Agreement and Plan of Merger
among
Shoreline Financial Corporation,
a Michigan corporation,
SJS Acquisition Corporation,
a Michigan corporation,
and
SJS Bancorp, Inc.,
a Delaware corporation
November 6, 1996
Table of Contents
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Page
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Article I - Merger; Closing; Effective Time; Definitions. . . 1
1.1 The Closing . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger. . . . . . . . . . . . 2
1.3 The Merger. . . . . . . . . . . . . . . . . . . . . 2
1.4 Bank Consolidation. . . . . . . . . . . . . . . . . 2
1.5 Company Liquidation . . . . . . . . . . . . . . . . 2
1.6 Regulatory and Stockholder Approvals. . . . . . . . 2
1.7 Certificate of Incorporation; Bylaws. . . . . . . . 3
1.8 Directors and Officers. . . . . . . . . . . . . . . 3
1.9 Definitions . . . . . . . . . . . . . . . . . . . . 3
Article II - Merger Consideration; Conversion of Shares in The
Merger. . . . . . . . . . . . . . . . . . . . . . 5
2.1 Terms of Merger . . . . . . . . . . . . . . . . . . 5
2.2 Payment for Shares. . . . . . . . . . . . . . . . . 6
2.3 Payment for Options . . . . . . . . . . . . . . . . 7
2.4 Dissenting Shares . . . . . . . . . . . . . . . . . 8
Article III - Representations and Warranties of Company. . . . 8
3.1 Organization, Standing, and Power . . . . . . . . . 8
3.2 Capitalization. . . . . . . . . . . . . . . . . . . 9
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . 10
3.4 1996 Financial Statements; Absence of Liabilities . 10
3.5 Authority of Company. . . . . . . . . . . . . . . . 11
3.6 No Violation. . . . . . . . . . . . . . . . . . . . 11
3.7 No Consent. . . . . . . . . . . . . . . . . . . . . 12
3.8 Insurance . . . . . . . . . . . . . . . . . . . . . 12
3.9 Books and Records . . . . . . . . . . . . . . . . . 12
3.10 Title to Assets. . . . . . . . . . . . . . . . . . 12
3.11 Condition of Real Property . . . . . . . . . . . . 13
3.12 Real and Personal Property Leases. . . . . . . . . 13
3.13 Litigation . . . . . . . . . . . . . . . . . . . . 14
3.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Compliance with Laws and Regulations . . . . . . . 16
3.16 Performance of Obligations . . . . . . . . . . . . 17
3.17 Employees. . . . . . . . . . . . . . . . . . . . . 17
3.18 Brokers and Finders. . . . . . . . . . . . . . . . 17
3.19 Material Contracts . . . . . . . . . . . . . . . . 17
3.20 Absence of Certain Changes . . . . . . . . . . . . 19
3.21 Licenses and Permits . . . . . . . . . . . . . . . 20
3.22 Regulatory Action. . . . . . . . . . . . . . . . . 20
3.23 Loans and Investments. . . . . . . . . . . . . . . 21
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3.24 Loan Origination and Servicing . . . . . . . . . . 21
3.25 Loan Guarantees. . . . . . . . . . . . . . . . . . 21
3.26 Employee Benefit Plans . . . . . . . . . . . . . . 21
3.27 Company SEC Reports. . . . . . . . . . . . . . . . 24
3.28 Environmental Conditions . . . . . . . . . . . . . 24
3.29 Proxy Statement. . . . . . . . . . . . . . . . . . 26
3.30 Insider Interests. . . . . . . . . . . . . . . . . 26
3.31 Fairness Opinion . . . . . . . . . . . . . . . . . 27
3.32 Duties as Fiduciary. . . . . . . . . . . . . . . . 27
3.33 Change in Business Relationships . . . . . . . . . 27
3.34 Public Communications; Securities Offering . . . . 27
3.35 No Xxxxxxx Xxxxxxx . . . . . . . . . . . . . . . . 27
3.36 True and Complete Information. . . . . . . . . . . 28
Article IV - Representations and Warranties of Acquiror . . . 28
4.1 Organization and Qualification. . . . . . . . . . . 28
4.2 Authority Relative to this Agreement. . . . . . . . 28
4.3 No Conflict or Violation. . . . . . . . . . . . . . 29
4.4 Proxy Statement . . . . . . . . . . . . . . . . . . 29
4.5 Necessary Capital . . . . . . . . . . . . . . . . . 29
4.6 Compliance with Applicable Law. . . . . . . . . . . 29
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . 30
4.8 Regulatory Approvals. . . . . . . . . . . . . . . . 30
4.9 No Fact or Condition, Etc . . . . . . . . . . . . . 30
4.10 True and Complete Information. . . . . . . . . . . 30
Article V - Additional Covenants and Agreements. . . . . . . . 30
5.1 Access to Information . . . . . . . . . . . . . . . 30
5.2 Conduct of Business by Company. . . . . . . . . . . 32
5.3 Regulatory Matters. . . . . . . . . . . . . . . . . 35
5.4 Stockholder Approval. . . . . . . . . . . . . . . . 36
5.5 Updated Financial Information . . . . . . . . . . . 36
5.6 Acquisition Proposals . . . . . . . . . . . . . . . 36
5.7 Further Assurances. . . . . . . . . . . . . . . . . 36
5.8 Employment Agreements . . . . . . . . . . . . . . . 37
5.9 Treatment of ESOP . . . . . . . . . . . . . . . . . 37
5.10 Conduct of Business. . . . . . . . . . . . . . . . 38
5.11 Indemnification. . . . . . . . . . . . . . . . . . 38
5.12 Subsequent Disclosures . . . . . . . . . . . . . . 38
5.13 WARN Act . . . . . . . . . . . . . . . . . . . . . 39
5.14 Dissenting Stockholders' Appraisal Rights. . . . . 39
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5.15 Data Processing and Related Contracts. . . . . . . 39
5.16 Environmental Investigation. . . . . . . . . . . . 39
5.17 Tax Ruling . . . . . . . . . . . . . . . . . . . . 40
5.18 Employee Agreements. . . . . . . . . . . . . . . . 40
Article VI - Conditions . . . . . . . . . . . . . . . . . . . 41
6.1 Conditions to Obligations of Acquiror . . . . . . . 41
6.2 Conditions to Obligations of Company. . . . . . . . 43
Article VII - Termination . . . . . . . . . . . . . . . . . . 44
7.1 Termination . . . . . . . . . . . . . . . . . . . . 44
7.2 Effect of Termination . . . . . . . . . . . . . . . 46
Article VIII - General. . . . . . . . . . . . . . . . . . . . 47
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . 48
8.3 Choice of Law . . . . . . . . . . . . . . . . . . . 48
8.4 Specific Enforcement. . . . . . . . . . . . . . . . 48
8.5 Jurisdiction; Venue; Jury . . . . . . . . . . . . . 49
8.6 Entire Agreement. . . . . . . . . . . . . . . . . . 49
8.7 Headings, Etc.. . . . . . . . . . . . . . . . . . . 49
8.8 Counterparts. . . . . . . . . . . . . . . . . . . . 49
8.9 Amendment . . . . . . . . . . . . . . . . . . . . . 49
8.10 No Assignment. . . . . . . . . . . . . . . . . . . 49
8.11 Severability . . . . . . . . . . . . . . . . . . . 49
8.12 Expenses . . . . . . . . . . . . . . . . . . . . . 49
8.13 Publicity. . . . . . . . . . . . . . . . . . . . . 50
8.14 Survival . . . . . . . . . . . . . . . . . . . . . 50
8.15 Calculation of Dates and Deadlines . . . . . . . . 50
Definitions
1933 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1934 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1996 Financial Statements . . . . . . . . . . . . . . . . . . 5
Acquiring Person. . . . . . . . . . . . . . . . . . . . . . . 45
Acquiror. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquiror Disclosure Statement . . . . . . . . . . . . . . . . 28
Acquiror Trigger Event. . . . . . . . . . . . . . . . . . . . 46
Acquiror Triggering Events. . . . . . . . . . . . . . . . . . 46
Acquiror's Bank . . . . . . . . . . . . . . . . . . . . . . . 1
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Acquisition Proposal. . . . . . . . . . . . . . . . . . . . . 36
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Affiliated Group. . . . . . . . . . . . . . . . . . . . . . . 16
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank Consolidation. . . . . . . . . . . . . . . . . . . . . . 2
Bank Consolidation Agreement. . . . . . . . . . . . . . . . . 2
Banking Code. . . . . . . . . . . . . . . . . . . . . . . . . 2
CERCLA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock. . . . . . . . . . . . . . . . . . . . . 3
Company Disclosure Statement. . . . . . . . . . . . . . . . . 8
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . 24
Company Triggering Event. . . . . . . . . . . . . . . . . . . 47
Company-Related Person. . . . . . . . . . . . . . . . . . . . 26
Company's Leases. . . . . . . . . . . . . . . . . . . . . . . 13
Company's Real Properties . . . . . . . . . . . . . . . . . . 13
Company's Subsidiaries. . . . . . . . . . . . . . . . . . . . 3
DGCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . 8
Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . 21
Environmental Laws. . . . . . . . . . . . . . . . . . . . . . 24
Environmental Risk. . . . . . . . . . . . . . . . . . . . . . 40
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ESOP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ESOP Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Excess Parachute Payment. . . . . . . . . . . . . . . . . . . 40
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . 3
FDIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . 2
FHLB of Indianapolis. . . . . . . . . . . . . . . . . . . . . 4
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . 24
HOLA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Immediate Family. . . . . . . . . . . . . . . . . . . . . . . 4
Incentive Plan. . . . . . . . . . . . . . . . . . . . . . . . 4
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IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . 4
MBCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration. . . . . . . . . . . . . . . . . . . . . 4
MergerSub . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Non-Bank Subsidiary . . . . . . . . . . . . . . . . . . . . . 4
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Phase II and III Work . . . . . . . . . . . . . . . . . . . . 40
Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 5
Recognition Plan. . . . . . . . . . . . . . . . . . . . . . . 5
SAIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 9
Subsequent Event. . . . . . . . . . . . . . . . . . . . . . . 38
WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Exhibits
A - Company's Disclosure Statement . . . . . . . . . . A-1
B - Acquiror's Disclosure Statement. . . . . . . . . . B-1
C - Form of Company's Counsel's Legal Opinion. . . . . C-1
D - Form of Acquiror's Counsel's Legal Opinion . . . . D-1
E - Form of Definitive Employment Statement . . . . . E-1
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Agreement And Plan of Merger
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This Agreement And Plan of Merger (the "Agreement") is entered
into on November 6, 1996, by and among Shoreline Financial
Corporation, a Michigan corporation ("Acquiror"), SJS Acquisition
Corporation, a Michigan corporation that is a wholly-owned
subsidiary of Acquiror ("MergerSub"), and SJS Bancorp, Inc., a
Delaware corporation ("Company").
