Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
between
CITIZENS FINANCIAL SERVICES, FSB
and
SUBURBFED FINANCIAL CORP.
dated as of December 29, 1997
(without exhibits)
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................... 1
ARTICLE II THE MERGER........................................................... 7
2.1 The Merger........................................................... 7
2.2 Effective Time; Closing.............................................. 7
2.3 Treatment of Capital Stock........................................... 8
2.4 Shareholder Rights; Stock Transfers.................................. 8
2.5 Dissenting Shares.................................................... 9
2.6 Fractional Shares.................................................... 9
2.7 Options.............................................................. 9
2.8 Exchange Procedures.................................................. 10
2.9 Additional Actions................................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...................................................... 13
3.1 Capital Structure.................................................... 13
3.2 Organization, Standing and Authority of the Company.................. 13
3.3 Ownership of the Company Subsidiaries................................ 13
3.4 Organization, Standing and Authority of
the Company Subsidiaries........................................... 14
3.5 Authorized and Effective Agreement................................... 14
3.6 Securities Documents and Regulatory Reports.......................... 15
3.7 Financial Statements................................................. 16
3.8 Material Adverse Change.............................................. 17
3.9 Environmental Matters................................................ 17
3.10 Tax Matters.......................................................... 18
3.11 Legal Proceedings.................................................... 18
3.12 Compliance with Laws................................................. 19
3.13 Certain Information.................................................. 19
3.14 Employee Benefit Plans............................................... 20
3.15 Certain Contracts.................................................... 21
3.16 Brokers and Finders.................................................. 22
3.17 Insurance............................................................ 22
3.18 Properties........................................................... 23
3.19 Labor................................................................ 23
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3.20 Affiliates........................................................... 23
3.21 Allowance for Loan Losses............................................ 23
3.22 Fairness Opinion..................................................... 24
3.23 Disclosures.......................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF CITIZENS........................................................ 24
4.1 Capital Structure.................................................... 24
4.2 Organization, Standing and Authority of Citizens and the Holding
Company ........................................................... 24
4.3 Ownership of the Citizens Subsidiaries............................... 25
4.4 Organization, Standing and Authority
of the Citizens Subsidiaries....................................... 25
4.5 Authorized and Effective Agreement................................... 25
4.6 Regulatory Reports................................................... 27
4.7 Financial Statements................................................. 27
4.8 Material Adverse Change.............................................. 28
4.9 Environmental Matters................................................ 28
4.10 Tax Matters.......................................................... 29
4.11 Legal Proceedings.................................................... 30
4.12 Compliance with Laws................................................. 30
4.13 Certain Information.................................................. 31
4.14 Employee Benefit Plans............................................... 31
4.15 Certain Contracts.................................................... 32
4.16 Brokers and Finders.................................................. 33
4.17 Insurance............................................................ 33
4.18 Properties........................................................... 33
4.19 Labor................................................................ 34
4.20 Ownership of Company Common Stock.................................... 34
4.21 Allowance for Losses on Loans........................................ 34
4.22 Disclosures.......................................................... 34
ARTICLE V COVENANTS............................................................ 35
5.1 Reasonable Best Efforts.............................................. 35
5.2 Shareholder and Member Meetings...................................... 35
5.3 Regulatory Matters................................................... 35
5.4 Investigation and Confidentiality.................................... 36
5.5 Press Releases....................................................... 37
5.6 Business of the Parties.............................................. 38
5.7 Certain Actions...................................................... 41
5.8 Current Information.................................................. 41
5.9 Indemnification; Insurance........................................... 42
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5.10 Directors............................................................ 44
5.11 Employees and Employee Benefit Plans................................. 44
5.12 Bank Merger.......................................................... 47
5.13 Organization of the Holding Company.................................. 48
5.14 Affiliates' Letters.................................................. 48
5.15 Accountants' Letters................................................. 48
5.16 Integration of Policies.............................................. 48
5.17 Disclosure Supplements............................................... 48
5.18 Failure to Fulfill Conditions........................................ 49
ARTICLE VI CONDITIONS PRECEDENT................................................. 49
6.1 Conditions Precedent - Citizens and the Company...................... 49
6.2 Conditions Precedent - The Company................................... 51
6.3 Conditions Precedent - Citizens...................................... 52
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT.................................... 53
7.1 Termination.......................................................... 53
7.2 Effect of Termination................................................ 54
7.3 Survival of Representations, Warranties
and Covenants...................................................... 54
7.4 Waiver............................................................... 54
7.5 Amendment or Supplement.............................................. 55
ARTICLE VIII MISCELLANEOUS................................................................ 55
8.1 Expenses; Termination Fees........................................... 55
8.2 Entire Agreement..................................................... 57
8.3 No Assignment........................................................ 57
8.4 Notices.............................................................. 57
8.5 Alternative Structure................................................ 58
8.6 Interpretation....................................................... 58
8.7 Counterparts......................................................... 58
8.8 Governing Law........................................................ 59
Exhibit A Form of Employment Agreement with Xxxxxx X. Xxxx
Exhibit B Form of Employment Agreement with Xxxxx X. Xxxxxx
Exhibit C Form of Employment Agreement with Xxxxxx X. Stock
Exhibit D Form of Shareholder Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of December
29, 1997, by and among Citizens Financial Services, FSB ("Citizens"), a
federally-chartered savings bank, and SuburbFed Financial Corp. (the "Company"),
a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Citizens and the Company have
determined to consummate the business combination transactions provided for
herein, subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Application for Conversion" shall mean the application submitted by
Citizens to the OTS pursuant to the HOLA and the regulations of the OTS
thereunder in connection with the Conversion, as amended and supplemented.
"Bank" shall mean Suburban Federal Savings Bank, a federally-chartered
savings bank and a wholly-owned subsidiary of the Company.
"Bank Merger" shall have the meaning set forth in Section 5.12 hereof.
"Bank Merger Agreement" shall have the meaning set forth in Section
5.12 hereof.
"BIP" means the Bank Incentive Plan and Trusts.
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Citizens Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Citizens Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Citizens as of December 31, 1996, 1995 and 1994 and the consolidated statements
of income, retained income and cash flows (including related notes and
schedules, if any) of Citizens for each of the three years ended December 31,
1996, 1995 and 1994, and (ii) the consolidated statements of condition of
Citizens (including related notes and schedules, if any) and the consolidated
statements of income, retained income and cash flows (including related notes
and schedules, if any) of Citizens with respect to the periods ended subsequent
to December 31, 1996.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Affiliate" shall mean any person who is deemed, for purposes
of Rule 145 under the Securities Act, to be an "affiliate" of the Company.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of December 31, 1996, 1995 and 1994 and the consolidated
statements of earnings, changes in stockholders' equity and cash flows
(including related notes and schedules, if any) of the Company for each of the
three years ended December 31, 1996, 1995 and 1994 as filed by the Company in
its Securities Documents, and (ii) the consolidated statements of financial
condition of the Company (including related notes and schedules, if any) and the
consolidated statements of earnings, changes in stockholders' equity and cash
flows (including related notes and schedules, if any) of the Company included in
the Securities Documents filed by the Company with respect to the periods ended
subsequent to December 31, 1996.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Option Plans.
"Company Option Plan" shall mean each of the following stock option
plans of the Company, as amended and as in effect as of the date hereof: the
1991 Stock Option and
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Incentive Plan, the 1995 Stock Option and Incentive Plan and the 1997 Stock
Option and Incentive Plan (collectively, the "Company Option Plans").
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of the Company.
"Conversion" shall mean (i) the amendment of Citizens' Charter to
authorize the issuance of capital stock and otherwise to conform to the
requirements of a stock savings bank chartered under the laws of the United
States, (ii) the issuance of Holding Company Common Stock to eligible account
holders of Citizens and others in connection therewith, (iii) the purchase by
the Holding Company of all of the capital stock of Citizens to be sold by
Citizens in connection with its conversion from mutual to stock form and (iv)
the establishment of a private charitable foundation.
"Dissenting Shares" shall have the meaning set forth in Section 2.5
hereof.
"DGCL" shall mean the General Corporation Law of the State of Delaware,
as amended.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 9601, et seq; the Emergency Planning and Community Right to Know Act, 42
U.S.C. Section 1101, et seq; the Safe Drinking Water Act,
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42 U.S.C. Section 300f, et seq; and all comparable state and local laws, and
(ii) any common law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ESOP" shall mean the Company's Employee Stock Ownership Plan and
Trust.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-1" shall mean the registration statement on Form S-1 (or on any
successor or other appropriate form) to be filed by the Holding Company in
connection with the issuance of shares of Holding Company Common Stock in
connection with the Merger and the Conversion, as amended and supplemented.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"Holding Company" shall mean a business corporation which shall be
organized by Citizens under the DGCL for the purposes of becoming the holding
company of Citizens upon consummation of the Conversion and acquiring the
Company pursuant to the terms of this Agreement.
"Holding Company Common Stock" shall mean the common stock, par value
$.01 per share, of the Holding Company.
"Holding Company Preferred Stock" shall mean the preferred stock, par
value $.01 per share, of the Holding Company.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
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"Initial Public Offering Price" shall mean the price per share at which
Holding Company Common Stock is ultimately sold by the Holding Company to
eligible account holders of Citizens and others in connection with the
Conversion.
"Material Adverse Effect" shall mean, (i) with respect to the Company,
any effect that is material and adverse to the financial condition, results of
operations or business of the Company and its Subsidiaries taken as whole, or,
in the case of Section 6.3(a) hereof, the Company and its Subsidiaries and the
Holding Company taken as a whole after giving effect to the Conversion, (ii)
with respect to Citizens, any effect that is material and adverse to the
financial condition, results of operations, or business of Citizens and its
Subsidiaries taken as a whole, or (iii) materially impairs the ability of either
the Company or the Bank, on the one hand, or the Holding Company or Citizens, on
the other hand, to consummate the Merger or any of the other transactions
contemplated by this Agreement, provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof that are generally applicable to the banking or
savings industries, (b) changes in generally accepted accounting principles that
are generally applicable to the banking or savings industries, (c) expenses
incurred in connection with the transactions contemplated hereby, (d) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior informed
written consent of the other party or parties in contemplation of the
transactions contemplated hereby or (e) changes attributable to or resulting
from changes in general economic conditions, including changes in the prevailing
level of interest rates.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Member" shall mean any person, firm or entity qualifying as a member
of Citizens in accordance with its Charter and Bylaws.
"Merger" shall have the meaning set forth in Section 2.1(a) hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a disclosure
schedule dated the date hereof delivered from the disclosing party to the other
party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein, or (ii) a
supplement to the disclosure schedule dated after the date hereof
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from the disclosing party specifically referring to this Agreement and
describing in reasonable detail the matters contained therein and delivered by
the other party pursuant to Section 5.17 hereof.
"Prospectus" shall mean the prospectus to be delivered to (i)
shareholders of the Company in connection with the offering of Holding Company
Common Stock in connection with the Merger pursuant to this Agreement and (ii)
eligible account holders of Citizens and others in connection with the offering
of Holding Company Common Stock in connection with the Conversion, as amended
and supplemented.
