Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 30, 2003 ("Agreement"),
among Approved Acquisition Corp. ("AAC"), Michigan Fidelity Acceptance Corp,
d/b/a Franklin Financial Group ("FFG"), a Michigan corporation, Approved
Financial Corp. (the "Company"), a Virginia corporation, and Approved Federal
Savings Bank, A Federal Savings Bank (the "Bank"), a federally-chartered savings
bank and wholly-owned subsidiary of the Company.
WITNESSETH:
WHEREAS, the Boards of Directors of the Company and the Bank have
determined that it is in the best interests of the Company and the Bank and the
Company's stockholders to consummate the business combination transaction
provided for herein (the "Merger");
WHEREAS, in connection with the Merger, FFG desires to acquire certain
assets and assume certain liabilities of the Company and the Bank as provided
for herein (the "Transfer");
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
WHEREAS, as a condition and inducement to the willingness of AAC to enter
into this Agreement, the directors and executive officers of the Company (the
"Company Stockholders") are concurrently entering into a Stockholder Agreement
with AAC (the "Stockholder Agreement"), in substantially the form attached
hereto as Exhibit A, pursuant to which, among other things, such directors agree
to vote their shares of Company Common Stock (as defined below) in favor of this
Agreement and the transactions contemplated hereby;
WHEREAS, as a condition and inducement to the willingness of FFG and AAC to
enter into this Agreement, each of the holders of the Company indebtedness,
obligations, duties and liabilities relating to the Promissory Notes outstanding
to related parties (the "Related Party Notes") set forth in the list attached
hereto as Exhibit B is exchanging each of the Related Party Notes for new notes
from two new classes of promissory notes (the "Exchanged Related Party Notes").
Each of the Exchanged Related Party Notes designated as a Note-A ("Note-A")
includes a provision making such note subject to the terms of the setoff set
forth in Section 8.02 of this Agreement and to the payment schedule set forth in
each of the Note-As. Each of the Exchanged Related Party Notes designated as a
Note-B ("Note-B") is not subject to the setoff set forth in Section 8.02 of the
Agreement, but is subject to the payment schedule set forth in each of the
Note-Bs. A list of all of the Note-A and Note-B Exchanged Related Party Notes
and the forms of each one to be executed are attached hereto as Exhibit C; and
WHEREAS, as a condition and inducement to the willingness of FFG and AAC to
enter into this Agreement, the directors of the Company and the Bank are
concurrently entering into a Resignation and Stock Sales Agreement in
substantially the form attached hereto as Exhibit D, pursuant to which such
directors agree as of the Effective Time (as defined in Section 1.05 hereof) to
resign from their positions as directors of the Company and the Bank and to sell
for $10.20 per share each of their shares of preferred stock of the Company to
persons designated by AAC.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement and
subject to and in accordance with an Agreement of Merger, a copy of which is
attached hereto as Exhibit E (the "Agreement of Merger"), between the Company
and Company Acquisition Corp. ("Interim"), a Virginia corporation to be formed
as a wholly-owned subsidiary of AAC in connection with the transactions
contemplated hereby, at the Effective Time (as defined in Section 1.05 hereof),
Interim shall be merged with and into the Company in accordance with the
Virginia Stock Corporation Act (the "VSCA") (the "Merger"), with the Company as
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation").
1.02 Effect of the Merger. As of the Effective Time (as defined in Section
1.05 hereof), the Surviving Corporation shall be considered the same business
and corporate entity as each of the Company and Interim and thereupon and
thereafter, all the property, rights, powers and franchises of each of the
Company and Interim shall vest in the Surviving Corporation and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the debts,
liabilities, obligations and duties of each of the Company and Interim and shall
have succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Corporation. In addition,
any reference to either of the Company and Interim in any contract or document,
whether executed or taking effect before or after the Effective Time, shall be
considered a reference to the Surviving Corporation if not inconsistent with the
other provisions of the contract or document; and any pending action or other
judicial proceeding to which either of the Company or Interim is a party, shall
not be deemed to have abated or to have discontinued by reason of the Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Merger had not been made; or the Surviving Corporation may be substituted
as a party to such action or proceeding, and any judgment, order or decree may
be rendered for or against it that might have been rendered for or against
either of the Company and Interim if the Merger had not occurred. At the
Effective Time, the directors and officers of the Surviving Corporation shall be
the persons designated in Section 1.04.
1.03 Articles of Incorporation and Bylaws. As of the Effective Time, the
Amended and Restated Articles of Incorporation ("Articles of Incorporation") and
Bylaws of the Company shall be
2
the Articles of Incorporation and Bylaws of the Surviving Corporation until
otherwise amended as provided by law.
1.04 Directors and Officers. As of the Effective Time, the directors and
officers of Interim shall become the directors and officers of the Surviving
Corporation.
1.05 Effective Time. The Merger shall become effective upon the occurrence
of the filing of Articles of Merger with the Secretary of State of the
Commonwealth of Virginia pursuant to Section 13.1-720 of the VSCA unless a later
date and time is specified as the effective time in such Articles of Merger
("Effective Time"). A closing (the "Closing") shall take place immediately prior
to the Effective Time at 10:00 a.m., on the fifth business day following the
receipt of all necessary regulatory or governmental approvals and consents and
the expiration of all statutory waiting periods in respect thereof and the
satisfaction or waiver, to the extent permitted hereunder, of the conditions to
the consummation of the Merger specified in Article V of this Agreement (other
than the delivery of certificates and other instruments and documents to be
delivered at the Closing), at the offices of AAC or at such other place, at such
other time, or on such other date as the parties may mutually agree upon. At the
Closing, there shall be delivered to AAC, the Company and the Bank the
certificates and other documents required to be delivered under Article V
hereof.
1.06 Modification of Structure. Notwithstanding any provision of this
Agreement to the contrary, AAC, with the prior written consent of the Company,
which consent shall not be unreasonably withheld, may elect, subject to the
filing of all necessary applications and the receipt of all required regulatory
approvals, to modify the structure of the transactions contemplated hereby so
long as (i) there are no adverse federal income tax consequences to the
stockholders of the Company as a result of such modification, (ii) the
consideration to be paid to holders of the Company Common Stock (as defined
below) under this Agreement is not thereby changed in kind or reduced in amount
solely because of such modification and (iii) such modification will not be
likely to materially delay or jeopardize receipt of any required regulatory
approvals or impair or prevent the satisfaction of any conditions to the
Closing.
1.07 Conversion of Company Common Stock and Cancellation of Options. As of
the Effective Time, each share of common stock, par value $1.00 per share, of
the Company (the "Company Common Stock"), issued and outstanding immediately
prior to the Effective Time (other than shares (i) as to which dissenters'
rights have been asserted and duly perfected in accordance with the VSCA
("Dissenting Shares") and (ii) held by the Company (including treasury shares)
or the Bank or AAC other than in a fiduciary capacity, which shares shall be
cancelled) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be cancelled and by operation of law be converted into and
represent the right to receive from AAC, the Book Value (as defined below) of
such share in cash (the "Merger Consideration") in accordance with Section 1.08
hereof. The aggregate consideration to be paid for the conversion of all
outstanding shares of Company Common Stock is hereinafter referred to as the
"Aggregate Merger Consideration." For purposes of this Agreement, Book Value for
each share of Company Common Stock shall be determined as of
3
the month end immediately preceding the date of Closing. Book Value shall be
determined in accordance with the methodology set forth in Appendix A hereto.
At or immediately prior to the Effective Time, each outstanding option to
purchase Company Common Stock issued by the Company and as described on
Disclosure Schedule 2.02 ("Company Option"), shall be cancelled, and each holder
of any such Company Option, whether or not then vested or exercisable, shall
have no further rights with respect to such Company Options or underlying shares
of Company Common Stock related to such Company Options. Each holder of a
Company Option shall execute such instruments of cancellation as AAC may
reasonably deem appropriate.
1.08 Exchange Procedures
(a) Immediately prior to the Effective Time, AAC shall deposit in trust
with an exchange agent designated by AAC and reasonably acceptable to the
Company (the "Exchange Agent") cash in an amount equal to the Aggregate Merger
Consideration. No later than seven business days following the Effective Time,
AAC shall cause the Exchange Agent to mail or make available to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented issued and outstanding shares of Company Common Stock a notice
and letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the certificates theretofore representing shares
of Company Common Stock shall pass only upon proper delivery of such
certificates to the Exchange Agent) advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock in exchange
for the consideration set forth in Section 1.07 hereof deliverable in respect
thereof pursuant to this Agreement. Within seven business days following receipt
of surrendered certificates and a properly completed letter of transmittal, the
Exchange Agent shall deliver the Merger Consideration to each former Company
stockholder. The Exchange Agent shall accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange practices.
(b) Each outstanding certificate which prior to the Effective Time
represented Company Common Stock (other than Dissenting Shares) and which is not
surrendered to the Exchange Agent in accordance with the procedures provided for
herein shall, except as otherwise herein provided, until duly surrendered to the
Exchange Agent, be deemed to evidence the right to receive the Merger
Consideration. After the Effective Time, there shall be no further transfer on
the records of the Company of certificates representing shares of Company Common
Stock and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of the Merger Consideration as hereinabove
provided.
(c) AAC shall not be obligated to deliver the Merger Consideration to which
a holder of Company Common Stock would otherwise be entitled as a result of the
Merger until such holder
4
surrenders the certificate or certificates representing the shares of Company
Common Stock for exchange as provided in this Section 1.08, or, in lieu thereof,
an appropriate affidavit of loss and indemnity agreement and/or a bond as may be
required in each case by AAC. If payment of the Merger Consideration is to be
made in a name other than that in which the certificate evidencing Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed or accompanied by an executed form of assignment separate from
the certificate and otherwise in proper form for transfer and that the person
requesting such payment pay to the Exchange Agent in advance, any transfer or
other tax required by reason of the payment in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) Any portion of the Merger Consideration delivered to the Exchange Agent
by AAC pursuant to Section 1.07 that remains unclaimed by the stockholders of
the Company for six months after the Effective Time (as well as any proceeds
from any investment thereof) shall be delivered by the Exchange Agent to AAC.