Acquiror and Company desire to have MergerSub merge with and
into Company upon the terms and subject to the conditions set forth
in this Agreement (the "Merger"). Company will be the surviving
corporate entity in the Merger. The boards of directors of
Acquiror, MergerSub, and Company have each duly approved this
Agreement. Upon consummation of the Merger, Company will carry out
its complete liquidation by merging with and into Acquiror (then
its parent corporation, with Acquiror being the surviving
corporation). Simultaneously, SJS Federal Savings Bank (the
"Bank"), a wholly-owned subsidiary of Company, will consolidate
with Acquiror's Bank ("Acquiror's Bank"), a wholly-owned subsidiary
of Acquiror.
Capitalized terms appearing below have the meanings defined in
this Agreement. References to articles, sections, and exhibits
refer to other parts of this Agreement, unless otherwise indicated.
In consideration of the premises and the mutual covenants,
representations, warranties, and agreements contained in this
Agreement, Acquiror and Company agree as follows:
Article I - Merger; Closing; Effective Time; Definitions
Subject to the terms and conditions of this Agreement, the
Merger shall be carried out in the following manner:
1.1 The Closing. The Merger shall be consummated following
the "Closing." The Closing shall be held at such time, date, and
location as may be agreed by the parties. In the absence of such
agreement, the Closing shall be held at the offices of Xxxxxx
Xxxxxxxx & Xxxx llp, 000 Xxx Xxxx Xxxxxxxx, 000 Xxxx Xxxxxx, X.X.,
Xxxxx Xxxxxx, Xxxxxxxx, commencing at 11 a.m. on a date specified
by either party upon 15 business days' notice after the last to
occur of the following events: (i) receipt of all consents and
approvals of government regulatory authorities legally required to
consummate the Merger and the expiration of all statutory waiting
periods; and (ii) adoption of this Agreement by Company's
stockholders. Scheduling or commencing the Closing shall not,
however, constitute a waiver of the conditions precedent of either
Acquiror or Company as set forth in Article VI. Upon completion of
the Closing, Company and MergerSub shall each execute and file the
certificate of merger as required by the Delaware General
Corporation Law ("DGCL") and the Michigan Business Corporation Act,
as amended (the "MBCA"), to effect the Merger (the "Certificate of
Merger").
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1.2 Effective Time of the Merger. The Merger shall be
consummated as promptly as possible following the Closing by filing
the Certificate of Merger in the manner required by law. The
"Effective Time" shall be as of the time and date to be specified
in the Certificate of Merger, which shall be as soon as practicable
following the Closing.
1.3 The Merger. Subject to the terms and conditions of this
Agreement, including the receipt of all requisite regulatory and
stockholder approvals, Company and MergerSub shall consummate the
Merger in which MergerSub shall be merged with and into Company and
the separate corporate existence of MergerSub shall then cease.
Company shall be the surviving corporation in the Merger and shall
become a wholly-owned subsidiary of Acquiror. Company shall
continue to be governed by the laws of the State of Delaware with
all its rights, privileges, powers, and franchises unaffected by
the Merger. The Merger shall have the effects set forth in Section
259 of the DGCL and the MBCA in cases where the surviving
corporation will be a Delaware corporation.
1.4 Bank Consolidation. After the Effective Time, Acquiror
intends to consolidate Bank and Acquiror's Bank into a single
Michigan banking corporation where Acquiror's Bank will be the
consolidated bank resulting from the transaction (the "Bank
Consolidation"). The Bank Consolidation will be effected pursuant
to a consolidation agreement (the "Bank Consolidation Agreement"),
in the form required by the Michigan Banking Code of 1969, as
amended (the "Banking Code"), and by the HOLA, containing terms and
conditions, not inconsistent with this Agreement, as determined by
Acquiror's Bank. The Bank Consolidation shall only occur if the
Merger is consummated, and it shall become effective immediately
after the Effective Time or such later time as may be determined by
Acquiror. In order to obtain the necessary regulatory approval for
the Bank Consolidation to occur immediately after the Effective
Time, Acquiror may request that Bank and Acquiror's Bank each
execute and deliver the Bank Consolidation Agreement prior to the
Effective Time. Regardless of when executed and delivered, the
effectiveness of the Bank Consolidation Agreement shall be subject
to Acquiror's action, in its capacity as the sole shareholder of
Acquiror's Bank and of Bank, to approve the Bank Consolidation
Agreement immediately after the Effective Time.
1.5 Company Liquidation. Immediately following the Bank
Consolidation, Acquiror shall contribute all of its common stock in
Company (then a subsidiary of Acquiror) to the consolidated bank
and Company shall adopt a plan of complete liquidation transferring
all of its assets and liabilities to the consolidated bank and the
separate corporate existence of Company shall then immediately
cease.
1.6 Regulatory and Stockholder Approvals. Company will
cooperate in the preparation by Acquiror and Acquiror's Bank of the
applications to the Board of Governors of the Federal Reserve
System ("Federal Reserve Board"), the FDIC, the OTS, the Financial
Institutions Bureau ("FIB"), and any other regulatory authorities
as may be necessary in connection with all governmental approvals
requisite to the consummation of the transactions contemplated by
this Agreement. Acquiror and Company will each cooperate in the
preparation of the applications, statements, or materials as may be
required to be furnished to the stockholders of Company or filed or
submitted to appropriate governmental agencies in connection with
the Merger.
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1.7 Certificate of Incorporation; Bylaws. At the Effective
Time, the Certificate of Incorporation and Bylaws of Company shall
become the Certificate of Incorporation and Bylaws, respectively,
of the surviving corporation.
1.8 Directors and Officers. The directors and officers of
MergerSub at the Effective Time shall, from and after the Effective
Time, be the directors and officers, respectively, of the surviving
corporation until their successors have been duly elected or
appointed in accordance with the Bylaws of the surviving
corporation.
1.9 Definitions. In addition to capitalized terms otherwise
defined in this Agreement, the following capitalized terms shall
have the meanings specified below:
(a) "Affiliate" of, or a person "Affiliated" with, a
specific person is a person that directly or indirectly,
through one or more intermediaries (by virtue of legal or
beneficial ownership, contractual rights, or otherwise)
controls, or is controlled by, or is under common control
with, the person specified;
(b) "Certificate" means a stock certificate evidencing
ownership of shares of Company Common Stock;
(c) "Closing" means the satisfaction, performance, or
waiver by the parties of all of the conditions set forth in
Article VI, which shall take place as provided in Section 1.1
(The Closing);
(d) "Code" means the Internal Revenue Code of 1986, as
amended;
(e) "Company Common Stock" means the common stock, par
value $0.01 per share, of Company;
(f) "Company's Subsidiaries" means Bank, Non-Bank
Subsidiary, and any other person in which Company holds a
direct or indirect equity interest of fifty-one percent (51%)
or more;
(g) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended;
(h) "ESOP" means the SJS Bancorp, Inc., Employee Stock
Ownership Plan, as amended;
(i) "Exchange Agent" means Acquiror's Bank, as agent for
the purpose of effectuating the exchange of Certificates for
the Merger Consideration in accordance with Article II;
(j) "FDIC" means the Federal Deposit Insurance
Corporation;
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(k) "FHLB of Indianapolis" means the Federal Home Loan
Bank of Indianapolis;
(l) "FHLMC" means the Federal Home Loan Mortgage
Corporation;
(m) "HOLA" means the federal Home Owners' Loan Act, as
amended;
(n) "Immediate Family" means a person's spouse, parents,
in-laws, children, and siblings;
(o) "Incentive Plan" means the SJS Bancorp, Inc., 1996
Stock Option and Incentive Plan;
(p) "IRS" means the Internal Revenue Service;
(q) "Knowledge" or "to the knowledge of" means to the
actual knowledge of any senior executive officer of the party
or the party's subsidiaries and of any current non-employee
director of the party or the party's subsidiaries;
(r) "Merger Consideration" means the right to receive
cash, in the amount of $27 per share, into which shares of
Company Common Stock shall be converted pursuant to this
Agreement upon the effectiveness of the Merger; if for any
reason, between the date of this Agreement and the Effective
Time, the number of shares of Company Common Stock outstanding
or the number of unexercised Stock Options outstanding shall
have been changed for any reason (whether or not a breach of
this Agreement), then the amount of cash into which shares of
Company Common Stock are to be converted shall be adjusted by
multiplying $27 by a fraction, the numerator of which is (x)
917,622 plus (y) the number of Stock Options, and the
denominator of which is (xx) the number of shares of Company
Common Stock outstanding at the Effective Time plus (yy) the
number of Stock Options, any other options, and any other
rights to acquire Company Common Stock outstanding at the
Effective Time.
