned (except for directors' qualifying shares and
a de minimis number of other shares) Subsidiaries of the Issuer,
provided, any such transaction is not entered into in violation of
the terms of the Merger Agreement), (x) a purchase, lease or other
acquisition of all or any substantial part of the assets or deposits
of Issuer or any Issuer Subsidiary, or (y) a purchase or other
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acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or any Issuer Subsidiary; and (b) "Subsidiary"
shall have the meaning set forth in Rule 12b-2 under the Exchange
Act;
(ii) Any person other than the Grantee or any Grantee
Subsidiary 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
Exchange Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and
failed to adopt the Merger Agreement at a meeting which has been held
for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement
or shall have been cancelled prior to termination of the Merger
Agreement if, prior to such meeting (or if such meeting shall not
have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made, or
publicly disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in any
manner adverse in any respect to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated by the
Merger Agreement, (y) 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 agreement to engage in an
Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or (z) Issuer shall have provided information to
or engaged in negotiations with a third party relating to a possible
Acquisition Transaction.
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to engage in
an Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the SEC a registration statement or
tender offer materials with respect to a potential exchange or tender
offer that would constitute an Acquisition Transaction (or filed a
preliminary proxy statement with the SEC with respect to a potential
vote by its shareholders to approve the issuance of shares to be
offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and following such breach
Grantee would be entitled to terminate the Merger Agreement (whether
immediately or after the giving of notice or passage of time or
both); or
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(viii) 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 Office of Thrift Supervision (the
"OTS") or other federal or state thrift or bank regulatory or
antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except
that the percentage referred to in clause (z) of the second sentence
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (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 (or any portion thereof), 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 OTS or any other
regulatory or antitrust agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify Issuer of such filing, 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 (i) 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 and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement 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
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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.
(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 "Securities 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 Securities Act; (ii) the reference to the provisions of 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 in the opinion
of Counsel to the Holder; 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, subject to the receipt of any necessary regulatory
approvals, 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 applicable 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 Savings and
Loan Holding
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Company Act or any state or other federal thrift or banking law, prior approval
of or notice to the OTS or to any state or other federal 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
OTS or such state or other federal 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 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.
(a) 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
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
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6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as provided in Section 10) of
such Subsequent Triggering Event (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), promptly prepare, file and keep current a
registration statement under the Securities Act covering 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 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 promptly 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
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer 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 offer and sale
of the 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 all Holders shall
constitute at least 25% of the total number of shares to be sold by the Holders
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the 12-month period referred to in
the first sentence of this section shall be increased to 24 months. 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 such
underwriting agreements for 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 the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as
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provided in Section 10), 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 prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto) 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 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 any substantial part of Issuer's assets or deposits,
the sum of the net price paid in such sale for such assets or deposits and the
current market value of the remaining net 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, a copy of 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. As promptly as practicable, and in any event within 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, 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, or as a consequence of administrative policy, 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, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in
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full (and Issuer hereby undertakes to 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 accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option and/or the Option Shares
whether 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 and/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 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 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, and/or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 50% or more of the
then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(b)(i) hereof, except that the percentage
referred to in clause (z) shall be 50%.
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 a Grantee Subsidiary, or engage in a plan of
exchange with any person, other than Grantee or a Grantee Subsidiary and Issuer
shall not be the continuing or surviving corporation of such consolidation or
merger or the acquirer in such plan of exchange, (ii) to permit any person,
other than Grantee or a Grantee Subsidiary, to merge into Issuer or be acquired
by Issuer in a plan of exchange and Issuer shall be the continuing or surviving
or acquiring corporation, but, in connection with such merger or plan of
exchange, 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
or plan of exchange represent less than 50% of the outstanding shares and share
equivalents of the merged or acquiring company, or (iii) to sell or otherwise
transfer all or a substantial part of its or the Issuer Subsidiary's assets or
deposits to any person, other than Grantee or a Grantee Subsidiary, 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,
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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:
(i) "Acquiring Corporation" shall mean (i) the continuing
or surviving person of a consolidation or merger with Issuer (if
other than Issuer), (ii) the acquiring person in a plan of exchange
in which Issuer is acquired, (iii) the Issuer in a merger or plan of
exchange in which Issuer is the continuing or surviving or acquiring
person, and (iv) the transferee of all or a substantial part of
Issuer's assets or deposits (or the assets or deposits of the Issuer
Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price,
as defined in Section 7.