"Proxy Statements" shall mean the proxy statements to be delivered to
(i) shareholders of the Company in connection with the solicitation of their
approval of this Agreement and the transactions contemplated hereby and (ii)
members of Citizens in connection with the solicitation of their approval of the
Conversion and the transactions contemplated thereby, as amended and
supplemented.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1- 02 of Regulation S-X of the Commission.
"Surviving Bank" shall have the meaning set forth in section 5.12
hereof.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
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ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Holding Company (the "Merger") in accordance with the
provisions of Section 251 of the DGCL. The Holding Company shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
of the Merger, and shall continue its corporate existence under the laws of the
State of Delaware. The name of the Surviving Corporation shall be as stated in
the Certificate of Incorporation of the Holding Company immediately prior to the
Effective Time. Upon consummation of the Merger, the separate corporate
existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL.
(c) The Certificate of Incorporation and Bylaws of the Holding Company,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be
as stated in the Certificate of Incorporation of the Holding Company immediately
prior to the Effective Time.
(e) The directors and officers of the Holding Company immediately prior
to the Effective Time, together with the directors and officers elected pursuant
to Section 5.10(a) and 5.11(e) hereof, shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation as well as
the provisions hereof.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
a certificate of merger with the Secretary of State of the State of Delaware
(the "Certificate of Merger"), unless a later date and time is specified as the
effective time in such Certificate of Merger (the "Effective Time"). The
Effective Time will occur simultaneously with, or immediately after, the
consummation of the Conversion. A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Central Time, following
the satisfaction or waiver, to the extent permitted hereunder, of the conditions
to the consummation of the Merger specified in Article VI of this Agreement
(other than the delivery of certificates, opinions and other instruments and
documents to be delivered at the
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Closing) (the "Closing Date"), at such place and at such time as the parties may
mutually agree upon. At the Closing, there shall be delivered to Citizens and
the Holding Company, on the one hand, and the Company, on the other hand, the
opinions, certificates and other documents required to be delivered under
Article VI hereof.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(i) each share of Holding Company Common Stock issued and
outstanding immediately prior to the Effective Time (consisting of
shares issued or to be issued by the Holding Company in connection with
the Conversion) shall be unchanged and shall remain issued and
outstanding;
(ii) each share of Company Common Stock owned by the Company
(including treasury shares) or the Holding Company or any of their
respective Subsidiaries (other than shares held in a fiduciary capacity
for the benefit of third parties or as a result of debts previously
contracted) shall be cancelled and retired and shall not represent
capital stock of the Holding Company and shall not be exchanged for
shares of Holding Company Common Stock, or other consideration; and
(iii) each share of Company Common Stock which under the terms
of Section 2.8 hereof is to be converted into the right to receive
shares of Holding Company Common Stock shall, subject to Section 2.6
hereof, be converted into and become the right to receive a number of
shares of Holding Company Common Stock equal to the quotient
(calculated to the nearest one-thousandth) determined by dividing
$36.00 by the Initial Public Offering Price (or 3.6 shares assuming an
Initial Public Offering Price of $10.00 per share) (the "Exchange
Ratio").
2.4 Shareholder Rights; Stock Transfers
At the Effective Time, holders of Company Common Stock shall cease to
be and shall have no rights as shareholders of the Company, other than to
receive the consideration provided under Sections 2.3 and 2.6 hereof. After the
Effective Time, there shall be no transfers on the stock transfers books of the
Company or the Surviving Corporation of shares of Company Common Stock and if
certificates evidencing such shares are presented for transfer after the
Effective Time, they shall be cancelled against delivery of certificates for
whole shares of Holding Company Common Stock (plus cash in lieu of any
fractional share interest) or cash (without interest) as herein provided.
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2.5 Dissenting Shares
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the DGCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Holding Company
Common Stock and the holder thereof shall be entitled only to such rights as are
granted by the DGCL. Any payments made in respect of Dissenting Shares shall be
made by the Surviving Corporation. If any dissenting shareholder shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to such payment at or prior to the Effective Time, such holder's shares of
Company Common Stock shall be converted into a right to receive Holding Company
Common Stock at the Exchange Ratio, subject to the provisions of Section 2.6
hereof. If such holder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment after the Effective Time, each
share of Company Common Stock of such holder shall be converted into the right
to receive Holding Company Common Stock at the Exchange Ratio, subject to the
provisions of Section 2.6 hereof.
2.6 Fractional Shares
Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Company Common Stock.
In lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Holding Company Common Stock shall, at the time of
surrender of the certificate or certificates representing such holder's shares,
receive an amount of cash (without interest) equal to the amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the Initial Public Offering Price. No such holder shall be
entitled to dividends, voting rights or any other rights in respect of
fractional shares.
2.7 Options
(a) At the Effective Time, each Company Option which is then
outstanding, whether or not exercisable, shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically into
a right to purchase shares of Holding Company Common Stock, and the Holding
Company shall assume each Company Option, in accordance with the terms of the
applicable Company Option Plan and stock option or other agreement by which it
is evidenced, except that from and after the Effective Time, (i) the Holding
Company and either its Board of Directors or a committee consisting solely of
two or more Non-Employee Directors, as defined in Rule 16b-3(b)(3) under the
Exchange Act, shall be substituted for the Company and the committee of the
Company's Board of Directors (including, if applicable, the entire Board of
Directors of the Company) administering such Company Option Plan, (ii) the
number of shares of Holding Company Common Stock subject to such Company Option
shall be equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, provided that any fractional shares of
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Holding Company Common Stock resulting from such multiplication shall be rounded
to the nearest share, and (iii) the per share exercise price under each such
Company Option shall be adjusted by dividing the per share exercise price under
each such Company Option by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. Notwithstanding clauses (ii) and
(iii) of the preceding sentence, each Company Option which is an "incentive
stock option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. The Holding Company and the Company shall take all necessary steps to
effect the foregoing provisions of this Section 2.7(a).
(b) As soon as practicable after the Effective Time, the Holding
Company shall deliver to each participant in each Company Option Plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to such Company Option Plan shall continue in effect on the
same terms and conditions, including without limitation the duration thereof,
subject to the adjustments required by Section 2.7(a) hereof after giving effect
to the Merger. Within 30 days after the Effective Time, the Holding Company
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to the shares of
Holding Company Common Stock subject to such options and shall maintain the
current status of the prospectus or prospectuses contained therein for so long
as such options remain outstanding.
2.8 Exchange Procedures
(a) The Holding Company shall designate an exchange agent, reasonably
acceptable to the Company, to act as agent (the "Exchange Agent") for purposes
of conducting the exchange procedure as described herein. No later than seven
business days following the Effective Time, the Holding Company shall cause the
Exchange Agent to mail or make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock (i) a notice
and letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the certificates theretofore representing shares
of Company Common Stock shall pass only upon proper delivery of such
certificates to the Exchange Agent) advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock in exchange
for the consideration set forth in Section 2.3 hereof deliverable in respect
thereof pursuant to this Agreement.
(b) At the Effective Time, the Holding Company shall issue to the
Exchange Agent the number of shares of Holding Company Common Stock issuable in
the Merger, which shall be held by the Exchange Agent in trust for the holders
of Company Common Stock. The Exchange Agent shall promptly distribute Holding
Company Common Stock (and cash in lieu of fractional shares pursuant to Section
2.6 hereof) as provided herein.
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The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the shares of Holding Company 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.
(c) Each holder of an outstanding certificate or certificates which
prior thereto represented shares of Company Common Stock who surrenders such
certificate or certificates to the Exchange Agent will, upon acceptance thereof
by the Exchange Agent, be entitled to a certificate or certificates representing
the number of full shares of Holding Company Common Stock into which the
aggregate number of shares of company Common Stock previously represented by
such certificate or certificates surrendered shall have been converted pursuant
to this Agreement and any other distribution theretofore paid with respect to
Holding Company Common Stock issuable in the Merger, in each case without
interest. The Exchange Agent shall accept such certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. Each
outstanding certificate which prior to the Effective Time represented Company
Common Stock and which is not surrendered to the Exchange Agent in accordance
with the procedures provided for herein shall, except as otherwise herein
provided, until duly surrendered to the Exchange Agent be deemed to evidence
ownership of the number of shares of Holding Company Common Stock into which the
aggregate number of shares of Company Common Stock previously represented by
such certificate shall have been converted pursuant to the terms of this
Agreement. After the Effective Time, there shall be no further transfer on the
records of the Company of certificates representing shares of Company Common
Stock and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of certificates for Holding Company Common
Stock or cash as hereinabove provided. No dividends which have been declared
will be remitted to any person entitled to receive shares of Holding Company
Common Stock under this Section 2.8 until such person surrenders the certificate
or certificates representing Company Common Stock, at which time such dividends
shall be remitted to such person, without interest.
(d) The Holding Company shall not be obligated to deliver a certificate
or certificates representing shares of Holding Company Common Stock to which a
holder of Company Common Stock would otherwise be entitled as a result of the
Merger until such holder surrenders the certificate or certificates representing
the shares of Company Common Stock for exchange as provided in this Section 2.8,
or, in default thereof, an appropriate affidavit of loss and indemnity agreement
and/or a bond as may be required in each case by the Holding Company. If any
certificates evidencing shares of Holding Company Common Stock are to be issued
in a name other than that in which the certificate evidencing Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered shall be properly
endorsed or accompanied by an executed form of assignment separate from the
certificate and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a
11
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(e) Any portion of the shares of Holding Company Common Stock delivered
to the Exchange Agent by the Holding Company pursuant to Section 2.8(b) that
remains unclaimed by the shareholders of Company for six months after the
Effective Time shall be delivered by the Exchange Agent to the Holding Company.