(s) "Non-Bank Subsidiary" means SJS Financial
Corporation, a Michigan corporation;
(t) "OTS" means the Office of Thrift Supervision, an
Office of the United States Department of the Treasury;
(u) "PBGC" means the Pension Benefit Guaranty
Corporation;
(v) "Person" (whether or not capitalized) means any
individual, corporation, association, partnership, limited
liability company, limited partnership, trust, joint venture,
other legal entity, government or governmental department or
agency;
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(w) "Proxy Statement" means the proxy statement,
including all amendments, supplements, and related materials
to be used by Company in connection with the solicitation by
its board of directors of proxies for use at the Stockholders'
Meeting;
(x) "Recognition Plan" means the SJS Bancorp, Inc.,
Management Recognition Plan;
(y) "SAIF" means the Savings Association Insurance Fund
administered by the FDIC;
(z) "SEC" means the Securities and Exchange Commission;
(aa) "Stockholders' Meeting" means the meeting of
Company's stockholders, including all adjournments, properly
called, noticed, and held for the purpose of considering
adoption of this Agreement and approval of the Merger as
required by the DGCL and Company's Certificate of
Incorporation;
(bb) "Transaction Document" collectively means the Proxy
Statement and any other documents to be filed with the SEC,
the Federal Reserve Board, the FDIC, the FIB, the State of
Delaware, the State of Michigan, or any other governmental or
regulatory agency in connection with the transactions
contemplated by this Agreement.
(cc) "1933 Act" means the Securities Act of 1933, as
amended;
(dd) "1934 Act" means the Securities Exchange Act of
1934, as amended; and
(ee) "1996 Financial Statements" means the audited
consolidated financial statements of Company contained, or
incorporated by reference, in Company's Annual Report on
Form 10-KSB for the year ended June 30, 1996, as filed with
the SEC.
Article II - Merger Consideration; Conversion of
Shares in The Merger
2.1 Terms of Merger. Upon the Merger becoming effective:
(a) Company Common Stock Shares. At the Effective Time,
each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than Company
Common Stock representing Dissenting Shares, and other than
Company Common Stock owned by Acquiror and as provided in
Subsection 2.1(b) (Treasury Shares) shall, ipso facto and
without any action on the part of any stockholder, become and
be converted into the right to receive the Merger
Consideration. Certificates representing outstanding Company
Common Stock, other than those representing Dissenting Shares,
shall, after the Effective Time, represent only the right to
receive the Merger Consideration from Acquiror. Upon
surrender to the Exchange Agent, in proper form for
cancellation, of Certificates held
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of record by a holder of Company Common Stock, that holder
shall be entitled to receive a check from the Exchange Agent
in an appropriate amount of Merger Consideration for those
shares. Until so presented and surrendered in exchange for
the Merger Consideration, each Certificate which represented
issued and outstanding Company Common Stock shall be deemed
for all purposes to evidence only the right to receive the
Merger Consideration. After the Effective Time, there shall
be no transfer on the stock transfer books of Company of
Company Common Stock. No interest shall accrue or be payable
with respect to the Merger Consideration.
(b) Treasury Shares. Each share of Company Common Stock
issued and held by Company in its treasury or owned of record
by Acquiror or any subsidiary of Acquiror on the Effective
Time shall be canceled and retired and no securities shall be
issuable and no cash paid with respect to those shares.
(c) Conversion of Stock Options. Each option granted
under the Incentive Plan issued and outstanding immediately
prior to the Effective Time shall ipso facto and without any
action on the part of any option holder, become and be
converted into the right to receive the difference between the
Merger Consideration and the applicable option exercise price;
provided that Company shall, at Acquiror's request, use its
best efforts to enter into option termination agreements with
the holders of the options pursuant to which Company may agree
to pay to the holders the cash amount immediately prior to the
Merger upon surrender and cancellation of their outstanding
options.
(d) Conversion of MergerSub Shares. Each share of
common stock of MergerSub issued and outstanding on the
Effective Time shall, ipso facto and without any action on the
part of Acquiror, continue as one share of the common stock of
the surviving corporation. Outstanding certificates
representing shares of common stock of MergerSub shall be
deemed to represent an identical number of shares of common
stock of the surviving corporation.
2.2 Payment for Shares. Company's stockholders shall
exchange their Certificates for the Merger Consideration in the
following manner:
(a) Funds Availability. From time to time after the
Effective Time, Acquiror shall make available or cause to be
made available to the Exchange Agent amounts sufficient in the
aggregate to provide all funds necessary for the Exchange
Agent to make payments of the Merger Consideration to holders
of Company Common Stock issued and outstanding immediately
prior to the Effective Time.
(b) Transmittal Instructions. Promptly after the
Effective Time, Acquiror shall cause to be mailed to each
person who was, at the Effective Time, a holder of record of
issued and outstanding Company Common Stock a form (agreed to
by Acquiror and Company) of letter of transmittal and
instructions for use in effecting the surrender of the
Certificates which, immediately prior to the Effective Time,
represented the shares. Acquiror shall make these documents
available for hand delivery at Bank and Acquiror's Bank.
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(c) Surrender of Certificates. Upon surrender to the
Exchange Agent of the Certificates (or affidavits of lost
Certificates and indemnity bonds in such form as is acceptable
to the Exchange Agent with respect to lost Certificates),
together with the letter of transmittal, duly executed and
completed in accordance with the related instructions, the
Exchange Agent shall promptly cause to be paid to the persons
entitled thereto a check in the amount to which the persons
are entitled, after giving effect to any required tax
withholdings.
(d) Uncertificated ESOP Shares. Payment of the Merger
Consideration with respect to uncertificated shares of Company
Common Stock (or fractional shares) held by the trustee of the
ESOP shall be made to the trustee upon delivery to the
Exchange Agent of documentation acceptable to Exchange Agent.
(e) Stock Transfers. If payment is to be made to a
person other than the registered holder of the Certificate
surrendered, it shall be a condition of the payment that the
Certificate so surrendered shall be properly endorsed or
accompanied by an executed stock power, with a satisfactory
signature guarantee, and shall be in proper form for transfer.
A record holder requesting payment of the Merger Consideration
to another person shall pay any transfer or other taxes
required by reason of the requested transfer or establish to
the satisfaction of Acquiror or the Exchange Agent that the
tax has been paid or is not applicable.
(f) Unclaimed Cash. One hundred eighty (180) days
following the Effective Time, Acquiror shall be entitled to
cause the Exchange Agent to deliver to it any funds (including
any interest received with respect thereto) made available to
the Exchange Agent which have not been disbursed to holders of
Certificates formerly representing Company Common Stock
outstanding at the Effective Time. Thereafter the holders
shall be entitled to look to Acquiror only as general
creditors with respect to the cash payable upon due surrender
of their Certificates. The Exchange Agent shall also deliver
to Acquiror a certified list of the names and addresses of all
former registered holders of Company Common Stock who have not
then surrendered their Certificates to receive the Merger
Consideration to which they are entitled. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto
shall be liable to any holder of Certificates formerly
representing the shares for any amount paid to a public
official pursuant to any applicable abandoned property,
escheat, or similar law.
(g) Exchange Agent Expenses. Acquiror shall pay all
charges and expenses, including those of the Exchange Agent,
in connection with the payment of the Merger Consideration in
exchange for Company Common Stock.
2.3 Payment for Options. If Company has not previously
entered into agreements with all holders of options under the
Incentive Plan and caused the surrender of the options prior to the
Effective Time, within five (5) days after the Effective Time,
Acquiror shall notify the remaining holders of options under the
Incentive Plan of the procedure for receipt of payments for their
unexercised options, which payments shall be made by Acquiror
within ten (10) days after an option holder has surrendered all of
his options to Acquiror. Acquiror shall also make available to
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Company sufficient funds to enable Company to consummate the
termination of unexercised stock options, as contemplated by
Subsection 2.1(c) (Conversion of Stock Options).
2.4 Dissenting Shares. Any shares of Company Common Stock
held by a holder who shall not have voted the shares in favor of
the Merger and who shall have complied with the applicable
procedures of Section 262 of the DGCL (if applicable) and becomes
entitled to obtain payment for the appraised value of the shares
pursuant to Section 262 of the DGCL (if applicable) shall be in
this Agreement called "Dissenting Shares." Notwithstanding any
other provision of this Agreement, any Dissenting Shares shall not,
after the Effective Time, be entitled to vote for any purpose or
receive any dividends or other distributions and shall be entitled
only to the rights as are afforded in respect of Dissenting Shares
pursuant to the DGCL. All payments in respect of Dissenting Shares
shall be from funds of Acquiror and not from the acquired assets of
Company.
Article III - Representations and Warranties of Company
Company represents and warrants to Acquiror that, except as
otherwise set forth in the disclosure statement dated November 6,
1996, constituting Exhibit A (collectively, the "Company Disclosure
Statement"), which has been delivered to Acquiror prior to the
execution of this Agreement:
3.1 Organization, Standing, and Power.
(a) Company's Organization. Company is duly organized,
validly existing, and in good standing as a corporation under
the laws of the State of Delaware and is authorized by the OTS
to be a savings and loan holding company. Company has all
requisite corporate power and authority to own, lease, and
operate its properties and assets and to carry on its business
as presently conducted. Neither the scope of the business of
Company nor the location of any of its properties requires
that it be licensed to do business in any jurisdiction other
than the State of Michigan. True and correct copies of
Company's Certificate of Incorporation and Bylaws, including
all amendments to the date of this Agreement, are contained in
the Company Disclosure Statement.