Any stockholders of the Company who have not exchanged their shares of Company
Common Stock for the Merger Consideration in accordance with this Agreement
shall thereafter look only to AAC for the consideration deliverable in respect
of each share of Company Common Stock such stockholder holds as determined
pursuant to this Agreement without any interest thereon. If outstanding
certificates for shares of Company Common Stock are not surrendered or the
payment for them is not claimed prior to the date on which payment of the Merger
Consideration would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent permitted
by abandoned property and any other applicable law, become the property of AAC
(and to the extent not in its possession shall be delivered to it), free and
clear of all claims or interest of any person previously entitled to such
property. Neither the Exchange Agent nor any party to this Agreement shall be
liable to any holder of stock represented by any certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. AAC and the Exchange Agent shall be entitled
to rely upon the stock transfer books of the Company to establish the identity
of those persons entitled to receive the Merger Consideration specified in this
Agreement, which books shall be conclusive with respect thereto. In the event of
a dispute with respect to ownership of stock represented by any certificate, AAC
and the Exchange Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
1.09 Withholding Rights. AAC (through the Exchange Agent, if applicable)
shall be entitled to deduct and withhold from any amounts otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as AAC is required under the Internal Revenue Code of 1986, as amended
("Code"), or any provision of state, local or foreign tax law to deduct and
withhold with respect to the making of such payment. Any amounts so withheld
shall be treated for all purposes of this Agreement as having been paid to the
holder of Company Common Stock in respect of which such deduction and
withholding was made by AAC, provided
5
that AAC or the Exchange Agent shall timely file such withheld funds with the
appropriate taxing authorities.
1.10 Dissenting Shares. Each outstanding share of Company Common Stock the
holder of which has perfected his right to dissent under the VSCA and has not
effectively withdrawn or lost such rights as of the Effective Time shall not be
converted into or represent a right to receive the Merger Consideration, and the
holder thereof shall be entitled only to such rights as are granted by the VSCA.
The Company shall give AAC prompt notice upon receipt by the Company of any such
written demands for payment of their fair value of such shares of Company Common
Stock and of withdrawals of such demands and any other instruments provided
pursuant to the VSCA (any stockholder duly making such demand being hereinafter
called a "Dissenting Stockholder"). Any payments made in respect of Dissenting
Shares shall be made by AAC. If any Dissenting Stockholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at or prior to the Effective Time, such holders shares of Company Common
Stock shall be converted into a right to receive the Merger Consideration in
accordance with the applicable provisions of this Agreement.
1.11 Additional Actions. If at any time after the Effective Time the
Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its rights, title
or interest in, to or under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger, or (ii) otherwise carry out the purposes of
this Agreement, the Company and its proper officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of the Company or otherwise to take any and all such
action.
1.12 Interim Shares. Each outstanding share of common stock of Interim,
$.01 par value per share ("Interim Common Stock"), on the Effective Time shall
be converted automatically and without any action on the part of the holder
thereof into an equal number of shares of the Surviving Corporation, which shall
constitute all of the outstanding common stock of the Surviving Corporation.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE BANK
References to "Company Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article II and Article IV hereof, dated as
of the date hereof and referenced to the specific sections and subsections of
this Agreement, which have been delivered by the Company to FFG and AAC. The
Company and the Bank hereby represent and warrant to FFG and AAC as follows as
of the date hereof:
2.01 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia. The Company has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
(as defined below). The Company is registered as a savings and loan holding
company under the Home Owners' Loan Act ("HOLA"). Company Disclosure Schedule
2.01(a) sets forth true and complete copies of the Articles of Incorporation and
Bylaws of the Company as in effect on the date hereof.
For the purposes of this Agreement, the term "Material Adverse Effect"
shall mean any effect that (i) is material and adverse to the financial
condition, results of operations or business of the Company and the Bank, either
individually or considered as one enterprise including, without limitation, the
nonconforming wholesale lending business, or (ii) materially impairs the ability
of the Company and/or the Bank to consummate the transactions contemplated by
this Agreement and the Agreement of Merger, provided, however, that the term
"Material Adverse Effect" shall not be deemed to include (i) the impact of
changes in (a) laws, regulations, or policies of any Federal or state court,
administrative agency, commission or other governmental authority or
interpretations thereof; or (b) generally accepted accounting principles, that
in each case are generally applicable to the banking industry, (ii) actions
taken or to be taken by the Company or the Bank upon the written request of FFG
and AAC pursuant to this Agreement or the Agreement of Merger, or (iii) actions
or payments contemplated by this Agreement, including as set forth in the
Company Disclosure Schedules.
(b) The only direct or indirect significant subsidiary (as defined in Rule
405 of the General Rules and Regulations under the Securities Act of 1933) of
the Company is the Bank. Disclosure Schedule 2.01(b)(i) sets forth true and
complete copies of the Charter and Bylaws of the Bank as in effect on the date
hereof. The Bank (i) is duly organized, validly existing and in good standing
under the laws of the United States of America, (ii) has the corporate power and
authority to own or lease all of its properties and assets, and (iii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse
Effect. The Company and the Bank have satisfied in all material
7
respects all commitments, financial or otherwise, as may have been agreed upon
with their state and/or federal regulatory agencies. Other than the Bank and
except as set forth in Company Disclosure Schedule 2.01(b)(ii), the Company does
not own or control, directly or indirectly, greater than a 5% equity interest in
any corporation, company, association, partnership, joint venture or other
entity.
2.02 Capitalization. The authorized capital stock of the Company consists
of 20,000,000 shares of Company Common Stock, of which 5,482,114 are issued and
outstanding as of the date hereof, and 100 shares of noncumulative, voting
preferred stock Series A, of which 90 shares are issued and outstanding. All
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except for an aggregate of 252,000 shares of Company Common
Stock issuable upon exercise of Company Options granted pursuant to the
Company's 1996 Incentive Stock Option Plan (the "Stock Option Plan") and one
non-statutory stock option agreement (the "Stock Option Agreement"), the Company
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase or issuance of any shares of capital stock of the Company or
any securities representing the right to purchase or otherwise receive any
shares of such capital stock or any securities convertible into or representing
the right to purchase or subscribe for any such stock. Disclosure Schedule 2.02
lists each Company Option outstanding as of the date hereof under the Stock
Option Plan and the Stock Option Agreement, as well as the name of the grantee,
the date of grant and the respective exercise price with respect thereto.
2.03 Authority; No Violation.
(a) Subject to the approval of this Agreement by the stockholders of the
Company, the Company and the Bank have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Boards of Directors of the
Company and the Bank. Except for the adoption by the Company's stockholders of
this Agreement, no other corporate proceedings on the part of the Company or the
Bank are necessary to consummate the Merger. This Agreement has been duly and
validly executed and delivered by the Company and the Bank and constitutes the
valid and binding obligation of the Company and the Bank, enforceable against
them in accordance with and subject to its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(b) Subject to the approval of this Agreement by the stockholders of the
Company, the Company has full corporate power and authority to execute and
deliver the Agreement of Merger and to consummate the transactions contemplated
thereby in accordance with the terms thereof. The execution and delivery of the
Agreement of Merger by the Company and the consummation of the
8
transactions contemplated thereby have been duly and validly approved by the
Board of Directors of the Company. The Agreement of Merger, upon its execution
and delivery by the Company, will constitute a valid and binding obligation of
the Company, enforceable against it in accordance with and subject to its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally, and
except that the availability of equitable remedies (including, without
limitation, specific performance) is within the discretion of the appropriate
court.
(c) None of the execution and delivery of this Agreement by the Company and
the Bank, the execution and delivery of the Agreement of Merger by the Company,
the consummation by the Company and the Bank of the transactions contemplated
hereby in accordance with the terms hereof, the consummation by the Company of
the transactions contemplated by the Agreement of Merger in accordance with the
terms thereof, compliance by the Company and the Bank with any of the terms or
provisions hereof or compliance by the Company with any terms or provisions of
the Agreement of Merger, will (i) violate any provision of the Articles of
Incorporation, Charter or Bylaws of the Company and the Bank, (ii) assuming that
the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company and the Bank or any of their respective
properties or assets, or (iii) except as disclosed in Disclosure Schedule
2.03(c), violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
the Company and the Bank under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company and the Bank are a party, or
by which any of their respective properties or assets may be bound or affected,
except, with respect to (ii) and (iii) above, such as individually or in the
aggregate will not have a Material Adverse Effect and which will not prevent or
delay the consummation of the transactions contemplated hereby. Except as set
forth in Company Disclosure Schedule 2.03(c) and for any consents and approvals
of or filings or registrations with or notices to the Federal Deposit Insurance
Corporation ("FDIC"), the State Corporation Commission of the Commonwealth of
Virginia, the Office of Thrift Supervision ("OTS") and the stockholders of the
Company, no consents or approvals of or filings or registrations with or notices
to any federal, state, municipal or other governmental or regulatory commission,
board, agency, or non-governmental third party are required on behalf of the
Company in connection with (a) the execution and delivery of this Agreement by
the Company and the Bank or the execution and delivery of the Agreement of
Merger by the Company, and (b) the completion by the Company and the Bank of the
transactions contemplated hereby or the completion by the Company of the
transactions contemplated by the Agreement of Merger.
(d) As of the date hereof, neither the Company nor the Bank is aware of any
reasons relating to the Company or the Bank why all consents and approvals shall
not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated hereby.
9
2.04 Financial Statements.
(a) The Company has previously delivered to FFG and AAC copies of the
consolidated balance sheets of the Company as of December 31, 2002 and 2001 and
the related consolidated statements of income (loss), shareholders' equity, and
cash flows for the years ended December 31, 2002, 2001 and 2000, in each case
accompanied by the audit report of Xxxxx Xxxxxxxx, LLP, independent public
accountants, as well as the unaudited consolidated balance sheet of the Company
as of June 30, 2003 and the related unaudited consolidated statements of income
(loss), shareholders' equity, and cash flows for the three months ended June 30,
2003 and 2002. The consolidated balance sheets of the Company referred to
herein, as well as the financial statements to be delivered pursuant to Section
4.04 hereof, (including the related notes, where applicable) fairly present or
will fairly present, in all material respects, as the case may be, the
consolidated financial condition of the Company as of the respective dates set
forth therein, and the related consolidated statements of income, shareholders'
equity and cash flows (including the related notes, where applicable) fairly
present or will fairly present, as the case may be, the results of the
consolidated income, shareholders' equity and cash flows of the Company for the
respective periods or as of the respective dates set forth therein (it being
understood that the Company's interim financial statements are not audited and
are not prepared with all related notes but have been, or will be, prepared in
compliance with all applicable legal and regulatory accounting requirements and
reflect all adjustments which are, in the opinion of the Company, necessary for
a fair presentation of such financial statements).
(b) Each of the financial statements referred to in this Section 2.04
(including the related notes, where applicable) has been prepared in accordance
with generally accepted accounting principles consistently applied during the
periods involved. The books and records of the Company and the Bank are being
maintained in material compliance with applicable legal and accounting
requirements.