(iv) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for 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 (after giving effect for
such purpose to the provisions of Section 9), which agreement 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 was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
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 was exercisable immediately prior to the
event described in the first sentence of Section 8(a) 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
-10-
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.
(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 issuer of the Substitute Option (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 rights 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/or
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 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, or as a consequence of administrative
policy, from repurchasing the Substitute Option
-11-
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
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 Option Repurchase Price and/or 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, or as a consequence of administrative policy, 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 reasonable best efforts to receive all required regulatory and legal
approvals as promptly as practicable in order to accomplish such repurchase),
the Substitute Option Holder and/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 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, and/or (B)
to the Substitute Share Owner, a certificate for the Substitute Option Shares it
is then so prohibited from repurchasing. If an Exercise Termination Event shall
have occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Substitute Option Holder shall nevertheless have the right
to exercise the Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange 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
-12-
validly authorized by the Issuer Board prior to the date hereof 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 thereto, 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.
12. 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; provided, however,
that until the date 15 days following the date on which the OTS has approved 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 OTS.
13. Each of Grantee and Issuer will use its reasonable 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, 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.
14. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$13,813,390 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (a) reduce the number of shares of Common Stock
subject to this Option, (b) deliver to Issuer for cancellation Option Shares
previously purchased by Grantee, (c) pay cash to Issuer, or (d) any combination
thereof, so that Grantee's actually realized Total Profit shall not exceed
$13,813,390 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
$13,813,390; provided that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date.
-13-
(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, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) 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 amount equivalent to the foregoing 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).
15. (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; provided, however, that Grantee may not exercise
its rights pursuant to this Section 15 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 $13,813,390 (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
excess of (A) 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 (B)
Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 15 by surrendering to Issuer, at its
principal office, a copy of 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 15 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 15 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from
-14-
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 Event shall be extended to a date six months from the date
on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
16. 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. In connection therewith
both parties waive the posting of any bond or similar requirement.
17. 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 l(a) hereof (as adjusted pursuant to Section l(b) or Section
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.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
20. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. 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.
-15-
22. 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 except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
-16-
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.
REPUBLIC BANCORP INC.
By /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman of the Board and
Chief Executive Officer
D&N FINANCIAL CORPORATION
By /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief
Executive Officer
EXHIBIT 3.5
AFFILIATE: ______________________
(Print Name)
AFFILIATE REPRESENTATION LETTER
Republic Bancorp Inc.
Dear Sirs:
I have been advised that as of the date hereof I may be deemed an
"affiliate" of D&N Financial Corporation, a Delaware corporation ("D&N"), as
that term is defined for purposes of Rule 145 of the Rules and Regulations of
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger, dated December 1, 1998 (the "Agreement"), by and
between Republic Bancorp Inc., a Michigan corporation ("Republic"), and D&N
providing for the merger of D&N with and into Republic (the "Merger"), shares of
D&N common stock ("D&N Capital Stock") owned by me on the effective date of the
Merger will be converted into shares of Republic common stock (collectively
"Republic Capital Stock").
With respect to the shares of Republic Capital Stock to be received by
me as a result of the Merger, either directly or indirectly, I represent,
warrant, understand and agree as follows:
1. I will not sell, transfer or otherwise reduce my interest in the
Republic Capital Stock or reduce my risk relating thereto until after such time
as Republic has published financial results covering at least 30 days of
combined operations after the effective date of the Merger.
2. I know of no plan (written or oral) pursuant to which the holders of
D&N Capital Stock intend to sell or otherwise dispose of a number of the shares
of Republic Capital Stock to be received in the Merger which would, in the
aggregate, constitute more than 50 percent of the value of the D&N Capital Stock
outstanding immediately prior to the Merger.
3. I have been advised that the issuance of the Republic Capital Stock
to me pursuant to the Agreement has been registered with the Securities and
Exchange Commission ("SEC") under the Act on a registration statement on Form
S-4. I have also been advised that, at the time the Merger was submitted to the
shareholders of D&N for approval, I may have been deemed an "affiliate" of D&N.