(b) Bank's Organization. Bank is duly organized and
validly existing as a federally chartered stock savings bank
under HOLA and is authorized by the OTS to conduct a savings
and loan business. Bank is a member of the FHLB of
Indianapolis, and its deposits are insured by the SAIF in the
manner and to the extent provided by law. Bank has paid when
due all deposit insurance assessments by the FDIC. Bank has
all requisite corporate power and authority to own, lease, and
operate its properties and assets and to carry on its business
as presently conducted. Neither the scope of the business of
Bank nor the location of any of its properties requires that
it be licensed to do business in any jurisdiction other than
the State of Michigan. True and correct copies of Bank's
Charter and Bylaws, including all amendments to the date of
this Agreement, are contained in the Company Disclosure
Statement.
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(c) Non-Bank Subsidiary's Organization. Non-Bank
Subsidiary is duly organized, validly existing, and in good
standing as a corporation under the laws of the State of
Michigan and is duly qualified or licensed as a foreign
corporation in each other state or jurisdiction in which the
ownership of property or the conduct of business requires
licensing or qualification, except where the failure to be so
qualified or licensed would not have a material adverse effect
on the financial condition, net income, business, or
operations of Company and Company's Subsidiaries, taken as a
whole. Non-Bank Subsidiary has all requisite corporate power
and authority to own, lease, and operate its respective
properties and assets and to carry on its business as
presently conducted. Non-Bank Subsidiary is engaged only in
those activities which are permitted by the OTS. True and
correct copies of the Articles of Incorporation and Bylaws of
Non-Bank Subsidiary, including all amendments to the date of
this Agreement, are contained in the Company Disclosure
Statement.
(d) Other Entities. The Company Disclosure Statement
contains a list of all legal entities that during the past
three (3) years were formerly Affiliates of Company, together
with a description of the disposition of the Affiliate.
3.2 Capitalization.
(a) Company's Capital Stock. The authorized capital
stock of Company consists of 4,500,000 shares of Company
Common Stock, par value $0.01 per share, of which 917,622
shares are issued and outstanding as of the date of this
Agreement, and 2,000,000 shares of preferred stock, par value
$0.01 per share, none of which is outstanding. All of the
outstanding shares of Company Common Stock are validly issued,
fully paid, and nonassessable. Except for stock options
covering not more than 79,509 shares of Common Stock granted
pursuant to the Incentive Plan (the "Stock Options"), there
are no outstanding options, warrants, or other rights in or
with respect to the unissued shares of Company's capital stock
nor any securities convertible into the stock. Except as
described in this Section, Company is not obligated to issue
any additional shares of Company's capital stock or any
additional options, warrants, or other rights in or with
respect to the unissued shares of Company's capital stock or
any other securities convertible into Company's capital stock.
(b) Issuance of Shares. After the execution of this
Agreement, the number of issued and outstanding shares of
Company Common Stock is not subject to change before the
Effective Time except for the exercise of the Stock Options.
(c) Voting Rights. Other than the shares of Company
Common Stock, neither Company nor any of Company's
Subsidiaries have outstanding any security or issue of
securities:
(i) The holder or holders of which have the right
to vote on the adoption of this Agreement or approval of
the Merger; or
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(ii) Which entitle the holder or holders to consent
to, or withhold consent on, the Merger or this Agreement.
(d) Bank Capital Stock. The authorized capital stock of
Bank consists of 4,500,000 shares of common stock, $0.01 par
value each, of which 917,622 shares are issued and
outstanding, and 2,000,000 shares of serial preferred stock,
none of which is outstanding. All of the outstanding shares
of Bank's common stock are validly issued, fully paid, and
nonassessable and are owned by Company, free and clear of all
liens and encumbrances. There are no outstanding options,
warrants, or other rights in or with respect to the unissued
shares of Bank's common stock nor any securities convertible
into the stock and Bank is not obligated to issue any
additional shares of its common stock or any additional
options, warrants, or other rights in or with respect to the
unissued shares of Bank's common stock or any other securities
convertible into Bank's common stock.
(e) Non-Bank Subsidiary Capital Stock. All of the
outstanding shares of common stock of Non-Bank Subsidiary are
validly issued, fully paid, and nonassessable and are owned by
Bank, free and clear of all liens and encumbrances. There are
no outstanding options, warrants, or other rights in or with
respect to the unissued shares of Non-Bank Subsidiary's common
stock nor any securities convertible into that stock. Non-
Bank Subsidiary is not obligated to issue any additional
shares of its common stock or any additional options,
warrants, or other rights in or with respect to the unissued
shares of its common stock or any other securities convertible
into Non-Bank Subsidiary's common stock.
3.3 Subsidiaries. Except for Bank and Non-Bank Subsidiary,
and except for stock held in the FHLB of Indianapolis and MIMLIC
Life Insurance Company, and equity interests obtained upon the
exercise of creditors rights in the usual course of its business or
held as collateral against extensions of credit or held in escrow
for safekeeping, neither Company nor any of Company's Subsidiaries
owns or holds, directly or indirectly, more than a five percent
(5%) equity interest in any person.
3.4 1996 Financial Statements; Absence of Liabilities.
(a) Financial Statements. The Company Disclosure
Statement contains copies of the 1996 Financial Statements of
Company. The 1996 Financial Statements of Company: (i) fairly
present the consolidated financial condition of Company and
Company's Subsidiaries as of the respective dates indicated
and its consolidated results of operations and the
consolidated changes in its stockholders' equity and cash
flows for the respective periods indicated; (ii) have been
prepared in accordance with generally accepted accounting
principles consistently applied for the periods indicated,
except as otherwise noted; (iii) are based on the books and
records of Company; and (iv) contain and reflect reserves for
all material accrued liabilities as of the date of the
statements and for all reasonably anticipated losses as of the
date of the statements, including (but not limited to)
adequate reserves for
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reasonably anticipated loan losses and losses upon disposition
or sale of other real estate owned by Bank.
(b) No Undisclosed Liabilities. Company does not know
of any liabilities or obligations, either accrued or
contingent, which are material to it and which have not been
reflected or disclosed in the 1996 Financial Statements of
Company other than liabilities and obligations incurred
subsequent to June 30, 1996, in the ordinary course of
business. Company does not know of any basis for the
assertion against it of any liability, obligation, or claim
(including, without limitation, that of any regulatory
authority) that might result in or cause a material adverse
change in the financial condition of Company which is not
fairly reflected in the 1996 Financial Statements or in
Company SEC Reports (including the accompanying financial
statements thereto) filed with the SEC subsequent to the
filing of Company's most recent Annual Report on Form 10-KSB.
3.5 Authority of Company. Subject to the requisite adoption
of this Agreement by the stockholders of Company, the execution,
delivery, and performance by Company of this Agreement and the
consummation of the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate
action on the part of Company. This Agreement is a valid and
binding obligation of Company, enforceable in accordance with its
terms, except insofar as the enforceability may be limited by
applicable bankruptcy, insolvency, receivership, and other laws
affecting the rights of creditors generally.
3.6 No Violation. Neither the execution, delivery, and
performance by Company of this Agreement, the consummation of the
transactions contemplated in this Agreement, nor compliance by
Company with any of the provisions of this Agreement, will:
(a) Corporate Documents. Conflict with or result in a
breach of any provision of its Certificate of Incorporation or
Bylaws;
(b) Material Contracts. Constitute a breach of or
result in a default, or give rise to any rights of
termination, cancellation, or acceleration, or any right to
acquire any securities (other than the options currently
outstanding under the Incentive Plan and shares of Company
Common Stock currently outstanding but subject to restrictions
under the Recognition Plan) or assets, under any of the terms,
conditions, or provisions of any note, bond, mortgage,
indenture, franchise, license, permit, agreement, or other
instrument or obligation to which Company or Company's
Subsidiaries are a party, or by which Company or Company's
Subsidiaries or any of their respective properties or assets
are bound, if in any of those circumstances the event could
have consequences materially adverse to the financial
condition, net income, business, or operations of Company and
Company's Subsidiaries, taken as a whole, or impair Company's
ability to perform its obligations under this Agreement; or
-11-
(c) Orders and Injunctions. Violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to
Company or Company's Subsidiaries or any of their respective
properties or assets, subject to receipt of the approvals
described in Section 3.7 (No Consent).
3.7 No Consent. No consent of, approval of, notice to, or
filing with any governmental authority having jurisdiction over any
aspect of the business or assets of Company or Company's
Subsidiaries, and no consent of, approval of, or notice to or
filing with any other person is required in connection with the
execution, delivery, and performance by Company of this Agreement
or the consummation by Company of the transactions contemplated by
this Agreement, except:
(a) Stockholder Adoption. The adoption of this
Agreement and the transactions contemplated by this Agreement
by the stockholders of Company;
(b) Regulatory Approvals. The approvals of the Federal
Reserve Board, the FDIC, the OTS, the FIB, and any other
governmental authorities having jurisdiction that are required
by law or regulation to consummate the transactions
contemplated by this Agreement.
3.8 Insurance. Company and the Company's Subsidiaries have
in full force and effect policies of insurance (including, without
limitation, a blanket bond, fire, third-party liability, use and
occupancy) with respect to their assets and business against the
casualties and contingencies and in the amounts, types, and forms
as are, in the reasonable opinion of management of Company,
appropriate for their business, operations, properties, and assets.
The Company Disclosure Statement contains a list of all policies of
insurance carried and owned by Company and Company's Subsidiaries,
showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums, and the expiration
dates. The Company Disclosure Statement contains a complete copy
of each policy of insurance.
