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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 25, 2004
BY AND BETWEEN
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
AND
GFSB BANCORP, INC.
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TABLE OF CONTENTS
Page No.
Introductory Statement 4
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ARTICLE I DEFINITIONS 5
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ARTICLE II THE MERGER 11
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2.1 THE MERGER 11
2.2 CLOSING 11
2.3 EFFECTIVE TIME 11
2.4 EFFECTS OF THE MERGER 11
2.5 EFFECT ON OUTSTANDING SHARES OF GFSB COMMON STOCK 12
2.6 ELECTION AND PRORATION PROCEDURES. 12
2.7 EXCHANGE PROCEDURES 15
2.8 EFFECT ON OUTSTANDING SHARES OF FFBSW COMMON STOCK 18
2.9 DIRECTORS AFTER EFFECTIVE TIME 18
2.10 CERTIFICATE OF INCORPORATION AND BYLAWS 18
2.11 TREATMENT OF STOCK OPTIONS AND RESTRICTED STOCK 18
2.12 DISSENTERS' RIGHTS 19
2.13 BANK MERGER. 19
2.14 ALTERNATIVE STRUCTURE 19
ARTICLE III REPRESENTATIONS AND WARRANTIES 20
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3.1 DISCLOSURE LETTERS 20
3.2 REPRESENTATIONS AND WARRANTIES OF GFSB 20
3.3 REPRESENTATIONS AND WARRANTIES OF 36
ARTICLE IV CONDUCT PENDING THE MERGER 44
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4.1 FORBEARANCES BY GFSB 44
4.2 FORBEARANCES BY FFBSW 47
ARTICLE V COVENANTS 48
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5.1 ACQUISITION PROPOSALS 48
5.2 CERTAIN POLICIES AND ACTIONS OF GFSB 49
5.3 ACCESS AND INFORMATION 49
5.4 APPLICATIONS; CONSENTS; TRANSITION 50
5.5 ANTITAKEOVER PROVISIONS 51
5.6 ADDITIONAL AGREEMENTS 51
5.7 PUBLICITY 52
5.8 STOCKHOLDER MEETINGS 52
5.9 REGISTRATION OF FFBSW COMMON STOCK 53
5.10 AFFILIATE LETTERS 54
5.11 NOTIFICATION OF CERTAIN MATTERS 54
5.12 EMPLOYEE BENEFITS MATTERS 54
5.13 INDEMNIFICATION 57
5.14 SECTION 16 MATTERS 58
5.15 DIVIDENDS 58
ARTICLE VI CONDITIONS TO CONSUMMATION 58
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6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS 58
6.2 CONDITIONS TO THE OBLIGATIONS OF FFBSW 60
6.3 CONDITIONS TO THE OBLIGATIONS OF GFSB 61
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ARTICLE VII TERMINATION 61
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7.1 TERMINATION 61
7.2 TERMINATION FEE 63
7.3 EFFECT OF TERMINATION 63
ARTICLE VIII CERTAIN OTHER MATTERS 64
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8.1 INTERPRETATION 64
8.2 SURVIVAL 64
8.3 WAIVER; AMENDMENT 64
8.4 COUNTERPARTS 64
8.5 GOVERNING LAW 64
8.6 EXPENSES 64
8.7 NOTICES 65
8.8 ENTIRE AGREEMENT; ETC. 65
8.9 SUCCESSORS AND ASSIGNS; ASSIGNMENT 66
EXHIBITS
Exhibit A Form of GFSB Director Voting Agreement
Exhibit B Form of FFBSW Director Voting Agreement
Exhibit C Form of Plan of Bank Merger
Exhibit D Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 25th day of
August, 2004 ("AGREEMENT"), by and between FIRST FEDERAL BANC OF THE SOUTHWEST,
INC., a Delaware corporation ("FFBSW"), and GFSB BANCORP, INC., a Delaware
corporation ("GFSB").
INTRODUCTORY STATEMENT
The Board of Directors of each of FFBSW and GFSB (i) has determined
that this Agreement and the business combination and related transactions
contemplated hereby are advisable and in the best interests of FFBSW or GFSB, as
the case may be, and in the best long-term interests of the stockholders of
FFBSW or GFSB, as the case may be, and (ii) has determined that this Agreement
and the transactions contemplated hereby are consistent with, and in furtherance
of, its respective business strategies.
The parties hereto intend that the Merger (as defined herein) shall
qualify as a reorganization under the provisions of Section 368(a) of the IRC
for federal income tax purposes.
FFBSW and GFSB each desire to make certain representations, warranties
and agreements in connection with the business combination and related
transactions provided for herein and to prescribe various conditions to such
transactions.
As a condition and inducement to FFBSW's willingness to enter into this
Agreement, at or prior to the date of this Agreement, each of the members of the
Board of Directors of GFSB has entered into an agreement dated as of the date
hereof in the form of Exhibit A pursuant to which he will vote his shares of
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GFSB Common Stock in favor of this Agreement and the transactions contemplated
hereby .
As a condition and inducement to GFSB's willingness to enter into this
Agreement, each director and advisory director of FFBSW has entered into an
agreement dated as of the date hereof in the form of Exhibit B pursuant to which
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he or she will vote his or her shares of FFBSW Common Stock in favor of this
Agreement and the transactions contemplated hereby.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
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ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"ACQUISITION PROPOSAL" means any proposal or offer with respect to any
of the following (other than the transactions contemplated hereunder): (i) any
merger, consolidation, share exchange, business combination, or other similar
transaction involving GFSB or any of its Subsidiaries; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 25% or more of
GFSB's consolidated assets in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 25% or more of the outstanding
shares of GFSB's capital stock or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in an any of the foregoing.
"AGREEMENT" means this Agreement, as amended, modified, or amended and
restated from time to time in accordance with its terms.
"BANK MERGER" shall have the meaning given to that term in Section
2.13.
"BANK MERGER ACT" means the Bank Merger Act, as amended.
"CASH CONSIDERATION" shall have the meaning given to that term in
Section 2.5(a).
"CASH ELECTION" shall have the meaning given to that term in Section
2.6(b).
"CASH ELECTION SHARES" shall have the meaning given to that term in
Section 2.6(b).
"CERTIFICATE" shall have the meaning given to that term in Section
2.6(c).
"CERTIFICATE OF MERGER" shall have the meaning given to that term in
Section 2.3.
"CLOSING" shall have the meaning given to that term in Section 2.2.
"CLOSING DATE" shall have the meaning given to that term in Section
2.2.
"CONTINUING EMPLOYEE" shall have the meaning given to that term in
Section 5.12(a).
"CRA" means the Community Reinvestment Act.
"DGCL" means the Delaware General Corporation Law.
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"DISCLOSURE LETTER" shall have the meaning given to that term in
Section 3.1.
"DISSENTERS' SHARES" shall have the meaning given to that term in
Section 2.12.
"EFFECTIVE TIME" shall have the meaning given to that term in Section
2.3.
"ELECTION DEADLINE" shall have the meaning given to that term in
Section 2.6(c).
"ELECTION FORM" shall have the meaning given to that term in Section
2.6(a).
"ENVIRONMENTAL LAW" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, directive, executive or administrative order, judgment, decree,
injunction, or agreement with any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, soil, surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety as it relates to Hazardous
Materials, or (ii) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970 as it relates to Hazardous Materials, the Federal
Hazardous Substances Transportation Act, the Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water Act, the Endangered Species Act, the
National Environmental Policy Act, the Rivers and Harbors Appropriation Act or
any so-called "Superfund" or "Superlien" law, each as amended and as now in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity that is considered one employer with
GFSB under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the
IRC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" shall have the meaning given to that term in Section
2.6(c).
"EXCHANGE RATIO" shall have the meaning given to that term in Section
2.5(a).
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"EXCLUDED SHARES" shall consist of (i) Dissenters' Shares and (ii)
shares held directly or indirectly by FFBSW (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted).
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FFBSW" shall have the meaning given to that term in the preamble.
"FFBSW COMMON STOCK" means the common stock, par value $.01 per share,
of FFBSW.
"FFBSW PRICE" means one hundred sixty-five percent (165%) of the fully
diluted book value per share of FFBSW Common Stock as determined in accordance
with generally accepted accounting principles as of September 30, 2004 ;
provided, however, that the FFBSW Price shall be appropriately adjusted to take
into account any FFBSW stock split, stock dividend, reclassification, special
distribution or similar transaction which shall occur or be declared prior to
the Effective Time.
"FFBSW STOCKHOLDER MEETING" shall have the meaning given to that term
on Section 5.8.
"GFSB" shall have the meaning given to that term in the preamble and
shall include all predecessor entities of GFSB.
"GFSB COMMON STOCK" means the common stock, par value $.10 per share,
of GFSB.
"GFSB EMPLOYEE PLANS" shall have the meaning given to that term in
Section 3.2(r)(i).
"GFSB OPTION" shall have the meaning given to that term in Section
2.11(a).
"GFSB PENSION PLAN" shall have the meaning given to that term in
Section 3.2(r)(iii).
"GFSB QUALIFIED PLAN" shall have the meaning given to that term in
Section 3.2(r)(iv).
"GFSB'S REPORTS" shall have the meaning given to that term in Section
3.2(g).
"FRB" mean the Board of Governors of the Federal Reserve System.
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"GFSB STOCKHOLDER MEETING" shall have the meaning given to that term in
Section 5.8.
"GALLUP FEDERAL" shall have the meaning given to that term in Section
2.13.
"GALLUP FEDERAL ESOP" shall have the meaning given to that term in
Section 5.12(d).
"GAAP" means generally accepted accounting principles.
"GOVERNMENT REGULATOR" means any federal or state governmental
authority charged with the supervision or regulation of depository institutions
or depository institution holding companies or engaged in the insurance of bank
or savings association deposits.
"GOVERNMENTAL ENTITY" means any court, administrative agency or
commission or other governmental authority or instrumentality.
"HAZARDOUS MATERIAL" means any substance (whether solid, liquid or gas)
which is or could be detrimental to human health or safety or to the
environment, currently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act, as amended.
"INDEMNIFIED PARTY" shall have the meaning given to that term in
Section 5.13(a).
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means, with respect to a party hereto, actual knowledge of
the members of the Board of Directors of that party or any officer of that party
with the title ranking not less than senior vice president.
"LETTER OF TRANSMITTAL" shall have the meaning given to that term in
Section 2.7(a).
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"LIEN" means any charge, mortgage, pledge, security interest, claim,
lien or encumbrance.
"LOAN" means a loan, lease, advance, credit enhancement, guarantee or
other extension of credit.
"LOAN PROPERTY" means any property in which the applicable party (or a
subsidiary of it) holds a security interest and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
"MAILING DATE" shall have the meaning given to that term in Section
2.6(a).
"MATERIAL ADVERSE EFFECT" means an effect which is material and adverse
to the business, financial condition or results of operations of GFSB or FFBSW,
as the context may dictate, and its Subsidiaries taken as a whole; provided,
however, that any such effect resulting from any (i) changes in laws, rules or
regulations or generally accepted accounting principles or regulatory accounting
requirements or interpretations thereof that apply to both FFBSW and GFSB, or to
financial and/or depository institutions generally, (ii) changes in economic
conditions affecting financial institutions generally within the region in which
FFBSW and GFSB operate, including but not limited to, changes in the general
level of market interest rates, (iii) actions and omissions of FFBSW or GFSB
taken consistent with the terms of the Agreement in contemplation of the
transactions contemplated hereby and (iv) direct effects of compliance with this
Agreement on the operating performance of the parties, including expenses
incurred by the parties in consummating the transactions contemplated by this
Agreement, including but not limited to reasonable compensation expenses
incurred or to be incurred as a result of the transactions contemplated
(provided that it is consistent with the terms of the Agreement ), and
compliance by FFBSW with the Securities Act, shall not be considered in
determining if a Material Adverse Effect has occurred.
"MAXIMUM INSURANCE AMOUNT" shall have the meaning given to that term in
Section 5.13(c).
"MERGER" shall have the meaning given to that term in Section 2.1.
"MERGER CONSIDERATION" shall have the meaning given to that term in
Section 2.5(a).
"MIXED ELECTION" shall have the meaning given to that term in Section
2.6(b).
"NASD" means the National Association of Securities Dealers, Inc.
"NON-ELECTION" shall have the meaning given to that term in Section
2.6(b).
"NON-ELECTION SHARES" shall have the meaning given to that term in
Section 2.6(b).
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"OTS" means the Office of Thrift Supervision.
"PARTICIPATION FACILITY" means any facility in which the applicable
party (or a Subsidiary of it) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where required
by the context, includes the owner or operator of such property, but only with
respect to such property.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization or other entity.
"PROXY STATEMENT-PROSPECTUS" shall have the meaning given to that term
in Section 5.9(a).
"REGISTRATION STATEMENT" shall have the meaning given to that term in
Section 5.9(a).
"REPRESENTATIVE" shall have the meaning given to that term in Section
2.6(b).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHORTFALL NUMBER" shall have the meaning given to that term in Section
2.6(e)(ii).
"STOCK CONSIDERATION" shall have the meaning given to that term in
Section 2.5(a).
"STOCK CONVERSION NUMBER" shall have the meaning given to that term in
Section 2.6(d).
"STOCK ELECTION" shall have the meaning given to that term in Section
2.6(b).
"STOCK ELECTION SHARES" shall have the meaning given to that term in
Section 2.6(b).
"STOCK ELECTION NUMBER" shall have the meaning given to that term in
Section 2.6(b).
"SUBSIDIARY" means a corporation, financial institution, partnership,
joint venture or other entity in which GFSB or FFBSW, as the case may be, has,
directly or indirectly, an equity interest representing 50% or more of any class
of the capital stock thereof or other equity interests therein and includes all
predecessor entities thereof.
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"SUPERIOR PROPOSAL" means an unsolicited, bona fide written offer made by a
third party to consummate an Acquisition Proposal that (i) GFSB's Board of
Directors determines in good faith, after consulting with its outside legal
counsel and its financial advisor, would, if accepted, be reasonably likely to
be consummated, (ii) is for 100% of the outstanding shares of GFSB Common Stock
and (iii) is, in the opinion of GFSB's Board of Directors after consultation
with its financial advisor, more favorable to the stockholders of GFSB from a
financial point of view than the transactions contemplated hereby.
"SURVIVING CORPORATION" shall have the meaning given to that term in
Section 2.1.
"TAXES" means all income, franchise, gross receipts, real and personal
property, real property transfer and gains, wage and employment taxes and any
applicable interest and penalties related thereto.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, GFSB will merge with and into FFBSW ("MERGER") at the Effective
Time. At the Effective Time, the separate corporate existence of GFSB shall
cease. FFBSW shall be the surviving corporation (hereinafter sometimes referred
to in such capacity as the "SURVIVING CORPORATION") in the Merger and shall
continue to be governed by the DGCL and its name and separate corporate
existence, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger.
2.2 CLOSING. The closing of the Merger (the "CLOSING") will take place in
the offices of Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C., 0000 Xxxxxxxxx Xxxxxx, X.X.,
Xxxxx 000, Xxxxxxxxxx, XX 00000 at 2:00 p.m., Washington, DC time, on the fifth
business day following satisfaction or waiver of the conditions to Closing set
forth in Article VI (other than those conditions that by their nature are to be
satisfied at the Closing), or such later date as the parties may otherwise agree
(the "CLOSING DATE").
2.3 EFFECTIVE TIME. In connection with the Closing, FFBSW shall duly
execute, deliver and file a certificate of merger (the "CERTIFICATE OF MERGER")
with the Delaware Secretary of State. The parties will make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Delaware Secretary of
State or at such later date or time as FFBSW and GFSB agree and specify in the
Certificate of Merger (the date and time the Merger becomes effective being the
"EFFECTIVE TIME").
2.4 EFFECTS OF THE MERGER. The Merger will have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
from and after the Effective Time, FFBSW shall possess all of the properties,
rights, privileges,
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powers and franchises of GFSB and be subject to all of the debts, liabilities
and obligations of GFSB.
2.5 EFFECT ON OUTSTANDING SHARES OF GFSB COMMON STOCK.
(a) Subject to the provisions of Section 2.6 hereof, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
each share of GFSB Common Stock issued and outstanding at the Effective Time,
other than Excluded Shares, shall become and be converted into, at the election
of the holder as provided in and subject to the limitations set forth in this
Agreement, either (i) the right to receive $20.00 in cash without interest (the
"CASH CONSIDERATION") or (ii) the number of shares of FFBSW Common Stock equal
to the Exchange Ratio (as defined below) (the "STOCK CONSIDERATION"). The Cash
Consideration and the Stock Consideration are sometimes referred to herein
collectively as the "MERGER CONSIDERATION." The "EXCHANGE RATIO" shall be equal
to the quotient of $20.00 divided by the FFBSW Price.