Any sale or disposition by me of any of the Republic Capital Stock may, under
current law, only be made in accordance with the provisions of paragraph (d) of
Rule 145 under the Act, pursuant to an effective registration statement under
the Act or pursuant to an exemption
1
provided by the Act. I understand that the requirements of Rule 145(d) will
differ depending upon how long I hold the Republic Capital Stock and whether I
am an affiliate of Republic at the time of sale. I understand that, in general,
the provisions of Rule 145(d) will permit resale within one year of the Merger
only in brokers' transactions where the aggregate number of shares sold at any
time, together with all sales of restricted shares of Republic Common Stock sold
for my account during the preceding three-month period, does not exceed the
greater of (i) 1 percent of the shares of Republic Common Stock outstanding or
(ii) the average weekly volume of trading in shares of Republic Common Stock on
all national securities exchanges and/or reported through the automated
quotation system of a registered securities association during the four-week
period preceding any such sale.
4. I have carefully read this letter and discussed its requirements and
other applicable limitations upon the sale, transfer or other disposition of the
Republic Capital Stock to be acquired by me in the Merger, to the extent I felt
necessary, with my counsel.
5. I have carefully read the Agreement and discussed its requirements
and its impact upon my ability to sell, transfer or otherwise dispose of the
Republic Capital Stock to be acquired by me in the Merger, to the extent I felt
necessary, with my counsel.
6. I have been informed by Republic that the distribution by me of the
Republic Capital Stock has not been registered under the Act and that the
Republic Capital Stock must be held by me for the time required by Rule 145(d),
unless (i) the distribution for sale of the Republic Capital Stock has been
registered under the Act, (ii) a sale of the Republic Capital Stock is made in
conformity with the limitations of Rule 145(d), or (iii) in the opinion of
counsel, which opinion is acceptable to Republic, some other exemption from
registration is available with respect to any such sale, transfer or other
disposition of the Republic Capital Stock.
7. I understand that Republic is under no obligation to register the
sale, transfer or other disposition of the Republic Capital Stock by me or on my
behalf or to take any other action necessary in order to make compliance with an
exemption from registration available.
8. I understand that stock transfer instructions will be given to
Republic's transfer agent with respect to Republic Capital Stock and that there
will be placed on the certificates for such shares, or any substitution
therefor, the following legend:
"The shares represented by this certificate (1) were issued
pursuant to a business combination which is being accounted
for as a pooling of interests and may not be sold, nor may the
owner thereof reduce his risk relative thereto in any other
way, until such time as Republic Bancorp Inc. has published
the financial results covering at least 30 days of combined
operations after _____________, 1999, the Effective Date of
the merger through which the business combination was
effected, and (2) may be sold only in accordance with the
provisions of paragraph (d) of Rule 145 under the Securities
Act of 1933, as amended (the `Act'), or pursuant to an
effective registration
2
statement under the Act or an exemption under the Act. The
restrictions of this paragraph shall automatically become
null and void and of no effect on and after ___________,
2000."
Very truly yours,
Dated: ____________ _________________________________
(Signed)
---------------------------------
(Printed)
3
EXHIBIT 3.10 (c)(i)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the _________ day of ___________, 199___, by and between REPUBLIC BANCORP INC.
(the "Holding Company"), D&N BANK (the "Bank") and XXXXXX X.
XXXXXXXX (the "Employee").
W I T N E S S E T H :
WHEREAS, it is proposed that the Employee serve as Vice-Chairman of
the Holding Company; and
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer of the Bank;
WHEREAS, the boards of directors of the Holding Company and the Bank
believe it is in the best interests of the Holding Company and the Bank to enter
into this Agreement with the Employee in order to assure continuity of
management and to reinforce and encourage the continued attention and dedication
of the Employee to the Employee's assigned duties; and
WHEREAS, the Employee was employed pursuant to an Employment Agreement
among D & N Financial Corporation (Holding Company's predecessor-in-interest),
the Bank and the Employee, dated July 31, 1997 (the "Prior Employment
Agreement"), which the Employee is willing to terminate in connection with the
execution of this Agreement by the parties; and
WHEREAS, the Board of Directors of each of the Holding Company and the
Bank has approved and authorized the execution of this Agreement with the
Employee to take effect as stated in Section 2 hereof.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) [INTENTIONALLY OMITTED.]