Any shareholders of the Company who have not theretofore complied with Section
2.8(c) shall thereafter look only to the Holding Company for the consideration
deliverable in respect of each share of Company Common Stock such shareholder
holds as determined pursuant to this Agreement without any interest thereon. If
outstanding certificates for shares of Company Common Stock are not surrendered
or the payment for them is not claimed prior to the date on which such shares of
Holding Company Common Stock or cash would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to the
extent permitted by abandoned property and any other applicable law, become the
property of the Holding Company (and to the extent not in its possession shall
be delivered to it), free and clear of all claims or interest of any person
previously entitled to such property. Neither the Exchange Agent nor any party
to this Agreement shall be liable to any holder of Company Common Stock
represented by any certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. The Holding
Company and the Exchange Agent shall be entitled to rely upon the stock transfer
books of the Company to establish the identity of those persons entitled to
receive consideration specified in this Agreement, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any certificate, the Holding Company and the
Exchange Agent shall be entitled to deposit any consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
2.9 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement, the Company
and its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Citizens as follows, except as
Previously Disclosed:
3.1 Capital Structure
The authorized capital stock of the Company consists of 2,000,000
shares of Company Common Stock and 500,000 shares of Company Preferred Stock. As
of the date hereof, 1,264,383 shares of Company Common Stock are issued and
outstanding, 104,318 shares of Company Common Stock are held in treasury, and no
shares of Company Preferred Stock are issued and outstanding. All outstanding
shares of Company Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable, and none of the outstanding shares of Company
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for Company Options to acquire not more than
264,967 shares of Company Common Stock as of the date hereof, a schedule of
which has been Previously Disclosed, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized and, validly existing under
the laws of the State of Delaware with full corporate power and authority to own
or lease all of its properties and assets and to carry on its business as now
conducted and is duly licensed or qualified to do business in each jurisdiction
in which its ownership or leasing of property or the conduct of its business
requires such licensing or qualification, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on the Company. The Company is duly registered as a savings and loan holding
company under the HOLA and the regulations of the OTS thereunder. The Company
has heretofore delivered to Citizens true and complete copies of the Certificate
of Incorporation and Bylaws of the Company as in effect as of the date hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (x) capital stock of the Company Subsidiaries, (y) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted and (z) securities and
other interests which are Previously Disclosed, the Company does not own or have
the right to acquire, directly or indirectly, any outstanding capital stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture
13
or other organization, other than investment securities representing not more
than 5% of any entity. The outstanding shares of capital stock or other
ownership interests of each Company Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable, and are directly owned by the
Company free and clear of all liens, claims, encumbrances, charges, pledges,
restrictions or rights of third parties of any kind whatsoever. No rights are
authorized, issued or outstanding with respect to the capital stock or other
ownership interests of the Company Subsidiaries and there are no agreements,
understandings or commitments relating to the right of the Company to vote or to
dispose of such capital stock or other ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Company Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The deposit
accounts of the Bank are insured by the SAIF to the maximum extent permitted by
the FDIA and the Bank has paid all deposit insurance premiums and assessments
required by the FDIA and the regulations thereunder. The Company has heretofore
delivered or made available to Citizens true and complete copies of the Charter
and Bylaws of the Bank as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by Citizens, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Bank Merger), nor compliance by the Company with any of the provisions
hereof (i) does or will conflict with or result in a breach of any provisions of
the Certificate of Incorporation or Bylaws of the
14
Company or the equivalent documents of any Company Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or a
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or a Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or a Company Subsidiary.
(c) To the best knowledge of the Company and the Bank, except for (i)
the filing of applications with and the approvals of the OTS, (ii) the filing
and effectiveness of the Form S-1 and the Proxy Statement relating to the
meeting of shareholders of the Company to be held pursuant to Section 5.2 hereof
with the Commission, (iii) the approval of this Agreement by the requisite vote
of the shareholders of the Company, (iv) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL in
connection with the Merger and, (v) the filing of Articles of Combination with
the OTS in connection with the Bank Merger, (vi) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of the Company or the Bank in connection with (x) the execution and
delivery by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby and (y) the execution and delivery by the
Bank of the Bank Merger Agreement and the consummation of the transactions
contemplated thereby.
(d) As of the date hereof, neither the Company nor the Bank is aware of
any reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement and the Bank Merger Agreement as
shall be necessary for (i) consummation of the transactions contemplated by this
Agreement and the Bank Merger Agreement and (ii) the continuation by the Holding
Company and Citizens after the Effective Time of the business of the Company and
the Bank, respectively, as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements which, in the reasonable
opinion of the Company, could have a Material Adverse Effect on the Holding
Company or Citizens or materially impair the value of the Company and the Bank
to the Holding Company and Citizens, respectively.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1994, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities
15
Documents complied in all material respects with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Since January 1, 1994, each of the Company and the Bank has duly
filed with the OTS and any other applicable federal or state banking authority,
as the case may be, the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of the Company and the Bank by the
OTS, neither the Company nor the Bank was required to correct or change any
action, procedure or proceeding which the Company or the Bank believes has not
been corrected or changed as required as of the date hereof and which could have
a Material Adverse Effect on the Company.
3.7 Financial Statements
(a) The Company has previously delivered or made available to Citizens
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
December 31, 1996, 1995 and 1994 and the consolidated statements of earnings,
changes in stockholders' equity and cash flows for each of the three years ended
December 31, 1996, 1995 and 1994, are accompanied by the audit reports of
Cobitz, Xxxxxxxxxx & Xxxxxxxx, independent certified public accountants with
respect to the Company. The Company Financial Statements referred to herein, as
well as the Company Financial Statements to be delivered pursuant to Section 5.8
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of the Company as of the respective dates set
forth therein, and the consolidated income, changes in stockholders' equity and
cash flows of the Company for the respective periods or as of the respective
dates set forth therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Company and its
Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of
December 31, 1996 (including related notes), (ii) of liabilities incurred since
December 31, 1996 in the ordinary course of business and (iii) of liabilities
incurred in connection with consummation of the
16
transaction contemplated by this Agreement, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 Material Adverse Change
Since September 30, 1997, (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or a Company Subsidiary has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or a Company
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Company or a Company Subsidiary has or may have retained or assumed
either contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
(d) The Company has not conducted any environmental studies during the
past five years with respect to any properties owned by it or a Company
Subsidiary as of the date hereof.
17
3.10 Tax Matters
(a) The Company and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all taxes required to
be paid in respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
material taxes for any subsequent periods ending on or prior to the Effective
Time. Neither the Company nor a Company Subsidiary will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor any Company Subsidiary is delinquent
in the payment of any tax, assessment or governmental charge or has requested
any extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof which have not since been filed. The federal,
state and local income tax returns of the Company and its Subsidiaries have been
examined by the applicable tax authorities (or are closed to examination due to
the expiration of the applicable statute of limitations) and no deficiencies for
any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against the Company or a Company Subsidiary
as a result of such examinations or otherwise which have not been settled and
paid. There are currently no agreements in effect with respect to the Company or
a Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Neither the Company nor any Company Subsidiary (i) is a party to
any agreement providing for the allocation or sharing of taxes, (ii) is required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company or a
Company Subsidiary (nor does the Company have any knowledge that the Internal
Revenue Service has proposed any such adjustment or change of accounting method)
or (iii) has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the
18
Company or a Company Subsidiary or against any asset, interest or right of the
Company or a Company Subsidiary, or against any officer, director or employee of
any of them that in any such case, if decided adversely, would have a Material
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary is
a party to any order, judgment or decree which has or could reasonably be
expected to have a Material Adverse Effect on the Company.
3.12 Compliance with Laws
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor any Company Subsidiary is in violation of
its respective Certificate of Incorporation, Charter or Bylaws, or of any
applicable federal, state or local law or ordinance or any order, rule or
regulation of any federal, state, local or other governmental agency or body
(including, without limitation, all banking (including all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor any Company Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that the Company or any Company Subsidiary is in violation of any of
the foregoing which could reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company nor a Company Subsidiary is subject
to any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to savings banks or holding companies thereof issued by
governmental authorities), and neither of them has received any written
communication requesting that it enter into any of the foregoing.
3.13 Certain Information
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied by them for inclusion in (i) the Form S-1, including
the Prospectus, at the time the Form S-1 and any amendment thereto becomes
effective under the Securities Act, will contain any untrue statement of a
material fact or omit to state a material fact necessary
19
to make the statements therein, in light of the circumstances under which they
were made, not misleading, (ii) the Application for Conversion, at the time the
Application for Conversion and any amendment thereto is approved by the OTS
under the HOLA and the regulations of the OTS thereunder, will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (iii) the Proxy Statements, as of the date or
dates such Proxy Statements are mailed to shareholders of the Company and
Members of Citizens and up to and including the date or dates of the meetings of
shareholders and Members to which such Proxy Statements relate, will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to Citizens accurate
and complete copies of the same together with, in the case of qualified plans,
(i) the most recent actuarial and financial reports prepared with respect
thereto, (ii) the most recent annual reports filed with any governmental agency
with respect thereto, and (iii) all rulings and determination letters and any
open requests for rulings or letters that pertain thereto.
(b) None of the Company, any Company Subsidiary, any Company Employee
Plan constituting an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Company Pension Plan") or, to the best of the Company's
knowledge, any fiduciary of such Company Pension Plan, has incurred any material
liability to the PBGC or the Internal Revenue Service with respect to any such
Company Pension Plan. To the best of the Company's knowledge, no reportable
event under Section 4043(b) of ERISA has occurred with respect to any Company
Pension Plan.
(c) Neither the Company nor any Company Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Pension Plan which is intended to
qualify under Section 401 of the Code to the effect that such Company Pension
Plan is qualified under Section 401 of the Code, and the trust associated with
such Company Pension Plan is tax
20
exempt under Section 501 of the Code. No such letter has been revoked or, to the
best of the Company's knowledge, is threatened to be revoked, and the Company
does not know of any ground on which such revocation may be based. Neither the
Company nor any Company Subsidiary has any liability under any such Company
Pension Plan that is not reflected on the consolidated statement of financial
condition of the Company at December 31, 1996 or the notes thereto included in
the Company Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 Certain Contracts
(a) Neither the Company nor a Company Subsidiary is a party to, is
bound or affected by, receives, or is obligated to pay, benefits under (i) any
agreement, arrangement or commitment, including without limitation any
agreement, indenture or other instrument, relating to the borrowing of money by
the Company or a Company Subsidiary (other than in the case of the Bank
deposits, FHLB advances, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business) or the guarantee by
the Company or a Company Subsidiary of any obligation, other than by the Bank in
the ordinary course of its banking business, (ii) any agreement, arrangement or
commitment
21
relating to the employment of a consultant or the employment, election or
retention in office of any present or former director, officer or employee of
the Company or a Company Subsidiary, (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of the
Company or a Company Subsidiary upon execution of this Agreement or upon or
following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events); (iv) any agreement, arrangement or understanding pursuant to which the
Company or a Company Subsidiary is obligated to indemnify any director, officer,
employee or agent of the Company or a Company Subsidiary; (v) any agreement,
arrangement or understanding to which the Company or a Company Subsidiary is a
party or by which any of the same is bound which limits the freedom of the
Company or a Company Subsidiary to compete in any line of business or with any
person, (vi) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the OTS, the FDIC or any other regulatory
agency, or (vii) any other agreement, arrangement or understanding which would
be required to be filed as an exhibit to the Company's Annual Report on Form
10-K under the Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 Brokers and Finders
Except for Capital Resources, Inc., neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 Insurance
Each of the Company and its Subsidiaries is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations.
22
3.18 Properties
All real and personal property owned by the Company or its Subsidiaries
or presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of its
material properties and assets, real and personal, except (i) liens for current
taxes not yet due or payable (ii) pledges to secure deposits and other liens
incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of condition of the Company as of September 30, 1997 included in the
Company Financial Statements. All real and personal property which is material
to the Company's business on a consolidated basis and leased or licensed by the
Company or a Company Subsidiary is held pursuant to leases or licenses which are
valid and enforceable in accordance with their respective terms and such leases
will not terminate or lapse prior to the Effective Time.
3.19 Labor
No work stoppage involving the Company or a Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor a Company Subsidiary is involved in or, to the best knowledge of the
Company, threatened with or affected by, any labor dispute, arbitration, lawsuit
or administrative proceeding involving the employees of the Company or a Company
Subsidiary which could have a Material Adverse Effect on the Company. Employees
of the Company and the Company Subsidiaries are not represented by any labor
union nor are any collective bargaining agreements otherwise in effect with
respect to such employees, and to the best of the Company's knowledge, there
have been no efforts to unionize or organize any employees of the Company or any
of the Company Subsidiaries during the past five years.