(b) Notwithstanding any other provision of this Agreement, no fraction
of a share of FFBSW Common Stock and no certificates or scrip therefor will be
issued in the Merger; instead, FFBSW shall pay to each holder of GFSB Common
Stock who would otherwise be entitled to a fraction of a share of FFBSW Common
Stock an amount in cash, rounded to the nearest cent, determined by multiplying
such fraction by the FFBSW Price.
(c) If, between the date of this Agreement and the Effective Time, the
outstanding shares of FFBSW Common Stock shall have been changed into a
different number of shares or into a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be adjusted appropriately to
provide the holders of GFSB Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist, and
no exchange or payment shall be made with respect thereto. All shares of GFSB
Common Stock that are held by FFBSW, if any, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted, shall be
canceled and shall constitute authorized but unissued shares. In addition, no
Dissenters' Shares shall be converted into the Cash Consideration or the Stock
Consideration pursuant to this Section 2.5 but instead shall be treated in
accordance with the provisions set forth in Section 2.12 of this Agreement.
2.6 ELECTION AND PRORATION PROCEDURES.
(a) An election form in such form as GFSB and FFBSW shall mutually
agree (an "ELECTION FORM") shall be mailed on the Mailing Date (as defined
below) to each holder of record of shares of GFSB Common Stock as of a record
date which shall be the same date as the record date for eligibility to vote on
the Merger. The
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"MAILING DATE" shall be the date on which proxy materials relating to the Merger
are mailed to holders of shares of GFSB Common Stock. FFBSW shall make available
AS MANY Election Forms as may be reasonably requested by all persons who become
holders of GFSB Common Stock after the record date for eligibility to vote on
the Merger and prior to the Election Deadline (as defined herein), and GFSB
shall provide to the Exchange Agent (as defined herein) all information
reasonably necessary for it to perform its obligations as specified herein.
(b) Each Election Form shall entitle the holder of shares of GFSB
Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions) to (i) elect to receive the Cash Consideration
for all of such holder's shares (a "CASH ELECTION"), (ii) elect to receive the
Stock Consideration for all of such holder's shares (a "STOCK ELECTION"), (iii)
elect to receive the Cash Consideration with respect to some of such holder's
shares and the Stock Consideration with respect to such holder's remaining
shares (a "MIXED ELECTION") or (iv) make no election or to indicate that such
holder has no preference as to the receipt of the Cash Consideration or the
Stock Consideration (a "NON-ELECTION"). Holders of record of shares of GFSB
Common Stock who hold such shares as nominees, trustees or in other
representative capacities (a "REPRESENTATIVE") may submit multiple Election
Forms, provided that such Representative certifies that each such Election Form
covers all the shares of GFSB Common Stock held by that Representative for a
particular beneficial owner. Shares of GFSB Common Stock as to which a Cash
Election has been made (including pursuant to a Mixed Election) are referred to
herein as "CASH ELECTION SHARES." Shares of GFSB Common Stock as to which a
Stock Election has been made (including pursuant to a Mixed Election) are
referred to herein as "STOCK ELECTION SHARES." Shares of GFSB Common Stock as to
which no election has been made are referred to as "NON-ELECTION SHARES." The
aggregate number of shares of GFSB Common Stock with respect to which a Stock
Election has been made is referred to herein as the "STOCK ELECTION NUMBER."
(c) To be effective, a properly completed Election Form must be
received by an independent party appointed by FFBSW and consented to by GFSB,
which consent shall not be unreasonably withheld, to act as an exchange agent
(the "EXCHANGE AGENT") on or before 5:00 p.m. local time on the third business
day immediately preceding GFSB's Stockholder Meeting or on such other time and
date as GFSB and FFBSW may mutually agree) (the "ELECTION DEADLINE"). An
election shall have been properly made only if the Exchange Agent shall have
actually received a properly completed Election Form by the Election Deadline.
An Election Form shall be deemed properly completed only if accompanied by one
or more certificates representing GFSB Common Stock ("CERTIFICATES") (or
customary affidavits and, if required by FFBSW pursuant to Section 2.7(i),
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of GFSB Common
Stock covered by such Election Form, together with duly executed transmittal
materials included with the Election Form. Any GFSB stockholder may at any time
prior to the Election Deadline change his or her election by written notice
received by the Exchange Agent prior to the Election Deadline accompanied by a
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properly completed and signed revised Election Form. Any GFSB stockholder may,
at any time prior to the Election Deadline, revoke his or her election by
written notice received by the Exchange Agent prior to the Election Deadline or
by withdrawal prior to the Election Deadline of his or her Certificates, or of
the guarantee of delivery of such Certificates, previously deposited with the
Exchange Agent. All elections shall be revoked automatically if the Exchange
Agent is notified in writing by FFBSW and GFSB that this Agreement has been
terminated. If a stockholder either (i) does not submit a properly completed
Election Form by the Election Deadline or (ii) revokes its Election Form prior
to the Election Deadline and does not submit a new properly executed Election
Form prior to the Election Deadline, the shares of GFSB Common Stock held by
such stockholder shall be designated Non-Election Shares. FFBSW shall cause the
Certificates representing GFSB Common Stock described in (ii) to be promptly
returned without charge to the person submitting the Election Form upon written
request to that effect from the person who submitted the Election Form. Subject
to the terms of this Agreement and of the Election Form, the Exchange Agent
shall have reasonable discretion to determine whether any election, revocation
or change has been properly or timely made and to disregard immaterial defects
in any Election Form, and any good faith decisions of the Exchange Agent
regarding such matters shall be binding and conclusive.
(d) Notwithstanding any other provision contained in this Agreement,
51% of the total number of shares of GFSB Common Stock outstanding at the
Effective Time (the "STOCK CONVERSION NUMBER") shall be converted into the Stock
Consideration and the remaining outstanding shares of GFSB Common Stock
(excluding Excluded Shares) shall be converted into the Cash Consideration;
provided, however, that for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the IRC and, notwithstanding anything to the contrary contained herein, in
order that the Merger will not fail to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the IRC, FFBSW may increase the number
of shares of GFSB Common Stock that will be converted into the Stock
Consideration and reduce the number of shares of GFSB Common Stock that will be
converted into the right to receive the Cash Consideration to ensure that the
Stock Consideration will represent not less than 45% of the value of the
aggregate Merger Consideration, increased by the value of any Excluded Shares,
each as measured as of the Effective Time.
(e) Within three business days after the later to occur of the
Election Deadline or the Effective Time, FFBSW shall cause the Exchange Agent to
effect the allocation among holders of GFSB Common Stock of rights to receive
the Cash Consideration and the Stock Consideration and to distribute such
consideration as follows:
(i) If the Stock Election Number exceeds the Stock Conversion
Number, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Consideration, and each holder of
Stock Election Shares will be entitled to receive (A) the Stock Consideration in
respect of that
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number of Stock Election Shares equal to the product obtained by multiplying (1)
the number of Stock Election Shares held by such holder by (2) a fraction, the
numerator of which is the Stock Conversion Number and the denominator of which
is the Stock Election Number and (B) the Cash Consideration in respect of the
remaining number of such holder's Stock Election Shares;
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number exceeds the
Stock Election Number being referred to herein as the "SHORTFALL NUMBER"), then
all Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A) if the Shortfall Number is less than or equal to the
number of Non-Election Shares, then all Cash Election Shares shall be converted
into the right to receive the Cash Consideration and each holder of Non-Election
Shares shall receive (1) the Stock Consideration in respect of that number of
Non-Election Shares equal to the product obtained by multiplying (x) the number
of Non-Election Shares held by such holder by (y) a fraction, the numerator of
which is the Shortfall Number and the denominator of which is the total number
of Non-Election Shares and (2) the Cash Consideration in respect of the
remaining number of such holder's Non-Election Shares; or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be converted into the
right to receive the Stock Consideration, and each holder of Cash Election
Shares shall receive (1) the Stock Consideration in respect of that number of
Cash Election Shares equal to the product obtained by multiplying (x) the number
of Cash Election Shares held by such holder by (y) a fraction, the numerator of
which is the amount by which the Shortfall Number exceeds the total number of
Non-Election Shares and the denominator of which is the total number of Cash
Election Shares and (2) the Cash Consideration in respect of the remaining
number of such holder's Cash Election Shares.
For purposes of the foregoing calculations, Excluded Shares shall be deemed
to be Cash Election Shares. For purposes of this Section 2.6(e), if FFBSW is
obligated to increase the number of shares of GFSB Common Stock to be converted
into shares of FFBSW Common Stock as a result of the application of the last
clause of Section 2.6(d) above, then the higher number shall be substituted for
the Stock Conversion Number in the calculations set forth in this Section
2.6(e).
2.7 EXCHANGE PROCEDURES.
(a) Appropriate transmittal materials ("LETTER OF TRANSMITTAL") in a
form satisfactory to FFBSW and GFSB shall be mailed within five (5) business
days after the Effective Time to each holder of record of GFSB Common Stock as
of the Effective Time who did not previously submit a completed Election Form. A
Letter of Transmittal
15
will be deemed properly completed only if accompanied by certificates
representing all shares of GFSB Common Stock to be converted thereby.
(b) At and after the Effective Time, each Certificate (except as
specifically set forth in Section 2.5(d)) shall represent only the right to
receive the Merger Consideration.
(c) Prior to the Effective Time, FFBSW shall (i) reserve for issuance
with its transfer agent and registrar a sufficient number of shares of FFBSW
Common Stock to provide for payment of the aggregate Stock Consideration and
(ii) deposit, or cause to be deposited, with the Exchange Agent, for the benefit
of the holders of shares of GFSB Common Stock, an amount of cash sufficient to
pay the aggregate Cash Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, (ii) be in a form and
contain any other provisions as FFBSW may reasonably determine and (iii) include
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon the proper surrender of the Certificates to
the Exchange Agent, together with a properly completed and duly executed Letter
of Transmittal, the holder of such Certificates shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
FFBSW Common Stock that such holder has the right to receive pursuant to Section
2.5, if any, and a check in the amount equal to the cash that such holder has
the right to receive pursuant to Section 2.5, if any, (including any cash in
lieu of fractional shares, if any, that such holder has the right to receive
pursuant to Section 2.5, and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.5). Certificates so surrendered shall
forthwith be canceled. As soon as practicable following receipt of the properly
completed Letter of Transmittal and any necessary accompanying documentation,
the Exchange Agent shall distribute FFBSW Common Stock and cash as provided
herein. The Exchange Agent shall not be entitled to vote or exercise any rights
of ownership with respect to the shares of FFBSW Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares for the
account of the persons entitled thereto. If there is a transfer of ownership of
any shares of GFSB Common Stock not registered in the transfer records of GFSB,
the Merger Consideration shall be issued to the transferee thereof if the
Certificates representing such GFSB Common Stock are presented to the Exchange
Agent, accompanied by all documents required, in the reasonable judgment of
FFBSW and the Exchange Agent, to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to FFBSW Common Stock issued pursuant to this
Agreement shall be remitted to any person entitled to receive shares of FFBSW
Common Stock hereunder until such person surrenders his or her Certificates in
accordance with this Section 2.7. Upon the surrender of such person's
Certificates, such person shall be
16
entitled to receive any dividends or other distributions, without interest
thereon, which subsequent to the Effective Time had become payable but not paid
with respect to shares of FFBSW Common Stock represented by such person's
Certificates.
(f) The stock transfer books of GFSB shall be closed immediately upon
the Effective Time and from and after the Effective Time there shall be no
transfers on the stock transfer records of GFSB of any shares of GFSB Common
Stock. If, after the Effective Time, Certificates are presented to FFBSW, they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 2.7.
(g) Any portion of the aggregate amount of cash to be paid pursuant to
Section 2.5, any dividends or other distributions to be paid pursuant to this
Section 2.7 or any proceeds from any investments thereof that remains unclaimed
by the stockholders of GFSB for one year after the Effective Time shall be
repaid by the Exchange Agent to FFBSW upon the written request of FFBSW. After
such request is made, any stockholders of GFSB who have not theretofore complied
with this Section 2.7 shall look only to FFBSW for the Merger Consideration
deliverable in respect of each share of GFSB Common Stock such stockholder
holds, as determined pursuant to Section 2.5 of this Agreement, without any
interest thereon. If outstanding Certificates are not surrendered prior to the
date on which such payments would otherwise escheat to or become the property of
any governmental unit or agency, the unclaimed items shall, to the extent
permitted by any abandoned property, escheat or other applicable laws, become
the property of FFBSW (and, to the extent not in its possession, shall be paid
over to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither the Exchange
Agent nor any party to this Agreement (or any affiliate thereof) shall be liable
to any former holder of GFSB Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(h) FFBSW and the Exchange Agent shall be entitled to rely upon GFSB's
stock transfer books to establish the identity of those persons entitled to
receive the Merger Consideration, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of stock
represented by any Certificate, FFBSW and the Exchange Agent shall be entitled
to deposit any Merger Consideration deliverable in respect thereof in escrow
with an independent third party and thereafter be relieved with respect to any
claims thereto.
(i) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Exchange Agent or FFBSW,
the posting by such person of a bond in such amount as the Exchange Agent may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof pursuant to Section 2.5.
17
2.8 EFFECT ON OUTSTANDING SHARES OF FFBSW COMMON STOCK. At and after the
Effective Time, each share of FFBSW Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of common stock of the Surviving Corporation and shall not be affected by
the Merger.
2.9 DIRECTORS AFTER EFFECTIVE TIME. Immediately after the Effective Time,
until their respective successors are duly elected or appointed and qualified,
the directors of the Surviving Corporation shall consist of the directors of
FFBSW serving immediately prior to the Effective Time and the directors of First
Federal Bank shall consist of the current directors of First Federal Bank
serving at the Effective Time; provided, however, that FFBSW shall offer to
Xxxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxx the opportunity to serve on its Board
of Directors and the Board of Directors of First Federal Bank.
2.10 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation of FFBSW, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law. The bylaws of FFBSW, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
2.11 TREATMENT OF STOCK OPTIONS AND RESTRICTED STOCK.
(a) Each option to purchase shares of GFSB Common Stock issued by GFSB
and outstanding at the Effective Time (a "GFSB OPTION") pursuant to any GFSB
stock option whether or not then vested or exercisable, shall be cancelled and
all rights thereunder shall be extinguished. As consideration for such
cancellation, FFSBW shall make payment immediately at the Effective Time to each
holder of a GFSB Option of an amount of Merger Consideration determined by
multiplying (x) the number of shares of GFSB Common Stock subject to such
holder's GFSB Option by (y) an amount equal to the excess (if any) of $20 over
the exercise price per share of such GFSB Option (the "Option Value"), provided,
however, that such Option Value shall be paid as follows:
(i) a number of whole shares of FFBSW Common Stock equal to a
fraction, the numerator of which is the Option Value multiplied by
0.51 and the denominator of which is the FFBSW Price, with cash paid
in lieu of fractional shares; and
(ii) an amount of cash equal to the Option Value multiplied by 0.49;
provided further, no such payment shall be made to such holder unless and until
such holder has executed and delivered to GFSB an instrument in such form
prescribed by FFBSW and reasonably satisfactory to GFSB accepting such payment
in full settlement of his or her rights relative to GFSB Option. GFSB shall take
all actions which are necessary or appropriate to carry out the intention of the
above.
18
(b) Awards outstanding as of the date hereof under GFSB's Management
Stock Bonus Plan, to the extent not already vested, shall vest and shall
represent the right to receive the same rights provided to other holders of GFSB
Common Stock pursuant to Section 2.5(a) above. GFSB agrees to take or to cause
to be taken all actions necessary to provide for such conversion at or prior to
the Effective Time, and shall use its reasonable best efforts to obtain the
written acknowledgement of each holder of a share of restricted GFSB Common
Stock with regard to the conversion of such shares in accordance with the terms
of this Agreement.