(b) The term "Commencement Date" means the date first above
written
(c) "Consolidation Date" means the date on which Bank merges,
consolidates or otherwise combines with Republic Bank or any other direct or
indirect subsidiary of Holding Company, or all or substantially all of the
assets of Bank are sold to Republic Bank or any other direct or indirect
subsidiary of Holding Company.
1
(d) The term "Date of Termination" means the date on which
employment shall cease as specified in a notice of termination pursuant to
Section 7(e) of this Agreement.
(e) The term "Involuntary Termination" means termination of
the employment of Employee without the Employee's express written consent, or
shall include a material diminution of or interference with the Employee's
duties, responsibilities and benefits as Vice-Chairman of the Holding Company,
and, prior to the Consolidation Date, as President and Chief Executive Officer
of the Bank, including (without limitation) any of the following actions unless
consented to in writing by the Employee: (1) at any time during the 12 calendar
months following the date first above written, a change in the principal
workplace of the Employee to a location that is outside of a 50 mile radius from
his current work location in Hancock, Michigan as of the date hereof; (2) a
material change to the Employee's duties or title with the Holding Company such
that his position will thereby have less responsibility or scope than his
position as of the date of this Agreement, including but not limited to a
requirement that the Employee report to anyone other than the Chairman of the
Board or the Board of Directors of the Holding Company; (3) a material reduction
in the number or seniority of personnel reporting to the Employee or a material
reduction in the frequency with which, or in the nature of the matters with
respect to which, such personnel are to report to the Employee, other than as
part of a Bank- or Holding Company-wide reduction in staff; and (4) a material
adverse change in the Employee's salary, perquisites, benefits or contingent
benefits, other than as part of an overall program applied uniformly and with
equitable effect to all members of the senior management of the Bank or the
Holding Company. The term "Involuntary Termination" does not include Termination
for Cause or termination of employment due to retirement, death, disability or
suspension or temporary or permanent prohibition from participation in the
conduct of the Bank's affairs under Section 8 of the Federal Deposit Insurance
Act ("FDIA").
(f) The terms "Termination for Cause" and "Terminated for
Cause" mean termination of the employment of the Employee because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. No act or failure to act by the
Employee shall be considered willful unless the Employee acted or failed to act
with an absence of good faith and without a reasonable belief that his action or
failure to act was in the best interests of the Holding Company and the Bank, as
applicable. Any act, or failure to act, based upon prior approval given by the
Board of Directors of the Holding Company or of the Bank, or based upon the
advice of counsel for the Holding Company or the Bank, shall be conclusively
presumed to be done, or omitted to be done, by the Employee in good faith and in
the best interests of the Holding Company and the Bank. The Employee shall not
be deemed to have been Terminated for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board of Directors of the Holding Company or of the Bank at a regular or special
meeting of such Board called and held for such purpose, (after reasonable notice
to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before such Board), stating that in the good
faith opinion of such Board the Employee has engaged in conduct described in
this paragraph and specifying the particulars thereof in detail.
2
2. Term; Termination of Prior Employment Agreement. The term of this
Agreement shall be a period of three years commencing on the Commencement Date,
subject to earlier termination as provided herein. This Agreement shall be of no
force or effect unless, immediately prior to this Agreement's being executed by
the parties hereto, the Prior Employment Agreement shall have been terminated.
3. Employment. The Employee (i) shall be Vice Chairman of the Board of
the Holding Company and (ii) until the Consolidation Date, shall be employed as
President and Chief Executive Officer of the Bank. As such, the Employee shall
render administrative and management services as are customarily performed by
persons situated in similar executive capacities, and shall have such other
powers and duties (i) of Vice-Chairman of the Holding Company as the Board of
Directors of the Holding Company may prescribe from time to time and (ii) prior
to the Consolidation Date, of an executive officer of the Bank as the Board of
Directors of the Bank may prescribe from time to time. The Employee shall serve
as a director and officer of any subsidiaries or affiliates of the Holding
Company (in addition to the Bank) if elected by the appropriate stockholders and
boards of directors of such subsidiaries. During the term of this Agreement, and
thereafter so long as the Employee is an employee of the Bank, the Employee (x)
shall be a director of Republic Bank, a wholly-owned subsidiary of the Holding
Company, (y) shall be a member of the Executive Committee of the Holding Company
and (z) shall be a member of the Office of Chairman of the Holding Company. So
long as Employee is employed by the Bank and Republic Bancorp Mortgage, Inc.