3.9 Books and Records. The minutes contained in corporate
minute books and files of Company and each of Company's
Subsidiaries (including former wholly owned Subsidiaries for all
purposes of this Section) properly and accurately record in all
material respects all actions actually taken by its shareholders,
directors, and committees of directors. The books, accounts, and
financial records of Company and each of Company's Subsidiaries
reflect only actual transactions and have been maintained in all
material respects in the usual and regular manner in accordance
with good accounting practices and in compliance with all
applicable laws and regulations.
3.10 Title to Assets. Company and Company's Subsidiaries
have good, sufficient, and marketable title to all of their
properties and assets, whether real, personal, or a combination
thereof, reflected in their books and records as being owned
(including those reflected in the consolidated balance sheet of
Company and Company's Subsidiaries as of June 30, 1996, except as
since disposed of in the ordinary course of business), free and
clear of all liens and encumbrances, except:
(a) Reflected on Balance Sheet. As reflected on the
consolidated balance sheet of Company and Company's
Subsidiaries as of June 30, 1996, or the notes thereto;
-12-
(b) Normal to Business. Liens for current taxes not yet
delinquent, and liens or encumbrances which are normal to the
business of Company and Company's Subsidiaries and which are
not material in relation to the financial condition, net
income, business, or operations of Company or any of Company's
Subsidiaries; and
(c) Immaterial Imperfections. Such imperfections of
title, easements, and encumbrances, if any, as are not
material in character, amount, or extent, and do not
materially detract from the value, or materially interfere
with the present use, of the properties subject thereto or
affected thereby, or which would not otherwise be material to
the financial condition, net income, business, or operations
of Company or any of Company's Subsidiaries.
3.11 Condition of Real Property. With respect to each parcel
of real property owned by Company and Company's Subsidiaries
("Company's Real Properties"), to Company's knowledge:
(a) No Encroachments. No building or improvement to
Company's Real Properties encroaches on any easement or
property owned by another person. No building or property
owned by another person encroaches on Company's Real
Properties or on any easement benefiting Company's Real
Properties. None of the boundaries of Company's Real
Properties deviates substantially from those shown on the
survey of such property, if any, included with the Company
Disclosure Statement or from what the boundaries appear to be
through visual inspection. No claim of encroachment has been
asserted by any person with respect to Company's Real
Properties.
(b) Zoning. Neither Company nor any of Company's
Subsidiaries are in material violation of any zoning
regulation, building restriction, restrictive covenant,
ordinance, or other law, order, regulation, or requirement
relating to Company's Real Properties.
(c) Buildings. All buildings and improvements to
Company's Real Properties are in good condition (normal wear
and tear excepted), are structurally sound and are not in need
of material repairs, are fit for their intended purposes, and
are adequately serviced by all utilities necessary for the
effective operation of business as presently conducted at that
location.
(d) No Condemnation. None of Company's Real Properties
are the subject of any condemnation action. There is, to the
best of Company's knowledge, no proposal under active
consideration by any public or governmental authority or
entity to acquire Company's Real Properties for any
governmental purpose.
3.12 Real and Personal Property Leases. With respect to the
leases and licenses pursuant to which Company or any of Company's
Subsidiaries, as lessee or licensee, have possession of real or
personal property ("Company's Leases"):
-13-
(a) Binding and Valid. To Company's knowledge, each of
Company's Leases are valid, effective, and enforceable against
the lessor or licensor in accordance with its terms.
(b) No Default. There is no existing default under any
of Company's Leases or any event which with notice or lapse of
time, or both, would constitute a default with respect to
Company, any of Company's Subsidiaries, or any other party to
the contract, which default would have a material adverse
effect on the financial condition, net income, business, or
operations of Company and Company's Subsidiaries, taken as a
whole.
(c) Assignment. None of Company's Leases contain a
prohibition against assignment by Company or any of Company's
Subsidiaries, by operation of law or otherwise, or any pro-
vision which would materially interfere with the possession or
use of the property by Acquiror or its subsidiaries for the
same purposes and upon the same rental and other terms
following consummation of the Merger as are applicable to
Company or Company's Subsidiaries, excepting from this
representation any Company Lease which is not material to the
financial condition, net income, business, or operations of
Company and Company's Subsidiaries, taken as a whole.
3.13 Litigation. There is no private or governmental suit,
claim, action, or proceeding (arbitral or otherwise) pending or, to
the knowledge of Company, threatened against Company, any of
Company's Subsidiaries, or any person who may be entitled to
indemnification by Company or Company's Subsidiaries involving a
monetary claim in excess of $10,000 or a demand for equitable
relief, or against any of their directors or officers relating to
the performance of their duties in those capacities. There are no
material judgments, decrees, stipulations, or orders against
Company or Company's Subsidiaries enjoining them or any of their
directors or officers in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any property
or the conduct of business in any area. The Company Disclosure
Statement contains summary reports of its attorneys, dated on or
after June 30, 1996, on all pending litigation to which Company,
Bank, or any of their directors or officers are a party and which
names Company, any of Company's Subsidiaries, or any person who may
be entitled to indemnification by Company or Company's Subsidiaries
as a defendant or cross-defendant and prays for damages or any
other remedy or remedies that, if sustained, could have
consequences materially adverse to the financial condition, net
income, business, or operations of Company and Company's
Subsidiaries, taken as a whole, or impair the ability of Company to
perform its obligations under this Agreement or the ability of Bank
to perform its obligations under the Bank Consolidation Agreement.
During the last ten (10) years, neither Company nor any of
Company's Subsidiaries have been named in any class action lawsuit,
regardless of its outcome, or in any lawsuit or formal
administrative proceeding alleging a material violation of any
banking or thrift laws or regulations.
3.14 Taxes.
(a) Tax Returns. Company and Company's Subsidiaries
have each filed all federal and foreign income tax returns,
all state and local franchise and income tax, real and
personal property tax, sales and use tax, premium tax, excise
tax, and other tax returns of every
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character required to be filed by it and have paid all taxes,
together with any interest and penalties owing in connection
therewith, shown on the returns to be due in respect of the
periods covered by the returns, other than taxes which are
being contested in good faith and for which adequate reserves
have been established.
(b) Payroll Taxes. Company and Company's Subsidiaries
have each filed all required payroll tax returns, have
fulfilled all tax withholding obligations, and have paid over
to the appropriate governmental authorities the proper amounts
with respect to the foregoing.
(c) Tax Positions. The tax and audit positions taken by
Company and Company's Subsidiaries in connection with the tax
returns described in this Section 3.14 were reasonable and
asserted in good faith.
(d) Tax Provisions. To Company's knowledge, adequate
provision has been made in the books and records of Company
and Company's Subsidiaries and, to the extent required by
generally accepted accounting procedures, reflected in the
1996 Financial Statements of Company, for all tax liabilities,
including interest or penalties, whether or not due and
payable and whether or not disputed, with respect to any and
all federal, foreign, state, local, and other taxes for the
periods covered by the 1996 Financial Statements and for all
prior periods.
(e) Closed Years. The IRS has examined, or the statute
of limitations has expired with respect to, the federal tax
returns of Company and the Company's Subsidiaries (to the
extent not filed as part of a consolidated return of Company)
for all periods ending prior to and including June 30, 1989.
(f) Extensions; Deficiencies. The Company Disclosure
Statement sets forth (a) the date or dates through which any
foreign, state, local, or other taxing authority has examined
any other tax returns of Company and Company's Subsidiaries;
(b) a complete list of each year for which any federal, state,
local, or foreign tax authority has obtained or has requested
an extension of the statute of limitations from Company and
Company's Subsidiaries and lists each tax case involving
Company or Company's Subsidiaries currently pending in audit,
at the administrative appeals level, or in litigation; and (c)
the date and issuing authority of each statutory notice of
deficiency, notice of proposed assessment, and revenue agent's
report issued to Company and Company's Subsidiaries within the
last twelve (12) months.
(g) Audits. Neither the IRS nor any foreign, state,
local, or other taxing authority has, during the past three
(3) years, examined or is in the process of examining any
federal, foreign, state, local, or other tax returns of
Company or Company's Subsidiaries. To the knowledge of
Company, neither the IRS nor any foreign, state, local, or
other taxing authority is now asserting or threatening to
assert any deficiency or claim for additional taxes (or
interest thereon or penalties in connection therewith) except
as set forth in the Company Disclosure Statement.
-15-
(h) Withholding Taxes. All taxes which Company or
Company's Subsidiaries have been required to collect or
withhold (other than backup withholdings pursuant to Section
3406 of the Code) have been duly withheld or collected and, to
the extent required, have been paid to the proper taxing
authority. With respect to backup withholdings, Company and
the Company's Subsidiaries have exercised the degree of care
required under Section 6724 of the Code to avoid the
imposition of any penalties for failure to obtain certified
and correct taxpayer identification numbers from payees or for
failure to make backup withholdings.
(i) Tax Elections. The Company Disclosure Statement
contains a complete list of all material tax elections made by
Company and Company's Subsidiaries on any income tax return
filed during the past five (5) years which have the effect of
deferring the realization of an item of income to a period
after the period for which the item of income was reported on
Company or Company's Subsidiaries financial statements, or
accelerating an item of deduction to a period prior to the
period for which the corresponding item of loss or expense was
reported on Company's or Company's Subsidiaries financial
statements. Neither Company nor any of Company's Subsidiaries
are a party to, or bound by, any tax indemnity, tax sharing,
or tax allocation agreement other than as described in the
Company Disclosure Statement.
(j) No Tax Liens. There are no liens for taxes (other
than for current taxes not yet due and payable) upon the
assets of Company or Company's Subsidiaries.