2.12 DISSENTERS' RIGHTS. Notwithstanding any other provision of this
Agreement to the contrary, shares of GFSB Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger and who have filed with GFSB a
written objection to the Merger in accordance with the DGCL (collectively, the
"DISSENTERS' SHARES") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled
only to such rights as are granted by applicable law, except that all
Dissenters' Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or otherwise lost their rights to payment of
the fair value of their shares under the DGCL shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive, without any interest thereon, the Merger
Consideration upon surrender in the manner provided in Section 2.7 of the GFSB
Certificate or GFSB Certificates that, immediately prior to the Effective Time,
evidenced such shares. GFSB shall give FFBSW (i) prompt notice of any written
objections to the Merger and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands under the DGCL consistent
with the obligations of GFSB thereunder. GFSB shall not, except with the prior
written consent of FFBSW, (x) make any payment with respect to such demand, (y)
offer to settle or settle any demand for payment or (z) waive any failure to
timely deliver a written demand for payment or timely take any other action in
accordance with the DGCL.
2.13 BANK MERGER. Concurrently with or as soon as practicable after the
execution and delivery of this Agreement, First Federal Bank, a wholly owned
subsidiary of FFBSW, and Gallup Federal Savings Bank ("GALLUP FEDERAL"), a
wholly owned subsidiary of GFSB, shall enter into the Plan of Bank Merger, in
the form attached hereto as Exhibit C, pursuant to which Gallup Federal will
---------
merge with and into First Federal Bank (the "BANK MERGER"). The parties intend
that the Bank Merger will become effective simultaneously with or immediately
following the Effective Time.
2.14 ALTERNATIVE STRUCTURE. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, FFBSW may specify that
the structure of the transactions contemplated by this Agreement be revised and
the parties shall enter into such alternative transactions as FFBSW may
reasonably determine to effect the purposes of this Agreement; provided,
however, that such revised structure shall not (i) alter or change the amount or
kind of the Merger Consideration, (ii) change the intended federal income tax
consequences of the transactions contemplated by this Agreement or (iii)
materially impede or delay the receipt of any regulatory approval referred to
in, or the consummation of the transactions contemplated by, this
19
Agreement. In the event that FFBSW elects to make such a revision, the parties
agree to execute appropriate documents to reflect the revised structure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 DISCLOSURE LETTERS. Prior to the execution and delivery of this
Agreement, FFBSW and GFSB have each delivered to the other a letter (each, its
"DISCLOSURE LETTER") setting forth, among other things, facts, circumstances and
events the disclosure of which is required or appropriate in relation to any or
all of their respective representations and warranties (and making specific
reference to the Section of this Agreement to which they relate); provided, that
no such fact, circumstance or event is required to be set forth in the
Disclosure Letter as an exception to a representation or warranty if its absence
is not reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standards of Section 6.2(a) or
Section 6.3(a) as applicable. The mere inclusion of a fact, circumstance or
event in a Disclosure Letter shall not be deemed an admission by a party that
such item represents a material exception or that such item is reasonably likely
to result in a Material Adverse Effect. Any matter disclosed pursuant to one
section of a party's Disclosure Letter shall be deemed disclosed for all
purposes of such party's Disclosure Letter.
3.2 REPRESENTATIONS AND WARRANTIES OF GFSB. GFSB represents and warrants to
FFBSW that, except as disclosed in GFSB's Disclosure Letter:
(a) Organization and Qualification. GFSB is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is registered with the OTS as a savings and loan holding company.
GFSB has all requisite corporate power and authority to own, lease and operate
its properties and to conduct the business currently being conducted by it. GFSB
is duly qualified or licensed as a foreign corporation to transact business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing would not have a Material Adverse
Affect on GFSB.
20
(b) Subsidiaries.
(i) GFSB's Disclosure Letter sets forth with respect to each of
GFSB's Subsidiaries its name, its jurisdiction of incorporation, GFSB's
percentage ownership, the number of shares of stock owned or controlled by GFSB
and the name and number of shares held by any other person who owns any stock of
the Subsidiary. GFSB owns of record and beneficially, directly or indirectly,
all the capital stock of each of its Subsidiaries free and clear of any Liens.
There are no contracts, commitments, agreements or understandings relating to
GFSB's right to vote or dispose of any equity securities of its Subsidiaries.
GFSB's ownership interest in each of its Subsidiaries is in compliance with all
applicable laws, rules and regulations relating to equity investments by savings
and loan holding companies or federally chartered savings associations.
(ii) Each of GFSB's Subsidiaries is a corporation or insured
depository institution duly organized and validly existing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority to own, lease and operate its properties and to conduct the
business currently being conducted by it and is duly qualified or licensed as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Affect on such Subsidiary.
(iii) The outstanding shares of capital stock of each Subsidiary
have been validly authorized and are validly issued, fully paid and
nonassessable. No shares of capital stock of any Subsidiary of GFSB are or may
be required to be issued by virtue of any options, warrants or other rights, no
securities exist that are convertible into or exchangeable for shares of such
capital stock or any other debt or equity security of any Subsidiary, and there
are no contracts, commitments, agreements or understandings of any kind for the
issuance of additional shares of capital stock or other debt or equity security
of any Subsidiary or options, warrants or other rights with respect to such
securities.
(iv) No Subsidiary of GFSB other than Gallup Federal is an
"insured depository institution" as defined in the FDIA and the applicable
regulations thereunder. Gallup Federal is a qualified thrift lender pursuant to
Section 10(m) of the HOLA and its deposits are insured by the FDIC through the
Savings Association Insurance Fund to the fullest extent permitted by law.
Gallup Federal is a member in good standing of the Federal Home Loan Bank of
Dallas.
(c) Capital Structure.
(i) The authorized capital stock of GFSB consists of:
21
(A) 1,500,000 shares of GFSB Common Stock; and
(B) 500,000 shares of preferred stock, par value $.10 per
share.
(ii) As of the date of this Agreement:
(A) 1,146,645 shares of GFSB Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
were issued in full compliance with all applicable laws .
(B) no shares of GFSB preferred stock are issued and
outstanding; and
(C) no shares of GFSB Common Stock are reserved for issuance
under any director or employee benefit plan except that:
(1) 96,896 shares are issued and outstanding and held
by the ESOP Trust for the GFSB Employee Stock Ownership Plan; and
(2) 217,474 shares reserved for issuance under the GFSB
Stock Option Plan of which 100,294 shares are subject to outstanding awards.
(iii) Set forth in GFSB's Disclosure Letter is a complete and
accurate list of all outstanding GFSB Options, including the names of the
optionees, dates of grant, exercise prices, dates of vesting, dates of
termination, shares subject to each grant and whether stock appreciation,
limited or other similar rights were granted in connection with such options.
(iv) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which stockholders of GFSB may vote are issued
or outstanding.
(v) Except as set forth in this Section 3.2(c) and the GFSB
Disclosure Letter as of the date of this Agreement, (A) no shares of capital
stock or other voting securities of GFSB or any of its Subsidiaries are issued,
reserved for issuance or outstanding and (B) neither GFSB nor any of its
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, rights, convertible securities, commitments or agreements of
any character obligating GFSB or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional shares of capital
stock of GFSB or obligating GFSB or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, right, convertible security,
commitment or agreement. Except as set forth in the GFSB Disclosure Letter, as
of the date hereof, there are no outstanding contractual obligations of GFSB or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of GFSB or any of its Subsidiaries.
22
(d) Authority. GFSB has all requisite corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate actions
on the part of GFSB's Board of Directors, and no other corporate proceedings on
the part of GFSB are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement other than the approval and adoption
of this Agreement by the REQUISITE vote of the holders of GFSB Common Stock.
This Agreement has been duly and validly executed and delivered by GFSB and
constitutes a valid and binding obligation of GFSB, enforceable against GFSB in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity, whether applied in a court of law or a court of equity.
(e) No Violations. The execution, delivery and performance of this
Agreement by GFSB do not, and the consummation of the transactions contemplated
by this Agreement will not, (i) assuming all required governmental approvals
have been obtained and the applicable waiting periods have expired, violate any
law, rule or regulation or any judgment, decree, order, governmental permit or
license to which GFSB or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) violate the certificate of incorporation or bylaws
of GFSB or the similar organizational documents of any of its Subsidiaries or
(iii) constitute a breach or violation of, or a default under (or an event
which, with due notice or lapse of time or both, would constitute a default
under), or result in the termination of, accelerate the performance required by,
or result in the creation of any Lien upon any of the properties or assets of
GFSB or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which GFSB or any of its Subsidiaries is
a party, or to which any of their respective properties or assets may be subject
except, in the case of (iii), for any such breaches, violations or defaults that
would not, individually or in the aggregate, have a Material Adverse Effect on
GFSB.
(f) Consents and Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Entity or any third party are required to
be made or obtained in connection with the execution and delivery by GFSB of
this Agreement or the consummation by GFSB of the Merger and the other
transactions contemplated by this Agreement, including the Bank Merger, except
for (i) filings of applications and notices with, receipt of approvals or
nonobjections from, and expiration of the related waiting period required by,
federal and state banking authorities, (ii) filing of the Registration Statement
with the SEC and declaration by the SEC of the Registration Statement's
effectiveness under the Securities Act, and (iii) the registration or
qualification of the shares of FFBSW Common Stock to be issued in exchange for
shares of GFSB Common Stock under state securities or "blue sky" laws and
Exchange Act registration and Nasdaq listing. As of the date hereof, GFSB knows
of no reason pertaining to GFSB why any of the approvals referred to in this
Section 3.2(f) should not
23
be obtained without the imposition of any material condition or restriction
described in Section 6.1(b).
(g) Securities Filings. Since June 30, 2001, GFSB has filed with the
SEC all reports, schedules, registration statements, definitive proxy statements
and other documents that it has been required to file under the Securities Act
or the Exchange Act (collectively, "GFSB'S REPORTS"). GFSB has made available to
FFBSW an accurate and complete copy of (i) each of GFSB's Reports and (ii) each
communication mailed by GFSB to its stockholders prior to the date hereof. None
of GFSB's Reports or such communications contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, all of
GFSB's Reports complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder. Each of the
financial statements (including, in each case, any notes thereto) of GFSB
included in GFSB's Reports complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto.
(h) Financial Statements. GFSB has previously made available to FFBSW
copies of (i) the consolidated balance sheets of GFSB and its Subsidiaries as of
June 30, 2003 and 2002 and related consolidated statements of income, cash flows
and changes in stockholders' equity for each of the years in the two-year period
ended June 30, 2003, together with the notes thereto, accompanied by the audit
report of GFSB's independent public auditors, as reported in GFSB's Annual
Report on Form 10-KSB for the year ended June 30, 2003 filed with the SEC, (ii)
the unaudited consolidated balance sheet of GFSB and its Subsidiaries as of
March 31, 2004 and the related consolidated statements of income and cash flows
for the nine months ended March 31, 2004 and 2003, as reported in GFSB's
Quarterly Report on Form 10-QSB for the period ended March 31, 2004 filed with
the SEC and (iii) the unaudited condensed consolidated balance sheet of GFSB and
its Subsidiaries as of June 30, 2004 and the related unaudited consolidated
statements of income and cash flows for the three and twelve month periods ended
June 30, 2004 as reported in GFSB's Reports. Such financial statements were
prepared from the books and records of GFSB and its Subsidiaries, fairly present
the consolidated financial position of GFSB and its Subsidiaries in each case at
and as of the dates indicated and the consolidated results of operations,
retained earnings and cash flows of GFSB and its Subsidiaries for the periods
indicated, and, except as otherwise set forth in the notes thereto, were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby; provided, however, that the unaudited financial statements for
interim periods are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes to the extent
permitted under applicable regulations. The books and records of GFSB and its
Subsidiaries have been, and are being, maintained in all respects in accordance
with GAAP and any other legal and accounting requirements and reflect only
actual transactions.
24
(i) Undisclosed Liabilities. Except as set forth on the GFSB
Disclosure Letter, neither GFSB nor any of its Subsidiaries has incurred any
debt, liability or obligation of any nature whatsoever (whether accrued,
contingent, absolute or otherwise and whether due or to become due) other than
liabilities reflected on or reserved against in the consolidated balance sheet
of GFSB as of March 31, 2004 as included in GFSB's Quarterly Report on Form
10-QSB for the period ended March 31, 2004, except for (i) liabilities incurred
since March 31, 2004 in the ordinary course of business consistent with past
practice that, either alone or when combined with all similar liabilities, have
not had, and would not reasonably be expected to have, a Material Adverse Effect
on GFSB and (ii) liabilities incurred for legal, accounting, financial advising
fees and out-of-pocket expenses in connection with the transactions contemplated
by this Agreement.
(j) Absence of Certain Changes or Events. Except as disclosed in
GFSB's Reports filed with the SEC prior to the date of this Agreement or as set
forth in the GFSB Disclosure Letter, and except for actions and omissions of
GFSB taken with the prior written consent of FFBSW, which consent shall not be
unreasonably withheld, in contemplation of the transactions contemplated hereby
and for direct effects of compliance with this Agreement on the operating
performance of GFSB, including expenses incurred by GFSB in consummating the
transactions contemplated by this Agreement, since June 30, 2003: (i) GFSB and
its Subsidiaries have conducted their respective businesses only in the ordinary
and usual course of such businesses consistent with their past practices, (ii)
there has not been any event or occurrence that has had, or is reasonably
expected to have, a Material Adverse Effect on GFSB or on the ability of GFSB to
complete the transactions contemplated by this Agreement, (iii) there has been
no increase in the salary, compensation, pension or other benefits payable or to
become payable by GFSB or any of its Subsidiaries to any of their respective
directors, officers or employees, other than in conformity with the policies and
practices of such entity in the usual and ordinary course of its business, (iv)
neither GFSB nor any of its Subsidiaries has paid or made any accrual or
arrangement for payment of bonuses or special compensation of any kind or any
severance or termination pay to any of their directors, officers or employees
and (v) there has been no change in any accounting principles, practices or
methods of GFSB or any of its Subsidiaries other than as required by GAAP.
(k) Litigation. There are no suits, actions or legal, administrative
or arbitration proceedings pending or, to the knowledge of GFSB, threatened
against or affecting GFSB or any of its Subsidiaries or any property or asset of
GFSB or any of its Subsidiaries that (i) individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on GFSB or (ii)
challenge the validity or propriety of the transactions contemplated by this
Agreement. To the knowledge of GFSB, there are no investigations, reviews or
inquiries by any court or Governmental Entity pending or threatened against GFSB
or any of its Subsidiaries. Except as set forth in the GFSB Disclosure Letter,
there are no judgments, decrees, injunctions, orders or rulings of any
Governmental Entity or arbitrator outstanding against GFSB or any of its
Subsidiaries.
25
(l) Absence of Regulatory Actions. Since January 1, 2000, neither GFSB
nor any of its Subsidiaries has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment letter
or similar undertaking to, or has been subject to any action, proceeding, order
or directive by any Government Regulator, or has adopted any board resolutions
at the request of any Government Regulator, or has been advised by any
Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, written agreement, memorandum of understanding,
commitment letter, board resolutions or similar undertaking. There are no
unresolved violations, criticisms or exceptions by any Government Regulator with
respect to any report or statement relating to any examinations of GFSB or its
Subsidiaries.
(m) Compliance with Laws. GFSB and each of its Subsidiaries conducts
its business in compliance in all material respects with all statutes, laws,
regulations, ordinances, rules, judgements, orders or decrees applicable to it
or the employees conducting such business. GFSB and each of its Subsidiaries has
all material permits, licenses, certificates of authority, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to carry on its
business as it is presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect, and to the
knowledge of GFSB, no suspension or cancellation of any of them is threatened.
Except as set forth in the GFSB Disclosure Letter, neither GFSB nor any of its
Subsidiaries has been given notice or been charged with any violation of, any
law, ordinance, regulation, order, writ, rule, decree or condition to approval
of any Governmental Entity.
(n) Taxes. All federal, state, local and foreign tax returns required
to be filed by or on behalf of GFSB or any of its Subsidiaries have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such returns,
all taxes required to be shown on returns for which extensions have been granted
and all other taxes required to be paid by GFSB or any of its Subsidiaries have
been paid in full or adequate provision has been made for any such taxes on
GFSB's balance sheet (in accordance with GAAP). There is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any taxes of GFSB or any of its Subsidiaries, and no claim has been made in
writing by any authority in a jurisdiction where GFSB or any of its Subsidiaries
do not file tax returns that GFSB or any such Subsidiary is subject to taxation
in that jurisdiction. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation relating
to GFSB or any of its Subsidiaries have been paid in full or adequate provision
has been made for any such taxes on GFSB's balance sheet (in accordance with
GAAP). GFSB and its Subsidiaries have not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect. GFSB and each of its Subsidiaries has withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
26
owing to any employee, independent contractor, creditor, stockholder or other
third party, and GFSB and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar applicable state and local information
reporting requirements. Except as set forth in the GFSB Disclosure Letter,
neither GFSB nor any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or would result, individually or in the
aggregate, in connection with this Agreement, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the IRC and neither
GFSB nor any of its Subsidiaries has made any payments and is not a party to any
agreement, and does not maintain any plan, program or arrangement, that could
require it to make any payments (including any deemed payment of compensation
upon the exercise of a GFSB Option or upon the issuance of any GFSB Common
Stock), that would not be fully deductible by reason of Section 162(m) of the
IRC.