("RBMI") is a wholly-owned subsidiary, directly or indirectly, of the Holding
Company, the Holding Company shall cause the Employee to be elected to the Board
of Directors of RBMI. The Employee shall perform his duties in accordance with
such reasonable standards as are established from time to time by the Board of
Directors of the Holding Company or the Bank, as applicable. During the term of
this Agreement, the Employee shall devote his full time and attention to the
business and affairs of the Holding Company and its subsidiaries and use his
best efforts, skills and abilities to promote the interests of the Holding
Company and its subsidiaries.
4. Compensation.
(a) Salary.
[AT THE TIME THIS INSTRUMENT IS EXECUTED THE EMPLOYEE SHALL SELECT
EITHER ALTERNATIVE 1 OR ALTERNATIVE 2 AND THE ALTERNATIVE THAT IS NOT SELECTED
SHALL BE DELETED AND OF NO FORCE OR EFFECT.]
[ALTERNATIVE 1: The Bank agrees to pay the Employee during the term of
this Agreement a base salary at the annual rate of Four Hundred Thousand and
00/100 Dollars ($400,000.00). The amount of the Employee's base salary shall not
be decreased from the prior rate.]
[ALTERNATIVE 2: The Bank agrees to pay the Employee during the term of
this Agreement a base salary at the minimum annual rate of Two Hundred Thousand
and 00/100 Dollars ($200,000.00) and annual cash bonus compensation (up to Six
Hundred Thousand and 00/100 Dollars ($600,000.00) per annum) in accordance with
Holding Company's Management Incentive Bonus Plan. The amount of the Employee's
base salary shall be reviewed by the Boards of Directors
3
of the Holding Company and the Bank annually and may be increased from time to
time at the discretion of the Boards of Directors of the Holding Company and the
Bank, acting jointly, but not decreased from the prior rate.]
(b) Incentive Plans. The Employee shall be entitled to
participate in all incentive plans of Holding Company now in effect or hereafter
adopted by the Board of Directors of Holding Company for executive officers
(excluding, however, the Holding Company's Management Incentive Bonus Plan
(unless Section 4(a) provides otherwise)), with target awards, performance
criteria and other plan provisions as determined by the Board of Directors of
the Holding Company in its sole discretion.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to executive officers, provided that the Employee accounts for such
expenses as required under such policies and procedures.
5. Benefits.
(a) Participation in Executive Benefit Plans. The Employee
shall be entitled to participate in all plans adopted for the benefit of
executive officers, including but not limited to the Holding Company's Tax
Deferred Savings Plan and Voluntary Management Stock Accumulation Plan, group
life insurance, medical coverage and professional development (excluding,
however, the Holding Company's Management Incentive Bonus Plan (unless Section
4(a) provides otherwise)).
(b) Fringe Benefits. The Employee shall be eligible to
participate in, and receive benefits under, any fringe benefit plans which are
or may become applicable to executive officers of the Bank, including but not
limited to a $400 per month automobile allowance and payment of reasonable
expenses for attendance at annual and periodic trade association meetings.
(c) Minimum Benefits. In no event shall the Employee's
benefits under this Section 5 be less than those provided for in the Holding
Company's Employee Handbook.