3.20 Affiliates
The Company has Previously Disclosed to Citizens a schedule of each
person that, to the best of its knowledge, is deemed to be a Company Affiliate.
3.21 Allowance for Loan Losses
The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the September 30, 1997 Company
Financial Statements is, or will be in the case of subsequently delivered
Company Financial Statements, as the case may be, in the opinion of the
Company's management, adequate in all material respects as of their respective
dates under the requirements of generally accepted accounting
23
principles to provide for reasonably anticipated losses on outstanding loans net
of recoveries. The real estate owned reflected on the consolidated statements of
financial condition included in the September 30, 1997 Company Financial
Statements is, or will be in the case of subsequently delivered Company
Financial Statements, as the case may be, carried at the lower of cost or fair
value, less estimated costs to sell, as required by generally accepted
accounting principles.
3.22 Fairness Opinion
The Company has received the opinion from Capital Resources, Inc. to
the effect that, as of the date hereof, the consideration to be received by
shareholders of the Company pursuant to this Agreement is fair, from a financial
point of view, to such shareholders.
3.23 Disclosures
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
Citizens in connection with or pursuant to this Agreement or the consummation of
the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CITIZENS
Citizens represents and warrants to the Company as follows, except as
Previously Disclosed:
4.1 Capital Structure
As of the date hereof, Citizens is a federally-chartered savings bank
in mutual form and, as a result, has no authorized or outstanding capital stock.
Upon consummation of the Conversion, Citizens will be a duly organized federal
savings bank in stock form and will have authorized capital stock as set forth
in its Charter.
4.2 Organization, Standing and Authority of Citizens and the Holding Company
(a) Citizens is a savings bank duly organized, validly existing and in
good standing under the laws of the United States, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Citizens is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such
24
licensing or qualification, except where the failure to be so licensed,
qualified or in good standing would not have a Material Adverse Effect on
Citizens. The deposit accounts of Citizens are insured by the SAIF to the
maximum extent permitted by the FDIA, and Citizens has paid all premiums and
assessments required by the FDIA and the regulations thereunder. Citizens has
heretofore delivered to the Company true and complete copies of the Charter and
Bylaws of Citizens as in effect as of the date hereof.
(b) At the Effective Time, the Holding Company will be duly organized,
and validly existing under the DGCL.
4.3 Ownership of the Citizens Subsidiaries
Citizens has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Citizens
Subsidiary. Except for (x) capital stock of the Citizens Subsidiaries, (y)
securities and other interests held in a fiduciary capacity and beneficially
owned by third parties or taken in consideration of debts previously contracted
and (z) securities and other interests which are Previously Disclosed, Citizens
does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture or other
organization, other than investment securities representing not more than 5% of
any entity. The outstanding shares of capital stock or other ownership interests
of each Citizens Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable, and are directly owned by Citizens free and clear
of all liens, claims, encumbrances, charges, pledges, restrictions or rights of
third parties of any kind whatsoever.
4.4 Organization, Standing and Authority of the Citizens Subsidiaries
Each of the Citizens Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Citizens Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing or property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on Citizens.
4.5 Authorized and Effective Agreement
(a) Citizens has, and following its organization the Holding Company
will have, all requisite corporate power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of the Conversion by the Members of Citizens) to perform all of its
respective obligations under this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions
25
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Citizens, except for the
approval of the Conversion by the Members of Citizens, and promptly following
organization of the Holding Company and their execution and delivery of an
instrument of accession pursuant to Section 5.13 of this Agreement, the
execution and delivery of this Agreement by the Holding Company and the
consummation of the transactions contemplated hereby will have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of the Holding Company. This Agreement has been duly and validly executed
and delivered by Citizens and upon its execution and delivery of an instrument
of accession pursuant to Section 5.13 of this Agreement, this Agreement will
have been duly and validly executed and delivered by the Holding Company and,
assuming due authorization, execution and delivery by the Company, this
Agreement constitutes or will constitute, as applicable, a legal, valid and
binding obligation of Citizens, the Holding Company which is enforceable against
Citizens, the Holding Company in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Bank Merger) nor compliance by Citizens or upon its organization the Holding
Company with any of the provisions hereof (i) does or will conflict with or
result in a breach of any provisions of the Charter, Certificate of
Incorporation, Bylaws or similar organizational documents of Citizens, any
Citizens Subsidiary or upon its organization the Holding Company, except that
Citizens will not be authorized to issue capital stock until consummation of the
Conversion, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of Citizens or upon its organization the Holding Company pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Citizens or upon its
organization the Holding Company is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental and Member approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Citizens or upon
its organization the Holding Company.
(c) To the best knowledge of Citizens, except for (i) the filing of
applications and notices with and the approvals of the OTS, (ii) the filing and
effectiveness of the Form S-1 with the Commission, (iii) compliance with
applicable state securities or "blue sky" laws and the NASD Bylaws in connection
with the issuance of Holding Company Common Stock in connection with the Merger
and the Conversion, (iv) the approval of the Conversion by the requisite vote of
the Members of Citizens, (v) the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the DGCL in connection
with the Merger, (vi) review of the Merger by the DOJ under federal antitrust
laws and (vii) the
26
filing of Articles of Combination with the OTS in connection with the Bank
Merger, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on the part of
Citizens or the Holding Company in connection with the (x) execution and
delivery by Citizens of this Agreement, the execution and delivery by the
Holding Company of an instrument of accession to this Agreement pursuant to
Section 5.13 hereof and the consummation by Citizens and the Holding Company of
the transactions contemplated hereby and (y) the execution and delivery by
Citizens of the Bank Merger Agreement and the consummation by Citizens of the
transactions contemplated thereby.
(d) As of the date hereof, Citizens is not aware of any reasons
relating to Citizens (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement and the Bank Merger Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement and (ii) the continuation by the Holding Company and Citizens
after the Effective Time of the business of each of the Company and the Bank as
such business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which in the reasonable opinion of Citizens could
have a Material Adverse Effect on the Holding Company or Citizens or materially
impair the value of the Company and the Bank to the Holding Company and
Citizens, respectively.
4.6 Regulatory Reports
Since January 1, 1994, Citizens has duly filed with the OTS the reports
required to be filed under applicable laws and regulations and such reports were
in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of Citizens by the OTS, Citizens was not required to correct
or change any action, procedure or proceeding which Citizens believes has not
been corrected or changed as required as of the date hereof and which could have
a Material Adverse Effect on Citizens.
4.7 Financial Statements
(a) Citizens has previously delivered or made available to the Company
accurate and complete copies of the Citizens Financial Statements, which are
accompanied by the audit reports of Ernst & Young LLP, independent certified
public accountants with respect to Citizens. The Citizens Financial Statements,
as well as the Citizens Financial Statements to be delivered pursuant to Section
5.8 hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of Citizens as of the respective dates set
forth therein, and the consolidated income, changes in retained income and cash
flows of Citizens for the respective periods or as of the respective dates set
forth therein.
(b) Each of the Citizens Financial Statements and the Citizens
Financial Statements to be delivered pursuant to Section 5.8 hereof has been or
will be, as the case
27
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as stated therein. The
audits of Citizens have been conducted in all material respects in accordance
with generally accepted auditing standards. The books and records of Citizens
and the Citizens Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of Citizens and the
Citizens Subsidiaries.
(c) Except as Previously Disclosed or to the extent (i) reflected,
disclosed or provided for in the consolidated statement of condition of Citizens
as of December 31, 1996 (including related notes), (ii) of liabilities incurred
since December 31, 1996 in the ordinary course of business and (iii) of
liabilities in connection with consummation of the transaction contemplated by
this Agreement, neither Citizens nor any Citizens Subsidiary has any
liabilities, whether absolute, accrued, contingent or otherwise, material to the
financial condition, results of operations or business of Citizens on a
consolidated basis.
4.8 Material Adverse Change
Since September 30, 1997, (i) Citizens and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with the Conversion and with
this Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, individually or in the aggregate, has had
or is reasonably likely to have a Material Adverse Effect on Citizens.
4.9 Environmental Matters
(a) To the best of Citizens's knowledge, Citizens and its Subsidiaries
are in compliance with all Environmental Laws, except for any violations of any
Environmental Law which would not, singly or in the aggregate, have a Material
Adverse Effect on Citizens. Neither Citizens nor any of its Subsidiaries have
received any communication alleging that Citizens or any of is Subsidiaries is
not in such compliance and, to the best knowledge of Citizens, there are no
present circumstances that would prevent or interfere with the continuation of
such compliance.
(b) To the best of Citizens's knowledge, none of the properties owned,
leased or operated by Citizens or any of its Subsidiaries has been or is in
violation of or liable under any Environmental Law, except any such violations
or liabilities which would not singly or in the aggregate have a Material
Adverse Effect on Citizens.
(c) To the best of Citizens's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that
28
could result in the imposition of any liability arising under any Environmental
Law against Citizens or any of its Subsidiaries or against any person or entity
whose liability for any Environmental Claim Citizens has or may have retained or
assumed either contractually or by operation of law, except such which would not
have a Material Adverse Effect on Citizens.
(d) Citizens has not conducted any environmental studies during the
past five years with respect to any properties owned by it or a Citizens
Subsidiary as of the date hereof.
4.10 Tax Matters
(a) Citizens and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including, without limitation, estimated tax returns, income
tax returns, information returns and withholding and employment tax returns) and
have paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all taxes for any
subsequent periods ending on or prior to the Effective Time. Neither Citizens
nor any of its Subsidiaries will have any material liability for any such taxes
in excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Citizens and its Subsidiaries are complete and accurate in all material
respects. Neither Citizens nor any of its Subsidiaries is delinquent in the
payment of any tax, assessment or governmental charge or has requested any
extension of time within which to file any tax returns in respect of any fiscal
year or portion thereof which have not since been filed. The federal, state and
local income tax returns of Citizens and its Subsidiaries have been examined by
the applicable tax authorities (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Citizens or any of its Subsidiaries as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to Citizens or any of
its Subsidiaries to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of Citizens' knowledge, threatened.
(c) Neither Citizens nor any of its Subsidiaries (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in
29
accounting method initiated by Citizens or any of its Subsidiaries (nor does
Citizens have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or to the best knowledge of Citizens threatened
against Citizens or any of its Subsidiaries or against any asset, interest or
right of Citizens or any of its Subsidiaries, or against any officer, director
or employee of them that in any such case, if decided adversely, would have a
Material Adverse Effect on Citizens. Citizens is not a party to any order,
judgment or decree which has or could reasonably be expected to have a Material
Adverse Effect on Citizens.
4.12 Compliance with Laws
(a) Citizens and each of its Subsidiaries have all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit them to
carry on their business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on
Citizens; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of Citizens,
no suspension or cancellation of any of the same is threatened.
(b) Neither Citizens nor any of its Subsidiaries is in violation of its
Charter or Bylaws, or of any applicable federal, state or local law or ordinance
or any order, rule or regulation of any federal, state, local or other
governmental agency or body (including, without limitation, all banking
(including all regulatory capital requirements), securities, municipal
securities, safety, health, environmental, zoning, anti-discrimination,
antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults could reasonably be
expected to have a Material Adverse Effect on Citizens; and neither Citizens nor
any of its Subsidiaries has received any notice or communication from any
federal, state or local governmental authority asserting that Citizens or any of
its Subsidiaries is in violation of any of the foregoing which could reasonably
be expected to have a Material Adverse Effect on Citizens. Neither Citizens nor
any of its Subsidiaries is subject to any regulatory or supervisory cease and
desist order, agreement, written directive, memorandum of understanding or
written commitment (other than those of general applicability to all savings
banks, savings associations or holding companies thereof, as applicable, issued
by governmental authorities), and neither Citizens nor any of its Subsidiaries
have received any written communication requesting that it enter into any of the
foregoing.