(o) Agreements.
(i) Except as set forth on the GFSB Disclosure Letter, GFSB and
its Subsidiaries are not bound by any material contract (as defined in Item
601(b)(10) of Regulation S-K promulgated by the SEC) to be performed after the
date hereof that has not been filed with GFSB's Reports.
(ii) GFSB's Disclosure Letter lists any contract, arrangement,
commitment or understanding (whether written or oral) not filed with GFSB's
Reports to which GFSB or any of its Subsidiaries is a party or is bound:
(A) with any executive officer or other key employee of GFSB
or any of its Subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
GFSB or any of its Subsidiaries of the nature contemplated by this Agreement;
(B) with respect to the employment of any directors,
officers, employees or consultants;
(C) any of the benefits of which will be increased, or the
vesting or payment of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement (including any stock option
plan, phantom stock or stock appreciation rights plan, restricted stock plan or
stock purchase plan);
(D) containing covenants that limit the ability of GFSB or
any of its Subsidiaries to compete in any line of business or with any person,
or that involve any restriction on the geographic area in which, or method by
which, GFSB (including any successor thereof) or any of its Subsidiaries may
carry on its business (other than as may be required by law or any regulatory
agency);
27
(E) pursuant to which GFSB or any of its Subsidiaries may
become obligated to invest in or contribute capital to any entity;
(F) not fully disclosed in GFSB's Reports that relates to
borrowings of money (or guarantees thereof) by GFSB or any of its Subsidiaries
in excess of $25,000; or
(G) which is a lease or license with respect to any
property, real or personal, whether as landlord, tenant, licensor or licensee,
involving a liability or obligation as obligor in excess of $10,000 on an annual
basis.
(iii) Except as set forth on the GFSB Disclosure Letter, neither GFSB
nor any of its Subsidiaries is in default under (and no event has occurred
which, with due notice or lapse of time or both, would constitute a default
under) or is in violation of any provision of any note, bond, indenture,
mortgage, deed of trust, loan agreement, lease or other agreement to which it is
a party or by which it is bound or to which any of its respective properties or
assets is subject and, to the knowledge of GFSB, no other party to any such
agreement (excluding any loan or extension of credit made by GFSB or any of its
Subsidiaries) is in default in any respect thereunder.
(p) Intellectual Property. Except as set forth on the GFSB Disclosure
Letter, GFSB and each of its Subsidiaries owns or possesses valid and binding
licenses and other rights to use without payment all patents, copyrights, trade
secrets, trade names, service marks, trademarks and other proprietary
intellectual property material to its businesses, and neither GFSB nor any of
its Subsidiaries has received any notice of conflict with respect thereto that
asserts the right of others. Each of GFSB and its Subsidiaries has performed all
the obligations required to be performed by it and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
(q) Labor Matters. GFSB and its Subsidiaries are in material compliance
with all applicable laws respecting employment, retention of independent
contractors, employment practices, terms and conditions of employment, and wages
and hours. Neither GFSB nor any of its Subsidiaries is or has ever been a party
to, or is or has ever been bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization with respect to its employees, nor is GFSB or any of its
Subsidiaries the subject of any proceeding asserting that it has committed an
unfair labor practice or seeking to compel it or any such Subsidiary to bargain
with any labor organization as to wages and conditions of employment nor, to the
knowledge of GFSB, has any such proceeding been threatened, nor is there any
strike, other labor dispute or organizational effort involving GFSB or any of
its Subsidiaries pending or, to the knowledge of GFSB, threatened.
(r) Employee Benefit Plans.
28
(i) GFSB's Disclosure Letter contains a complete and accurate
list of all pension, retirement, stock option, stock purchase, stock ownership,
recognition and retention, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of ERISA,
incentive and welfare policies, contracts, plans and arrangements and all trust
agreements related thereto with respect to any present or former directors,
officers or other employees of GFSB or any of its Subsidiaries (hereinafter
referred to collectively as the "GFSB EMPLOYEE PLANS"). True and complete copies
of each agreement, plan, trust agreement, Form 5500 filed with the IRS for the
three most recently completed plan years, the most recent actuarial report and
financial statement, the most recent summary plan description, the most recent
determination letter issued by the IRS, any Form 5310 or Form 5330 filed with
the IRS, any loan agreements and related documents evidencing any outstanding
loan to an employee stock ownership plan maintained by GFSB or any Subsidiary,
and other documents referenced in GFSB's Disclosure Letter have been made
available to FFBSW. There has been no announcement or commitment by GFSB or any
of its Subsidiaries to create an additional GFSB Employee Plan, or to amend any
GFSB Employee Plan, except for amendments required by applicable law which do
not materially increase the cost of such GFSB Employee Plan.
(ii) To the knowledge of GFSB, there is no pending or threatened
litigation, administrative action or proceeding relating to any GFSB Employee
Plan. All of the GFSB Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws, including
but not limited to the Securities Act, the Exchange Act, the Age Discrimination
in Employment Act, and any regulations and rules promulgated thereunder, and all
filings, disclosures, notices required by ERISA, the IRC, the Securities Act,
the Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. There has occurred no "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the IRC)
with respect to the GFSB Employee Plans which is likely to result in the
imposition of any penalties or taxes upon GFSB or any of its Subsidiaries under
Section 502(i) of ERISA or Section 4975 of the IRC, and neither GFSB nor any of
its Subsidiaries, nor any GFSB Employee Plan, nor any trust created thereunder,
nor any trustee or administrator thereof has engaged in a transaction in
connection with which any of the aforesaid persons or entities would reasonably
be expected to be subject to either a civil liability or penalty pursuant to
Section 409 of ERISA.
(iii) No liability to the Pension Benefit Guarantee Corporation
has been or is expected by GFSB or any of its Subsidiaries to be incurred with
respect to any GFSB Employee Plan which is subject to Title IV of ERISA ("GFSB
PENSION Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a) of ERISA) currently or formerly maintained by GFSB or any ERISA
Affiliate. No GFSB Pension Plan had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, as of the last day of
the end of the most recent plan year ending prior to the date hereof; the fair
market value of the assets of each GFSB Pension
29
Plan exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such GFSB Pension Plan as of the end of the
most recent plan year with respect to the respective GFSB Pension Plan ending
prior to the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such GFSB Pension Plan as of the
date hereof; and no notice of a "reportable event" (as defined in Section 4043
of ERISA) for which the 30-day reporting requirement has not been waived has
been required to be filed for any GFSB Pension Plan within the 12-month period
ending on the date hereof. Neither GFSB nor any of its Subsidiaries has
provided, or is required to provide, security to any GFSB Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
IRC. Neither GFSB, its Subsidiaries, nor any ERISA Affiliate has contributed to
any "multiemployer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980.
(iv) Each GFSB Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC (a "GFSB QUALIFIED PLAN") has received
a favorable determination letter from the IRS, and GFSB and its Subsidiaries are
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. Each GFSB Qualified Plan that is an "employee
stock ownership plan" (as defined in Section 4975(e)(7) of the IRC) has
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the IRC and the regulations thereunder in all material respects and any assets
of any such GFSB Qualified Plan that, as of the end of the plan year, are not
allocated to participants' individual accounts are pledged as security for, and
may be applied to satisfy, any securities acquisition indebtedness.
(v) Neither GFSB nor any of its Subsidiaries has any obligations
for post-retirement or post-employment benefits under any GFSB Employee Plan
that cannot be amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by Part 6 of
Title I of ERISA or Section 4980B of the IRC, or similar state laws, the cost of
which is borne by the insured individuals.
(vi) All contributions required to be made under the terms of any
GFSB Employee Plan or ERISA Affiliate plan or any employee benefit arrangement
to which GFSB or Gallup Federal is a party or sponsor have been timely made, and
all anticipated contributions and funding obligations are accrued monthly on
GFSB consolidated financial statements to the extent required and in accordance
with GAAP. GFSB and its Subsidiaries have expensed and accrued as a liability
the present value of future benefits under each applicable GFSB Employee Plan in
accordance with applicable laws and GAAP consistently applied. None of GFSB,
Gallup Federal or any ERISA Affiliate (i) has provided, or would reasonably be
expected to be required to provide, security to any GFSB Pension Plan or to any
ERISA Affiliate plan pursuant to Section 401(a)(29) of the IRC, or (ii) has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a lien under Section
412(n) of the IRC or pursuant to ERISA.
30
(vii) Except as set forth on the GFSB Disclosure Letter, The
consummation of the Merger will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time) (A) entitle any employee, consultant
or director to any payment or benefit (including severance pay, change in
control benefit, or similar compensation) or any increase in compensation, (B)
result in the vesting or acceleration of any benefits under any GFSB Employee
Plan or (C) result in any increase in benefits payable under any GFSB Employee
Plan.
(viii) Neither GFSB nor Gallup Federal maintains any compensation
plans, programs or arrangements under which any payment is reasonably likely to
become non-deductible, in whole or in part, for tax reporting purposes as a
result of the limitations under Section 162(m) of the IRC and the regulations
issued thereunder.
(ix) Except as set forth on the GFSB Disclosure Letter, the
consummation of the Merger will not, directly or indirectly (including without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time), entitle any current or former
employee, director or independent contractor of GFSB or Gallup Federal to any
actual or deemed payment (or benefit) which would constitute a "parachute
payment" (as such term is defined in Section 280G of the IRC).
(s) Properties.
(i) A description of each parcel of real property owned by GFSB
or a Subsidiary of GFSB is set forth in GFSB's Disclosure Letter. GFSB and each
of its Subsidiaries has good and marketable title to all real property owned by
it (including any property acquired in a judicial foreclosure proceeding or by
way of a deed in lieu of foreclosure or similar transfer), in each case free and
clear of any Liens except (A) liens for taxes not yet due and payable, (B) such
easements, restrictions and encumbrances, if any, as are not material in
character, amount or extent, and do not materially detract from the value, or
materially interfere with the present use of the properties subject thereto or
affected thereby and (C) as reflected on the consolidated balance sheet of GFSB
as of March 31, 2004 included in GFSB's Reports. All real property and fixtures
of GFSB and each of its Subsidiaries are in a good state of maintenance and
repair (normal wear and tear excepted), conform in all material respects with
all applicable ordinances, regulations and zoning laws and are considered by
GFSB to be adequate for the current business of GFSB and its Subsidiaries. To
the knowledge of GFSB, none of the buildings, structures or other improvements
located on its real property encroaches upon or over any adjoining parcel or
real estate or any easement or right-of-way.
(ii) Except as set forth in the GFSB Disclosure Letter, GFSB and
each of its Subsidiaries has good and marketable title to all tangible material
personal property owned by it, free and clear of all Liens except such
encumbrances, if any, as are
31
not material in character, amount or extent, and do not materially detract from
the value, or materially interfere with the present use of the properties
subject thereto or affected thereby. With respect to personal property used in
the business of GFSB and its Subsidiaries that is leased rather than owned,
neither GFSB nor any of its Subsidiaries is in default under the terms of any
such lease.
(iii) A description of all real property leased by GFSB or a
Subsidiary of GFSB is set forth in GFSB's Disclosure Letter. Each lease pursuant
to which GFSB or any of its Subsidiaries as lessee, leases real or personal
property, is valid and in full force and effect and neither GFSB nor any of its
Subsidiaries, nor, to GFSB's knowledge, any other party to any such lease, is in
default or in violation of any material provisions of any such lease.
(t) Fairness Opinion. GFSB has received the opinion of The Xxxxxxx
Company, a division of McDonald Investments Inc. to the effect that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to GFSB's stockholders.
(u) Fees. Other than financial advisory services performed for GFSB by
The Xxxxxxx Company, a division of McDonald Investments pursuant to an agreement
dated September 4, 2003, a true and complete copy of which is set forth in
GFSB's Disclosure Letter, neither GFSB nor any of its Subsidiaries, nor any of
their respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for GFSB or any of its Subsidiaries in connection with
this Agreement or the transactions contemplated hereby.
(v) Environmental Matters.
(i) Except as set forth in the GFSB Disclosure Letter, each of
GFSB and its Subsidiaries, the Participation Facilities, and, to the knowledge
of GFSB, the Loan Properties are, and have been, in substantial compliance with
all Environmental Laws.
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
knowledge of GFSB, threatened, before any court, governmental agency or board or
other forum against GFSB or any of its Subsidiaries or any Participation
Facility (A) for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (B) relating to the presence of or
release into the environment of any Hazardous Material, whether or not occurring
at or on a site owned, leased or operated by GFSB or any of its Subsidiaries or
any Participation Facility.
(iii) To the knowledge of GFSB, there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending
32
or threatened before any court, governmental agency or board or other forum
relating to or against any Loan Property (or GFSB or any of its Subsidiaries in
respect of such Loan Property) (A) relating to alleged noncompliance (including
by any predecessor) with, or liability under, any Environmental Law or (B)
relating to the presence of or release into the environment of any Hazardous
Material, whether or not occurring at a Loan Property.
(iv) Neither GFSB nor any of its Subsidiaries, has received any
notice, demand letter, executive or administrative order, directive or request
for information from any Governmental Entity or any third party indicating that
it may be in violation of, or liable under, any Environmental Law.
(v) Except as set forth on the GFSB Disclosure Letter, to the
knowledge of GFSB and its Subsidiaries, there are no underground storage tanks
at any properties owned or operated by GFSB or any of its Subsidiaries or any
Participation Facility and no underground storage tanks have been closed or
removed from any properties owned or operated by GFSB or any of its Subsidiaries
or any Participation Facility.
(vi) Except as set forth on the GFSB Disclosure Letter, to the
knowledge of GFSB and its Subsidiaries during the period of (A) GFSB's or its
Subsidiary's ownership or operation of any of their respective current
properties or (B) GFSB's or its Subsidiary's participation in the management of
any Participation Facility, there has been no release of Hazardous Materials in,
on, under or affecting such properties. To the knowledge of GFSB, prior to the
period of (A) GFSB's or its Subsidiary's ownership or operation of any of their
respective current properties or (B) GFSB's or its Subsidiary's participation in
the management of any Participation Facility, there was no contamination by or
release of Hazardous Material in, on, under or affecting such properties.
(w) Loan Portfolio; Allowance for Loan Losses.
(i) With respect to each Loan owned by GFSB or its Subsidiaries
in whole or in part:
(A) The note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms subject
to bankruptcy, insolvency, and other laws of general applicability relating to
or affecting creditor's rights and general equity principles;
(B) neither GFSB nor any of its Subsidiaries, nor to the
knowledge of GFSB and its Subsidiaries, any prior holder of a Loan, has modified
the note or any of the related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the applicable Loan
file;
33
(C) GFSB or a Subsidiary of GFSB is the sole holder of legal
and beneficial title to each Loan (or GFSB's or its Subsidiary's applicable
participation interest, as applicable), except as otherwise referenced on the
books and records of GFSB or a Subsidiary of GFSB;
(D) the original note and the related security documents are
maintained separately by GFSB from the Loan files, and copies of any documents
in the Loan files are true and correct copies of the documents they purport to
be and have not been suspended, amended, modified, canceled or otherwise changed
except as otherwise disclosed by documents in the applicable Loan file; and
(E) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(ii) The allowance for loan losses amounts reflected in GFSB's
balance sheet at June 30, 2004 was, and the allowance for loan losses shown on
the balance sheets in GFSB's Reports for periods ending after June 30, 2004, in
the opinion of management, were or will be adequate, as of the dates thereof,
under GAAP.
(iii) The GFSB Disclosure Letter sets forth every GFSB loan,
lease or other extension of credit as of July 31, 2004 (A) which is 90 days or
more delinquent, (B) has been classified as "special mention", "substandard",
"doubtful", "loss", "non-performing", or "of concern", or (C) involves a
borrower or collateral in bankruptcy, reorganization or similar proceeding.