(c) Except to the extent reflected, disclosed or reserved against in the
consolidated financial statements referred to in the first sentence of Section
2.04(a) or the notes thereto, and except for liabilities incurred since June 30,
2003 in the ordinary course of business and consistent with past practice, the
Company does not have any obligation or liability, whether absolute, accrued,
contingent or otherwise, material to the business, results of operations, assets
or financial condition of the Company and the Bank taken as a whole.
2.05 Absence of Certain Changes or Events. Except as set forth in Company
Disclosure Schedule 2.05, since June 30, 2003, (i) the Company and the Bank have
conducted their businesses in the ordinary and usual course and (ii) no event
has occurred or circumstances arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect.
2.06 Legal Proceedings. Except as disclosed in Company Disclosure Schedule
2.06, neither the Company nor the Bank is a party to any, and there are no
pending or, to the best knowledge of the Company and the Bank, threatened legal,
administrative, arbitration or other
10
proceedings, claims, actions or governmental investigations of any nature
against the Company or the Bank, except such proceedings, claims, actions or
governmental investigations which in the good faith judgment of the Company and
the Bank will not have a Material Adverse Effect. Except for the OTS Supervisory
Agreement among the Company, the Bank and the OTS, dated December 3, 2001, (the
"Supervisory Agreement"), neither the Company nor the Bank is a party to any
order, judgment or decree which has or could reasonably be expected to have a
Material Adverse Effect.
2.07 Taxes and Tax Returns.
(a) The Company and the Bank have duly filed (and until the Effective Time
will so file) all returns, declarations, reports, information returns and
statements ("Returns") required to be filed or sent by or with respect to them
in respect of any Taxes (as hereinafter defined), and have duly paid (and until
the Effective Time will so pay) all Taxes due and payable other than Taxes or
other charges which (i) are being contested in good faith (and disclosed in
writing to representatives of FFG and AAC) and (ii) have not finally been
determined. The Company has established (and until the Effective Time will
establish) on its books and records reserves that are adequate for the payment
of all Taxes not yet due and payable for periods ending on or prior to the
Effective Time, whether or not disputed or accrued. Except as set forth in
Company Disclosure Schedule 2.07(a), (i) the federal income tax returns of the
Company have been examined by the Internal Revenue Service ("IRS") (or are
closed to examination due to the expiration of the applicable statute of
limitations), and (ii) the Virginia income tax returns of the Company have been
examined by applicable authorities (or are closed to examination due to the
expiration of the statute of limitations), and in the case of both (i) and (ii)
no deficiencies were asserted as a result of such examinations which have not
been resolved and paid in full. All tax refunds, if any, have been properly
recorded, and, to the knowledge of the Company and the Bank, were properly paid
and binding obligations of the applicable state or federal authority. There are
no audits or other administrative or court proceedings presently pending nor any
other disputes pending, or claims asserted for, Taxes or assessments upon the
Company or the Bank, nor has the Company given any currently outstanding waivers
or comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Returns.
(b) Except as set forth in Company Disclosure Schedule 2.07(b), the Company
(i) has not requested any extension of time within which to file any Return
which Return has not since been filed, (ii) is not a party to any agreement
providing for the allocation or sharing of Taxes, (iii) is not required to
include in income any adjustment pursuant to Section 481(a) of the Code, by
reason of a voluntary change in accounting method initiated by the Company (nor
does the Company have any knowledge that the IRS has proposed any such
adjustment or change of accounting method), or (iv) has not filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to
11
employees), excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) upon the Company
and/or the Bank.
2.08 Employee Benefit Plans.
(a) Company Disclosure Schedule 2.08(a) sets forth all benefit and
compensation plans, contracts, policies or arrangements under which the Company
and the Bank have obligations covering current or former employees of the
Company and the Bank (the "Employees") and current or former directors of the
Company and the Bank including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and deferred compensation, stock option,
stock purchase, stock appreciation rights, stock-based, incentive and bonus
plans (the "Benefits Plans"). True and complete copies of all Benefit Plans
including, but not limited to, any trust instruments and insurance contracts
forming a part of any Benefit Plans and all amendments thereto have been
provided to representatives of FFG and AAC.
(b) All Benefits Plans other than "multiemployer plans" within the meaning
of Section 3(37) of ERISA, covering Employees, to the extent subject to ERISA,
are in compliance with ERISA. Each Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and
which is intended to be qualified under Section 401(a) of the Code, has received
a favorable determination letter from the IRS, and the Company is not aware of
any circumstances likely to result in revocation of any such favorable
determination letter or the loss of the qualification of such Pension Plan under
Section 401(a) of the Code. There is no material pending or, to the Company's
knowledge, threatened litigation relating to the Benefits Plans. Neither the
Company nor the Bank has engaged in a transaction with respect to any Benefit
Plan or Pension Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject the Company or the Bank to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in
an amount which would have a Material Adverse Effect upon the Company or the
Bank.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Company or the Bank with respect to any ongoing,
frozen or terminated "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither the Company nor the Bank has incurred, and neither expects
to incur, any withdrawal liability with respect to a multiemployer plan under
Subtitle E of Title IV of ERISA (regardless of whether based on contributions of
an ERISA Affiliate). No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or by any ERISA
Affiliate
12
within the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms of any Benefit
Plan have been timely made or have been reflected on the financial statements of
the Company. Neither any Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Neither the Company nor the Bank
has provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(e) Under each Pension Plan which is a single-employer plan, as of the last
day of the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan, and
there has been no material change in the financial condition of such Pension
Plan since the last day of the most recent plan year.
(f) Neither the Company nor the Bank has any obligations for retiree health
and life benefits under any Benefit Plan other than as may be required under
Section 4980B of the Code or Part 6 of Title I of ERISA, or under the
continuation of coverage provisions of the laws of any state or locality. The
Company or the Bank may amend or terminate any such Benefit Plan at any time
without incurring any liability thereunder.
(g) Except as set forth on Company Disclosure Schedule 2.08(g), none of the
execution of this Agreement, stockholder approval of this Agreement or
consummation of the transactions contemplated hereby will (A) entitle any
employees of the Company or the Bank to severance pay or any increase in
severance pay upon any termination of employment after the date hereof, (B)
accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation pursuant
to, any of the Benefit Plans, (C) result in any breach or violation of, or a
default under, any of the Benefit Plans or (D) result in any payment that would
be a "parachute payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code, without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.
2.09 Securities Documents and Regulatory Reports.
(a) Except for SEC online filings available on the SEC web site, the
Company has previously delivered or made available to representatives of FFG and
AAC a complete copy of each final registration statement, prospectus, annual,
quarterly or current report and definitive proxy statement or other
communication (other than general advertising materials) filed pursuant to the
Securities Act of 1933, as amended ("1933 Act"), or the Securities Exchange Act
of 1934, as
13
amended ("1934 Act"), or mailed by the Company to its stockholders as a class
since January 1, 1998, and each such final registration statement, prospectus,
annual, quarterly or current report and definitive proxy statement or other
communication, as of its date, complied in all material respects with all
applicable statutes, rules and regulations and did 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 made therein, in
light of the circumstances under which they were made, not misleading; provided
that information as of a later date shall be deemed to modify information as of
an earlier date.
(b) Since January 1, 1998, the Company and the Bank have duly filed with
the OTS, in materially correct form the monthly, quarterly and annual reports
required to be filed under applicable laws and regulations, and the Company has
delivered or made available to representatives of FFG and AAC accurate and
complete copies of such reports. Company Disclosure Schedule 2.09 lists all
examinations of the Company or the Bank conducted by the applicable regulatory
authorities since January 1, 1998 and the dates of any responses thereto
submitted by the Company or the Bank. Except as set forth in Company Disclosure
Schedule 2.09, in connection with the most recent examinations of the Company or
the Bank by the applicable regulatory authorities, neither the Company nor the
Bank were required to correct or change any action, procedure or proceeding
which the Company or the Bank believe has not been now corrected or changed as
required other than corrections or changes which, if not made, either
individually or in the aggregate, would not have a Material Adverse Effect.
2.10 Compliance with Applicable Law.
(a) The Company and the Bank have all permits, licenses, certificates of
authority, orders and approvals of, and have made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit them to carry on their respective
businesses as they are presently being conducted and the absence of which could
reasonably be expected to have a Material Adverse Effect; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect; and to the best knowledge of the Company and the Bank, no suspension or
cancellation of any of the same is threatened.
(b) Neither the Company nor the Bank is in violation of its Articles of
Incorporation, Charter or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all
banking, securities, municipal securities, safety, health, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect, and
neither the Company nor the Bank has received any notice or communication from
any federal, state or local governmental authority asserting that the Company or
the Bank is in violation of any of the foregoing which could reasonably be
expected to have a Material Adverse Effect. Except for the OTS Supervisory
14
Agreement, neither the Company nor the Bank is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all commercial banks issued by governmental authorities), and has not
received any written communication requesting that it enter into any of the
foregoing.
2.11 Deposit Insurance. The deposit accounts of the Bank are insured by the
Savings Association Insurance Fund administered by the Federal Deposit Insurance
Corporation ("FDIC") to the maximum extent permitted by the Federal Deposit
Insurance Act, as amended ("FDIA"), and the Bank has paid all premiums and
assessments required by the FDIA and the regulations thereunder.
2.12 Certain Contracts.
(a) Except as disclosed in Company Disclosure Schedule 2.12(a), neither the
Company nor the Bank is a party to, is bound by, receives, or is obligated to
pay benefits under, (i) any agreement, indenture or other instrument relating to
the borrowing of money by the Company or the Bank (other than in the case of
deposits, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by the Company
or the Bank of any obligation, (ii) any agreement, arrangement or commitment
relating to the employment of a consultant or the employment, election or
retention in office of any present or former director or officer of the Company
or the Bank, (iii) any contract, agreement or understanding with a labor union,
(iv) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of the Company or the Bank upon execution of this
Agreement and the Agreement of Merger or upon or following consummation of the
transactions contemplated by this Agreement or the Agreement of Merger (either
alone or in connection with the occurrence of any additional acts or events),
(v) any agreement, arrangement or understanding to which the Company or the Bank
is a party or by which any of the same is bound which limits the freedom of the
Company or the Bank to compete in any line of business or with any person, or
(vi) any other agreement, arrangement, commitment or understanding to which the
Company or the Bank is a party and which is material to the business, results of
operations, assets or financial condition of the Company and the Bank taken as a
whole (excluding loan agreements or agreements relating to deposit accounts), in
each of the foregoing cases whether written or oral.
(b) Neither the Company nor the Bank is in default or in non-compliance
under any contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party or by which its assets, business or
operations may be bound or affected, whether entered into in the ordinary course
of business or otherwise and whether written or oral, which default or
non-compliance would have a Material Adverse Effect, 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 or non-compliance.