(k) Affiliated Group. Company has never been a member
of an affiliated group of corporations, within the meaning of
Section 1504 of the Code ("Affiliated Group"), other than as
a common parent corporation, and Bank has never been a member
of an Affiliated Group except where Company or Bank was the
common parent of the Affiliated Group.
(l) Parachute Provisions. Neither Company nor any of
Company's Subsidiaries are a party to any current agreement,
contract, arrangement, or plan that has resulted or would
result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G
of the Code other than as may result from the acceleration of
vesting under Company's Incentive Plan or Recognition Plan.
3.15 Compliance with Laws and Regulations. Neither Company
nor any of Company's Subsidiaries are in default under or in breach
of any law, ordinance, order, rule or regulation promulgated by any
governmental agency having authority over it, including
specifically, but not limited to all applicable federal and state
laws, rules and regulations regulating the conduct of a savings and
loan business, banking, securities, truth-in-lending,
truth-in-savings, mortgage origination and servicing, usury, fair
credit reporting, consumer protection, occupational safety, civil
rights, employee protection, fair employment practices, fair labor
standards, and insurance; and Environmental Laws (as defined in
Subsection 3.28(b) (Environmental Laws)); except for violations
that would not have a material adverse effect on the financial
condition, net income, business, or operations of Company or any of
Company's Subsidiaries, taken as a whole. Company and Bank have
complied in all material respects with all applicable laws and
regulations governing the
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conversion of Bank from a federal mutual savings bank to a federal
stock savings bank and the issuance of all of Bank's capital stock
to Company.
3.16 Performance of Obligations. Company and the Company's
Subsidiaries have performed in all respects all material
obligations required to be performed by them to date and are not in
default under or in breach of any term or provision of any
covenant, contract, lease, loan servicing agreement or arrangement,
indenture, or any other covenant to which they are a party, are
subject, or are otherwise bound, and no event has occurred which,
with the giving of notice or the passage of time or both, would
constitute the default or breach, where the default or breach would
have a material adverse effect on the financial condition, net
income, business, or operations of Company and Company's
Subsidiaries, taken as a whole. Except for loans and leases made
by Company or Company's Subsidiaries in the ordinary course of
business and identified on its books and records as a
non-performing or non-accrual credit, to the knowledge of Company,
no party with whom Company or Company's Subsidiaries have an
agreement which is of material importance to the financial
condition, net income, business, properties, or operations of
Company or Company's Subsidiaries are in default under that
agreement.
3.17 Employees. There are no controversies pending or
threatened between, or related to, Company, Bank, and any of their
employees which could have consequences materially adverse to the
financial condition, net income, business, or operations of Company
and Company's Subsidiaries, taken as a whole, or impair the ability
of Company to perform its obligations under this Agreement. Except
as disclosed in the 1996 Financial Statements of Company, all
material sums due for employee compensation and benefits have been
duly and adequately paid or accrued on its books in accordance with
generally accepted accounting principles. Neither Company nor any
of Company's Subsidiaries are a party to any collective bargaining
agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
3.18 Brokers and Finders. Except for Company's agreement
with The Chicago Corporation, a copy of which is contained in the
Company Disclosure Statement, Company is not a party to any
agreement with any broker, finder, or investment banker relating to
the transactions contemplated by this Agreement, and neither the
execution of this Agreement nor the consummation of the
transactions provided for in this Agreement will result in any
liability to any broker or finder.
3.19 Material Contracts. Except as contained or described in
the Company Disclosure Statement, neither Company nor any of
Company's Subsidiaries are a party to any agreement or
understanding described below:
(a) Borrowing Commitments. Any commitment made to
Company or Company's Subsidiaries permitting it to borrow
money, any letter of credit, any pledge, any security
agreement, any lease (excluding leases of real property
otherwise identified in the Company Disclosure Statement), any
guarantee or any subordination agreement, or other similar or
related type of understanding, involving an amount in excess
of $50,000 as to which Company or Company's Subsidiaries are
a debtor, pledgor, lessee, or obligor;
-17-
(b) Agency Relationships. Any agreement or
understanding dealing with advertising, brokerage, licensing,
dealership, representative, or agency relationships in excess
of $50,000;
(c) Benefit Plans. Any profit-sharing, group insurance,
bonus, deferred compensation, stock option, severance pay,
pension, retirement, or any other employee benefit plan or any
plan, agreement, contract, authorization, or arrangement
pursuant to which any person is or will become entitled to any
benefit upon a change in control of Company or Company's
Subsidiaries;
(d) Correspondents. Any written correspondent banking
contracts;
(e) Asset Transactions. Any agreement or understanding
(i) for the sale of its assets in excess of $50,000 outside of
the ordinary course of business; (ii) for the grant of any
preferential right to purchase any of its assets, properties,
or rights in excess of $50,000; or (iii) which requires the
consent of any third party to the transfer and assignment of
any assets, properties, or rights in excess of $50,000;
(f) Long-term Contracts. Any agreement or understanding
which obligates Company or Company's Subsidiaries for a period
in excess of one year, which has a value in excess of $50,000,
to purchase, sell, or provide services, materials, supplies,
merchandise, facilities, or equipment and which is not
terminable without penalty on not more than thirty (30) days'
notice;
(g) Capital Expenditures. Any agreement or
understanding for any one capital expenditure or a series of
capital expenditures, the aggregate amount of which is in
excess of $50,000;
(h) Unfunded Loan Commitments. Any agreement or
understanding entered into to make a loan not yet fully
disbursed or funded as of June 30, 1996, to any person,
wherein the undisbursed or unfunded amount exceeds $100,000;
(i) Affiliate Relationships. Any agreement or
understanding of any kind, except for deposit relationships or
loans made prior to June 30, 1996, with any current director
or officer of Company or Company's Subsidiaries or with any
Affiliate or any member of the Immediate Family of any
director or officer;
(j) Employment Agreements. Any agreement or
understanding for the employment of any officer or employee
which is not by its terms, terminable by Company or Company's
Subsidiaries without liability on not more than thirty (30)
days' notice, including any employee manual or policy which
may be construed under applicable law to grant employment
rights or any agreement implied by law or any agreement
providing for severance benefits;
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(k) Terminable Contracts. Any material agreement or
understanding which would be terminable by any other party
other than Company or Company's Subsidiaries as a result of
the consummation of the transactions contemplated by this
Agreement;
(l) Participation Agreements. Any loan participation
agreement with any other person entered into subsequent to
June 30, 1995, in excess of $50,000 and on the books at
June 30, 1996; and
(m) Other Contracts. Any agreement or understanding not
otherwise disclosed or excepted pursuant to this Section 3.19
which is material to the financial condition, net income,
business, or operations of Company and Company's Subsidiaries,
taken as a whole.
3.20 Absence of Certain Changes. Since June 30, 1996, to the
date of this Agreement, the businesses of Company and the Company's
Subsidiaries have been conducted diligently and only in the
ordinary course, in the same manner as theretofore conducted, and
there have not been:
(a) Adverse Changes. Any change in the financial
condition, net income, business, or operations of Company and
Company's Subsidiaries, taken as a whole, which has been
materially adverse;
(b) Casualty Losses. Any damage, destruction, or loss
(whether or not covered by insurance) individually or in the
aggregate materially adversely affecting the financial
condition, net income, business, or operations of Company and
Company's Subsidiaries, taken as a whole;
(c) Material Contracts. Any material contract,
agreement, license, or understanding which Company or
Company's Subsidiaries have entered into or to which Company
or Company's Subsidiaries are a party which has been
terminated or amended other than in the ordinary course of
business, which termination or amendment would have a
materially adverse effect on the financial condition, net
income, business, or operations of Company and Company's
Subsidiaries, taken as a whole;
(d) Capital Expenditures. Except for supplies or
equipment purchased in the ordinary course of business, any
capital expenditure exceeding individually or in the aggregate
$50,000;
(e) Labor Disputes. Any labor trouble, dispute or
problem of any character involving employees having a material
adverse effect upon the financial condition, net income,
business, or operations of Company and Company's Subsidiaries,
taken as a whole;
(f) Accounting Changes. Any change in accounting
methods or practices by Company or Company's Subsidiaries,
except as required by applicable governmental authorities or
by generally accepted accounting principles;
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(g) Write-downs. Any write-down in excess of $50,000 by
Bank of any of its assets which are not reflected in Company's
statement of financial condition as of June 30, 1996;
(h) Employee Benefits. Any increase in the salary
schedule, compensation, rate, fee, or commission of Company or
Bank employees, officers, or directors, or the declaration,
commitment, or obligation of any kind for the payment by
Company or Company's Subsidiaries of a bonus or other
additional salary, compensation, fee, or commission to any
person, except increases made in the ordinary course of
business and consistent with past practices;
(i) Asset Dispositions. Any sale, assignment, or
transfer of any material asset, or any interest in a material
asset, except in the ordinary course of business;
(j) Mortgages. Any mortgage, pledge, or encumbrance of
any asset of Company other than liens for taxes not yet due,
except in the ordinary course of business and except as set
forth in Sections 3.10 (Title to Assets) and 3.11 (Condition
of Real Property);
(k) Waivers. Any waiver or release of any material
right or claim of Company or Company's Subsidiaries except in
the ordinary course of business (including, but not limited
to, loan, or lease collection actions); and
(l) Distributions. Any declaration, setting aside, or
payment of any dividend or distribution with respect to
Company Common Stock or the issuance of any shares of Company
Common Stock or any other securities of Company, except for
shares issued upon exercise of the options described in
Subsection 3.2(a) (Company's Capital Stock).