Since March 31, 2004, there has been no material adverse change in the items
listed in parts (A), (B) and (C) of this paragraph.
(x) Deposits. Except as set forth in the GFSB Disclosure Letter, none
of the deposits of Gallup Federal is a "brokered" deposit, as such terms is
defined at 12 C.F.R. Section 337.6(a)(2).
(y) Anti-takeover Provisions Inapplicable. Assuming the accuracy of
the representations contained in Section 3.3(f) hereof, the Agreement, the Plan
of Bank Merger, the Merger and the Bank Merger are not subject to any provisions
of an antitakeover nature contained in GFSB's or its Subsidiaries'
organizational documents, and the provisions of any federal or state
"anti-takeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations.
(z) Material Interests of Certain Persons. No officer or director of
GFSB, or any "associate" (as such term is defined in Rule 12b-2 under the
Exchange Act) of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of GFSB or any of its subsidiaries, except as
set forth on the GFSB Disclosure Letter.
34
(aa) Insurance. GFSB and its Subsidiaries are presently insured for
amounts and against such risks as is required by law or contract. Such insurance
is similar in coverage and amount as the insurance maintained by similar
financial institutions. All of the insurance policies and bonds maintained by
GFSB and its Subsidiaries are in full force and effect, GFSB and its
Subsidiaries are not in default thereunder and all material claims thereunder
have been filed in due and timely fashion.
(bb) Investment Securities; Derivatives.
(i) Except as indicated in the GFSB Disclosure Letter and except
for (A) restrictions that exist for securities that are classified as "held to
maturity" and (B) securities which are pledged with respect to certain
borrowings of GFSB, none of the investment securities held by GFSB or any of its
Subsidiaries is subject to any restriction (contractual or statutory) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time.
(ii) Except as set forth in the GFSB Disclosure Letter neither
GFSB nor any of its Subsidiaries is a party to or has agreed to enter into an
exchange-traded or over-the-counter equity, interest rate, foreign exchange or
other swap, forward, future, option, cap, floor or collar or any other contract
that is a derivative contract (including various combinations thereof) 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."
(cc) Indemnification. Except as provided in the certificate of
incorporation or bylaws of GFSB and the similar organizational documents of its
Subsidiaries and except as set forth in GFSB's Disclosure Letter, neither GFSB
nor any of its Subsidiaries is a party to any agreement that provides for the
indemnification of any of its present or former directors, officers or
employees, or other persons who serve or served as a director, officer or
employee of another corporation, partnership or other enterprise at the request
of GFSB and, to the knowledge of GFSB, there are no claims for which any such
person would be entitled to indemnification under the certificate of
incorporation or bylaws of GFSB or the similar organizational documents of any
of its Subsidiaries, under any applicable law or regulation or under any
indemnification agreement.
(dd) Corporate Documents. GFSB has previously furnished or made
available to FFBSW a complete and correct copy of the certificate of
incorporation and bylaws of GFSB and similar organizational documents of each of
GFSB's Subsidiaries, as in effect as of the date of this Agreement. Neither GFSB
nor any of GFSB's Subsidiaries is in violation of its certificate of
incorporation, bylaws or similar organizational documents. The minute books of
GFSB and each of GFSB's Subsidiaries constitute a complete and correct record of
all material actions taken by their respective boards of directors (and each
committee thereof) and their stockholders.
35
(ee) GFSB Information. The information regarding GFSB and its
Subsidiaries to be supplied by GFSB for inclusion in the Registration Statement,
any filings or approvals under applicable state securities laws, or any filing
pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under
the Exchange Act will 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 therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement Prospectus (except for such
portions thereof as relate only to FFBSW or any of its Subsidiaries) will comply
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder.
(ff) Community Reinvestment Act Compliance. Gallup Federal is in
material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder except where the failure to be in compliance
would not have a Material Adverse Effect of GFSB, and Gallup Federal currently
has a CRA rating of satisfactory or better. To the knowledge of GFSB, there is
no fact or circumstance or set of facts or circumstances that would cause Gallup
Federal to fail to comply with such provisions or cause the CRA rating of Gallup
Federal to fall below satisfactory.
(gg) Tax Treatment of the Merger. GFSB has no knowledge of any fact or
circumstance relating to it that would prevent the transactions contemplated by
this Agreement from qualifying as a reorganization under Section 368 of the IRC.
(hh) Anti-Money Laundering Compliance. Gallup Federal maintains an
effective anti-money laundering program and is in compliance with federal laws
and regulations relating to such anti-money laundering program.
(ii) Voting Requirements.
The affirmative vote at the GFSB Stockholders Meeting of the
holders of a majority of the outstanding shares of GFSB Common Stock to approve
and adopt this Agreement is the only vote of the holders of any class or series
of the GFSB's capital stock necessary to approve and adopt this Agreement and
the transactions contemplated hereby, including the Merger.
3.3 REPRESENTATIONS AND WARRANTIES OF FFBSW. FFBSW represents and warrants
to GFSB that, except as set forth in FFBSW's Disclosure Letter:
(a) Organization and Qualification. FFBSW is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is a registered savings and loan holding company with the OTS.
FFBSW has all requisite corporate power and authority to own, lease and operate
its properties and to conduct the business currently being conducted by it.
FFBSW is duly qualified or licensed as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except
36
where the failure to be so qualified or licensed and in good standing would not
have a Material Adverse Effect on FFBSW.
(b) Subsidiaries.
(i) FFBSW owns of record and beneficially all the capital stock
of each of its Subsidiaries free and clear of any Liens. There are no contracts,
commitments, agreements or understandings relating to FFBSW's right to vote or
dispose of any equity securities of its Subsidiaries. FFBSW's ownership interest
in each of its Subsidiaries is in compliance with all applicable laws, rules and
regulations.
(ii) Each of FFBSW's Subsidiaries is a corporation or insured
depository institution duly organized and validly existing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority to own, lease and operate its properties and to conduct the
business currently being conducted by it and is duly qualified or licensed as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Affect on FFBSW.
(iii) The outstanding shares of capital stock of each Subsidiary
have been validly authorized and are validly issued, fully paid and
nonassessable. Except as set forth in the Disclosure Letter, no shares of
capital stock of any Subsidiary are or may be required to be issued by virtue of
any options, warrants or other rights, no securities exist that are convertible
into or exchangeable for shares of such capital stock or any other debt or
equity security of any Subsidiary, and there are no contracts, commitments,
agreements or understandings of any kind for the issuance of additional shares
of capital stock or other debt or equity security of any Subsidiary or options,
warrants or other rights with respect to such securities.
(iv) No Subsidiary of FFBSW other than First Federal Bank is an
"insured depository institution" as defined in the FDIA and the applicable
regulations thereunder. First Federal Bank's deposits are insured by the FDIC to
the fullest extent permitted by law. First Federal Bank is a member in good
standing of the Federal Home Loan Bank of Dallas.
(c) Capital Structure.
(i) The authorized capital stock of FFBSW consists of:
(A) 1,000,000 shares of FFBSW Common Stock; and
(B) 500,000 shares of preferred stock, par value $.01 per
share.
37
(ii) As of the date of this Agreement:
(A) 395,196 shares of FFBSW Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
were issued in full compliance with all applicable laws;
(B) no shares of FFBSW preferred stock are issued and
outstanding; and
(C) 70,885 shares of FFBSW Common Stock are reserved for
issuance under FFBSW's stock-based benefit plans and awards covering 20,950
shares are currently outstanding thereunder.
(iii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders of FFBSW may vote are
issued or outstanding.
(iv) As of the date of this Agreement, (A) no shares of capital
stock or other voting securities of FFBSW are issued, reserved for issuance or
outstanding and (B) neither FFBSW nor any of its Subsidiaries has or is bound by
any outstanding subscriptions, options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating FFBSW or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, any additional shares of capital stock of FFBSW or obligating FFBSW or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right, convertible security, commitment or agreement. Except as set forth
in the FFBSW Disclosure Letter, there are no outstanding contractual obligations
of FFBSW or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of FFBSW or any of its Subsidiaries.
(v) The shares of FFBSW Common Stock to be issued in exchange for
shares of GFSB Common Stock upon consummation of the Merger in accordance with
this Agreement have been duly authorized and when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
free of any liens or encumbrances and subject to no preemptive rights or rights
of first refusal created by statute, the Certificate of Incorporation or Bylaws
of FFBSW or to any agreement to which FFBSW is a party or by which it is bound.
(vi) It is understood that FFBSW may implement a 8:1 or other
stock split between the date hereof and the Effective Time, although it is under
no obligation to do so. The information contained in this part (c) regarding
FFBSW's outstanding shares and stock options shall not be deemed incorrect to
the extent it changes as a result of a stock split.
(d) Authority. Subject to the requisite approval of the shareholders
of FFBSW, FFBSW has all requisite corporate power and authority to enter into
this
38
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate actions on the
part of FFBSW's Board of Directors, and no other corporate proceedings (other
than the approval and adoption of this Agreement by FFBSW's stockholders) on the
part of FFBSW are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by FFBSW and constitutes a valid and binding
obligation of FFBSW, enforceable against FFBSW in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity.
(e) No Violations. The execution, delivery and performance of this
Agreement by FFBSW do not, and the consummation of the transactions contemplated
by this Agreement will not, (i) assuming all required governmental approvals
have been obtained and the applicable waiting periods have expired, violate any
law, rule or regulation or any judgment, decree, order, governmental permit or
license to which FFBSW or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) violate the certificate of incorporation or bylaws
of FFBSW or the similar organizational documents of any of its Subsidiaries or
(iii) constitute a breach or violation of, or a default under (or an event
which, with due notice or lapse of time or both, would constitute a default
under), or result in the termination of, accelerate the performance required by,
or result in the creation of any Lien upon any of the properties or assets of
FFBSW or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which FFBSW or any of its Subsidiaries is
a party, or to which any of their respective properties or assets may be subject
except, in the case of (iii), for any such breaches, violations or defaults that
would not, individually or in the aggregate, have a Material Adverse Effect on
FFBSW.
(f) Consents and Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Entity or any third party are required to
be made or obtained in connection with the execution and delivery by FFBSW of
this Agreement or the consummation by FFBSW of the Merger and the other
transactions contemplated by this Agreement, including the Bank Merger, except
for (i) filings of applications and notices with, receipt of approvals or
nonobjections from, and expiration of the related waiting period required by,
federal and state banking authorities, (ii) filing of the Registration Statement
with the SEC and declaration by the SEC of the Registration Statement's
effectiveness under the Securities Act, and (iii) the registration or
qualification of the shares of FFBSW Common Stock to be issued in exchange for
shares of FFBSW Common Stock under the Securities Exchange Act of 1934 and the
state securities or "blue sky" laws and (iv) the listing of the FFBSW Common
Stock on the National Association of Securities Dealers Automated Quotation
system ("NASDAQ") . As of the date hereof, FFBSW knows of no reason pertaining
to FFBSW why any of the
39
approvals referred to in this Section 3.3(f) should not be obtained without the
imposition of any material condition or restriction described in Section 6.1(b).
(g) Financial Statements. FFBSW has previously made available to GFSB
copies of (i) the consolidated balance sheets of FFBSW and its Subsidiaries as
of September 30, 2003 and 2002 and related consolidated statements of income,
cash flows and changes in stockholders' equity for the two years ended September
30, 2003, together with the notes thereto, accompanied by the audit report of
FFBSW's independent public auditors, as reported in FFBSW's Annual Report and
(ii) the unaudited consolidated balance sheet of FFBSW and its Subsidiaries as
of June 30, 2004 and the related consolidated statements of income, cash flows
and changes in stockholders' equity for the nine (9) months ended June 30, 2004.
Such financial statements were prepared from the books and records of FFBSW and
its Subsidiaries, fairly present the consolidated financial position of FFBSW
and its Subsidiaries in each case at and as of the dates indicated and the
consolidated results of operations, retained earnings and cash flows of FFBSW
and its Subsidiaries for the periods indicated, and, except as otherwise set
forth in the notes thereto, were prepared in accordance with GAAP consistently
applied throughout the periods covered thereby; provided, however, that the
unaudited financial statements for interim periods are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes to the extent permitted under applicable
regulations. The books and records of FFBSW and its Subsidiaries have been, and
are being, maintained in all respects in accordance with GAAP and any other
legal and accounting requirements and reflect only actual transactions.
(h) Absence of Certain Changes or Events. Except as disclosed in
FFBSW's Disclosure Letter, since September 30, 2003 (i) FFBSW and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course of such business consistent with their past practice, (ii) there
has not been any event or occurrence that has had, or is reasonably expected to
have, a Material Adverse Effect on FFBSW or on the ability of FFBSW to complete
the transactions contemplated by this Agreement and (iii) there has been no
change in any accounting principles, practices or methods of FFBSW or any of its
Subsidiaries other than as required by GAAP.
(i) Litigation. There are no suits, actions or legal, administrative
or arbitration proceedings pending or, to the knowledge of FFBSW, threatened
against or affecting FFBSW or any of its Subsidiaries or any property or asset
of FFBSW or any of its Subsidiaries that (i) individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on FFBSW or (ii)
challenge the validity or propriety of the transactions contemplated by this
Agreement. To the knowledge of FFBSW, there are no investigations, reviews or
inquires by any court or Governmental Entity pending or threatened against FFBSW
or any of its Subsidiaries. There are no judgments, decrees, injunctions, orders
or rulings of any Governmental Entity or arbitrator outstanding against FFBSW or
any of its Subsidiaries that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on FFBSW.
40
(j) Absence of Regulatory Actions. Since January 1, 1999, neither
FFBSW nor any of its Subsidiaries has been a party to any cease and desist
order, written agreement or memorandum of understanding with, or any commitment
letter or similar undertaking to, or has been subject to any action, proceeding,
order or directive by any Government Regulator, or has adopted any board
resolutions at the request of any Government Regulator, or has been advised by
any Government Regulator that it is contemplating issuing or requesting any such
action, proceeding, order, directive, written agreement, memorandum of
understanding, commitment letter, board resolutions or similar undertaking.
There are no unresolved violations, criticisms or exceptions by any Government
Regulator with respect to any report or statement relating to any examinations
of FFBSW or its Subsidiaries.
(k) Compliance with Laws. FFBSW and each of its Subsidiaries conducts
its business in compliance with all statutes, laws, regulations, ordinances,
rules, judgements, orders or decrees applicable to it or the employees
conducting such business. FFBSW and each of its Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that are
required in order to permit it to carry on its business as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, to the knowledge of FFBSW, no
suspension or cancellation of any of them is threatened. Neither FFBSW nor any
of its Subsidiaries has been given notice or been charged with any violation of,
any law, ordinance, regulation, order, writ, rule, decree or condition to
approval of any Governmental Entity which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on FFBSW.
(l) Taxes. All federal, state, local and foreign tax returns required
to be filed by or on behalf of FFBSW or any of its Subsidiaries have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such returns,
all taxes required to be shown on returns for which extensions have been granted
and all other taxes required to be paid by FFBSW or any of its Subsidiaries have
been paid in full or adequate provision has been made for any such taxes on
FFBSW's balance sheet (in accordance with GAAP). There is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any taxes of FFBSW or any of its Subsidiaries, and no claim has been made in
writing by any authority in a jurisdiction where FFBSW or any of its
Subsidiaries do not file tax returns that FFBSW or any such Subsidiary is
subject to taxation in that jurisdiction. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation relating to FFBSW or any of its Subsidiaries have been paid in full
or adequate provision has been made for any such taxes on FFBSW's balance sheet
(in accordance with GAAP). FFBSW and its Subsidiaries have not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect. FFBSW and each of its
Subsidiaries has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor,
41
stockholder or other third party, and FFBSW and each of its Subsidiaries has
timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the IRC and similar applicable state and
local information reporting requirements.
(m) Agreements. Neither FFBSW nor any of its Subsidiaries is in
default under (and no event has occurred which, with due notice or lapse of time
or both, would constitute a default under) or is in violation of any provision
of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject and, to the knowledge of
FFBSW, no other party to any such agreement (excluding any loan or extension of
credit made by FFBSW or any of its Subsidiaries) is in default in any respect
thereunder, except for such defaults or violations that would not, individually
or in the aggregate, have a Material Adverse Effect on FFBSW.