15
(c) Neither the Company nor the Bank is a party or has agreed to enter into
an exchange traded or over-the-counter equity, interest rate, foreign exchange
or other swap, forward, future, option, cap, floor or collar or any other
contract that is not included in the Company's audited financial statements at
and for June 30, 2003 and is a derivatives contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities that
are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives."
2.13 Properties and Insurance.
(a) All real and personal property owned by the Company or the Bank or
presently used by them in their respective businesses is in adequate condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
the Company and the Bank in the ordinary course of business consistent with
their past practices. The Company and the Bank have good and, as to owned real
property, marketable title to all material assets and properties, whether real
or personal, tangible or intangible, reflected in the Company's consolidated
balance sheet as of June 30, 2003, or owned and acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business since June 30, 2003), subject to
no encumbrances, liens, mortgages, securities interests or pledges, except (i)
those items that secure liabilities that are reflected in said consolidated
balance sheet or the notes thereto or have been incurred in the ordinary course
of business after the date of such consolidated balance sheet, (ii) statutory
liens for current taxes not yet due, (iii) such encumbrances, liens, mortgages,
securities interests, pledges and title imperfections that are not in the
aggregate material to the business, results of operations, assets or financial
condition of the Company and the Bank taken as a whole, and (iv) with respect to
owned real property, title imperfections noted in title reports prior to the
date hereof. The Company and the Bank as lessees have the right under valid and
subsisting leases to occupy, use, possess and control all property leased by
them in all material respects as presently occupied, used, possessed and
controlled by the Company and the Bank and the consummation of the transactions
contemplated hereby and by the Agreement of Merger will not affect any such
right in a way that would have a Material Adverse Effect. Company Disclosure
Schedule 2.13(a) sets forth an accurate listing of each lease pursuant to which
the Company or the Bank act as lessor or lessee, including the expiration date
and the terms of any renewal options which relate to the same ("Leased
Properties").
(b) The business operations and all insurable properties and assets of the
Company and the Bank are insured for its benefit against all risks which, in the
reasonable judgment of the management of the Company and the Bank, should be
insured against, in each case under valid, binding and enforceable policies or
bonds issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of the Company and the Bank adequate for the business engaged in by
the Company and the Bank. As of the date hereof, neither the Company nor the
Bank has received any notice of cancellation or notice of a material amendment
of any such insurance policy or bond or is in material default under such policy
or bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion.
16
2.14 Environmental Matters. For purposes of this Agreement, the following
terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
'9601, et seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
'6901, et seq; the Clean Air Act, as amended, 42 U.S.C. '7401, et seq; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. '1251, et seq; the
Toxic Substances Control Act, as amended, 15 U.S.C. '9601, et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. '11001, et seq; the Safe
Drinking Water Act, 42 U.S.C. '300f, et seq; and all comparable state and local
laws, and (2) any common law (including without limitation common law that may
impose strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated material containing any such substance as a
component. Hazardous Substances include without limitation petroleum (including
crude oil or any fraction thereof), asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan Portfolio Properties" means those properties which serve as
collateral for loans owned by the Company or the Bank.
"Other Properties Owned" means those properties owned or operated by the
Company or the Bank which are not Loan Portfolio Properties. A legal description
of each of the Other Properties Owned is set forth in Company Disclosure
Schedule 2.14.
(a) Except as set forth in Company Disclosure Schedule 2.14(a), to the
knowledge of the Company and the Bank, neither the Company nor the Bank has been
and are not in violation of or liable under any Environmental Law.
(b) None of the Other Properties Owned is the subject of liability under,
or, to the knowledge of the Company and the Bank, has been in violation of, any
Environmental Law except any such violations or liabilities which would not,
individually or in the aggregate, have a Material
17
Adverse Effect. Except as set forth in Company Disclosure Schedule 2.14(b), a
Phase I study has been conducted with respect to each of the Other Properties
Owned and such study will be updated prior to Closing. Except as set forth in
Company Disclosure Schedule 2.14(b), a Phase I survey has been conducted with
respect to each of the Other Properties Owned and such survey will be updated
prior to Closing. A copy of each of the Phase I studies and surveys is attached
hereto as part of Company Disclosure Schedule 2.14(b).
(c) To the knowledge of the Company and the Bank, none of the Loan
Portfolio Properties or Leased Properties has been in violation of, or is the
subject of liability under, any Environmental Law except any such violations or
liabilities which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) There are no actions, suits, demands, notices, claims, investigations
or proceedings pending or, to the knowledge of the Company and the Bank,
threatened relating to the liability of the Loan Portfolio Properties, Leased
Properties and Other Properties Owned under any Environmental Law, including
without limitation any notices, demand letters or requests for information from
any federal or state environmental agency relating to any such liabilities under
or violations of Environmental Law, except such which would not have or result
in a Material Adverse Effect.
(e) Company Disclosure Schedule 2.14(e) lists (i) any environmental studies
which have been undertaken by, or on behalf of, the Company or the Bank with
respect to the Other Properties Owned and the Leased Properties and (ii) and
correspondence known to the Company or the Bank with respect to the Other
Properties Owned and the Leased Properties and issues related to Environmental
Laws.
2.15 Allowance for Loan Losses and Real Estate Owned. The allowance for
loan losses reflected on the Company's consolidated balance sheets included in
the consolidated financial statements referred to in Section 2.04 hereof is, in
the opinion of the Company's management, adequate in all material respects as of
their respective dates under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans net
of recoveries. The real estate owned reflected on the consolidated balance
sheets included in the consolidated financial statements referred to in Section
2.04 hereof is carried at the lower of cost or fair value, or the lower of cost
or net realizable value, as required by generally accepted accounting
principles.
2.16 Minute Books. Since January 1, 2000, the minute books of the Company
and the Bank contain complete and accurate records of all meetings and other
corporate action held or taken by their Boards of Directors (including
committees of its Board of Directors) and stockholders in all material respects.
2.17 Broker Fees. Except as set forth in Company Disclosure Schedule 2.17,
neither the Company nor the Bank or any of the respective directors or officers
of such companies has employed
18
any consultant, broker or finder or incurred any liability for any consultant's,
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
2.18 Proxy Statement Information. None of the information relating to it
which is included in the proxy statement distributed by the Company to its
stockholders in order to solicit their approval of this Agreement and the
transactions contemplated hereby ("Proxy Statement"), as of the date such Proxy
Statement is mailed to its stockholders and up to and including the date of the
meeting of its stockholders to which such Proxy Statement relates, will contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
2.19 Transactions with Affiliates. Except as set forth in Company
Disclosure Schedule 2.19 or other Schedules to this Agreement, there are no
existing or pending transactions, nor are there any agreements or
understandings, with any directors, officers or employees of the Company or the
Bank or any person or entity affiliated with it (collectively, "Affiliates"),
relating to, arising from or affecting the Company and the Bank, including,
without limitation, any transactions, arrangements or understandings relating to
the purchase or sale of goods or services, the lending of monies or the sale,
lease or use of any assets of the Company or the Bank.
2.20 Required Vote; Fairness Opinion.
(a) This Agreement and the transactions contemplated hereby are required to
be approved on behalf of the Company by the affirmative vote of the holders of
more than two thirds of the votes cast of Company Common Stock at a meeting
called for such purpose. No other vote of the stockholders of the Company is
required by law, the Company's Articles of Incorporation, the Company's Bylaws
or otherwise to approve this Agreement and the transactions contemplated hereby.
(b) No "control share acquisition," "interested stockholder," "fair price"
or other form of antitakeover statute or regulation is applicable to this
Agreement and the transactions contemplated hereby.
(c) The Company has received a written opinion of Summit Capital Partners,
LLC and the Xxxxxx Group, Inc., dated the date hereof, with respect to the
fairness of the Merger Consideration to be received by the stockholders of the
Company pursuant to this Agreement from a financial point of view.
2.21 Disclosures. No representation or warranty contained in Article II of
this Agreement, and no statement contained in the Company Disclosure Schedules,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein not misleading.
19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FFG AND AAC
References to "AAC Disclosure Schedules" shall mean all of the disclosure
schedules required by this Article III, dated as of the date hereof and
referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered by FFG and AAC to the Company. FFG and AAC
hereby represent and warrant to the Company and the Bank as follows as of the
date hereof:
3.01 Corporate Organization.
(a) Each of FFG and AAC is a corporation duly organized, validly existing
and in good standing under the laws of Michigan. Each of FFG and AAC has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the ability of
each of FFG and AAC to consummate the transactions contemplated hereby.
(b) Interim will be at the Effective Time an interim stock corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Interim will not engage in any business other than in
connection with the transactions contemplated by this Agreement and the
Agreement of Merger and Interim will have no material obligations or liabilities
other than its obligations hereunder.
3.02 Authority; No Violation.
(a) Each of FFG and AAC has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby in accordance with the terms hereof. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of each of FFG and AAC, and
no other corporate proceedings on the part of FFG or AAC are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of FFG and AAC and constitutes a valid
and binding obligation of each of FFG and AAC, enforceable against it in
accordance with and subject to its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
20
(b) At the Effective Time, Interim will have full corporate power and
authority to execute and deliver the Agreement of Merger and to consummate the
transactions contemplated thereby in accordance with the terms thereof. At the
Effective Time, the execution and delivery of the Agreement of Merger by Interim
and the consummation of the transactions contemplated thereby will have been
duly and validly approved by the Board of Directors of Interim and by AAC as the
sole stockholder of Interim, and no other corporate proceedings on the part of
Interim are necessary to consummate the transactions so contemplated. The
Agreement of Merger, upon its execution and delivery by Interim, will constitute
a valid and binding obligation of Interim, enforceable against it in accordance
with and subject to its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and except that the availability of equitable
remedies (including, without limitation, specific performance) is within the
discretion of the appropriate court.
(c) None of the execution and delivery of this Agreement by FFG and AAC,
the execution and delivery of the Agreement of Merger by Interim, the
consummation by FFG and AAC of the transactions contemplated hereby in
accordance with the terms hereof, the consummation by Interim of the
transactions contemplated by the Agreement of Merger, compliance by FFG and AAC
with any of the terms or provisions hereof or compliance by Interim with any
terms or provisions of the Agreement of Merger, will (i) violate any provision
of the Articles of Incorporation, Charter or Bylaws of FFG, AAC or Interim, (ii)
assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to FFG, AAC or Interim or their respective
properties or assets, or (iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the respective
properties or assets of FFG, AAC or Interim under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which FFG, AAC or Interim
is a party, or by which any of their respective properties or assets may be
bound or affected, except, with respect to (ii) and (iii) above, such as
individually or in the aggregate will not have a material adverse effect on the
business, operations, assets or financial condition of FFG or AAC and which will
not prevent or delay the consummation of the transactions contemplated hereby.