30
4.13 Certain Information
None of the information relating to Citizens or the Holding Company
supplied by them and to be included in (i) the Form S-1, including the
Prospectus, will, at the time the Form S-1 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, (ii)
the Application for Conversion, at the time the Application for Conversion and
any amendment thereto is approved by the OTS under the HOLA and the regulations
of the OTS thereunder, will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (iii) the
Proxy Statements, as of the date or dates such Proxy Statements are mailed to
shareholders of the Company and Members of Citizens and up to and including the
date or dates of the meetings of shareholders and Members to which such Proxy
Statements relate, will contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
4.14 Employee Benefit Plans
(a) Citizens has Previously Disclosed all qualified pension or
profit-sharing plans, any deferred compensation, consultant, bonus or group
insurance contract or any other incentive, health and welfare or employee
benefit plan or agreement maintained for the benefit of employees or former
employees of Citizens or any of its Subsidiaries(the "Citizens Employee Plans"),
whether written or oral.
(b) None of Citizens, any of its Subsidiaries, any Citizens Employee
Plan constituting an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Citizens Pension Plan") or to the best of Citizens's
knowledge, any fiduciary of a Citizens Pension Plan has incurred any material
liability to the PBGC or the Internal Revenue Service with respect to any such
Citizens Pension Plan. To the best of Citizens's knowledge, no reportable event
under Section 4043(b) of ERISA has occurred with respect to any Citizens Pension
Plan.
(c) Neither Citizens nor any of its Subsidiaries participate in and
have not incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from a multi-employer plan (as such term is defined in
ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Citizens Pension Plan which is intended to
qualify under Section 401 of the Code to the effect that the Citizens Pension
Plan is qualified under Section 401 of the Code and the trust associated with
such Citizens Pension Plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of
31
Citizens's knowledge, is threatened to be revoked and Citizens does not know of
any ground on which such revocation may be based. Neither Citizens nor any of
its Subsidiaries have any liability under any such Citizens Pension Plan that is
not reflected on the statement of condition of Citizens at December 31, 1996 or
the notes thereto included in the Citizens Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) To the best of Citizens's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Citizens Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on Citizens.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Citizens
Employee Plan or ERISA; no accumulated funding deficiency (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, exists with
respect to any Citizens Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Citizens
Pension Plan.
(g) To the best of Citizens's knowledge, the Citizens Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of Citizens,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Citizens Employee Plans or any trust related thereto or any
fiduciary thereof.
4.15 Certain Contracts
Neither Citizens nor any of its Subsidiaries is a party to, is bound or
affected by, receives, or is obligated to pay, benefits under (i) any agreement,
arrangement or understanding to which Citizens or any of its Subsidiaries is a
party or by which any of the same is bound which limits the freedom of Citizens
or any of its Subsidiaries to compete in any line of business or with any
person, (ii) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any of
regulatory order or decree with or by the OTS, the FDIC or any other regulatory
agency, or (iii) any other agreement, arrangement or understanding which would
be required to be filed as an exhibit to the Annual Report on Form 10-K under
the Exchange Act (assuming Citizens was required to file such reports under the
Exchange Act).
32
(b) Neither Citizens nor any of its Subsidiaries is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on Citizens, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 Brokers and Finders
Except Xxxxxxx Xxxx & Company, none of Citizens, any of its
Subsidiaries, the Holding Company, nor any of their respective directors,
officers or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
4.17 Insurance
Citizens and each of its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
4.18 Properties
All real and personal property owned by Citizens or any of its
Subsidiaries or presently used by them in their business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on their
respective business in the ordinary course of business consistent with its past
practices. Citizens has good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of redemption
under applicable foreclosure laws) to all of its material properties and assets,
real and personal, except (i) liens for current taxes not yet due or payable
(ii) pledges to secure deposits and other liens incurred in the ordinary course
of its banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) as reflected on the statement of condition of Citizens as of September 30,
1997 included in the Citizens Financial Statements. All real and personal
property which is material to Citizens's business on a consolidated basis and
leased or licensed by Citizens or any of its Subsidiaries is held pursuant to
leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time.
33
4.19 Labor
No work stoppage involving Citizens or any of its Subsidiaries is
pending or, to the best knowledge of Citizens, threatened. Neither Citizens nor
any of its Subsidiaries is involved in or to the best knowledge of Citizens
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving its employees which could have a Material
Adverse Effect on Citizens. Employees of Citizens and its Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees, and to the best of
Citizens's knowledge, there have been no efforts to unionize or organize any
employees of Citizens or any of its Subsidiaries during the past five years.
4.20 Ownership of Company Common Stock
As of the date hereof, neither Citizens nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 5% or more of the outstanding shares of Company Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties or shares taken in consideration of debts previously contracted).
4.21 Allowance for Losses on Loans
The allowance for losses on loans reflected on Citizens' consolidated
statements of condition included in the September 30, 1997 Citizens Financial
Statements is, or will be in the case of subsequently delivered Citizens
Financial Statements, as the case may be, in the opinion of Citizens' management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The real
estate owned reflected on the consolidated statements of condition included in
the September 30, 1997 Citizens Financial Statements is, or will be in the case
of subsequently delivered Citizens Financial Statements, as the case may be,
carried at the lower of cost or fair value, less estimated costs to sell, as
required by generally accepted accounting principles.
4.22 Disclosures
None of the representations and warranties of Citizens or any of the
written information or documents furnished or to be furnished by Citizens to the
Company in connection with or pursuant to this Agreement or the consummation of
the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
34
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of the
Company and Citizens (i) shall use its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary or advisable under applicable laws and regulations so as to
permit and otherwise enable consummation of the Conversion and the Merger as
promptly as reasonably practicable, it being the intention of the parties that
the Conversion be consummated prior to the Effective Time and that the Bank
Merger be consummated following the Effective Time in accordance with Section
5.12 hereof, and (ii) shall cooperate fully with each other to that end.
5.2 Shareholder and Member Meetings
(a) The Company shall take all action necessary to properly call and
convene a meeting of its shareholders as soon as practicable after the date
hereof to consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company will recommend that
the shareholders of the Company approve this Agreement and the transactions
contemplated hereby, provided that the Board of Directors of the Company may
fail to make such recommendation, or withdraw, modify or change any such
recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
(b) Citizens shall take all action necessary to properly call and
convene a meeting of its Members as soon as practicable to consider and vote
upon the Conversion and the transactions contemplated thereby. The Board of
Directors of Citizens will recommend that the Members of Citizens approve the
Conversion and the transactions contemplated thereby.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-1, the Prospectus and the Proxy Statements
relating to the meetings of shareholders of the Company and the Members of
Citizens to be held pursuant to Section 5.2 of this Agreement (the "Company
Proxy Statement" and the "Citizens Proxy Statement," respectively) under the
Securities Act and the Exchange Act, as applicable. Each of the Holding Company,
Citizens and the Company shall use its reasonable best efforts to have the Form
S-1 declared effective under the Securities Act and the Company Proxy Statement
approved for mailing in definitive form under the Exchange Act as promptly as
practicable after such filings and the receipt of conditional approval of the
Application for Conversion by the OTS, and thereafter the Company shall promptly
mail to its shareholders the
35
Company Proxy Statement and Prospectus and Citizens shall promptly mail, or in
the case of the Prospectus make available, to its Members the Citizens Proxy
Statement and the Prospectus. The Holding Company also shall use its reasonable
best efforts to obtain all necessary state securities law or "blue sky" permits
and approvals required to carry out the issuance of Holding Company Common Stock
in connection with the Merger and the Conversion. The Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any of the foregoing actions.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Conversion, the Merger and the Bank
Merger). Citizens and the Company shall have the right to review in advance, and
to the extent practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information which appears in any filing made with or written materials submitted
to any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) Citizens and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors and officers and shareholders of the Company and such other matters as
may be reasonably necessary or advisable in connection with the Form S-1 or any
other statement, filing, notice or application made by or on behalf of Citizens,
the Holding Company, the Company or the Bank to any Governmental Entity in
connection with the Conversion, the Merger, the Bank Merger and the other
transactions contemplated hereby.
(d) Citizens and the Company shall promptly furnish each other with
copies of written communications received by Citizens or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other
36
party all books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities of it and its Subsidiaries,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of meetings of boards of directors (and any
committees thereof) and shareholders, organizational documents, bylaws, material
contracts and agreements, filings with any regulatory authority, accountants'
work papers, litigation files, loan files, plans affecting employees, and any
other business activities or prospects in which the other party may have a
reasonable interest, provided that such access shall be reasonably related to
the transactions contemplated hereby and, in the reasonable opinion of the
respective parties providing such access, not unduly interfere with normal
operations. Each party and its Subsidiaries shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
the other party and its representatives, provided that such access shall be
reasonably related to the transactions contemplated hereby and shall not unduly
interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish was already in its possession prior to the disclosure thereof by
the party furnishing the information; (y) was then generally known to the
public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof.