(n) FFBSW Information. The information regarding FFBSW and its
Subsidiaries to be supplied by FFBSW for inclusion in the Registration
Statement, any filings or approvals under applicable state securities laws, or
any filing pursuant to Rule 165 or Rule 425 under the Securities Act or Rule
14a-12 under the Exchange Act will 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 therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement-Prospectus (except for such portions thereof that relate only to GFSB
or any of its Subsidiaries) will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
(o) Community Reinvestment Act Compliance. First Federal Bank is in
material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, except where such failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect on
FFBSW. First Federal Bank currently has a CRA rating of satisfactory or better.
To the knowledge of FFBSW, there is no fact or circumstance or set of facts or
circumstances that would cause First Federal Bank to fail to comply with such
provisions or cause the CRA rating of First Federal Bank to fall below
satisfactory.
(p) Tax Treatment of the Merger. FFBSW has no knowledge of any fact or
circumstance relating to it that would prevent the transactions contemplated by
this Agreement from qualifying as a reorganization under Section 368 of the IRC.
(q) Availability of Funds. FFBSW has and will have available to it at
the Effective Time, sources of capital sufficient to pay the aggregate Cash
Consideration and to pay any other amounts payable pursuant to this Agreement
and to effect the transactions contemplated hereby. First Federal Bank is, and
immediately following the
42
Merger and the Bank Merger will be, in compliance with all applicable capital
requirements.
(r) Anti-Money Laundering. First Federal Bank maintains an effective
anti-money laundering program and is in compliance with federal law and
regulations relating to such anti-money laundering program.
(s) Undisclosed Liabilities. Except as set forth on the FFBSW
Disclosure Letter, neither FFBSW nor any of its Subsidiaries has incurred any
debt, liability or obligation of any nature whatsoever (whether accrued,
contingent, absolute or otherwise and whether due or to become due) other than
liabilities reflected on or reserved against in the consolidated balance sheet
of FFBSW as of March 31, 2004, except for (i) liabilities incurred since March
31, 2004 in the ordinary course of business consistent with past practice that,
either alone or when combined with all similar liabilities, have not had, and
would not reasonably be expected to have, a Material Adverse Effect on FFBSW and
(ii) liabilities incurred for legal, accounting, financial advising fees and
out-of-pocket expenses in connection with the transactions contemplated by this
Agreement.
(t) Voting Requirements. The affirmative vote at the FFBSW
Stockholders Meeting of the holders of a majority of the outstanding shares of
FFBSW Common Stock to approve and adopt this Agreement is the only vote of the
holders of any class or series of the FFBSW's capital stock necessary to approve
and adopt this Agreement and the transactions contemplated hereby, including the
Merger.
(u) Title to Properties. FFBSW has good and marketable title to all of
its respective properties, interests in properties and assets, real and
personal, reflected on its balance sheets as of June 30, 2004 (the "Balance
Sheet Date") as provided to GFSB pursuant to Section 3.3(g) hereof, or acquired
after the Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Balance Sheet Date in the
ordinary course of business. All properties used in the operations of FFBSW are
reflected in the FFBSW's balance sheets to the extent GAAP require the same to
be reflected. All leases are in good standing, are valid and effective in
accordance with their respective terms, and there is not under any such leases
any existing default or event of default (or event which with notice or lapse of
timing, or both, would constitute a default).
(v) Environmental. To the knowledge of FFBSW, FFBSW is in compliance
with all applicable Environmental Laws and FFBSW has all permits, authorizations
and approvals required under applicable Environmental Laws and is in compliance
with the requirements of such permits, authorizations and approvals. To the
knowledge of FFBSW, there are no pending or threatened Environmental Claims (as
defined below) against FFBSW. "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law.
43
(w) Loans; Allowance for Loan Losses. All of the loans on the books of
FFBSW are valid and properly documented and were made in the ordinary course of
business, and the security therefore, if any, is valid and properly perfected.
Neither the terms of such loans, nor any of the loan documentation, nor the
manner in which such loans have been administered and services, nor FFBSW's
procedures and practices of approving or rejecting loan applications, violates
any applicable law, rule or regulation thereto. The allowance for loan losses
reflected on FFBSW's consolidated balance sheet as of June 30, 2004, is and in
the case of subsequently delivered financial statements by FFBSW to GFSB, if
any, in the opinion of management, adequate under GAAP as of such date.
ARTICLE IV
CONDUCT PENDING THE MERGER
4.1 FORBEARANCES BY GFSB. Except as expressly contemplated or permitted by
this Agreement and to the extent required by law or regulation, during the
period from the date of this Agreement to the Effective Time, GFSB shall not,
nor shall GFSB permit any of its Subsidiaries to, without the prior written
consent of FFBSW, which consent shall not be unreasonably withheld:
(a) conduct its business other than in the regular, ordinary and usual
course consistent with past practice; use commercially reasonable efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships and retain the services of its
officers and key employees; or take any action that would adversely affect or
delay its ability to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby;
(b) (i) incur, modify, extend or renegotiate any indebtedness for
borrowed money, or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation or
other entity, other than (x) demand deposits, NOW, money market and passbook
deposit accounts, (y) securities sold with an agreement to repurchase within one
year, federal funds purchases with terms of one year or less, and borrowings
from a Federal Home Loan Bank that mature within one year and (z) certificates
of deposit that mature within 36 months; provided, however, that in no event
shall any new borrowings under this Section exceed an aggregate of $2.0 million;
provided further, that this Section shall not apply to overnight borrowings by
Gallup Federal;
(ii) prepay any indebtedness or other similar arrangements so as
to cause GFSB to incur any prepayment penalty thereunder;
(c) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on its capital stock, except for regular quarterly cash dividends
at a rate not in
44
excess of the lesser of $0.125 per share of GFSB Common Stock or 45% of GFSB's
net earnings for the prior quarter;
(iii) grant any stock awards under the GFSB Employee Plans (other
than the ESOP) or grant any individual, corporation or other entity any right to
acquire any shares of its capital stock; or
(iv) issue any additional shares of capital stock or any
securities or obligations convertible or exercisable for any shares of its
capital stock except pursuant to the exercise of stock options as of the date
hereof;
(d) sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets with a value of $100,000 or more to any
individual, corporation or other entity other than a Subsidiary, or cancel,
release or assign any indebtedness to any such person or any claims held by any
such person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of this
Agreement;
(e) except pursuant to contracts or agreements in force at the date of
or permitted by this Agreement, make any equity investment, either by purchase
of stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation or other
entity;
(f) enter into, renew, amend or terminate any contract or agreement,
or make any change in any of its leases or contracts, other than with respect to
those contracts or agreements individually involving aggregate payments of less
than, or the provision of goods or services with a market value of less than,
$25,000 per annum and other than contracts or agreements covered by Section
4.1(g);
(g) make, renegotiate, renew, increase, extend, modify or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except (i)
in conformity with existing lending practices in amounts not to exceed an
aggregate of $350,000 per borrower with respect to any individual borrower in
the case of secured loans and $20,000 in the case of unsecured loans or (ii)
loans or advances as to which GFSB has a binding obligation to make such loans
or advances as of the date hereof;
(h) except for loans or extensions of credit made on terms generally
available to the public, make or increase any loan or other extension of credit,
or commit to make or increase any such loan or extension of credit, to any
director or executive officer of GFSB or Gallup Federal, or any entity
controlled, directly or indirectly, by any of the foregoing, other than renewals
of existing loans or commitments to loan;
(i) increase in any manner the compensation or fringe benefits of any
of its employees or directors, or pay or make any stock award, cash or stock
bonus, pension, retirement allowance or contribution to any such employees or
directors not
45
required by any binding agreement in effect as of the date hereof, except for
annual non-officer employee salary increases of not more than 5% consistent with
past practice;
(i) except as may be required by law or by the terms of GFSB's
401(k) profit sharing plan, make contributions to become a party to, amend, make
contributions to, or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee or director;
(ii) voluntarily accelerate the vesting of, or the lapsing of
restrictions with respect to, any stock options or other stock-based
compensation;
(iii) elect to any senior executive office any person who is not
a member of its senior executive officer team as of the date of this Agreement
or elect to its Board of Directors any person who is not a member of its Board
of Directors as of the date of this Agreement, or hire any additional employee;
(iv) submit for approval or ratification any stock option or
similar plan to its stockholders; or
(v) make any monthly contribution to the Gallup Federal ESOP in
excess of the scheduled monthly contributions; or
(j) settle any claim, action or proceeding involving payment by it of
money damages in excess of $10,000 or impose any material restriction on its
operations or the operations of any of its Subsidiaries;
(k) amend its certificate of incorporation or bylaws, or similar
governing documents;
(l) restructure or materially change its investment securities
portfolio through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported;
(m) make any investment in any debt security, including
mortgage-backed and mortgage-related securities, other than U.S. government and
U.S. government agency securities with final maturities not greater than one
year;
(n) make any capital expenditures in excess of $5,000 other than
pursuant to binding commitments existing on the date hereof, expenditures
necessary to maintain existing assets in good repair, to make payment of
necessary taxes;
(o) establish or commit to the establishment of any new branch or
other office facilities or file any application to relocate or terminate the
operation of any banking office;
46
(p) take any action that is intended or expected to result in any of
its representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VI not being satisfied
or in a violation of any provision of this Agreement;
(q) other than pursuant to this Agreement, implement or adopt any
change in its accounting principles, practices or methods, other than as may be
required by GAAP or regulatory guidelines;
(r) knowingly take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
IRC; or
(s) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 4.1.
Any request by GFSB or response thereto by FFBSW shall be made in
accordance with the notice provisions of Section 8.7 and shall note that it is a
request pursuant to this Section 4.1.
4.2 FORBEARANCES BY FFBSW. Except as expressly contemplated or permitted by
this Agreement, and except to the extent required by law or regulation or any
Governmental Entity, during the period from the date of this Agreement to the
Effective Time, FFBSW shall not, nor shall FFBSW permit any of its Subsidiaries
to, without the prior written consent of GFSB, which shall not unreasonably be
withheld:
(a) take any action that is intended to or expected to result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective Time,
or in any of the conditions to the Merger set forth in Article VI not being
satisfied or in a violation of any provision of this Agreement;
(b) knowingly take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
IRC;
(c) amend its Certificate of Incorporation or Bylaws in a manner that
would adversely affect the benefits of the Merger to the stockholders of GFSB;
(d) issue any shares of FFBSW Common Stock for consideration other
than cash or for a price less than the FFBSW Price, or issue any options for
securities convertible into FFBSW Common Stock at a per share price less than
the FFBSW Price, or repurchase any shares of FFBSW Common Stock or securities
convertible into FFBSW Common Stock for a per share price greater than the FFBSW
Price;
47
(e) issue any securities with greater voting rights than FFBSW Common
Stock or convertible into securities with greater voting rights than FFBSW
Common Stock, or having a preference in dividends or liquidation over the FFBSW
Common Stock;
(f) agree to take, make any commitment to take, or adopt any
resolutions of its Board of Directors in support of, any of the actions
prohibited by this Section 4.2; or
(g) make, declare or pay any dividend, or make any other distribution
on its capital stock, except for an annual dividend declared before September
30, 2004 of up to $2.50 per share of FFBSW Common Stock and quarterly dividends
thereafter not to exceed $0.50 per share per quarter of FFBSW Common Stock.
ARTICLE V
COVENANTS
5.1 ACQUISITION PROPOSALS.
(a) Except as permitted by this Agreement, GFSB shall not, and shall
not authorize or permit any of its Subsidiaries or any of its Subsidiaries'
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by GFSB or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage, or take any other action to facilitate, any inquiries, discussions or
the making of any proposal that constitutes or could reasonably be expected to
lead to an Acquisition Proposal or (ii) participate in any discussions or
negotiations, or otherwise communicate in any way with any person (other than
FFBSW), regarding an Acquisition Proposal. Notwithstanding the foregoing, GFSB
may, in response to an unsolicited Proposal that did not otherwise result from a
breach of this Section 5.1, (x) furnish non-public information with respect to
GFSB to the person who made such Acquisition Proposal (y) participate in
discussions or negotiations with such person regarding such Acquisition Proposal
and (z) recommend such Acquisition Proposal to the stockholders of GFSB, if and
so long as GFSB's Board of Directors determines in good faith, , that such
action is legally necessary for the proper discharge of its fiduciary duties
under applicable law.
(b) Nothing contained in this Section 5.1 shall prohibit GFSB from at
any time taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or making any
disclosure required by Rule 14a-9 promulgated under the Exchange Act.
(c) GFSB will notify FFBSW orally (within two calendar days) and in
writing (within three business days) of any Acquisition Proposal, any request
for non-public information that could reasonably be expected to lead to an
Acquisition Proposal, or any inquiry with respect to an Acquisition Proposal,
including, in each case, the
48
identity of the person making such Acquisition Proposal, request or inquiry and
the terms and conditions thereof, and shall provide to FFBSW any written
materials received by GFSB or any of its Subsidiaries in connection therewith..
GFSB will keep FFBSW informed of any developments with respect to any such
Acquisition Proposal, request or inquiry immediately upon the occurrence
thereof. GFSB will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. GFSB will take the necessary steps to
inform the appropriate individuals or entities referred to in the first sentence
of Section 5.1(a) of the obligations undertaken in this Section 5.1. GFSB will
promptly request each person (other than FFBSW) that has executed a
confidentiality agreement prior to the date hereof in connection with its
consideration of a business combination with GFSB or any of its Subsidiaries to
return or destroy all confidential information previously furnished to such
person by or on behalf of GFSB or any of its Subsidiaries. GFSB shall not
release any third party from, or waive any provisions of, any confidentiality
agreements or standstill agreement to which it or any of its Subsidiaries is a
party.
5.2 CERTAIN POLICIES AND ACTIONS OF GFSB. At the request of FFBSW, GFSB
shall (i) cause Gallup Federal to modify and change its loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves) and investment and asset/liability management policies and
practices so as to be consistent with those of First Federal Bank and (ii)
recognize for financial reporting purposes of all its expenses related to the
Merger; provided, however, that GFSB shall not be required to take such actions
prior to the date on which all regulatory and stockholder approvals required to
consummate the transactions contemplated hereby are received, and until after
receipt of written confirmation from FFBSW that the conditions to FFBSW's
obligations to close the Merger have been satisfied or waived , and provided
further, that such policies and procedures are not prohibited by GAAP or any
applicable laws and regulations. GFSB's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications or
changes undertaken solely on account of this Section 5.2.
5.3 ACCESS AND INFORMATION.
(a) Upon reasonable notice, GFSB shall (and shall cause GFSB's
Subsidiaries to) afford FFBSW and its representatives (including, without
limitation, directors, officers and employees of FFBSW and its affiliates and
counsel, accountants and other professionals retained by FFBSW) such reasonable
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and work
papers of independent auditors), contracts, properties, personnel and to such
other information relating to GFSB and GFSB's Subsidiaries as FFBSW may
reasonably request. Upon reasonable notice, FFBSW shall (and shall cause First
Federal Bank to) afford GFSB and its representatives (including, without
limitation, directors, officers and employees of GFSB and its affiliates and
counsel, accountants and other professionals retained by GFSB) such
49
reasonable access during normal business hours throughout the period prior to
the Effective Time to the executive officers of FFBSW and First Federal Bank and
to such information regarding FFBSW and its Subsidiaries as GFSB may reasonably
request. No investigation by any party pursuant to this Section 5.3 shall affect
or be deemed to modify any representation or warranty made by the other party in
this Agreement.
(b) From the date hereof until the Effective Time, GFSB shall, and
shall cause GFSB's Subsidiaries to, promptly provide FFBSW with (i) a copy of
each report, schedule, registration statement and other document filed or
received by it pursuant to the requirements of the Securities Act or the
Exchange Act, (ii) a copy of each report filed with federal banking regulators,
(iii) a copy of each periodic report to its senior management and all materials
relating to its business or operations furnished to its Board of Directors, (iv)
a copy of each press release made available to the public and (iv) all other
information concerning its business, properties and personnel as FFBSW may
reasonably request. Notwithstanding the foregoing, neither GFSB nor its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure relates to any party's compliance with this
Agreement or would violate the rights of such entity's customers, jeopardize the
attorney-client privilege of the entity in possession or control of such
information, or contravene any law, rule, regulation, order, judgment, decree or
binding agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the previous sentence apply.
(c) GFSB and FFBSW will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of applicable law, GFSB and FFBSW will
keep confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 5.3 unless such
information (i) was already known to such party or an affiliate, other than
pursuant to a confidentiality agreement or other confidential relationship, (ii)
becomes available to such party or an affiliate from other sources not known by
such party to be bound by a confidentiality agreement or other obligation of
secrecy, (iii) is disclosed with the prior written approval of the other party
or (iv) is or becomes readily ascertainable from published information or trade
sources.