Except for consents and approvals of or filings or registrations or notices to
the Secretary of State of the Commonwealth of Virginia, the FDIC and the OTS
listed in Schedule 3.02(c), no consents or approvals of or filings or
registrations with or notices to any federal, state, municipal or other
governmental or regulatory commission, board, agency or non-governmental third
party are required on behalf of FFG, AAC and Interim in connection with (a) the
execution and delivery of this Agreement by FFG and AAC or the execution and
delivery of the Agreement of Merger by Interim and (b) the completion by FFG and
AAC of the transactions contemplated hereby or the completion by Interim of the
transactions contemplated by the Agreement of Merger.
(d) As of the date hereof, neither FFG nor AAC is aware of any reasons
relating to it why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over
21
the transactions contemplated by this Agreement as shall be necessary for
consummation of the transactions contemplated hereby.
3.03 Ability to Pay Merger Consideration. AAC has upon execution of this
Agreement and will have available to it, immediately prior to the Effective Time
sufficient cash (which shall not consist of any funds borrowed by AAC or its
investors) to pay the Aggregate Merger Consideration to stockholders of the
Company as set forth in Section 1.07 and FFG has upon execution of this
Agreement and will have available to it, immediately prior to the Effective Time
sufficient cash (which shall not consist of any funds borrowed by FFG or its
investors) to pay the Purchase Price to the Company and the Bank as set forth in
Section 9.03. FFG and AAC will upon request of the Company provide confirmation
of such available funding.
3.04 Certain Information. None of the information relating to FFG and AAC
supplied or to be supplied by AAC to the Company expressly for inclusion in the
Proxy Statement, as of the date such Proxy Statement is mailed to shareholders
of the Company and up to and including the date of the meeting of shareholders
to which such Proxy Statement relates, will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.05 Disclosures. No representation or warranty contained in Article III of
this Agreement, and no statement contained in the FFG or AAC Disclosure
Schedules, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading.
3.06 Lender Consent. FFG has received an irrevocable written consent from
its lender, Residential Funding Corporation, to undertake the transaction
contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE PARTIES
4.01 Conduct of the Business of the Company and the Bank. During the period
from the date hereof to the Effective Time, the Company and the Bank shall
conduct their respective businesses and engage in transactions permitted
hereunder or only in the ordinary course and consistent with past practice. The
Company and the Bank shall use all reasonable efforts to (i) preserve their
business organization intact, (ii) keep available for themselves and FFG and AAC
the present services of the majority of the employees of the Company and the
Bank, and (iii) preserve for themselves and FFG and AAC, the goodwill of their
customers and others with whom business relationships exist.
22
4.02 Negative Covenants. The Company agrees that from the date hereof to
the Effective Time, except as otherwise approved by FFG and AAC in writing or as
permitted or required by this Agreement, the Company will not and the Company
will not permit the Bank to:
(i) amend or change any provision of its Articles of Incorporation, Charter
or Bylaws unless such amendment shall be necessary to complete the Merger;
(ii) change the number of shares of its authorized or issued capital stock
or issue or grant any option, warrant, call, commitment, subscription, award,
right to purchase or agreement of any character relating to the authorized or
issued capital stock of the Company, or any securities convertible into shares
of such capital stock, or split, combine or reclassify any shares of its capital
stock, or redeem or otherwise acquire any shares of such capital stock;
(iii) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of the capital
stock of the Company;
(iv) grant any severance or termination pay (other than pursuant to binding
contracts, plans, or policies of the Company or the Bank in effect on the date
hereof and disclosed to FFG and AAC on Company Disclosure Schedule 2.12(a)) to,
or enter into or amend any employment, consulting or compensation agreement
with, any of its directors, executive officers or employees; or award any
increase in compensation or benefits to its directors, officers or employees;
(v) enter into or modify (except as may be required by applicable law or as
may be required by Section 4.12 hereof, with the prior written consent of FFG
and AAC, which shall not be unreasonably withheld) any pension, retirement,
stock option, stock purchase, stock grant, stock appreciation right, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any defined contribution
plan or any defined benefit pension or retirement plan other than in the
ordinary course of business consistent with past practice and policies;
(vi) purchase or otherwise acquire, or sell or otherwise dispose of, any
assets or incur any liabilities other than in the ordinary course of business
consistent with past practice and policies;
(vii) enter into any new capital commitments or make any capital
expenditures in excess of $10,000 each, and $50,000 in the aggregate, other than
pursuant to binding commitments existing on the date hereof and expenditures
necessary to maintain existing assets in good repair;
(viii) file any applications or make any contract with respect to branching
or site location or relocation;
(ix) make any material change in its accounting methods or practices, other
than changes required by outside independent CPAs , the OTS or changes in
applicable laws or regulations or
23
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes, except as
required by changes in applicable laws or regulations;
(x) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law or regulations;
(xi) enter into any futures contract, option or other agreement or take any
other action for purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of interest;
(xii) incur any liability for borrowed funds (other than in the case of
deposits, federal funds purchased, securities sold under agreements to
repurchase and FHLB or warehouse line of credit advances in the ordinary course
of business) or place upon or permit any lien or encumbrance upon any of its
properties or assets, except liens of the type permitted in the exceptions to
Section 2.13(a).
(xiii) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xiv) engage in any transaction with an Affiliate not in the ordinary
course of business consistent with past practice;
(xv) discharge or satisfy any material lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business;
(xvi) enter or agree to enter into any agreement or arrangement granting
any preferential right to purchase any of its assets or rights or requiring the
consent of any party to the transfer and assignment of any such assets or
rights;
(xvii) invest in any investment securities other than United States
government agencies and insured certificates of deposit with a maturity of two
(2) years or less or federal funds;
(xviii) make or commit to make any loan to any one person or entity except
mortgage loans originated in the ordinary course of business (together with
"affiliates of such person or entity) in excess of $300,000 in the aggregate;
(xix) take any action that would result in any of its representations and
warranties contained in Article II of this Agreement not being true and correct
in any material respect at the Effective Time;
24
(xx) modify or curtail any of its wholesale mortgage operations, including
changing its mortgage origination policies, underwriting guidelines, closing
policies or quality control policies or fail to meet any obligation under any of
its agreements with its loan purchasers; or
(xxi) agree to do any of the foregoing.
4.03 No Solicitation. The Company and the Bank agree that neither they nor
any of their respective officers or directors shall, and that they shall direct
and use their reasonable best efforts to cause each of their employees, agents
and representatives not to, directly or indirectly, initiate, solicit, encourage
or otherwise facilitate any inquiries or the making of any proposal or offer
with respect to a merger, reorganization, share exchange, consolidation or
similar transaction involving, or any purchase of all or substantially all of
the assets of the Company or more than 9.9% of the outstanding equity securities
of the Company or the Bank (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). The Company and the Bank further
agree that neither the Company nor the Bank nor any of their respective officers
and directors shall, and that they shall direct and use their reasonable best
efforts to cause their employees, agents and representatives not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that nothing contained in
this Agreement shall prevent the Company or the Bank from (A) complying with its
disclosure obligations under federal or state law; (B) providing information in
response to a request therefor by a person who has made an unsolicited bona fide
written Acquisition Proposal if the Company receives from the person so
requesting such information an executed confidentiality agreement; (C) engaging
in any negotiations or discussions with any person who has made an unsolicited
bona fide written Acquisition Proposal or (D) recommending such an Acquisition
Proposal to the stockholders of the Company, if and only to the extent that, (i)
in each such case referred to in clauses (B), (C) or (D) above, the Company
Board of Directors determines in good faith (after consultation with outside
legal counsel) that such action would be required in order for its directors to
comply with their respective fiduciary duties under applicable law and (ii) in
the case referred to in clause (D) above, the Company Board of Directors
determines in good faith (after consultation with its financial advisor) that
such Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the person making the proposal and would, if consummated, result in a
transaction more favorable to the Company's stockholders from a financial point
of view than the Merger. The Company and the Bank agree that they will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposals provided however, a subsequent unsolicited proposal
by a third party that was in discussion prior to execution of this Agreement
will be treated the same as an unsolicited proposal that did not involve a third
party in discussions prior to execution of this Agreement. The Company and the
Bank agree that they will notify FFG and AAC immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such discussions or negotiations are sought to be initiated or continued
with, any of its
25
representatives, and the substance thereof and will keep FFG and AAC informed of
any developments with respect thereto immediately following the occurrence
thereof.
4.04 Current Information. During the period from the date hereof to the
Effective Time, the Company will cause one or more of its designated
representatives to confer from time to time, as FFG and AAC may reasonably
request, with representatives of FFG and AAC regarding the Company's business,
operations, prospects, assets and financial condition and matters relating to
the completion of the transactions contemplated hereby. Within 30 days after the
end of each month or in accordance with required reporting of same to OTS, the
Company shall provide FFG and AAC with a statement of financial condition and a
statement of earnings, without related notes, for such month prepared in
accordance with past practices as presented to its Board of Directors. On a
monthly basis, the Company shall furnish FFG and AAC with a report, in such
detail as reasonably requested by FFG and AAC, indicating all loans which have
been originated, purchased or sold during such period as well as all
applications for loans which have been received for processing ("pipeline
report") subject to the Company maintaining the confidentiality of the parties
associated with such applications.
4.05 Access to Properties and Records; Confidentiality.
(a) The Company and the Bank shall permit FFG and AAC and their
representatives reasonable access, upon advance notice, to their properties, and
shall disclose and make available to FFG and AAC all books, papers and records
relating to the assets, stock ownership, properties, operations, obligations and
liabilities of the Company and the Bank, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' and stockholders' meetings (excluding minutes related to the
transactions contemplated by this Agreement or other Acquisition Proposals),
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files, plans
affecting employees, and any other business activities or prospects in which FFG
and AAC may have a reasonable interest. The Company and the Bank shall not be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of any customer or would
contravene any law, rule, regulation, order or judgment. The Company and the
Bank will use their best efforts to obtain waivers of any such restriction and
in any event make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. The
Company and the Bank shall make its directors, officers, employees and agents
and authorized representatives (including counsel and independent public
accountants) available to confer with FFG and AAC and their representatives,
provided that such access shall be reasonably related to the transactions
contemplated hereby and not unduly interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the Merger and, if such Merger shall not occur, the party receiving the
information shall, at the request of the party which furnished such information,
either
26
return to the party which furnished such information or destroy all documents or
other materials containing, reflecting or referring to such information; shall
use its best effort to keep confidential all such information; shall use such
information only for the purpose of consummating the transactions contemplated
by this Agreement; and shall not directly or indirectly use such information for
any competitive or commercial purposes. The obligation to keep such information
confidential shall continue for three years from the date the proposed Merger is
abandoned but shall not apply to (i) any information which (A) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof to it by the party furnishing the
information; (B) was then generally known to the public; (C) became known to the
public through no fault of the party receiving the information; or (D) was
disclosed to the party receiving the information by a third party not bound by
an obligation of confidentiality; or (ii) disclosures pursuant to a legal
requirement or in accordance with an order of a court of competent jurisdiction.