5.5 Press Releases
Citizens and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
37
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Citizens, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use all
reasonable efforts to (x) preserve its business organization and that of the
Bank intact, (y) keep available to itself and Citizens the present services of
the employees of the Company and the Bank and (z) preserve for itself and
Citizens the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of Citizens or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $.08 per share and except, in the event the Effective
Time occurs more than 45 days after the commencement of any calendar
quarter but prior to the normal dividend payment date for such calendar
quarter, a pro rata cash dividend based on the Company's normal
quarterly cash dividend rate; provided, however, that nothing contained
herein shall be deemed to affect the ability of a Company Subsidiary to
pay dividends on its capital stock to the Company;
(ii) issue any shares of its capital stock, other than upon
exercise of the Company Options referred to in Section 3.1 hereof, or
issue, grant, modify or authorize any Rights; purchase any shares of
Company Common Stock; or effect any recapitalization, reclassification,
stock dividend, stock split or like change in capitalization;
(iii) amend its Certificate of Incorporation, Bylaws or
similar organizational documents; impose, or suffer the imposition, on
any share of stock or other ownership interest held by the Company in a
Company Subsidiary of any lien, charge or encumbrance or permit any
such lien, charge or encumbrance to exist; or waive or release any
material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except (i) as may be
required pursuant to Previously Disclosed
38
commitments existing on the date hereof, (ii) as may be required by law
and (iii) merit increases in accordance with past practices, normal
cost-of-living increases and normal increases related to promotions or
increased job responsibilities;
(v) enter into or, except as may be required by law, modify
any pension, retirement, stock option, stock purchase, stock
appreciation right, savings, profit sharing, deferred compensation,
supplemental retirement, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement,
or any trust agreement related thereto, in respect of any of its
directors, officers or employees; or make any contributions to any of
the Company's Pension Plan, BIP or ESOP (other than as required by law
or regulation or in a manner and amount consistent with past
practices);
(vi) enter into (w) any transaction, agreement, arrangement or
commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by the Company or a Company Subsidiary or guarantee by the
Company or any Company Subsidiary of any such obligation, except in the
case of the Bank for deposits, FHLB advances, federal funds purchased
and securities sold under agreements to repurchase in the ordinary
course of business consistent with past practice, (y) any agreement,
arrangement or commitment relating to the employment of an employee or
consultant, or amend any such existing agreement, arrangement or
commitment, provided that the Company and the Bank may employ an
employee or consultant in the ordinary course of business if the
employment of such employee or consultant is terminable by the Company
or the Bank at will without liability, other than as required by law;
or (z) any contract, agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the year
ended December 31, 1996, except as required by changes in laws or
regulations or generally accepted accounting principles, or change any
of its methods of reporting income and deductions for federal income
tax purposes from those employed in the preparation of its federal
income tax return for such year, except as required by changes in laws
or regulations;
(viii) make any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair; or
enter into any new lease of real property or any new lease of personal
property providing for annual payments exceeding $25,000;
39
(ix) file any applications or make any contract with respect
to branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) control over or any equity
interest in any business or entity, except for investments in
marketable equity securities in the ordinary course of business and not
exceeding 5% of the outstanding shares of any class;
(xi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights
or requiring the consent of any party to the transfer and assignment of
any such assets or rights;
(xii) change or modify in any material respect any of its
lending or investment policies, except to the extent required by law or
an applicable regulatory authority;
(xiii) take any action that would prevent or impede the Merger
or the Conversion from qualifying as a reorganization within the
meaning of Section 368 of the Code or from being accounted for as a
pooling-of-interests under GAAP;
(xiv) enter into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market rates of interest;
(xv) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time or that would cause any of the conditions of Sections
6.1 or 6.3 hereof not to be satisfied; or
(xvi) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, except with the prior written consent of the Company
or as expressly contemplated hereby, Citizens and its Subsidiaries shall carry
on their respective businesses in the ordinary course consistent with past
practice. During the period between the date hereof and the Effective Time,
Citizens will use all reasonable efforts to (x) preserve its business
organization intact, and (y) preserve for itself and the Company the goodwill of
the customers of Citizens and others with whom business relationships exist.
Without limiting the generality of the foregoing, except with the prior written
consent of the Company or as
40
expressly contemplated hereby, between the date hereof and the Effective Time,
Citizens shall not, and shall cause each Citizens Subsidiary not to:
(i) take any action that would prevent or impede the Merger or
the Conversion from qualifying as a reorganization within the meaning
of Section 368 of the Code or from being accounted for as a
pooling-of-interests under GAAP;
(ii) take any action that would result in any of the
representations and warranties of Citizens contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.2
hereof not to be satisfied; or
(iii) agree to do any of the foregoing.
5.7 Certain Actions
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, purchase of all or a substantial portion of the
assets of, or any equity interest in, the Company or a Company Subsidiary (other
than with Citizens or an affiliate thereof), provided, however, that the Board
of Directors of the Company may furnish such information or participate in such
negotiations or discussions if such Board of Directors, after having consulted
with and considered the advice of outside counsel, has determined that the
failure to do the same may cause the members of such Board of Directors to
breach their fiduciary duties under applicable law. The Company will promptly
inform Citizens orally and in writing of any such request for information or of
any such negotiations or discussions, as well as instruct its and its
Subsidiaries' directors, officers, representatives and agents to refrain from
taking any action prohibited by this Section 5.7.
5.8 Current Information
During the period from the date of this Agreement to the Effective
Time, each of Citizens and the Company shall, upon the request of the other
party, cause one or more of its designated representatives to confer on a
monthly or more frequent basis with representatives of the other party regarding
its financial condition, operations and business and matters relating to the
completion of the transactions contemplated hereby. As soon as reasonably
available, but in no event more than 45 days after the end of each calendar
quarter ending after the date of this Agreement (other than the quarter ending
December 31, 1997), the Company will deliver to Citizens its quarterly report on
Form 10-Q under the Exchange Act, and, as soon as reasonably available, but in
no event more than 90 days after December 31, 1997, the Company will deliver to
Citizens its Annual Report on Form 10-K for 1997. As soon as reasonably
available, but in no event more than 90 days after
41
December 31, 1997, Citizens will deliver to the Company audited statements of
condition (including related notes and schedules, if any) of Citizens as of
December 31, 1997 and 1996 and statements of income, changes in net worth and
cash flows (including related notes and schedules, if any) of Citizens for each
of the years in the three-year period ended December 31, 1997. Citizens also
will deliver to the Company each Thrift Financial Report ("TFR") report filed by
Citizens with the OTS concurrently with the filing of such call report. Within
25 days after the end of each month, the Company and Citizens will deliver to
the other party an unaudited consolidated statement of condition and an
unaudited consolidated statement of income, without related notes, for such
month prepared in accordance with generally accepted accounting principles.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, the Holding Company (the "Indemnifying Party") shall provide
indemnification to any present or former director, officer or employee of the
Company and each Company Subsidiary, in each case determined as of the Effective
Time (the "Indemnified Parties"), with respect to any costs or expenses
(including reasonable attorneys' fees), judgments, fines, 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, if first asserted or claimed prior to the date hereof and
Previously Disclosed, if first asserted or claimed between the date hereof and
the Effective Time and disclosed pursuant to Section 5.17 hereof or if first
asserted or claimed after the Effective Time, to the fullest extent, if any,
that such Indemnified Party would have been entitled to indemnification by the
Company or any Company Subsidiary under the Certificate of Incorporation,
Charter or Bylaws of the Company or any Company Subsidiary as Previously
Disclosed, provided, however, that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the final
disposition of such claim, and provided, further, that nothing contained herein
shall extend or be deemed a waiver of any applicable statute of limitations in
respect of any claim or claim for indemnification. Without limiting the
foregoing, all limitations of liability existing in favor of the Indemnified
Parties in the Certificate of Incorporation, Charter or Bylaws of the Company or
any Company Subsidiary, arising out of matters existing or occurring at or prior
to the Effective Time shall survive the Merger and shall continue in full force
and effect.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel
42
or any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if the Indemnifying Party
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues which raise conflicts of interest between the Indemnifying
Party and the Indemnified Parties, the Indemnified Parties may retain counsel
which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying
Party shall pay, promptly as statements therefor are received, the reasonable
fees and expenses of such counsel for the Indemnified Parties (which may not
exceed one firm in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest) in
accordance with the obligations set forth in Section 5.9(a) hereof, (ii) the
Indemnified Parties will cooperate in the defense of any such matter, (iii) the
Indemnifying Party shall not be liable for any settlement effected without its
prior written consent and (iv) the Indemnifying Party shall have no obligation
hereunder in the event a federal banking agency or a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of an Indemnified Party in
the manner contemplated hereby is prohibited by applicable law.
(c) The Holding Company shall maintain the Company's existing
directors' and officers' liability insurance policy (or purchase an insurance
policy providing coverage on substantially the same terms and conditions) for
acts or omissions occurring prior to the Effective Time by persons who are
currently covered by such insurance policy maintained by the Company and the
Company Subsidiaries for a period of six years following the Effective Time,
provided, however, that in no event shall the Holding Company be required to
expend on an annual basis more than 125% of the amount paid by the Company and
the Company Subsidiaries as of the date hereof for such insurance coverage (the
"Insurance Amount") to maintain or procure such insurance coverage, and further
provided that if the Holding Company is unable to maintain or obtain the
insurance called for hereby, the Holding Company shall use all reasonable
efforts to obtain as much comparable insurance as is available for the Insurance
Amount. At the request of the Holding Company, the Company shall use reasonable
efforts to procure the insurance coverage referred to in the preceding sentence
prior to the Effective Time.
(d) In the event that the Holding Company or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.9, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
43
5.10 Directors
Each of Citizens and the Holding Company agrees to take all action
necessary to appoint or elect, effective as of the Effective Time, Xxxxxx X.
Xxxx as a director of the Holding Company and the Surviving Bank, and one
additional director of the Company and the Bank as a director of the Surviving
Bank (in each ease to a three-year class ending at the Annual Meeting in 2001).
The remaining directors of the Bank as of the Effective Time shall be appointed
to an advisory board of the Holding Company for a three-year term.
5.11 Employees and Employee Benefit Plans
(a) All employees of the Company, the Bank or any other Company
Subsidiary as of the Effective Time (collectively, "Company Employees") shall
become employees of the Holding Company or a Holding Company Subsidiary as of
the Effective Time, provided that, other than as provided by Section 5.11(g)
hereof, the Holding Company or a Holding Company Subsidiary shall have no
obligation to continue the employment of any such person and nothing contained
in this Agreement shall give any employee of the Holding Company or a Holding
Company Subsidiary a right to continuing employment with the Holding Company or
a Holding Company Subsidiary after the Effective Time. To the extent that the
Holding Company or a Holding Company Subsidiary terminates the employment of any
Company Employee (other than those employees who receive payments pursuant to
Section 5.11(d) hereof), other than for cause, within six months following the
Effective Time, the Holding Company shall, or shall cause a Holding Company
Subsidiary to, provide severance benefits in a cash amount equal to such
employee's regular salary for a one-week period (as in effect immediately prior
to the Effective Time) multiplied by the total number of whole years of such
employee's employment (up to maximum of 10 years or, in the case of any Bank
officer at or above the level of Vice-President as of the date hereof, 20 years)
at the Company, the Bank and any other Company Subsidiary and Citizens,
provided, however that in no event shall the Holding Company or a Holding
Company Subsidiary have any obligation to provide severance benefits to any
Company Employee whose termination of employment occurs due to resignation or
discharge for cause or who is entitled to severance benefits or the equivalent
thereof under the terms of an individual contract with the Company or the Bank.
(b) With the exception of those individuals who are expected to enter
into new employment agreements pursuant to Section 5.11(g) hereof, each Company
Employee who remains employed by the Holding Company or a Holding Company
Subsidiary following the Effective Time (each, a "Continuing Employee") shall be
entitled to participate in (i) such of the employee benefit plans, deferred
compensation arrangements, bonus or incentive plans and other compensation and
benefit plans that the Holding Company or a Holding Company Subsidiary may
continue for the benefit of Continuing Employees following the Effective Time
and (ii) whatever employee benefit plans and other compensation and benefit
plans (other than any stock option or restricted stock grant plan implemented by
the Holding Company) that the Holding Company or a Holding Company Subsidiary
may
44
maintain for the benefit of its similarly situated employees on an equitably
equivalent basis, if such Continuing Employee is not otherwise then
participating in a similar plan described in Section 5.11(c) hereof. The parties
hereto acknowledge that Continuing Employees shall be eligible to participate in
the stock option plan implemented by the Holding Company within one year
subsequent to the Effective Time ("New Option Plan") (subject to receipt of
necessary corporate, regulatory and stockholder approval) based upon the same
criteria as other employees of Citizens or the Holding Company and the level of
grants shall give due regard to, among other factors, relative levels of title,
duties, salary and other compensation and benefits. Notwithstanding the
foregoing, the parties hereto agree that an aggregate of options to acquire not
less than 75,000 shares of Holding Company Common Stock shall be made available
under the New Option Plan for awards to be made, subject to the plan terms and
conditions, to those individuals Previously Disclosed. The awards to be made
under the New Option Plan pursuant to the immediately preceding sentence shall
be made by the New Option Plan Committee after giving consideration to the
recommendation of a committee of not less than three directors of the Company
selected by the Board of Directors of the Company immediately prior to the
Effective Time in order to implement the provisions hereof (the "Suburb Fed
Stock Option Advisory Committee").