(d) From and after the date hereof, representatives of FFBSW and GFSB
shall meet on a regular basis to discuss and plan for the conversion of GFSB's
and its Subsidiaries' data processing and related electronic informational
systems to those used by FFBSW and its Subsidiaries with the goal of conducting
such conversion simultaneously with the consummation of the Bank Merger.
5.4 APPLICATIONS; CONSENTS; TRANSITION.
(a) The parties hereto shall cooperate with each other and shall use
their reasonable best efforts to prepare and file as soon as practicable after
the date hereof, but in no event later than ninety (90) calendar days, all
necessary applications,
50
notices and filings to obtain all permits, consents, approvals and
authorizations of all Governmental Entities that are necessary or advisable to
consummate the transactions contemplated by this Agreement. GFSB and FFBSW shall
furnish each other with all information concerning themselves, their respective
Subsidiaries, and their respective Subsidiaries' directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any application, notice or filing made by or on behalf of
FFBSW, GFSB or any of their respective Subsidiaries to any Governmental Entity
in connection with the transactions contemplated by this Agreement and the Plan
of Bank Merger. FFBSW and GFSB shall have the right to review in advance, and to
the extent practicable each will consult with the other on, all the information
relating to FFBSW and GFSB, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written materials
submitted to, any Governmental Entity pursuant to this Section 5.4(a).
(b) As soon as practicable after the date hereof, each of the parties
hereto shall, and they shall cause their respective Subsidiaries to, use its
best efforts to obtain any consent, authorization or approval of any third party
that is required to be obtained in connection with the transactions contemplated
by this Agreement and the Plan of Bank Merger.
(c) FFBSW and GFSB shall, and shall cause their respective
Subsidiaries to, use their reasonable best efforts to facilitate the integration
of the GFSB and its Subsidiaries, with the businesses of FFBSW and its
Subsidiaries to be effective as of the Effective Time. Without limiting the
generality of the foregoing, from the date hereof through the Effective Time and
consistent with the performance of their day-to-day operations and the
continuous operation of the GFSB and its Subsidiaries in the ordinary course of
business, GFSB and its Subsidiaries shall cause their employees to use their
reasonable best efforts to provide support and assistance to FFBSW on such tasks
as may be reasonably required to result in a successful integration at the
Effective Time.
5.5 ANTITAKEOVER PROVISIONS. GFSB and its Subsidiaries shall take all steps
required by any relevant federal or state law or regulation or under any
relevant agreement or other document to exempt or continue to exempt FFBSW,
First Federal Bank, the Agreement, the Plan of Bank Merger and the Merger from
any provisions of an antitakeover nature in GFSB's or its Subsidiaries'
certificate of incorporation and bylaws, or similar organizational documents,
and the provisions of any federal or state antitakeover laws.
5.6 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable Governmental
Entities, effecting all necessary registrations, applications and filings
(including, without
51
limitation, filings under any applicable state securities laws) and obtaining
any required contractual consents and regulatory approvals.
5.7 PUBLICITY. The initial press release announcing this Agreement shall be
a joint press release and thereafter GFSB and FFBSW shall consult with each
other prior to issuing any press releases or otherwise making public statements
with respect to the Merger and any other transaction contemplated hereby and in
making any filings with any Governmental Entity or with any national securities
exchange or market with respect thereto; provided, however, that nothing in this
Section 5.7 shall be deemed to prohibit any party from making any disclosure
which its counsel deems necessary in order to satisfy such party's disclosure
obligations imposed by law.
5.8 STOCKHOLDER MEETINGS.
(a) GFSB will submit to its stockholders this Agreement and any other
matters required to be approved or adopted by stockholders in order to carry out
the intentions of this Agreement. In furtherance of that obligation, and subject
to receipt by GFSB from FFBSW of a written confirmation of a financial plan for
the funding of the Merger Consideration by FFBSW, GFSB will take, in accordance
with applicable law and its certificate of incorporation and bylaws, all action
necessary to call, give notice of, convene and hold a meeting of its
stockholders (the "GFSB STOCKHOLDER MEETING") as promptly as practicable within
60 days of the effectiveness of the Registration Statement for the purpose of
considering and voting on approval and adoption of this Agreement and the
transactions provided for in this Agreement. GFSB's Board of Directors will use
all reasonable best efforts to obtain from GFSB's stockholders a vote approving
this Agreement. Except as otherwise provided in Section 5.1(a) of this Agreement
and subject to receipt by GFSB of an updated fairness opinion dated no earlier
than three (3) calendar days prior to the mailing, (i) GFSB's Board of Directors
shall recommend to GFSB's stockholders approval of this Agreement, (ii) the
Proxy Statement-Prospectus shall include a statement to the effect that GFSB's
Board of Directors has recommended that GFSB's stockholders vote in favor of the
approval of this Agreement and (iii) neither GFSB's Board of Directors nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to FFBSW, the recommendation of
GFSB's Board of Directors that GFSB's stockholders vote in favor of approval of
this Agreement or make any statement in connection with the GFSB Stockholder
Meeting inconsistent with such recommendation provided that nothing in this
Agreement shall prevent GFSB's Board of Directors from withholding, withdrawing,
amending or modifying its recommendation if GFSB's Board of Directors
determines, after consultation with its outside counsel, that such action is
legally required in order for the directors to comply with their fiduciary
duties to GFSB's shareholders under applicable law; provided further, that
Section 5.1 shall govern withholding, withdrawing, amending or modifying of such
recommendation in the circumstances described therein.
(b) FFBSW will submit to its stockholders this Agreement and any other
matters required to be approved or adopted by stockholders in connection with
this Agreement. In furtherance of that obligation, FFBSW will take, in
accordance with
52
applicable law and its certificate of incorporation and bylaws, all action
necessary to call, give notice of, convene and hold a meeting of its
stockholders (the "FFBSW STOCKHOLDER MEETING") as promptly as practicable (and
in any event within sixty (60) days of the effectiveness of the Registration
Statement, as such term is defined in Section 5.9 hereof) for the purpose of
considering and voting on approval and adoption of this Agreement and the
transactions provided for in this Agreement. FFBSW's Board of Directors will use
all reasonable best efforts to obtain from FFBSW's stockholders a vote approving
this Agreement. In connection therewith, (i) FFBSW's Board of Directors shall
recommend to FFBSW's stockholders approval of this Agreement, (ii) the Proxy
Statement-Prospectus shall include a statement to the effect that FFBSW's Board
of Directors has recommended that FFBSW's stockholders vote in favor of the
approval of this Agreement and (iii) neither FFBSW's Board of Directors nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to FFBSW, the recommendation of
FFBSW's Board of Directors that FFBSW's stockholders vote in favor of approval
of this Agreement or make any statement in connection with the FFBSW Stockholder
Meeting inconsistent with such recommendation.
5.9 REGISTRATION OF FFBSW COMMON STOCK.
(a) As promptly as reasonably practicable following the date hereof,
(and in any event no later than ninety (90) days of the date hereof), FFBSW
shall prepare and file with the SEC a registration statement on Form S-4 with
respect to the issuance of FFBSW Common Stock in the Merger (such Form S-4, and
any amendments or supplements thereto, the "REGISTRATION Statement"). The
Registration Statement shall contain proxy materials relating to the matters to
be submitted to the GFSB stockholders at the GFSB Stockholders Meeting and the
FFBSW stockholders at the FFBSW Stockholders Meeting which shall also constitute
the prospectus relating to the shares of FFBSW Common Stock to be issued in the
Merger (such proxy statement/prospectus, and any amendments or supplements
thereto, the "PROXY STATEMENT-PROSPECTUS"). GFSB will furnish to FFBSW the
information required to be included in the Registration Statement with respect
to its business and affairs and shall have the right to review and consult with
FFBSW and approve the form of, and any characterizations of such information
included in, the Registration Statement prior to its being filed with the SEC.
FFBSW shall use reasonable best efforts to have the Registration Statement
declared effective by the SEC and to keep the Registration Statement effective
as long as is necessary to consummate the Merger and the transactions
contemplated hereby. GFSB will use its best efforts to cause the Proxy Statement
Prospectus to be mailed to GFSB's stockholders promptly as practicable after the
Registration Statement is declared effective under the Securities Act. FFBSW
will advise GFSB, promptly after it receives notice thereof, of the time when
the Registration Statement has become effective, the issuance of any stop order,
the suspension of the qualification of the FFBSW Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement-Prospectus or the
Registration Statement. If at any time prior to the Effective Time, any
information relating to FFBSW or GFSB, or any of their respective affiliates,
officers or directors, is discovered by
53
FFBSW or GFSB which should be set forth in an amendment or supplement to any of
the Registration Statement or the Proxy Statement-Prospectus so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and, to
the extent required by law, rules or regulations, an appropriate amendment or
supplement describing such information shall be promptly filed by FFBSW with the
SEC and disseminated by GFSB to the stockholders of GFSB;
(b) FFBSW shall also take any action required to be taken under any
applicable state securities laws in connection with the Merger and each of GFSB
and FFBSW shall furnish all information concerning it and the holders of GFSB
Common Stock as may be reasonably requested in connection with any such action;
(c) FFBSW shall at all times reserve and have available a sufficient
number of shares of FFBSW Common Stock to pay the Stock Consideration;
(d) FFBSW shall also take any and all action required for the FFBSW
Common Stock to become registered under the Exchange Act; and
(e) Nasdaq listing. FFBSW will use its best efforts to obtain approval
for listing on the NASDAQ, as of the Effective Time.
5.10 AFFILIATE LETTERS. GFSB shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" of GFSB under
Rule 145 of the Securities Act to deliver to FFBSW as soon as practicable and
prior to the mailing of the Proxy Statement-Prospectus executed letter
agreements, each substantially in the form attached hereto as Exhibit D,
----------
providing that such person will comply with Rule 145.
5.11 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the other of: (i) any event or notice of, or other communication relating to,
a default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results of operations of each
party and its Subsidiaries taken as a whole to which each party or any
Subsidiary is a party or is subject; and (ii) any event, condition, change or
occurrence which individually or in the aggregate has, or which is reasonably
likely to result in a Material Adverse Effect. Each of GFSB and FFBSW shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with any of the transactions contemplated by this Agreement.
5.12 EMPLOYEE BENEFITS MATTERS.
(a) FFBSW will review all GFSB Employee Plans to determine whether to
maintain, terminate or continue such plans. All GFSB and Gallup Federal
54
employees who become participants in an FFBSW compensation and benefit plan
shall, for purposes of determining eligibility for and for any applicable
vesting periods of such employee benefits only (and not for pension benefit
accrual purposes) be given credit for meeting eligibility and vesting
requirements in such plans for service as an employee of GFSB or Gallup Federal
prior to the Effective Time. This Agreement shall not be construed to limit the
ability of FFBSW or First Federal Bank to terminate the employment of any
employee or to review employee benefits programs from time to time and to make
such changes as they deem appropriate.
(b) The GFSB Bancorp, Inc. Directors Deferred Compensation Agreement
and the Gallup Federal Savings Bank Directors Deferred Compensation Agreement
(the "Deferred Compensation Agreements") shall be terminated prior to the
Effective Time, and benefits thereunder paid out to participants in a lump sum
immediately prior to the Effective Time, provided, however, that each such
person entitled to a payment under a Deferred Compensation Agreement shall be
required to enter into an acknowledgement and release that the amounts paid
thereunder are in complete satisfaction of all amounts due under such Deferred
Compensation Agreement.
(c) All persons who are employees of Gallup Federal immediately prior
to the Effective Time and whose employment is not specifically terminated at or
prior to the Effective Time (a "CONTINUING EMPLOYEE") shall, at the Effective
Time, become employees of First Federal Bank; provided, however, that in no
event shall any of Gallup Federal's employees be officers of First Federal Bank,
or have or exercise any power or duty conferred upon such an officer, unless and
until duly elected or appointed to such position in accordance with the bylaws
of First Federal Bank and that FFBSW shall use reasonable efforts to offer a
position to all employees of Gallup Federal. Except for Continuing Employees who
have employment contracts with GFSB or Gallup Federal as of the date hereof or
enter into employment contracts with FFBSW or First Federal Bank, all of the
Continuing Employees shall be employed at the will of First Federal Bank and no
contractual right to employment shall inure to such employees because of this
Agreement. In the event any Continuing Employee without an employment contact or
change-in-control agreement is terminated without cause within one year
following the Effective Time, he or she shall be entitled to receive, within ten
(10) days of such termination, a cash severance payment equal to one (1) week
salary for each full year of continuous service he or she has with GFSB, or
Gallup Federal, First Federal Bank or FFBSW, up to a maximum of eight (8) weeks
salary.
(d) As of the Effective Time, FFBSW shall provide employer-provided
health and other employee welfare benefit plans to each Continuing Employee on
the same basis as it provides such coverage to FFBSW employees, except that any
eligibility waiting period otherwise applicable under such plans to new
employees shall not apply to a Continuing Employee or their covered dependents
who were covered under a similar GFSB Employee Plan at the Effective Time.
(e) With respect to accrued but unused vacation time to which any
Continuing Employee is entitled pursuant to the vacation policy applicable to
such
55
Continuing Employee immediately prior to the Effective Time, FFBSW and its
Subsidiaries shall assume the liability only for any vacation time accrued in
2004 and will allow such Continuing Employee to use such accrued 2004 vacation
time in accordance with the provisions of FFBSW's vacation policy as in effect
at the Effective Time as if such vacation time accrued in 2004 were accrued
while in the employ of FFBSW or one of its Subsidiaries.
(f) (i) Each participant in the GFSB Employee Stock Ownership Plan
("GFSB ESOP") not fully vested will become fully vested in his or her GFSB ESOP
account as of the Effective Time. The GFSB ESOP will terminate upon the
Effective Time in accordance with its terms in effect as of the date of this
Agreement. Upon the repayment of the GFSB ESOP loan, the remaining shares in the
loan suspense account will be allocated (to the extent permitted by Sections
401(a), 415 or 4975 of the IRC and the applicable laws and regulations
including, without limitation, the applicable provisions of ERISA) to GFSB ESOP
participants (as determined under the terms of the GFSB ESOP). Between the date
hereof and the Effective Time, the existing GFSB ESOP indebtedness shall
continue to be repaid in monthly installments pursuant to the terms of the ESOP
Loan Agreement dated as of June 29, 1995 by and between the GFSB Employee Stock
Ownership Plan Trust and GFSB, and GFSB or Gallup Federal shall make only such
contributions to the GFSB ESOP as necessary to fund such payments. Any
indebtedness of the GFSB ESOP remaining as of the Effective Time shall be repaid
from the trust associated with the GFSB ESOP through application of the Merger
Consideration received by the GFSB ESOP. GFSB and FFBSW agree that, subject to
the conditions described herein, as soon as possible after the Effective Time
and repayment of the GFSB ESOP loan and subject to applicable law, participants
in the GFSB ESOP will receive lump sum distributions of their GFSB ESOP
accounts.
(ii) The actions relating to the termination of the GFSB ESOP
will be adopted conditioned upon the consummation of the Merger and upon
receiving a favorable determination letter from the IRS with regard to the
continued qualification of the GFSB ESOP after any required amendments. GFSB
shall submit appropriate requests for any such determination letter to the IRS
and will use its best efforts to seek the issuance of such letter as soon as
possible following the date hereof. GFSB will adopt such additional amendments
to the GFSB ESOP as may be reasonably required by the IRS as a condition to
granting such determination letter, provided that such amendments do not
substantially change the terms outlined herein or would result in a Material
Adverse Effect on GFSB or result in an additional material liability to FFBSW.
(iii) As of and following the Effective Time, FFBSW shall cause
the GFSB ESOP to be maintained for the exclusive benefit of employees and other
persons who were participants or beneficiaries therein prior to the Effective
Time and proceed with termination of the GFSB ESOP through distribution of its
assets in accordance with its terms, subject to the amendments described herein
and as otherwise may be required to comply with applicable law or to obtain a
favorable determination letter from the IRS as to the continuing qualified
status of the GFSB ESOP, provided,
56
however, that no such distributions of the GFSB ESOP shall occur until a
favorable termination ruling has been received from the IRS.