3.21 Licenses and Permits. Company and Company's
Subsidiaries each hold all material licenses and permits required
by federal, state, or local governmental authorities that are
necessary for the conduct of its business, and the licenses and
permits are in full force and effect, which are listed in the
Company Disclosure Statement. Bank is an approved seller-servicer
for FHLMC and each other mortgage investor identified in the
Company Disclosure Statement and in that capacity holds all
necessary permits, authorizations, or approvals of FHLMC necessary
to carry on a mortgage banking business. To the knowledge of
Company, the properties of Company and the Company's Subsidiaries
are and have been maintained and conducted, in all material
respects, in compliance with all applicable laws and regulations.
3.22 Regulatory Action. Neither Company nor any of Company's
Subsidiaries:
(a) Governmental Investigations. Have within the last
five years been charged with, or to Company's knowledge are
under governmental investigation with respect to, any actual
or alleged violation of any statute, ordinance, rule,
regulation, guideline, or standard except as disclosed in any
report of examination; or
-20-
(b) Proceedings. Is the subject of any pending or, to
Company's knowledge, threatened proceeding by any regulatory
authority having jurisdiction over its business, properties,
or operations.
3.23 Loans and Investments. To the knowledge of Company, all
loans and investments of Bank are legal and enforceable in
accordance with their terms, except as may be limited by any
bankruptcy, insolvency, moratorium, or other laws affecting
creditors rights generally or by the exercise of judicial
discretion, and each is authorized under applicable federal and
state laws and regulations. No loans or investments held by
Company or Company's Subsidiaries are as of June 30, 1996: (a)
more than ninety (90) days past due with respect to any scheduled
payment of principal or interest; (b) classified as "loss,"
"doubtful," "substandard," or "special mention" by any federal
regulators or by Company's or Company's Subsidiaries' internal
credit review system; (c) on a non-accrual status in accordance
with Company's or Company's Subsidiaries loan review procedures; or
(d) "renegotiated loans," as that term is defined in Financial
Accounting Standard No. 15.
3.24 Loan Origination and Servicing. In originating,
underwriting, servicing, purchasing, selling, transferring, and
discharging loans, mortgages, land contracts, and other contractual
obligations, either for its own account or for the account of
others, Bank has complied with all applicable terms and conditions
of such obligations and with all applicable laws, regulations,
rules, contractual requirements, and procedures, except for
incidents of noncompliance that would not, individually or in the
aggregate, have a material effect on the financial condition, net
income, business, or operations of Company or any of Company's
Subsidiaries.
3.25 Loan Guarantees. To Company's knowledge, all guarantees
of indebtedness owed to any of Company's Subsidiaries, including
but not limited to those of the Federal Housing Administration, the
Small Business Administration, and other state and federal
agencies, are valid and enforceable, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting creditors' rights, and by the
exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies.
3.26 Employee Benefit Plans.
(a) Plan Disclosures. The Company Disclosure Statement
contains a true and correct list of (i) every employee benefit
plan within the meaning of Section 3(3) of ERISA maintained by
Company or the Bank for any employee, or to which Company or
the Bank is required to contribute pursuant to any collective
bargaining agreement to which either of them is a party or by
which either of them is bound; (ii) all written bonus,
percentage compensation, stock purchase and stock option
plans, to which Company or the Bank is a party or is subject;
(iii) all group insurance programs in effect for employees of
Company or the Bank not included in (i) above; and (iv) any
other material bonus, profit-sharing, retirement, insurance,
death, or other programs or plans not disclosed pursuant to
(i), (ii) or (iii) above (each an "Employee Benefit Plan").
Company has furnished to Acquiror true and complete copies of
all Employee Benefit Plans, as well as any summary plan
description for each benefit plan and, if applicable, the
most recent actuarial valuation for each benefit
-21-
plan. All expenses associated with each Employee Benefit Plan
which were incurred during the fiscal year ended June 30,
1996, have been accrued on the books of Company in accordance
with generally accepted accounting principles and are
reflected in the 1996 Financial Statements. All expenses
associated with each Employee Benefit Plan which were incurred
since June 30, 1996, have been accrued on the books of Company
in accordance with generally accepted accounting principles.
(b) Pension Benefit Plans. Each Employee Benefit Plan
which is a pension benefit plan within the meaning of Section
3(2) of ERISA has been duly authorized and adopted by the
Board of Directors of Company and/or the Bank. With respect
to each such pension benefit plan, Company and/or the Bank is
in material compliance with the requirements prescribed by all
statutes, governmental or court orders, governmental rules or
regulations currently in effect, including but not limited to
ERISA and the Code, applicable to each such plan or
arrangement. Subject to extensions of time for approval as
permitted under Code Section 401(b) and applicable IRS
announcements, each such pension benefit plan, which is
intended to be a qualified plan under Section 401(a) of the
Internal Revenue Code, and all trusts created thereunder, has
been determined by the Internal Revenue Service to be a
qualified plan under Section 401(a) and exempt from tax under
Section 501(a) of the Code, respectively. All material
government reports and filings required by law have been
properly and timely filed and all information required to be
distributed to plan participants or beneficiaries has been
distributed. Minimum funding standards have been met for each
year to which Section 302 of ERISA or Section 412 of the Code
was applicable and no waiver of minimum funding standards has
been requested for any year with regard to any such pension
benefit plan. The present value of all accrued benefits under
each plan did not, as of the latest valuation date, exceed the
then current value of the assets of such plan allocable to
such accrued benefits, based upon the actuarial assumptions
currently used for the plan. To the knowledge of Company
and/or the Bank no condition exists that could constitute
grounds for termination of any such pension benefit plan under
Section 4042 of ERISA. To the knowledge of Company and/or the
Bank, no prohibited transaction (within the meaning of Section
4975 of the Code) or party-in-interest transaction (within the
meaning of Section 406 of ERISA) has occurred or exists with
respect to any Employee Benefit Plan which could subject any
plan to liability under Sections 409 or 502 of ERISA or
Section 4975 of the Code which would have a material adverse
effect on the financial condition of Company and the Bank,
taken as a whole, or which would adversely affect the
qualified status of each plan. To the extent applicable, all
costs of each Employee Benefit Plan have been provided for on
the basis of consistent methods in accordance with sound
actuarial assumptions and practices.
(c) Plan Reports. Company or the Bank has made
available to Acquiror for each such pension benefit plan,
where applicable: (i) a copy of the Form 5500 which was filed
in each of the most recent three plan years, including,
without limitation, all schedules thereto and all financial
statements with attached opinions of independent accountants;
(ii) the most recent determination letter from the IRS; (iii)
Statement of Assets and Liabilities as of the most recent
valuation date; and (iv) the Statement of Changes in Fund
Balance and
-22-
Financial Position or the Statement of Changes in
Net Assets Available for Benefits under each such plan for the
most recently ended plan year. The documents referred to in
clauses (iii) and (iv) fairly present the financial condition
of each such plan as of such dates and the results of
operations of each such plan.
(d) Welfare Benefit Plans. With respect to any Employee
Benefit Plan that is an "employee welfare plan" as defined in
ERISA Section 3(l), and except as disclosed in the Company
Disclosure Statement: (i) there are no retiree benefits
provided or payable; (ii) each plan that is a "group health
plan" (as defined in Code Section 5000(b)(1)) complies and in
each case has complied in all respects with the applicable
requirements of ERISA Sections 601 and 602, Code Section
162(k) (through December 31, 1988) and Code Sections 4980(B)
(commencing on January 1, 1989); and (iii) subject to
reasonable notice requirements that may exist within plans,
each plan that covers current and former employees may be
amended or terminated at any time by Company or its successor
on or at any time after the Effective Time.
(e) Compliance. Each employee welfare plan disclosed in
the Company Disclosure Statement (i) has been duly adopted and
maintained in all material respects in accordance with its
respective provisions; and (ii) has complied and is in
compliance in all material respects with the applicable
provisions of law, including the requirements of ERISA, and
the Code and the regulations promulgated thereunder by the IRS
and the United States Department of Labor. With respect to
each welfare plan, all material government reports and filings
required by law have been properly and timely filed and all
information required to be distributed to plan participants
and beneficiaries has been distributed, and all contributions
required thereunder have been made in a timely fashion.
(f) Multiemployer Plans. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of
ERISA.
(g) No Defined Benefit Plans. Since January 1, 1974,
neither Company nor any of Company's Subsidiaries have been a
sponsor of, or contributor to, a "defined benefit plan" within
the meaning of Section 3(35) of ERISA with respect to its
employees.
(h) Required Contributions. Company or the Bank has
made when due all contributions required under any Employee
Benefit Plan and under applicable laws and regulations.
(i) Payments Due. There are no payments which have
become due from any Employee Benefit Plan, the trusts created
thereunder, or from the Company or the Bank which have not
been paid through normal administrative procedures to the plan
participants or beneficiaries entitled thereto, except for
claims for benefits for which administrative claims procedures
under such plan have not been exhausted.
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(j) No Funding Deficiency. No Employee Benefit Plan
which is intended to be a qualified plan under Section 401(a)
of the Internal Revenue Code and no trust created thereunder
has incurred, subsequent to June 30, 1974, an "accumulated
funding deficiency" as defined in Section 412(a) of the
Internal Revenue Code and Section 302 of ERISA (whether or not
waived).