(c) (i) At the Effective Time, the Holding Company or a Holding Company
Subsidiary shall become the plan sponsor of each Company Employee Plan prior to
such time. The Company agrees to take or cause to be taken such actions as the
Holding Company or a Holding Company Subsidiary may reasonably request to give
effect to such assumption. The Holding Company or a Holding Company Subsidiary
shall have the right and power at any time following the Effective Time to amend
or terminate or cease benefit accruals under any Company Employee Plan or cause
it to be merged with or its assets and liabilities to be transferred to a
similar plan maintained by it.
(ii) For purposes of its employee benefit plans, the Holding
Company and a Holding Company Subsidiary shall treat Continuing Employees as new
employees, but shall amend its plans to provide credit for purposes of vesting
and eligibility to participate, for each Continuing Employee's service with the
Company, the Bank and any other Subsidiary of the Company to the extent that
such service was recognized for similar purposes under the Company Employee
Plans immediately prior to the Effective Time. Continuing Employees and their
covered dependents will not be deprived of any partial or complete coverage
under any employee plan of the Holding Company or a Holding Company Subsidiary
(which provides the type of benefits similar to benefits under any Company
Employee Plan) because of any waiting period or pre-existing condition or
previous medical treatments, except to the extent that such pre-existing
condition or previous medical treatments were excluded from coverage under a
Company Employee Plan, in which case this Section 5.11(c)(ii) shall not require
coverage for such pre-existing condition or previous medical treatments. To the
extent that the initial period of coverage for Continuing Employees under any
employee benefit plan of the Holding Company or a Holding Company Subsidiary
that is an "employee welfare benefit plan" as defined in Section 3(1) of ERISA
overlaps with the 12 months coverage period of an applicable
45
Company Employee Plan, Continuing Employees shall be given credit during the
initial period of coverage for any deductibles and coinsurance payments made by
Continuing Employees under any Company Employee Plan during any partial period.
(d) At the Effective Time, the employment agreements between the
Company and the seven executives listed on Disclosure Schedule 5.11(d) hereto
shall be cancelled in consideration of the benefits to be provided to each such
executive as set forth in Disclosure Schedule 5.11(d) subject to the receipt by
Holding Company from such executive of an acknowledgment and a release described
in Section 5.11(e) below relating to his or her employment agreement. Except for
the individuals described in Section 5.11(g) below, who will be offered new
one-year employment agreements, the other four executives set forth on
Disclosure Schedule 5.11(d) shall become, at the election of the Holding
Company, at will Continuing Employees.
(e) In the sole discretion of the Holding Company or a Holding Company
Subsidiary, as applicable, payments made by it in satisfaction of obligations of
the Company or the Bank under any Company Employee Plan or under any employment
agreement referred to in Section 5.11(d) hereof shall be subject to the
recipient's delivery to the Holding Company or a Holding Company Subsidiary, as
applicable, of (i) a written acknowledgement signed by such recipient that the
payment or payments to be made to him or her is in full and complete
satisfaction of all liabilities and obligations thereunder of the Company, the
Bank, the Holding Company or any Holding Company Subsidiary, and each of their
respective affiliates, directors, officers, employees and agents, and (ii) a
release by such recipient of all such parties from further liability in
connection with the particular Company Employee Plan or employment agreement, as
applicable.
(f) The Company's Employee Stock Ownership Plan (the "Company ESOP")
shall be terminated effective one day prior to the Effective Time. As soon as
practicable after the Effective Time (but not prior to the publication of
financial results covering at least 30 days of combined operations after the
Merger), the trustees of the Company ESOP shall, if necessary, convert to cash a
portion of the Holding Company Common Stock received by the Company ESOP in the
Merger with respect to unallocated Company Common Stock in order to repay the
entire outstanding balance of the Company ESOP loan in accordance with ERISA,
the rules and regulations promulgated thereunder, the Code, the rules,
regulations promulgated thereunder, and any precedential rulings issued by the
Internal Revenue Service ("IRS"). As soon as practicable after the retirement of
the Company ESOP loan (but not later than 90 days after the publication of
financial results covering at least 30 days of combined operations after the
Merger), the trustees of the Company ESOP shall allocate the remaining Holding
Company Common Stock received by the Company ESOP in the Merger with respect to
unallocated shares of Company Common Stock to the accounts of all Company ESOP
participants (whether or not such participants are then actively employed) and
beneficiaries in proportion to the account balance of such participants and
beneficiaries as they existed as of the Effective Time (and, if required, to the
accounts of former participants or their beneficiaries) as investment earnings
of the
46
Company ESOP except as restricted by applicable law, and in such a manner so as
not to jeopardize accounting for the Merger as a pooling of interests. The
Company and/or Citizens and the Holding Company shall exercise best efforts to
implement procedures that will assure the full allocation of the remaining
suspense account to such participants or their beneficiaries. Upon the election
of any participant, his or her benefit that constitutes an "eligible rollover
distribution" (as defined in Section 402(f)(2)(A) of the Code) under the Company
ESOP may (i) in the sole discretion of Citizens and the Holding Company, be
rolled over to any qualified Citizens or Holding Company (or any Subsidiary
thereof) benefit plan, other than an employee stock ownership plan of the
Holding Company or Citizens, or (ii) be rolled over to any individual retirement
account and, provided further, that any such distribution shall not occur until
receipt of a favorable termination ruling from the IRS.
The foregoing actions relating to termination of the Company ESOP will
be adopted conditioned upon the consummation of the Merger and upon receiving
(i) a favorable determination letter from the IRS with regard to the continued
qualification of the Company ESOP after any required amendments necessary to
implement the actions thereof set forth above and (ii) the receipt of a
favorable termination letter as to the termination of the Company ESOP. The
Company, the Bank, and the Holding Company will cooperate in submitting
appropriate requests for any such determination and termination letters to the
IRS and will use their best efforts to seek the issuance of such letters as soon
as practicable following the date hereof. The Company and the Holding Company
will adopt such additional amendments to the Company ESOP as may be reasonably
required by the IRS as a condition to granting such favorable determination and
termination letters provided that such amendments do not substantially change
the terms outlined herein or would result in a material adverse change in the
business, operations, assets, financial condition or prospects of the Company or
the Bank or result in an additional material liability to the Holding Company or
Citizens.
(g) As of the Effective Time, Citizens shall offer employment to
Messrs. Xxxxxx X. Xxxx, Xxxxx X. Xxxxxx and Xxxxxx X. Stock pursuant to the
terms of employment agreements in the form attached hereto as Exhibits A, B and
C, respectively.
5.12 Bank Merger
Citizens, the Holding Company and the Company shall take, and the
Company shall cause the Bank to take, all necessary and appropriate actions,
including causing the Bank and Citizens to enter into a merger agreement (the
"Bank Merger Agreement"), to cause the Bank to merge with and into Citizens (the
"Bank Merger") immediately after the Effective Time, or at such other time
thereafter as may be determined by the Holding Company and Citizens in their
sole discretion, in accordance with the requirements of all applicable laws of
the United States and regulations of the OTS thereunder. Citizens shall be the
surviving corporation in the Bank Merger (the "Surviving Bank"), and shall
continue its corporate existence under the laws of the United States as a
wholly-owned subsidiary of the Holding Company. The name of the Surviving Bank
shall be determined by the Board
47
of Directors of Citizens. The directors and executive officers of the Surviving
Bank upon consummation of the Bank Merger shall be the directors and executive
officers of Citizens immediately prior to the consummation of the Bank Merger,
except as provided in Section 5.10 of this Agreement. Upon consummation of the
Bank Merger, the separate corporate existence of the Bank shall cease.
5.13 Organization of the Holding Company
Prior to the Effective Time, Citizens shall cause the Holding Company
to be organized under the DGCL. Following the organization of the Holding
Company and prior to the Effective Time, the Board of Directors shall approve
this Agreement and the transaction contemplated hereby, and Citizens shall cause
the Holding Company to execute and deliver an appropriate instrument of
accession to this Agreement, whereupon the Holding Company shall become a party
to, and be bound by, this Agreement.
5.14 Affiliates' Letters
The Company shall use its reasonable best efforts to cause each person
who is a Company Affiliate to execute and deliver to the Holding Company within
60 days of the date hereof an agreement in the form of Exhibit D hereto.
5.15 Accountants' Letters
Each of the Company and Citizens shall use its reasonable best efforts
to be delivered to the other party a letter of its respective independent public
accountants, dated (i) the date on which the Form S-1 becomes effective under
the Securities Act and (ii) a date shortly prior to the Effective Time, and
addressed to such other party, in form and substance customary for "comfort"
letters delivered by independent accountants in accordance with Statement of
Financial Accounting Standards No. 72.
5.16 Integration of Policies
During the period from the date of this Agreement to the Effective
Time, the Company and the Bank shall, and shall cause their directors, officers
and employees to, cooperate and assist Citizens in the formulation of a plan of
integration for Citizens and the Company and the Bank with respect to their
combined operations subsequent to the Effective Time.
5.17 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in
48
materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered materially
inaccurate thereby; no such supplement or amendment to such materials shall be
deemed to have modified the representations, warranties and covenants of the
parties for the purpose of determining whether the conditions set forth in
Article VI hereof have been satisfied.
5.18 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each party will promptly
inform the other party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger, the Conversion or any of the
other transactions contemplated hereby by any Governmental Entity or third party
or which would otherwise prevent or materially delay consummation of such
transactions.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Citizens and the Company
The respective obligations of Citizens and the Company to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger and the other
transactions contemplated hereby shall have been duly and validly taken by
Citizens, the Holding Company, and the Company, including without limitation
approval of this Agreement by the requisite vote of the shareholders of the
Company.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the consummation of the Merger and
the other transactions contemplated hereby shall have been received and all
statutory waiting periods in respect thereof shall have expired; and Citizens,
the Holding Company, the Company and the Bank shall have procured all other
approvals, consents and waivers of each person (other than the Governmental
Entities referred to above) whose approval, consent or waiver is necessary to
the consummation of the Merger and the other transactions contemplated hereby
and the failure of which to obtain would have the effects set forth in the
following proviso clause; provided, however, that no approval or consent
referred to in this Section 6.1(b) shall be deemed to have been received if it
shall include any condition or requirement that, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by this Agreement to Citizens that had such
49
condition or requirement been known, Citizens, in its reasonable judgment, would
not have entered into this Agreement.
(c) None of Citizens, the Holding Company, the Company or the Bank
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger or the other transactions contemplated hereby.
(d) The Form S-1 shall have become effective under the Securities Act,
and Citizens shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Holding Company Common Stock in connection
with the Merger, and neither the Form S-1 nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by the
Commission or any state securities authority.