(c) No investigation by either of the parties hereto or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other party set forth herein
4.06 Regulatory Matters.
(a) AAC shall have filed its application for change in control with all
required exhibits and related documents on or before 60 days after the date of
this Agreement. Each of the Company, the Bank, FFG and AAC shall cooperate with
each other and use their best efforts to prepare all necessary documentation to
effect all necessary filings and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and governmental bodies
necessary to consummate the transactions contemplated by this Agreement as soon
as practicable. The parties shall each have the right to review and approve in
advance all information relating to the other, as the case may be, and any of
their respective subsidiaries, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement.
(b) Each of the parties will furnish each other with all information
concerning themselves, their directors, officers and stockholders and such other
matters as may be necessary or advisable in connection with any statement or
application made by or on behalf of them to any governmental body in connection
with the Merger and the other transactions, applications or filings contemplated
by this Agreement.
(c) Each of the parties will (provided the OTS does not object in the case
of communications between the Company or the Bank and the OTS) promptly furnish
each other with copies of written communications received by them from, or
delivered by any of the foregoing to, any governmental body in connection with
the Merger and the other transactions, applications or filings contemplated by
this Agreement.
(d) Each of the Company, FFG and AAC agrees that if such party shall become
aware prior to the mailing date of the Proxy Statement of any information
furnished by such party that
27
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other parties thereof and to take the necessary steps to
correct the Proxy Statement.
4.07 Approval of Stockholders. The Company will (a) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders as soon as reasonably practicable, but in no event later than
November 30, 2003, for the purposes of securing the adoption of such
stockholders of this Agreement and the Agreement of Merger, (b) unless the Board
of Directors of the Company makes a good faith determination, upon consideration
of the advice of outside counsel that such recommendation would be deemed to
constitute a breach of their fiduciary duties under applicable Virginia law,
recommend to its stockholders the approval of this Agreement and the Agreement
of Merger and the transactions contemplated hereby and thereby, and use its best
efforts to obtain, as promptly as practicable, such approvals, and (c) cooperate
and consult with FFG and AAC with respect to the foregoing matters.
4.08 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all reasonable action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions to closing contained herein and to consummate and make
effective the transactions contemplated by this Agreement and the Agreement of
Merger. In case, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary action. Nothing in this section shall be construed to require any
party to participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is a
party or subject or threatened to be made a party or subject) in connection with
consummation of the transactions contemplated by this Agreement unless such
party shall consent in advance and in writing to such participation and the
other party agrees to reimburse and indemnify such party for and against any and
all costs and damages related thereto.
4.09 Disclosure Supplements. From time to time prior to the Effective Time,
each party will promptly supplement or amend its respective Disclosure Schedules
delivered pursuant hereto with respect to any matter hereafter arising which, if
existing, occurring or known as of the date hereof, would have been required to
be set forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered inaccurate thereby. No
supplement or amendment to such Schedules shall have any effect for the purpose
of determining satisfaction of the conditions set forth in Article V or the
compliance by the Company and the Bank with the covenants set forth in Section
4.01 hereof.
4.10 Public Announcements. The parties hereto shall approve in advance the
substance of and cooperate with each other in the development and distribution
of all news releases and other public disclosures with respect to this Agreement
or any of the transactions contemplated hereby,
28
except as may be otherwise required by law or regulation and as to which the
parties releasing such information have used their best efforts to discuss with
the other parties in advance.
4.11 Failure to Fulfill Conditions. In the event that either of the parties
hereto determines that a condition to its respective obligations to consummate
the transactions contemplated hereby cannot be fulfilled and that it will not
waive that condition, it will promptly notify the other party. AAC and the
Company will promptly inform the other of any facts applicable to them, or their
respective directors or officers, that would be likely to prevent or materially
delay approval of the Merger by any governmental authority or which would
otherwise prevent or materially delay completion of the Merger.
4.12. Retention Bonuses. Following execution of this Agreement in order to
insure an orderly Closing and transition period, the Company, FFG and AAC shall
identify individual employees of the Company (other than employees who have
executive agreements as disclosed in Schedule 2.12(a)) who will be entitled to
receive a "retention" bonus in the event that such employee remains an employee
and satisfactorily fulfills the duties and responsibilities of his or her
position through the Effective Time, to be paid immediately prior to the
Effective Time. The amount of each bonus shall be determined by mutual agreement
of the parties provided, however, that such bonus payments shall not exceed
$200,000 in the aggregate. The Company and AAC shall share equally the cost of
such bonus payments.
4.13 Employment, Severance and Change in Control Agreements. Any officer or
employee of the Company or the Bank who has an employment, severance or change
in control agreement ("Executive Agreements") with the Company or the Bank (each
a "Contract Officer") which is disclosed on Company Disclosure Schedule 2.12(a)
shall receive from FFG the severance or termination payments ("Contract
Payments") provided for in their respective Termination and Release Agreements
(the "Release Agreement") in lieu of the payments described and quantified in
reasonable detail on Company Disclosure Schedule 4.13. Subject to the Transfer
pursuant to Section 9.01(b)(iii) of this Agreement, the Contract Payments,
except for those Contract Payments required pursuant to Section 4.14, will be
made by FFG ratably over a twelve month period beginning November 1, 2003,
provided, however, that the Closing occurs on or before October 31, 2003. In the
event the Closing occurs on or after November 1, 2003, the Contract Payments
shall be reduced pro rata for each month thereafter that the Closing does not
occur, provided AAC receives requisite OTS approval prior to October 31, 2003
and the delay is caused solely by the Company or the Bank. As a condition to
receiving their Contract Payments, each Contract Officer shall sign and deliver
to FFG and AAC a Release Agreement in the form attached hereto as Exhibit F.
Notwithstanding anything contained herein to the contrary, (1) the Company
represents and warrants that the amounts set forth in Company Disclosure
Schedule 4.13 have been calculated in a manner consistent with, and according
to, the provisions of the Executive Agreements (copies of which have been
furnished by the Company to FFG and AAC), and (ii) the amounts payable under
such Executive Agreements will not exceed, individually or in the aggregate, the
amounts set forth in Company Disclosure Schedule 4.13.
29
4.14 Certain Contract Payments. Subject to the Transfer pursuant to Section
9.01(b)(iii) of this Agreement, Xxxx Xxxxxxxx shall receive from FFG Contract
Payments pursuant to her Release Agreement. The Contract Payments will be made
by FFG ratably over a twelve-month period beginning as of the date of Closing
and shall not be subject to the reduction provisions in Section 4.13.
ARTICLE V
CLOSING CONDITIONS
5.01 Conditions to the Parties' Obligations Under This Agreement. The
respective obligations of the parties under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) All necessary regulatory, governmental or third party approvals,
waivers, clearances, authorizations and consents (including without limitation
the requisite approval and/or non-objection, if any, of the FDIC and the OTS
required to consummate the transactions contemplated hereby) shall have been
obtained without any term or condition which, in the reasonable opinion of FFG
and AAC, would materially impair the value of the Company and the Bank to FFG
and AAC or materially adversely affect the terms of the Merger as they relate to
the stockholders of the Company; all conditions required to be satisfied prior
to the Effective Time by the terms of such approvals and consents shall have
been satisfied; and all waiting periods in respect thereof shall have expired.
(b) All corporate action necessary to authorize the execution and delivery
of this Agreement and the Agreement of Merger and consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken by FFG, AAC, the Company and the Bank, including approval by the requisite
vote of the stockholders of the Company of this Agreement and the Agreement of
Merger.
(c) No order, judgment or decree shall be outstanding against a party
hereto or a third party that would have the effect of preventing completion of
the Merger; no suit, action or other proceeding shall be pending or threatened
by any governmental body in which it is sought to restrain or prohibit the
Merger; and no suit, action or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit the
Merger or obtain other substantial monetary or other relief against one or more
of the parties hereto in connection with this Agreement and which AAC or the
Company determines in good faith, based upon the advice of their respective
counsel, makes it inadvisable to proceed with the Merger because any such suit,
action or proceeding has a significant potential to be resolved in such a way as
to deprive the party electing not to proceed of any of the material benefits to
it of the Merger.
30
5.02. Conditions to the Obligations of FFG and AAC Under This Agreement.
The obligations of AAC under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by AAC:
(a) Each of the obligations of the Company and the Bank required to be
performed by them at or prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects and the representations and warranties of the Company and the Bank
contained in this Agreement shall have been true and correct as of the date
hereof and as of the Effective Time as though made at and as of the Effective
Time, except (i) as to any representation or warranty which specifically relates
to an earlier date, or (ii) where the facts which caused the failure of any
representation or warranty to be so true and correct would not, either
individually or in the aggregate, constitute a Material Adverse Effect, and FFG
and AAC shall have received a certificate to that effect signed by the President
of the Company and the Bank.
(b) All holders of Company Options shall enter into cancellation agreements
with respect to such Company Options.
(c) Holders of Company Common Stock who dissent from the Merger pursuant to
the VSCA by meeting the requirements set forth in the VSCA shall not hold more
than 13% of the Company Common Stock immediately prior to the Effective Time.
(d) The OTS shall have terminated the Supervisory Agreement.
(e) The Company and the Bank shall have furnished FFG and AAC with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 5.02 as FFG and AAC may
reasonably request.
(f) The average monthly noncomforming residential mortgage loan
originations by the Company and the Bank shall be no less than $12 million for
the last full three-month period immediately prior to Closing and no less than
$12 million for the last full month immediately prior to Closing.
5.03 Conditions to the Obligations of the Company and the Bank Under this
Agreement. The obligations of the Company and the Bank under this Agreement
shall be further subject to the satisfaction, at or prior to the Effective Time,
of the following conditions, any one or more of which may be waived by the
Company and the Bank:
(a) Each of the obligations of FFG and AAC required to be performed by it
at or prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of FFG and AAC contained in this Agreement shall
have been true and correct as of the date hereof and as of the Effective Time as
though made at and as of the Effective Time, except (i) as to any representation
or warranty which specifically relates to an earlier date or (ii) where the
facts which caused the failure of any
31
representation or warranty to be so true and correct would not, either
individually or in the aggregate, constitute a material adverse change in the
business, operations, assets or financial condition of FFG or AAC taken as a
whole, and the Company and the Bank shall have received a certificate to that
effect signed by the President and Chief Executive Officer of each of FFG and
AAC.