6. Vacations: Leave. The Employee shall be entitled to annual paid
vacation in accordance with the policies established in the Holding Company's
Employee Handbook except as such policies may be modified by the Board of
Directors of the Holding Company. The timing of-vacations shall be scheduled in
a reasonable manner by the Employee. The Employee shall also be entitled to
voluntary leaves of absence, with or without pay, from time to time at such
times and upon such conditions as the Board of Directors of the Holding Company
may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination of Employment. The Board of
Directors of Holding Company or Bank may terminate the Employee's employment at
any time, but, except in the case of Termination for Cause, termination of
employment shall not prejudice the Employee's right to
4
compensation or other benefits under this Agreement. In the event of Involuntary
Termination occurs during the term of this Agreement, the Bank shall (1) pay to
the Employee during the remaining term of this Agreement the Employee's base
salary at the rate in effect immediately prior to the Date of Termination, in
such manner and at such times as such base salary would have been payable to the
Employee under Section 4 if the Employee had continued to be employed by the
Bank, and (2) provide to the Employee during the remaining term of this
Agreement all benefits, including but not limited to medical coverage maintained
for the benefit of executive officers from time to time during the remaining
term of the Agreement, but excluding participation in the Holding Company's
Tax-Deferred Savings Plan and Trust (except as to vested rights thereunder) and
in stock option or restricted stock plans (except to the extent provided in
stock option agreements or restricted stock agreements between the Holding
Company and the Employee executed prior to the Date of Termination), expense
reimbursement, professional development and expenses for attendance at trade
association meetings. Medical coverage provided under this Section 7(a) shall be
on the same terms and conditions as apply to executive officers generally,
including but not limited to dependent coverage, contributions (if any) by the
Employee to the cost of premiums, and deductible amounts. With the Employee's
consent, in lieu of providing a benefit or benefits under this Section 7(a), the
Bank may pay to the Employee the reasonable value of such benefits.
(b) Termination for Cause. In the event of Termination for
Cause, the Bank shall pay the Employee the Employee's base salary through the
Date of Termination, and the Holding Company and the Bank shall have no further
obligation to the Employee under this Agreement.
(c) Voluntary Termination of Employment. The Employee's
employment may be voluntarily terminated by the Employee at any time pursuant to
a notice of termination as provided for in Section 7(e) below. In the event of
such voluntary termination, the Bank shall (1) pay to the Employee during the
remaining term of this Agreement the Employee's base salary at the rate in
effect immediately prior to the Date of Termination, in such manner and at such
times as such base salary would have been payable to the Employee under Section
4 if the Employee had continued to be employed by the Bank, and (2) provide to
the Employee during the remaining term of this Agreement all benefits, including
but not limited to medical coverage maintained for the benefit of executive
officers from time to time during the remaining term of the Agreement, but
excluding participation in the Holding Company's Tax-Deferred Savings Plan and
Trust (except as to vested rights thereunder) and in stock option or restricted
stock plans (except to the extent provided in stock option agreements or
restricted stock agreements between the Holding Company and the Employee
executed prior to the Date of Termination), expense reimbursement, professional
development and expenses for attendance at trade association meetings, and the
Holding Company and the Bank shall have no further obligation to the Employee
under this Agreement.
In the event that the Employee's employment is voluntarily
terminated by the Employee, then, and in consideration of the payments provided
for in the immediately preceding paragraph, from the applicable Date of
Termination and until that date that is three years from and after the date
first above written the Employee shall not, directly or indirectly, on his own
behalf or on behalf of any other person or entity, engage within the State of
Michigan, as an employee, officer, director, consultant, independent contractor,
partner or sole proprietor of, or have any financial interest in, any business
activity that competes with any business conducted by the Holding
5
Company or any of its subsidiaries prior to such Date of Termination.
Notwithstanding anything to the contrary express or implied in the preceding
sentence, the Employee shall not be prohibited from investing in the securities
of any entity so long as such investment does not exceed 5% of the outstanding
securities of any class of securities of such entity. The covenants set forth in
this Section 7(c) shall survive the termination of this Agreement.
(d) [INTENTIONALLY OMITTED.]
(e) Notice of Termination. In the event that the Holding
Company (which, for purposes of this Section 7(e), includes the Bank) desires to
terminate the employment of the Employee during the term of this Agreement, the
Holding Company shall deliver to the Employee a written notice of termination,
stating whether such termination constitutes Termination for Cause or
Involuntary Termination, setting forth in reasonable detail the facts and
circumstances that are the basis for the termination, and specifying the date
upon which employment shall terminate, which date shall be at least 30 days
after the date upon which the notice is delivered except in the case of
Termination for Cause. In the event that the Employee determines in good faith
that he has experienced an Involuntary Termination of his employment, he shall
send a written notice to the Holding Company stating the circumstances that
constitute such Involuntary Termination and the date upon which his employment
shall have terminated due to such Involuntary Termination. In the event that the
Employee desires to terminate his employment voluntarily, he shall deliver a
written notice to the Holding Company, stating the date upon which his
employment shall terminate, which date shall be at least 90 days after the date
upon which the notice is delivered, unless the parties agree to a date sooner.