(e) The shares of Holding Company Common Stock to be issued in
connection with the Merger and the Conversion shall have been approved for
listing on the Nasdaq Stock Market's National Market.
(f) Citizens shall have received the written opinion of Elias, Matz,
Xxxxxxx & Xxxxxxx L.L.P., special counsel to Citizens, to the effect that for
federal income tax purposes the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, and the Company shall have received
the written opinion of Silver, Xxxxxxxx & Taff, L.L.P. to such effect and to the
effect that (i) no gain or loss will be recognized by the shareholders of the
Company who receive Holding Company Common Stock in exchange for their Company
Common Stock in the Merger; (ii) the tax basis of a shareholder in the Holding
Company Common Stock received in the Merger in exchange for his or her Company
Common Stock will be the same as the tax basis of the Company Common Stock
surrendered in exchange therefor; and (iii) the holding period of the shares of
Holding Company Common Stock received in the Merger will include the holding
period of the shares of Company Common Stock surrendered therefor, provided that
such Company Common Stock was held as a capital asset by such shareholder. Each
such opinion shall be based on such written representations from Citizens, the
Company and others as such independent public accountants and counsel shall
reasonably request as to factual matters.
(g) The Conversion shall have been consummated in accordance with the
terms of Section 5.1 of this Agreement and applicable laws and regulations.
(h) The Holding Company and the Company shall have received a letter
from Ernst & Young LLP, Citizens's and the Holding Company's independent
certified public accounts, dated as of the Effective Time, to the effect that,
based on its review of this Agreement and the facts and circumstances then known
to it, the Merger shall be accounted for as a pooling-of-interests under GAAP.
50
(i) Holders of not more than 10% of the outstanding Company Common
Stock shall have elected to exercise dissenters' or appraisal rights under the
DGCL.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of Citizens set forth in Article
IV hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date. Notwithstanding the
preceding sentence, except for the representations and warranties contained in
the first sentence of Section 4.13, any inaccuracies in the representations and
warranties of Citizens shall not prevent the satisfaction of the condition
contained in this Section 6.2(a) unless the cumulative effect of all such
inaccuracies, taken in the aggregate, represent a Material Adverse Effect on
Citizens. In applying the preceding sentence, the determination of whether a
representation and warranty of Citizens is inaccurate shall be made without
regard to any language in Article IV which would otherwise qualify such
representation and warranty individually by reference to materiality or a
Material Adverse Effect.
(b) Citizens shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Citizens shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its Chairman and Chief Executive Officer
and by its Chief Financial Officer, to the effect that the conditions set forth
in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger or the other transactions contemplated hereby shall be pending.
(e) Citizens shall have furnished the Company with such certificates of
its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to Citizens as the Company may reasonably request.
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6.3 Conditions Precedent - Citizens
The obligations of Citizens to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by Citizens pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date. Notwithstanding the
preceding sentence, except for the representations and warranties contained in
the second and fourth sentences of Section 3.1 and the first sentence of Section
3.13, any inaccuracies in the representations and warranties of the Company
shall not prevent the satisfaction of the condition contained in this Section
6.3(a) unless the cumulative effect of all such inaccuracies, taken in the
aggregate, represent a Material Adverse Effect on the Company. In applying the
preceding sentence, the determination of whether a representation and warranty
of the Company is inaccurate shall be made without regard to any language in
Article III which would otherwise qualify such representation and warranty
individually by reference to materiality or a Material Adverse Effect.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to Citizens a certificate, dated
the date of the Closing and signed by its Chairman and Chief Executive Officer
and by its Chief Financial Officer, to the effect that the conditions set forth
in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger or the other transactions contemplated hereby shall be pending.
(e) The Company shall have furnished Citizens with such certificates of
its officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to the
Company as Citizens may reasonably request.
52
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by Citizens in
writing if the Company has, or by the Company in writing if Citizens has, in any
material respect, breached (i) any material covenant or undertaking contained
herein or (ii) any representation or warranty contained herein, in any case if
such breach would have a Material Adverse Effect on the party and has not been
cured by the earlier of 30 days after the date on which written notice of such
breach is given to the party committing such breach or the Effective Time;
(c) at any time, by either Citizens or the Company in writing, (i) if
any application for prior approval of a Governmental Entity which is necessary
to consummate the Merger, the Conversion or the other transactions contemplated
hereby is denied or withdrawn at the request or recommendation of the
Governmental Entity which must grant such approval, unless within the 25-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 7(c)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein, or (ii) if any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the Merger, the Conversion or the
other transactions contemplated by this Agreement;
(d) at any time, by either Citizens or the Company in writing, if (i)
the shareholders of the Company do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof) or (ii) the Members of Citizens do not approve the Conversion after a
vote taken thereon at a meeting duly called for such purpose (or at any
adjournment thereof), unless in either case the failure of such occurrence shall
be due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth herein to be performed or observed
by such party at or before the Effective Time; and
(e) by either Citizens or the Company in writing if the Effective Time
has not occurred by the close of business on September 30, 1998, of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an
53
obligation in breach of such party's obligations under this Agreement has been
the cause of, or resulted in, the failure of the Merger to be consummated by
such date.
(f) by Citizens in the event of a Purchase Event (as defined in Section
8.1 hereof).
For purposes of this Section 7.1, termination by Citizens also shall be
deemed to be termination on behalf of the Holding Company.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality set forth in Section 5.4(b) and expenses
and the termination fees set forth in Section 8.1, and this Section 7.2, shall
survive any such termination and (ii) a termination pursuant to Section 7.1(b),
(c), (d) or (e) shall not relieve the breaching party from liability for willful
breach of any covenant, undertaking, representation or warranty giving rise to
such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9, 5.10, 5.11 and 5.12 hereof),
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive Citizens or the Company (or
any director, officer or controlling person of either thereof) of any defense at
law or in equity which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former shareholder of
either Citizens or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Company) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and may waive (i) any inaccuracies of the other party in the representations or
warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements of
the other party, (iii) to the extent permitted by law, satisfaction of any of
the conditions precedent to its obligations contained herein or (iv) the
performance by the other party of any of its obligations set forth herein,
provided that any such waiver granted, or any amendment or supplement pursuant
to Section 7.5 hereof executed after shareholders of the Company have approved
this Agreement shall not modify either the amount or form of the
54
consideration to be provided hereby to the holders of Company Common Stock upon
consummation of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses; Termination Fees
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, provided that notwithstanding
anything to the contrary contained in this Agreement, neither Citizens nor the
Company shall be released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
(b) Except as provided below, if this Agreement is terminated for any
reason, Citizens shall pay to the Company within five days after such
termination in immediately available funds, the sum of $2,500,000 as an
agreed-upon break up fee. Provided, however, no break up fee shall be payable by
Citizens to the Company if any of the following shall occur: (i) this Agreement
is properly terminated by Citizens pursuant to 7.1(b) or (f); (ii) the Company
refuses to convene its shareholders' meeting to vote on this Agreement or such
shareholders' meeting is held and the Company shareholders do not approve this
Agreement by the required vote; (iii) this Agreement is terminated because the
closing condition set forth in Section 6.3(c) or (d) can not be satisfied; or
(v) the Company exercises a right of termination prior to September 30, 1998.
(c) The Company shall pay Citizens, and Citizens shall be entitled to
payment of, a fee (the "Fee") upon the occurrence of a Purchase Event (as
defined herein) so long as the Purchase Event occurs prior to a Fee Termination
Event (as defined herein). Such payment shall be made to Citizens in immediately
available funds within five business days after the occurrence of a Purchase
Event. The Fee shall be equal to $2,500,000. A Fee Termination Event shall be
the first to occur of the following: (i) the Effective Date, (ii) termination of
this Agreement in accordance with the terms hereof prior to the occurrence of a
Purchase Event (other than a termination of this Agreement by Citizens pursuant
to Section 7.1(b) hereof as a result of a willful breach of any representation,
warranty, covenant
55
or agreement of the Company or the Bank or pursuant to Section 7.1(f) as a
result of a Purchase Event) or (iii) 12 months following a termination of this
Agreement by Citizens pursuant to Section 7.1(b) hereof unless a Purchase Event
shall have occurred prior thereto.
(d) The term "Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) The Company or the Bank, without having received Citizens'
prior written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as defined below) with any person (the
term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange Act
and the rules and regulations thereunder) other than Citizens or any
affiliate of Citizens (the term "affiliate" for purposes of this
Agreement having the meaning assigned thereto in Rule 405 under the
Securities Act) or the Board of Directors of the Company shall have
recommended that the shareholders of the Company approve or accept any
Acquisition Transaction with any person other than Citizens or any
affiliate of Citizens. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Company or the Bank, (y) a purchase, lease
or other acquisition of all or substantially all of the assets of the
Company or the Bank, or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of
securities representing 25% or more of the voting power of the Company
or the Bank; provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only the Company
and/or any Subsidiary including the Bank;
(ii) After a bona fide proposal is made by any person other
than Citizens or any affiliate of Citizens to the Company or its
shareholders to engage in an Acquisition Transaction, (A) the Company
or the Bank shall have breached any covenant or obligation contained in
this Agreement and such breach would entitle Citizens to terminate this
Agreement or (B) the holders of the Company Common Stock shall not have
approved this Agreement at the meeting of such shareholders held for
the purpose of voting on this Agreement or (C) the meeting of the
holders of the Company Common Stock to approve this Agreement shall not
have been held or shall have been canceled prior to termination of this
Agreement or (D) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Citizens the
recommendation of the Board of Directors of the Company with respect to
this Agreement.
If more than one of the transactions giving rise to a Purchase Event
under this Section is undertaken or effected, then all such transactions shall
give rise to only one Purchase Event.
56
(e) The Company shall give written notice to Citizens within 24 hours
of the occurrence of a Purchase Event known to the Company; however, the giving
of such notice by the Company shall not be a condition to the right of Citizens
to obtain the Fee.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.9, 5.10 and
5.11 hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Citizens:
Citizens Financial Services, FSB
000 Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
Fax: (000) 000-0000
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq. or Xxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
57
If to the Company:
SuburbFed Financial Corp.
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxx
Chairman, President and Chief Executive Officer
Fax: (000) 000-0000
With a required copy to:
Silver, Xxxxxxxx & Taff, L.L.P.
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary,
Citizens may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) consideration to be paid to the holders of the Company Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification
and (iii) such modification will not materially delay or jeopardize receipt of
any required regulatory approvals or any other condition to the obligations of
Citizens set forth in Sections 6.1 and 6.3 hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
58
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana applicable to agreements made and entirely to
be performed within such jurisdiction.
59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
SUBURBFED FINANCIAL CORP.
Attest:
/s/Xxxxx X. Xxxxxx By: /s/Xxxxxx X. Xxxx
--------------------------------- ------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxx
Title: Executive Vice President Title: Chairman, President and
Chief Executive Officer
CITIZENS FINANCIAL
SERVICES, FSB
Attest:
/s/Xxxxxx X. Xxxxxxxx By: /s/Xxxxxx X. Xxxxxx
--------------------------------- ------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxx X. Xxxxxx
Title: Corporate Secretary Title: Chairman and
Chief Executive Officer
60