(b) FFG and AAC shall have furnished the Company and the Bank with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 5.03 as the Company and
the Bank may reasonably request.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, ETC.
6.01 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Agreement of Merger by the stockholders of the Company:
(a) by mutual written consent of the parties hereto;
(b) by AAC or the Company (i) if the Effective Time shall not have occurred
on or prior to December 31, 2003, or (ii) if a vote of the stockholders of the
Company is taken and such stockholders fail to approve this Agreement and the
Agreement of Merger at the meeting of stockholders (or any adjournment thereof)
of the Company contemplated by Section 4.07 hereof; unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements in all material respects set
forth herein to be performed or observed by such party at or before the
Effective Time;
(c) by AAC or the Company upon written notice to the other 30 or more days
after the date upon which any application for a regulatory or governmental
approval necessary to consummate the Merger and the other transactions
contemplated hereby shall have been denied or withdrawn at the request or
recommendation of the applicable regulatory agency or governmental authority,
unless within such 30-day period a petition for rehearing or an amended
application is filed or noticed, or 30 or more days after any petition for
rehearing or amended application is denied;
(d) by AAC in writing if the Company or the Bank has, or by the Company or
the Bank in writing if AAC has, breached (i) any covenant or undertaking
contained herein or in the Agreement of Merger, or (ii) any representation or
warranty contained herein, which, in the case of either (i) or (ii), breach
would have a Material Adverse Effect on the business, operations, assets or
financial condition of the Company and the Bank taken as a whole or AAC, or upon
the consummation of the transactions contemplated hereby, in any case if such
breach has not been cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing such breach or
the Effective Time;
32
(e) by AAC or the Company in writing, if any of the applications for prior
approval referred to in Section 4.06 hereof are denied or are approved
contingent upon the satisfaction of any condition or requirement which, in the
reasonable opinion of the Board of Directors of AAC or the Company, as
applicable, would materially impair the value of the Company and the Bank taken
as a whole to AAC, or would materially adversely affect the terms of the Merger
as they relate to the stockholders of the Company and the time period for
appeals and requests for reconsideration has run;
(f) by AAC if (i) at any time prior to the meeting of stockholders of the
Company to consider the Agreement, the Company shall have breached Section 4.03,
(ii) the Company's Board of Directors shall have failed to make its
recommendation referred to in Section 4.07, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse in any respect to
the interests of AAC and the Company's stockholders fail to approve this
Agreement and the Agreement of Merger at the meeting of stockholders of the
Company contemplated by Section 4.07 or (iii) the Company shall have materially
breached its obligations under Section 4.07 by failing to call, give notice of,
convene and hold a meeting of the Company's stockholders in accordance with
Section 4.07; and
(g) by AAC if a tender offer or exchange offer for 20% or more of the
outstanding shares of Company Common Stock is commenced (other than by AAC), and
the Company's Board of Directors (i) recommends that the stockholders of the
Company tender their shares in such tender or exchange offer within the 10
business day period ("Recommendation Period") specified in Rule 14e-2(a) under
the Exchange Act or (ii) fails to recommend that such stockholders reject such
tender offer or exchange offer within the Recommendation Period and such
stockholders fail to approve this Agreement and the Agreement of Merger at the
meeting of stockholders of the Company contemplated by Section 4.07.
6.02 Effect of Termination. In the event of termination of this Agreement
by AAC or the Company as provided above, this Agreement shall forthwith become
void (other than Sections 4.05(b) and 7.01 hereof, which shall remain in full
force and effect) and there shall be no further liability on the part of the
parties or their respective officers or directors except for the liability of
the parties under Sections 4.05(b) and 7.01 hereof.
6.03 Amendment, Extension and Waiver. Subject to applicable law, at any
time prior to the consummation of the Merger, whether before or after approval
thereof by the stockholders of the Company, the parties may (a) amend this
Agreement and the Agreement of Merger, (b) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (c) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, or (d) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the Merger by the stockholders of the Company, there may not be,
without further approval of such stockholders, any amendment or waiver of this
Agreement or the Agreement of Merger which modifies the amount of the Merger
Consideration to
33
be delivered to stockholders of the Company. This Agreement and the Agreement of
Merger may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, but such waiver or failure to insist on strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE VII
TERMINATION FEES AND EXPENSES
7.01 Expenses; Termination Fee.
(a) Except as provided below, each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by this Agreement, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) If either party terminates this Agreement pursuant to Section 6.01(a),
(b), (c) or (e), that party shall not have any obligation or liability to the
other. In the event of a termination of this Agreement pursuant to Section
6.01(d), the party committing such breach shall be liable for $200,000 to the
other party, plus the reasonable expenses of the other party, which expenses
shall not exceed $100,000, without prejudice to any other rights or remedies as
may be available to the non-breaching party, including without limitation any
rights under Section 7.01(c) or (d) hereof. Such amount shall be paid by wire
transfer of immediately available funds to an account designated by the
non-breaching party no later than the tenth business day following such
termination. If AAC terminates this Agreement pursuant to Section 6.01(f) or
(g), the Company shall be liable to AAC as specified in Section 7.01(c) below.
If the Company terminates this Agreement pursuant to Section 6.01(d) and AAC
enters into a definitive agreement as set forth in Section 7.01(d) below, AAC
shall be liable to the Company as specified in section 7.01(d).
(c) Notwithstanding anything to the contrary herein, the Company shall pay
AAC the sum of $400,000 (the "Termination Fee") if this Agreement is terminated
as follows:
(i) if this Agreement is terminated by AAC pursuant to Section
6.01(f)(i), (ii) and (iii) or (g); or
(ii) if this Agreement is terminated by (A) AAC pursuant to Section
6.01(d) or (B) by either AAC or the Company pursuant to Section 6.01(b)(i)
and with respect to such termination events under this Section 7.01(b)(ii)
an Acquisition Proposal shall have been publicly announced or otherwise
communicated or made known to the senior management of the Company or the
Company's Board of Directors (or any person shall have publicly announced,
communicated or made known an intention, whether or not conditional, to
make
34
an Acquisition Proposal) at any time after the date of this Agreement and
prior to the date of termination; or
(iii) if this Agreement is terminated by either AAC or the Company
pursuant to Section 6.01(b)(ii) and an Acquisition Proposal shall have been
publicly announced or otherwise communicated or made known to the senior
management of the Company or the Company's Board of Directors (or any
person shall have publicly announced, communicated or made known an
intention, whether or not conditional, to make an Acquisition Proposal) at
any time after the date of this Agreement and prior to the taking of the
vote of the stockholders of the Company at a meeting thereof to consider
this Agreement as contemplated by Section 4.07.
Any amount that becomes payable pursuant to Section 7.01(c)(i), (ii) or (iii)
shall be paid by wire transfer of immediately available funds to an account
designated by AAC no later than the tenth business day following such
termination.
(d) Notwithstanding anything to the contrary herein, FFG and/or AAC shall
pay the Company the sum of $250,000 if this Agreement is terminated by the
Company pursuant to Section 6.01(d) and, within 90 days of such breach, AAC
enters into a definitive agreement involving the acquisition of, or purchase of,
all or substantially all of the assets of a bank, savings bank, savings
association or similar savings institution or the holding company thereof.
(e) The Company and AAC agree that the agreement contained in paragraph (c)
of this Section 7.01 is an integral part of the transactions contemplated by
this Agreement, that without such agreement AAC would not have entered into this
Agreement and that such amounts do not constitute a penalty or liquidated
damages in the event of a breach of this Agreement by the Company and the Bank.
If the Company or the Bank fail to pay AAC the amounts due under paragraph (c)
above within the time period specified therein, the Company shall pay the costs
and expenses (including reasonable legal fees and expenses) incurred by AAC in
connection with any action in which AAC prevails, including the filing of any
lawsuit, taken to collect payment of such amounts, together with interest on the
amount of any such unpaid amounts at the prime lending rate prevailing during
such period as published in The Wall Street Journal, calculated on a daily basis
from the date such amounts were required to be paid until the date of actual
payment.
(f) Amounts paid pursuant to Section 7.01(a) shall not be in addition to
the amounts paid pursuant to Section 7.01(c). The maximum amount payable to AAC
pursuant to this Agreement shall be $400,000. Further, amounts paid pursuant to
Section 7.01(a) shall not be in addition to the amount paid pursuant to Section
(d). The maximum amount payable to the Company pursuant to this Agreement shall
be $250,000.
35
ARTICLE VIII
SETOFF
8.01 Remedies. The parties acknowledge that if the planned merger is
terminated, the rights and remedies of the parties are specified in Section
7.01. If the planned merger is consummated then the provision of this Article
VIII shall provide the exclusive remedy for any claims by FFG or AAC against the
Bank, the Company or their shareholders, directors and officers.
8.02 Setoff.
(a) After the Effective Time and until all of FFG's obligations pursuant to
the Note-A class of Exchanged Related Party Notes have been paid in full or a
period of three (3) years elapses, whichever occurs sooner, the Bank and the
Company and each of the holders of a Note-A (the "Noteholders"), pursuant to the
provisions of each Note-A, agree that the amount of FFG's obligations pursuant
to the Note-A shall be reduced (the "Setoff") as specified in Exhibit G by the
amount of any costs or expenses (including reasonable attorney's fees),
judgments, fines, amounts paid in settlement, losses, claims, damages or
liabilities ("Setoff Amounts") incurred or imposed in connection with (1) any
claim, action, suit, proceeding or investigation against the Bank or the
Company, whether civil, criminal, administrative or investigative, arising out
of matters related to the Bank or the Company existing or occurring prior to the
Effective Time and not reflected or reserved in the Financial Statements, or
other Schedules or Exhibits to this Agreement and not covered by insurance,
whether asserted or claimed prior to, at or after the Effective Time or (2) the
breach or inaccuracy of any of the representation and warranties included in
Article II hereof. For purposes of this Section 8.02, Setoff Amounts shall
include, but shall not be limited to, any repurchase and recapture obligations
(net of prepayment penalties lawfully paid and as applied pursuant to the
investor agreement) regarding mortgages originated, table funded or otherwise
funded or brokered by the Company and the Bank and any expenses regarding items
not included on the balance sheets of the Company and the Bank as of the
Effective Time. The amount of the Setoff will be applied to the total
outstanding balance of FFG's obligations as specified in Exhibit G.