(f) Death; Disability. In the event of the death of the
Employee while employed under this Agreement and prior to any termination of
employment, the Employee's estate, or such person as the Employee may have
previously designated in writing, shall be entitled to receive from the Holding
Company and the Bank the salary of the Employee through the last day of the
calendar month in which the Employee died. If the Employee becomes disabled as
defined in the then applicable disability plan, if any, or if the Employee is
otherwise unable to serve as Vice-Chairman of the Holding Company or, prior to
the Consolidation Date, as President and Chief Executive Officer of the Bank,
the Employee shall be entitled to receive disability income benefits of the
type, if any, then provided for executive officers of the Bank.
(g) Temporary Suspension or Prohibition. If the Employee is
suspended and/or temporarily prohibited from participating in the conduct of the
Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA,
12 U.S.C. ss. 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Employee all or part of the compensation withheld while
its obligations under this Agreement were suspended and (ii) reinstate in whole
or in part any of its obligations which were suspended.
(h) Permanent Suspension or Prohibition. If the Employee is
removed and/or permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued
6
under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. ss. 1818(e)(4) and
(g)(1), all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the contracting
parties shall not be affected.
(i) Default of the Bank. If the Bank is in default (as defined
in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.
(j) Termination by Regulators. All obligations under this
Agreement shall be terminated, except to the extent determined that continuation
of this Agreement is necessary for the continued operation of the Bank: (1) by
the Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the FDIA; or (2) by the Director or his or her
designee, at the time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by any
such action.
(k) Bank, or its successor, shall provide to the Employee
medical coverage maintained for the benefit of executive officers, or its
successor, at no cost to the Employee, until the Employee reaches age 65. The
covenants set forth in this Section 7(k) shall survive the termination or
expiration of this Agreement for any reason.
8. Certain Reduction of Payments and Benefits. Any payments made to the
Employee pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C. 1828(k) and any regulations
promulgated thereunder.
9. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation earned by
the Employee as the result of employment by another employer, by retirement
benefits after the Date of Termination or otherwise.
10. Confidential Information. The Employee acknowledges that as a
result of his employment, he may develop, obtain, or learn about Confidential
Information (as defined below) which is the property of the Holding Company and
its affiliates. The Employee hereby covenants and agrees to use his best efforts
and the utmost diligence to guard and protect Confidential Information, and that
he shall not, without the consent of the Holding Company, during the term of
this Agreement or any time thereafter, use for himself or others, or disclose or
permit to be disclosed to any third Party by any method whatsoever, any
Confidential Information.
The term "Confidential Information" shall include, but not be limited
to, trade secrets and any and all records, notes, memoranda, data, ideas,
processes, methods, devices, programs, computer software, writings, research,
personnel information, customer information, financial information, plans, or
any information of whatever nature, in the possession or control of the Holding
Company
7
or any of its affiliates which has not been published or disclosed to the
general public or which gives to the Holding Company or any of its affiliates an
opportunity to obtain an advantage over competitors who do not know of or use
it.
The Employee agrees that if his employment is terminated for any
reason, he shall return to the Holding Company all originals and copies of all
records, papers, programs, computer software and documents and all matter of
whatever nature which bears Confidential Information that are in his possession
or control.
The covenants set forth in this Section 10 are made by the Employee in
consideration of his continuing employment, and the compensation paid to him
during his employment hereunder. Violation of the conditions of this Section 10
shall result in forfeiture of any remaining compensation due under this
Agreement. The provisions of this Section 10 shall survive termination of this
Agreement for any reason.
11. [INTENTIONALLY OMITTED.]
12. No Assignments.
(a) This Agreement is personal to each of the parties hereto,
and no party may assign or delegate any of his or its rights or obligations
hereunder without first obtaining the written consent of the other parties;
provided, however, that at any time after that date that is 12 months after the
date first above written Bank may be merged with and into Republic Bank without
such consent, and that the Holding Company and the Bank shall require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Holding Company and the Bank, by an assumption agreement in form
and substance reasonably satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Holding Company and the Bank would be required to perform it if no such
succession or assignment had taken place. Failure of the Holding Company and the
Bank to obtain such an assumption agreement prior to the effectiveness of any
such succession or assignment (other than in connection with a merger of the
Bank with and into Republic Bank) shall be a breach of this Agreement and shall
entitle the Employee to compensation from the Holding Company and the Bank. For
purposes of implementing the provisions of this Section 12(a), the date on which
any such succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee or if there is no such designee. to the Employee's
estate.