(g) Subject to the foregoing paragraphs, FFBSW agrees to honor in
accordance with their terms all benefits vested as of the Effective Time under
the GFSB Employee Plans and all vested benefits or other vested amounts earned
or accrued through such time under contracts, arrangement commitments or
understandings described in GFSB's Disclosure Letter, including benefits which
vest or are otherwise accrued as a result of the consummation of the
transactions contemplated by this Agreement.
5.13 INDEMNIFICATION.
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, FFBSW agrees to indemnify and hold harmless each present and
former director, officer and employee of GFSB and its Subsidiaries and each
director, officer or employee of GFSB and its Subsidiaries that is serving or
has served as a director, officer, employee, representative or agent of another
entity expressly at GFSB's request or direction (each, an "INDEMNIFIED PARTY"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, amounts paid in settlement, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement), whether asserted or
claimed prior to, at or after the Effective Time, as they are from time to time
incurred, in each case to the fullest extent such person would have been
indemnified or have the right to advancement of expenses pursuant to GFSB's
certificate of incorporation and bylaws and, to the extent applicable, any
agreement between GFSB and Gallup Federal and such Indemnified Party which are
included in the GFSB Disclosure Letter, as in effect on the date of this
Agreement, and to the fullest extent permitted by law.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.13(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify FFBSW thereof, but the failure to so notify
shall not relieve FFBSW of any liability it may have hereunder to such
Indemnified Party if such failure does not materially and substantially
prejudice FFBSW.
(c) FFBSW shall maintain GFSB's existing directors' and officers'
liability insurance policy (or provide a policy providing comparable coverage
and amounts on terms no less favorable to the persons currently covered by
GFSB's existing policy, including FFBSW's existing policy if it meets the
foregoing standard) covering persons who are currently covered by such insurance
for a period of three (3) years after the Effective Time; provided, however,
that in no event shall FFBSW be obligated to expend, in order to maintain or
provide insurance coverage pursuant to this Section 5.13(c), an amount in excess
of 150% of the annual premiums paid by GFSB as of the date hereof for such
insurance ("MAXIMUM INSURANCE AMOUNT"); provided further, that
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if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Insurance Amount, FFBSW shall obtain the
most advantageous coverage obtainable for an annual premium equal to the Maximum
Insurance Amount.
(d) In the event FFBSW or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of FFBSW
assume the obligations set forth in this Section 5.13.
(e) The provisions of this Section 5.13 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
5.14 SECTION 16 MATTERS. Prior to the Effective Time, GFSB and FFBSW shall
take all such steps as may be required to cause any dispositions of GFSB Common
Stock (including derivative securities with respect to GFSB Common Stock) or
acquisitions of FFBSW Common Stock resulting from the transactions contemplated
by this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to GFSB to be
exempt under Rule 16b-3 promulgated under the Exchange Act. GFSB agrees to
promptly furnish FFBSW with all requisite information necessary for FFBSW to
take the actions contemplated by this Section 5.14.
5.15 DIVIDENDS. After the date of this Agreement, GFSB shall declare and
pay dividends on the GFSB Common Stock on a quarterly basis and each of FFBSW
and GFSB shall coordinate with the other regarding the payment of dividends with
respect to the FFBSW Common Stock and the GFSB Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of FFBSW Common Stock and GFSB Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their shares of FFBSW Common Stock and/or GFSB Common Stock or any
shares of FFBSW Common Stock that any such holder receives in exchange for such
shares of GFSB Common Stock in the Merger.
ARTICLE VI
CONDITIONS TO CONSUMMATION
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction of the
following conditions:
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(a) Stockholder Approval. This Agreement shall have been approved by
the requisite vote of GFSB's and FFBSW's stockholders in accordance with
applicable laws and regulations.
(b) Regulatory Approvals. All approvals, consents or waivers of any
Governmental Entity required to permit consummation of the transactions
contemplated by this Agreement shall have been obtained and shall remain in full
force and effect, and all statutory waiting periods shall have expired;
provided, however, that none of such approvals, consents or waivers shall
contain any condition or requirement that would reasonably be likely to have or
result in a Material Adverse Effect on FFBSW and its Subsidiaries after the
Effective Time.
(c) No Injunctions or Restraints; Illegality. No party hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger or the
Bank Merger and no Governmental Entity shall have instituted any proceeding for
the purpose of enjoining or prohibiting the consummation of the Merger or the
Bank Merger or any transactions contemplated by this Agreement. No statute, rule
or regulation shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or makes illegal consummation of the Merger.
(d) Registration Statement; Blue Sky Laws. The Registration Statement
shall have been declared effective by the SEC and no proceedings shall be
pending or threatened by the SEC to suspend the effectiveness of the
Registration Statement, and FFBSW shall have received all required approvals by
state securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement.
(e) Third Party Consents. FFBSW and GFSB shall have obtained the
consent or approval of each person (other than the governmental approvals or
consents referred to in Section 6.1(b)) whose consent or approval shall be
required to consummate the transactions contemplated by this Agreement, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on FFBSW (after
giving effect to the consummation of the transactions contemplated hereby).
(f) Tax Opinion. FFBSW and GFSB shall have received an opinion from
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C., dated as of the Closing Date, in form and
substance customary in transactions of the type contemplated hereby, and
reasonably satisfactory to GFSB and FFBSW, as the case may be, substantially to
the effect that on the basis of the facts, representations and assumptions set
forth in such opinions which are consistent with the state of facts existing at
the Effective Time, (i) the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the IRC,
(ii) FFBSW and GFSB will each be a party to that reorganization within the
meaning of Section 368(b) of the IRC and (iii) except to the extent of any cash
received in lieu of a fractional share interest in FFBSW Common Stock and cash
consideration received in the Merger, no gain or loss will be recognized by the
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stockholders of GFSB who exchange their GFSB Common Stock for FFBSW Common Stock
pursuant to the Merger. Such opinion may be based on, in addition to the review
of such matters of fact and law as counsel considers appropriate,
representations contained in certificates of officers of FFBSW, GFSB and others.
6.2 CONDITIONS TO THE OBLIGATIONS OF FFBSW. The obligations of FFBSW to
effect the Merger shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by FFBSW in
accordance with Section 8.3 hereof:
(a) GFSB's Representations and Warranties. Each of the representations
and warranties of GFSB contained in Sections 3.2(a) (i) shall be true and
correct in all material respects as of the date of this Agreement; and (ii)
shall be true and correct as of the Effective Date as though made anew as of the
Effective Date, unless the representation and warranty relates only to a
specified earlier date; provided however, in the case of clause (ii),
inaccuracies in such representations and warranties arising from events
occurring after the date of this Agreement will be disregarded if the
circumstances giving rise to such inaccuracies (considered collectively) do not
have, and are not likely to result in, a Material Adverse Effect on GFSB;
provided, however, that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect" qualifications and
other materiality qualifications contained in such representations and
warranties shall be disregarded.
(b) Performance of GFSB's Obligations. GFSB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time.
(c) Officers' Certificate. FFBSW shall have received a certificate
signed by the chief executive officer and the chief financial or principal
accounting officer of GFSB to the effect that the conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(d) No Violation of Agreements with Employees. Prior to the Effective
Time, there shall be no violation of (1) the employment agreement entered into
between First Federal Bank and Xxxxx X. Xxxxxxx, (2) the employment agreement
entered into between First Federal Bank and Xxxxxxx X. Xxxxxx, and (3) any of
the mutual release and non-compete agreements entered into by other employees of
GFSB.
(e) Minimum Capital. Immediately prior to the Effective Time, Gallup
Federal shall have capital levels at least equal to those capital levels
reported by it as of December 31, 2003 on Schedule CCR of the Thrift Financial
Report filed with the OTS, less merger related expenses up to $1,073,840 and
without giving effect to the impact of the exercise of any GFSB Stock Options.
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6.3 CONDITIONS TO THE OBLIGATIONS OF GFSB. The obligations of GFSB to
effect the Merger shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by GFSB:
(a) FFBSW's Representations and Warranties. Each of the
representations and warranties of FFBSW contained in Sections 3.3(a) (i) shall
be true and correct in all material respects as of the date of this Agreement;
and (ii) shall be true and correct as of the Effective Date as though made anew
as of the Effective Date, unless the representation and warranty relates only to
a specified earlier date; provided however, in the case of clause (ii),
inaccuracies in such representations and warranties arising from events
occurring after the date of this Agreement will be disregarded if the
circumstances giving rise to such inaccuracies (considered collectively) do not
have, and are not likely to result in, a Material Adverse Effect on FFBSW;
provided, however, that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect" qualifications and
other materiality qualifications contained in such representations and
warranties shall be disregarded.
(b) Performance of FFBSW's Obligations. FFBSW shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time.
(c) Officers' Certificate. GFSB shall have received a certificate
signed by the chief executive officer and the chief financial or principal
accounting officer of FFBSW to the effect that the conditions set forth in
Sections 6.3(a) and (b) have been satisfied.
(d) Deposit of Merger Consideration. FFBSW shall have deposited with
the Exchange Agent sufficient cash to pay the aggregate Cash Consideration and
shall have irrevocably instructed its transfer agent to issue shares for the
aggregate Stock Consideration.
(e) Minimum Capital. Immediately prior to the Effective Time, First
Federal Bank shall have capital levels at least equal to those capital levels
reported by the it as of December 31, 2003 on Schedule CCR of the Thrift
Financial Report filed with the OTS, less merger related expenses up to $765,000
and without giving effect to the exercise of any FFBSW stock options.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, by action taken or
authorized by the Board of Directors of the terminating party, either before or
after any requisite stockholder approval:
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(a) by the mutual written consent of FFBSW and GFSB; or
(b) by either FFBSW or GFSB, in the event of the failure of GFSB's
stockholders to approve the Agreement at the GFSB Stockholder Meeting; provided,
however, that GFSB shall only be entitled to terminate the Agreement pursuant to
this clause if it has complied in all material respects with its obligations
under Section 5.8; or
(c) by either FFBSW or GFSB, upon written notice to the other, if
either (i) any approval, consent or waiver of a Governmental Entity required to
permit consummation of the transactions contemplated by this Agreement shall
have been denied or (ii) any Governmental Entity of competent jurisdiction shall
have issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement; or
(d) by either FFBSW or GFSB, in the event that the Merger is not
consummated by June 30, 2005, unless the failure to so consummate by such time
is due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein;
or
(e) by either FFBSW or GFSB, upon written notice to the other,
(provided that the party seeking termination is not then in material breach of
any representation, warranty, covenant or other agreement contained herein), in
the event of a breach of any covenant or agreement on the part of the other
party set forth in this Agreement, or if any representation or warranty of the
other party shall have become untrue, in either case such that the conditions
set forth in Sections 6.2(a) and (b) or Sections 6.3(a) and (b), as the case may
be, would not be satisfied and such breach or untrue representation or warranty
has not been or cannot be cured within thirty (30) days following written notice
to the party committing such breach or making such untrue representation or
warranty;
(f) by FFBSW, if (i) the GFSB shareholders fail to approve the
Agreement or GFSB does not comply with its obligations under Section 5.8 hereof
and (ii) the Board of Directors of GFSB does not publicly recommend in the Proxy
Statement-Prospectus that stockholders approve and adopt this Agreement or if,
after recommending in the Proxy Statement-Prospectus that stockholders approve
and adopt this Agreement, the Board of Directors of GFSB withdraws, qualifies or
revises such recommendation in any respect materially adverse to FFBSW; or
(g) at any time prior to the GFSB Stockholder Meeting, by GFSB in
order to concurrently enter into an acquisition agreement or similar agreement
(each an "Acquisition Agreement") with respect to a Superior Proposal which has
been received and considered by GFSB and GFSB's Board of Directors in compliance
with Section 5.1 hereof, provided, however, that this Agreement may be
terminated by GFSB pursuant to this Section 7.1(g) only after the second
business day following the receipt by FFBSW of written notice from GFSB advising
FFBSW that GFSB is prepared to enter into an
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Acquisition Agreement with respect to a Superior Proposal, and describing in
reasonable detail such proposal and only if, during such five business day
period, FFBSW does not, in its sole discretion, make an offer to GFSB that
GFSB's Board of Directors determines in good faith, after consultation with its
financial advisors, is at least as favorable as the Superior Proposal; or
(h) by FFBSW, if any person or group (as those terms are defined in
the Exchange Act), other than FFBSW or any Subsidiary or any group already
owning 25% of more of FFBSW, shall have acquired beneficial ownership of 25% or
more of the voting power of GFSB or any of its significant Subsidiaries; or
(i) by FFBSW at any time after GFSB becomes entitled to terminate the
Agreement under paragraph (g) above.
7.2 TERMINATION FEE.
(a) If FFBSW terminates this Agreement pursuant to Section 7.1((f) or
(i)),or GFSB terminates this Agreement pursuant to Section 7.1(g), then GFSB
shall make payment to FFBSW of a termination fee in the amount of $800,000. Such
amount shall be paid by wire transfer of immediately available funds within two
business days following such termination.
(b) If this Agreement is terminated by (i) FFBSW pursuant to Section
7.1(e) or (ii) either party pursuant to Section 7.1(b), and in any such case an
Acquisition Proposal has been publicly announced, disclosed or communicated or
made known to the senior management or the Board of Directors of GFSB at any
time after the date of this Agreement and prior to the date of the Stockholders
Meeting, in the case of clause (ii), or the date of termination, in the case of
clause (i), then GFSB shall make payment to FFBSW of a termination fee in the
amount of $800,000 if within 12 months after such termination, GFSB shall
consummate or enter into any agreement with respect to such Acquisition
Proposal. Such amount shall be paid by wire transfer of immediately available
funds on the date of such execution or consummation.
(c) Notwithstanding anything herein to the contrary, in no event shall
the aggregate amount that GFSB must pay to FFBSW pursuant to Sections 7.2(a) and
(b) exceed $ 800,000.
7.3 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either FFBSW or GFSB as provided in Section 7.1, this Agreement shall forthwith
become void and, subject to Section 7.2, have no effect, and there shall be no
liability on the part of any party hereto or their respective officers and
directors, except that (i) Sections 5.3(c), 7.2, and 8.6, shall survive any
termination of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
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ARTICLE VIII
CERTAIN OTHER MATTERS
8.1 INTERPRETATION. When a reference is made in this Agreement to Sections
or Exhibits such reference shall be to a Section of, or Exhibit to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to include any other
gender.
8.2 SURVIVAL. Only those agreements and covenants of the parties that are
by their terms applicable in whole or in part after the Effective Time,
including Section 5.13 of this Agreement, shall survive the Effective Time. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of the Agreement and shall not survive the Effective Time.
8.3 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Agreement may be: (i) waived in writing by the party benefited by the provision
or (ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto except that,
after the vote by the stockholders of GFSB, no amendment or modification may be
made that would reduce the amount or alter or change the kind of consideration
to be received by holders of GFSB Common Stock or contravene any provision of
the DGCL, the federal and state securities and banking laws, or any of the rules
and regulations thereunder.
8.4 COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
8.5 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that the provisions contained in this Agreement are not
performed in accordance with its specific terms and conditions, or are otherwise
breached. Thus, parties hereto agree that each shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any competent court of
jurisdiction in the United States, and that such remedy is in addition to any
other remedy to which such party is entitled at law or in equity.
8.6 GOVERNING LAW. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, without regard to conflicts
of laws principles.
8.7 EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that
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expenses incurred in connection with the printing and mailing of the Proxy
Statement-Prospectus and Registration Statement shall be shared equally by FFBSW
and GFSB.
8.8 NOTICES. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, overnight courier or facsimile
transmission to such party at its address or facsimile number set forth below or
such other address or facsimile transmission as such party may specify by notice
(in accordance with this provision) to the other party hereto.
If to FFBSW, to:
First Federal Banc of the Southwest, Inc.
000 Xxxxx Xxxxxxxxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Xx.
With a copy to:
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, PC
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxx, Esq.
If to GFSB, to:
GFSB Bancorp, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Facsimile: (000)000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
With a copy to:
Xxxxxxx Spidi & Xxxxx, P.C.
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxx 000 Xxxx
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
8.9 ENTIRE AGREEMENT; ETC. This Agreement, together with the Disclosure
Letters, represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made. All terms and provisions of
this Agreement shall be
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binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Except for Section 5.13, which confers rights
on the parties described therein, nothing in this Agreement is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
8.10 SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either party hereto without the written consent of the other party.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
By: /s/ Xxxxxx X. Xxxx, Xx.
-----------------------------------------
Xxxxxx X. Xxxx, Xx.
President and Chief Executive Officer
GFSB BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
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