(b) The maximum setoff against all Noteholders in the aggregate shall be
$700,000.00
8.03 Notice and Defense of Claim by Third-Party. In the case of any claim
asserted by a third party which could result in a Setoff under this Agreement,
notice shall be given by FFG to the Noteholders promptly after FFG has knowledge
of any claim as to which a Setoff may be sought, Noteholder and FFG shall
cooperate in the defense of any claim or litigation subject to this Section and
the records of each shall be available to the other with respect to such
defense. Noteholders may, individually or collectively and at their own expense,
assist in such defense if they so choose.
8.04 Reduction and Suspension of Payment of Note-A Principal.
(a) In the event that FFG believes a Setoff is appropriate, FFG shall
notify the Noteholders of the amount of the reduction of the Note-A principal
and provide the Noteholders with reasonable details regarding the amount of the
Setoff. If a majority of the Noteholders disagree with
36
a Setoff, the Noteholder shall notify FFG within five (5) days of the notice.
All such disputes shall be resolved pursuant to the provisions of Section 8.05.
If FFG is not provided timely notification of a disagreement with a reduction of
the Note-A principal pursuant to the procedures set forth in this Section
8.04(a), the reduction shall be final and binding.
(b) If a claim, action, suit, proceeding or investigation subject to Setoff
is made or commences after the Effective Time and prior to the date the
Exchanged Related Party Notes have been paid in full or three years elapse after
the Effective Time, notice shall be given to the Noteholders pursuant to Section
8.03 and payments of Note-A principal, up to the amount set forth in such claim
or similar action, shall be immediately suspended until final resolution,
settlement or dismissal of the claim, action, suit, proceeding or investigation.
Any Setoff Amounts incurred or imposed prior to or in connection with the final
resolution, settlement or dismissal of a claim, action, suit, proceeding or
investigation shall be subject to Setoff.
8.05 Dispute Resolution
(a) In the event of any dispute, question or disagreement arising out of or
relating to the application of the Setoff, the parties hereto shall use their
best efforts to settle such dispute, question or disagreement. To this effect,
they shall consult and negotiate with each other, in good faith, and,
recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties.
(b) If the affected parties do not reach such a solution within a period of
three (3) days, then the unresolved dispute, question or disagreement shall be
submitted to and finally settled by a third party expert (the "Expert") chosen
by the parties. The parties shall mutually agree upon the Expert within ten (10)
days of the Closing. In the event that the parties are unable to so agree within
such ten (10) day period, then within the following ten (10) day period, an
expert shall be named by each party. The Expert shall be named by the two
experts so chosen within ten (10) days after the appointment of the two experts.
In the event that the Expert is not agreed upon under the procedure described in
the preceding sentence, he or she shall be named by the Circuit Court for the
County of Oakland, Michigan.
(c) The decisions rendered by the Expert shall be final and binding.
(d) Should the Expert resign or otherwise be unable to fulfill his or her
obligations under this Section 8.05, the parties shall appoint a replacement
utilizing the same procedures as set forth in Section 8.05(b) above for the
appointment of the initial Expert.
(e) Any expenses incurred in connection with the resolution of disputes,
questions or disagreements under this Section 8.05 shall be shared equally
between FFG and the Noteholders.
37
ARTICLE IX
TRANSFER OF CERTAIN ASSETS AND LIABILITIES TO FFG
9.01 Transfer of Certain Assets and Liabilities to FFG.
(a) Company and Bank agree that, subject to the terms and conditions of
this Agreement, they will sell, assign, transfer, convey and deliver to FFG
immediately prior to the Closing (the "Transfer Closing"), effective as of the
Transfer Effective Date (as defined below) all of their rights, title and
interest in and to all of the mortgages held for sale, all of the mortgages held
for yield and all of the accrued interest held on such mortgages (the "Assets").
(b) FFG agrees that at the Transfer Closing, effective as of the Transfer
Effective Date (as defined below), subject to the terms and conditions of this
Agreement, it will assume and agree to pay, perform and discharge the following:
(i) All of the Company's indebtedness, obligations, duties and
liabilities (including indebtedness for accrued interest) relating to the
certificates of indebtedness outstanding and notes to the persons ("Third
Party Debt") set forth on the list attached hereto as Exhibit H; and
(ii) Subject to the right of Setoff provided for in this Section 8.02
of this Agreement, all of the Company's indebtedness, obligations, duties
and liabilities relating to the Note-A and Note-B Exchanged Related Parties
Notes set forth on the list attached hereto as Exhibit C; and
(iii) All of the Company's indebtedness, obligations, duties and
liabilities relating to the Executive Agreements set forth on the list
attached hereto as Exhibit I.
The Third Party Debt, the Exchanged Related Party Notes and the Executive
Agreements shall be referred to herein as the "Liabilities."
(c) FFG shall not assume or be bound by any liabilities or obligation of
Bank or Company of any kind or nature, known or unknown, contingent or
otherwise, other than the liabilities and obligations specifically assumed by
FFG under Section 9.01(b) or as otherwise expressly provided in this Agreement.
38
9.02 Closing and Effective Date.
The closing date of the transactions provided for in this Article IX (the
"Transfer Closing") shall be immediately prior to and as a condition to the
consummation of the Merger and shall follow the date on which all regulatory
approvals for this transaction, required by law and this Agreement, have been
obtained, all waiting periods required by statute have expired and all consents
required under this Agreement have been obtained so that the Transfer may be
legally consummated in accordance with the terms of this Agreement. Subject to
the terms and conditions of this Agreement, the Closing shall occur in
conjunction with the consummation of the Merger. The effective date of the
transactions provided for herein (the "Transfer Effective Date") shall be
immediately prior to the Effective Time.
9.03 Purchase Price.
In consideration for the sale, assignment, transfer, conveyance and
delivery of the Assets, FFG will assume the Liabilities as provided in this
Agreement and the difference between the value of the Assets and the outstanding
amount of the Liabilities assumed shall be paid by FFG to the Company and the
Bank in cash. The amount of consideration paid by FFG to the Company and the
Bank pursuant to this Section 9.03 shall be determined in accordance with the
Book Value determined pursuant to Appendix A hereto.
9.04 Obligations of the Company and the Bank at the Closing.
At the Closing, the Company and the Bank, as appropriate, will:
(a) Deliver to FFG such of the Assets purchased as shall be capable of
physical delivery;
(b) Execute, acknowledge (if appropriate) and deliver to FFG a Xxxx of Sale
and all such deeds, endorsements, assignments or other instruments of
conveyance, assignment and transfer as shall be reasonably necessary or
advisable to consummate the sale and transfer to FFG of the Assets;
(c) Assign, transfer and deliver to FFG such of the following records
pertaining to the Liabilities to be assumed by FFG and any other records
reasonably requested by FFG as exist and are the possession of the Company or
the Bank, as the case may be, and as are necessary to enable FFG to honor the
obligations related to said Liabilities on a continued basis:
9.05 Obligations of FFG at the Closing.
At the Transfer Closing, FFG shall execute, acknowledge and deliver to the
Company or the Bank, as the case may be, such documents necessary or appropriate
to effectuate the transactions contemplated by this Agreement as the Company or
the Bank, as the case may be, shall reasonably request.
39
ARTICLE X
SURVIVAL
10.01 Survival. The respective representations, warranties and covenants of
the parties to this Agreement shall not survive the Effective Time but shall
terminate as of the Effective Time, except for (i) the provisions of Sections
1.07 and 1.08 and (ii) for the right of setoff in Article VIII which shall
survive for a period of three (3) years after the effective date along with the
representation and warranties which shall survive for three (3) years for the
purpose of setoff only.
10.02 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by overnight
express or mailed by prepaid registered or certified mail (return receipt
requested) or by cable, telegram or telex addressed as follows:
(a) If to AAC, to:
Approved Acquisition Corp.
00000 Xxxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
Copy to:
Elias, Matz, Xxxxxxx and Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Xxxxx X. Xxxxxxxx, Esq.
(b) If to FFG, to:
Michigan Fidelity Acceptance Corp
(d/b/a Franklin Financial Group)
00000 Xxxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
40
Copy to:
Elias, Matz, Xxxxxxx and Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Xxxxx X. Xxxxxxxx, Esq.
(c) If to the Company, to:
Approved Financial Corp.
0000 Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
Chairman, President and Chief Executive Officer
Copy to:
Payne, Gates, Xxxxxxxx & Radd, P.C.
Dominion Tower
000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
(d) If to the Bank, to:
Approved Federal Savings Bank,
A Federal Savings Bank.
0000 Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxxx, President
Copy to:
Payne, Gates, Xxxxxxxx & Radd, P.C.
Dominion Tower
000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
41
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
10.03 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other party and, except as provided in Section
4.12 hereof or as otherwise expressly provided herein, that nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement.
10.04 Complete Agreement. This Agreement and the Agreement of Merger,
including the documents and other writings referred to herein or therein or
delivered pursuant hereto or thereto, contain the entire agreement and
understanding of the parties with respect to their subject matter and shall
supersede all prior agreements and understandings between the parties, both
written and oral, with respect to such subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein.
10.05 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.06 Governing Law. This Agreement shall be construed, enforced and
interpreted in accordance with and governed by the laws of the State of Michigan
in the Circuit Court for the County of Oakland, Michigan, without giving effect
to the principles of conflicts of laws thereof.
10.07 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
42
IN WITNESS WHEREOF, AAC, the Company and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
APPROVED ACQUISITION CORP.
Attest:
By:
------------------------- -------------------------------------
Xxxxxx Xxxxxxxxx
Secretary President and Chief Executive Officer
APPROVED FINANCIAL CORP.
Attest:
By:
------------------------- -------------------------------------
Xxxxx Xxxxx
Secretary President
APPROVED FEDERAL SAVINGS BANK, A
FEDERAL SAVINGS BANK
Attest:
By:
------------------------- -------------------------------------
Xxxx Xxxxxxxx
Secretary President
MICHIGAN FIDELITY ACCEPTANCE CORP.
(d/b/a FRANLIN FINANCIAL GROUP)
Attest:
By:
------------------------- -------------------------------------
Xxxxxx Xxxxxxxxx
Secretary President and Chief Executive Officer
43
Index of Exhibits and Appendices
Exhibit A Stockholder Agreement
Exhibit B List of Holders of Related Party Notes
Exhibit C Forms of Note-A and Note-B Exchanged Related Party Notes
and Holders Thereof
Exhibit D Resignation and Stock Sales Agreement
Exhibit E Agreement of Merger
Exhibit F Form of Release of Executive Agreements
Exhibit G Allocation of Setoff to Noteholders
Exhibit H List of Certificates of Indebtedness
and Notes
Exhibit I List of Executive Agreements
* * * * *
Appendix A Book Value Formula