13. Notice. For the purposes of this Agreement, notices and all
other communications
8
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, to the Holding Company and the Bank at the
Holding Company's principal office, to the attention of the Board of Directors
with a copy to the Secretary of the Holding Company, or, if to the Employee, to
such home or other address as the Employee has most recently provided in writing
to the Holding Company.
14. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
15. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Michigan without reference to its provisions concerning conflicts of laws.
18. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in Oakland
County, Michigan in accordance with the laws of the State of Michigan by one
arbitrator agreed upon by the Employee and the Holding Company (which, for
purposes of this Section 18, includes the Bank). If either the Holding Company
or the Employee determines to seek arbitration in connection with this
Agreement, such party shall provide a written notice to the other. If the
Employee and the Holding Company are unable to agree on the appointment of an
arbitrator within 30 days after receipt by one party of the other party's
written notice of a determination to seek arbitration, they shall request that
the American Arbitration Association provide a list of three arbitrators who are
National Academy of Arbitrator members. Within 10 days after receiving the list,
the Employee shall designate one name to be stricken from the list and notify
the Holding Company thereof, and the Holding Company shall designate one name to
be stricken from the list and notify the Employee thereof within 10 days after
receiving such notice from the Employee. The parties shall request the
arbitrator whose name is not so stricken to arbitrate the dispute. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
REPUBLIC BANCORP INC.
-------------------------------
By: Xxxxx X. Xxxxxxxx
Its: Chairman of the Board
D&N BANK
-------------------------------
By: X. X. Xxxxxxx
Its: Chairman of the
Compensation Committee
EMPLOYEE
-------------------------------
Xxxxxx X. Xxxxxxxx
10
EXHIBIT 3.10(c)(ii)
ACKNOWLEDGEMENT AND RELEASE
FOR GOOD AND VALUABLE CONSIDERATION (including, without limitation, the
payment provided for in paragraph 2 hereof), the receipt and sufficiency of
which is hereby acknowledged, the undersigned covenants to, agrees with and
acknowledges to, Republic Bancorp Inc., a Michigan corporation ("Republic"), D&N
Financial Corporation, a Delaware corporation ("D&N"), and D&N Bank, a federal
savings bank ("D&N Bank") as follows:
1. In connection with the transactions contemplated by that certain
Agreement and Plan of Merger dated as of December 1, 1998 between Republic and
D&N (the "Merger Agreement"), Republic and D&N Bank have offered to provide me
with employment at and following the Effective Time pursuant to an Employment
Agreement in the form attached as Exhibit 3.10(c)(i) to the Merger Agreement
(the "New Employment Agreement").
2. I have knowingly and voluntarily chosen to terminate the Employment
Agreement dated as of July 31, 1997, among myself, D&N and D&N Bank (the "Old
Employment Agreement"). In full settlement of any and all rights I may have
pursuant to the Old Employment Agreement, I have been paid the sum equal to the
lesser of $2,000,000 and the amount payable under Section 7(d) of the Existing
Employment Agreement by D&N.
3. For myself and my heirs, executors, administrators, successors and
assigns, I hereby irrevocably and unconditionally release and forever discharge
Republic, D&N, D&N Bank, their respective Subsidiaries, and each and every
director, officer, employee and shareholder of each of such entities (jointly
and severally, a "Releasee"), of and from all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgment, executions, claims, and demands whatsoever, in
law, admiralty or equity, which against any Releasee I (or my heirs, executors,
administrator, successors or assigns) ever had, now have or hereafter can, shall
or may have by reason of any action, proceeding, matter, cause or thing
whatsoever arising out of or relating to the Old Employment Agreement.
4. I hereby acknowledge that all payments due to me and all obligations
owed to me under the D&N SERP have been paid or satisfied in full.
5. All capitalized terms not otherwise defined herein shall be defined
herein as in the Merger Agreement.
IN WITNESS WHEREOF, I have executed this Instrument this ______ day of
____________, 199__.
------------------------------
Name: Xxxxxx X. Xxxxxxxx