3.27 Company SEC Reports. Company has filed on a timely
basis all proxy statements, reports, and other documents required
to be filed by it under the 1934 Act after June 30, 1996
(collectively, the "Company SEC Reports"). The Company Disclosure
Statement contains copies of Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1996, and all quarterly and
periodic reports and proxy statements filed under the 1934 Act by
Company after that date, each as filed with the SEC. Each Company
SEC Report was in substantial compliance with the requirements of
its respective report form and did not, on the date of filing or as
subsequently amended, as applicable, contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
3.28 Environmental Conditions.
(a) Hazardous Substances. For purposes of this
Agreement, "Hazardous Substance" has the meaning set forth in
Section 9601 of the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended,
42 U.S.C.A. Section 9601, et seq. ("CERCLA"), and also
includes any substance regulated by or subject to any
Environmental Law (as defined below), and any other pollutant,
contaminant, or waste, including, without limitation,
petroleum, asbestos, radon, and polychlorinated biphenyls.
(b) Environmental Laws. For purposes of this Agreement,
"Environmental Laws" means all laws (civil or common),
ordinances, rules, regulations, guidelines, and orders that:
(i) regulate air, water, soil, or solid waste management,
including the generation, release, containment, storage,
handling, transportation, disposal, or management of Hazardous
Substances; (ii) regulate or prescribe requirements for air,
water, or soil quality; (iii) are intended to protect public
health or the environment; or (iv) establish liability for the
investigation, removal, or cleanup of, or damage caused by,
any Hazardous Substance.
(c) Owned or Operated Property. With respect
to: (1) the real estate owned or leased by Company or any of
Company's Subsidiaries or used in the conduct of their
businesses; (2) other real estate acquired by Company's
Subsidiaries in satisfaction of a debt previously contracted;
(3) real estate held and administered in trust by any of
Company's Subsidiaries; and (4) to Company's knowledge, any
real estate formerly owned or leased by Company or any of
Company's Subsidiaries (for purposes of this Section,
properties described in any of (1) through (4) are
collectively referred to as "Premises"):
-24-
(i) Construction and Content. To Company's
knowledge, none of the Premises are constructed of, or
contain as a component part, any material which (either
in its present form or as it may reasonably be expected
to change through aging or normal use) releases or may
release any substance, whether gaseous, liquid, or solid,
that is a Hazardous Substance or is known to be (either
by single exposure or by repeated or prolonged exposure)
injurious or hazardous to the health of persons occupying
the Premises at levels determined to be dangerous to
human health.
(ii) Uses of Premises. To Company's knowledge, no
part of the Premises have been used for the generation,
manufacture, handling, storage, disposal, or management
of Hazardous Substances.
(iii) Underground Storage Tanks. To Company's
knowledge, the Premises do not contain, and have never
contained, any underground storage tanks. With respect
to any underground storage tank that is listed in the
Company Disclosure Statement as an exception to the
foregoing, to Company's knowledge, each such underground
storage tank presently or previously located on Premises
are or has been maintained or removed, as applicable, in
compliance with all applicable Environmental Laws, and
has not been the source of any release of a Hazardous
Substance to the environment which has not been
remediated.
(iv) Absence of Contamination. To Company's
knowledge, the Premises do not contain, and are not
contaminated by, a Hazardous Substance in a quantity
which under applicable laws and regulations would require
Company to clean-up the contamination or to file a report
with any governmental agency giving notice of the
contamination.
(v) Environmental Suits and Proceedings. There is
no action, suit, investigation, liability, inquiry, or
other proceeding, ruling, order, notice of potential
liability, or citation against Company, any of Company's
Subsidiaries, or any of Company's Real Properties
pending, or to Company's knowledge threatened, or
previously asserted under, or as a result of any actual
or alleged failure to comply with any requirement of, any
Environmental Law. Without limiting the generality of
this Section, there is no basis for any claim against
Company, any of Company's Subsidiaries, or any of their
respective properties or assets under Section 107 of
CERCLA or any similar provision of any other
Environmental Law.
(d) Loan Portfolio. With respect to any real estate
securing any outstanding loan or related security interest and
any owned real estate acquired in full or partial satisfaction
of a debt previously contracted, to Company's knowledge:
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(i) Investigation. Company and each of Company's
Subsidiaries have complied in all material respects with
any policies adopted by their respective boards of
directors (as such policies may have been in effect from
time to time and as disclosed in the Company Disclosure
Statement), and all applicable laws and regulations,
concerning the investigation of each such property to
determine whether or not there exists or is reasonably
likely to exist any Hazardous Substance on, in, or under
such property and whether or not a release of a Hazardous
Substance has occurred at or from such property.
(ii) No Known Contamination. No such property
contains or is contaminated by any quantity of any
Hazardous Substance from any source.
3.29 Proxy Statement.
(a) Accurate Information. None of the information to be
supplied by Company for inclusion, or included, in any
Transaction Document will:
(i) Be false or misleading with respect to any
material fact, or omit to state any material fact
necessary to make the statements therein not misleading
(1) at the respective times such Transaction Documents
are filed; and (2) with respect to the Proxy Statement,
when it is mailed.
(ii) With respect to the Proxy Statement, as it may
be amended or supplemented, at the time of the
Stockholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any
material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of
any proxy for the Stockholders' Meeting.
(b) Compliance of Filings. All documents which Company
is responsible for filing with any regulatory agency in
connection with the Merger will comply as to form in all
material respects with the provisions of applicable law.
3.30 Insider Interests. For purposes of this Agreement, the
term "Company-Related Person" shall mean any director or executive
officer of Company or any of Company's Subsidiaries, their spouses
and children, any person who is a member of the same household as
such persons, and any corporation, partnership, proprietorship,
trust, or other entity of which any such persons, alone or
together, have Control.
(a) Insider Loans. No Company-Related Person has any
loan, credit, or other contractual arrangement outstanding
with Company or Company's Subsidiaries which does not conform
to applicable rules and regulations of the OTS or the Federal
Reserve Board.
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(b) Control of Material Assets. Other than in a
capacity as a shareholder, director, or executive officer of
Company or any of Company's Subsidiaries, no Company-Related
Person owns or controls any material assets or properties
which are used in the business of Company or any of Company's
Subsidiaries.
(c) Contractual Relationships. Other than ordinary and
customary banking relationships, no Company-Related Person has
any contractual relationship with Company or any of Company's
Subsidiaries.
(d) Loan Relationships. No Company-Related Person has
any outstanding loan or loan commitment from, or on whose
behalf an irrevocable letter of credit has been issued by,
Company or any of Company's Subsidiaries in a principal amount
of $10,000 or more.
3.31 Fairness Opinion. The board of directors of Company has
received the written opinion of The Chicago Corporation, to the
effect that the Merger Consideration to be received by stockholders
of Company in the Merger is fair to the stockholders from a
financial point of view, and the opinion has not been withdrawn,
modified, or revoked.
3.32 Duties as Fiduciary. Bank has performed all of its
duties in any capacity as custodian, escrow agent, receiver, or
other fiduciary in a fashion that complies in all material respects
with all applicable laws, regulations, orders, agreements, xxxxx,
instruments, and common law standards. Bank has not received
notice of any claim, allegation, or complaint from any person that
Bank failed to perform these fiduciary duties in the required
manner.
3.33 Change in Business Relationships. Neither Company nor
any of Company's Subsidiaries has notice, whether on account of the
Merger or otherwise, that (i) any customer, agent, representative,
or supplier of Company or any of Company's Subsidiaries intends to
discontinue, diminish, or change its relationship with Company or
any of Company's Subsidiaries, the effect of which would be
material to the business of Company or any of Company's
Subsidiaries; or (ii) any executive officer of Company or any of
Company's Subsidiaries intends to terminate his or her employment.
3.34 Public Communications; Securities Offering. No annual
report, quarterly report, proxy material, press release, or other
communication previously sent or released by Company or any of
Company's Subsidiaries to Company's shareholders or the public was
false or misleading with respect to any material fact, or omitted
to state any material fact necessary to make the statements therein
not misleading.
3.35 No Xxxxxxx Xxxxxxx. Company has reviewed its stock
transfer records since January 1, 1996, and has questioned its
directors and executive officers concerning known stock transfers
since that date. Based upon that investigation, to Company's
knowledge: (i) no director or officer of Company or any of
Company's Subsidiaries; (ii) no person related to any such director
or officer by blood or marriage and residing in the same household;
and (iii) no person knowingly provided material nonpublic
information by any one or more of these persons has purchased or
sold, or caused
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to be purchased or sold, any shares of Company Common Stock during
any period when Company was in possession of material nonpublic
information or in violation of any applicable provision of the 1934
Act.
3.36 True and Complete Information. No schedule, statement,
list, certificate, or other information furnished or to be
furnished by Company in connection with this Agreement, including
the Company Disclosure Statement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained therein,
in light of the circumstances in which they are made, not
misleading.
Article IV - Representations and Warranties of Acquiror
Acquiror represents and warrants to Company that, except as
otherwise set forth in the disclosure statement dated November 6,
1996, constituting Exhibit B (collectively, the "Acquiror
Disclosure Statement"), which has been delivered to Company prior
to the execution of this Agreement:
4.1 Organization and Qualification. Acquiror and MergerSub
are corporations duly organized, validly existing, and in good
standing under the laws of the State of Michigan. Acquiror's Bank
is a Michigan banking corporation duly organized, validly existing,
and in good standing under the Banking Code. Acquiror's Bank is
regulated by the FDIC and its deposits are primarily insured by the
Bank Insurance Fund in the manner and to the extent provided by
law. Neither the scope of the business of Acquiror or of
Acquiror's Bank nor the location of any of their respective
properties requires that either of them be licensed to do business
in any jurisdiction other than the State of Michigan. MergerSub
has no material assets, has never conducted any business
activities, and is not a party to any contract, agreement, or
understanding other than this Agreement.
4.2 Authority Relative to this Agreement. Acquiror and
MergerSub each have full corporate power and authority to execute,
deliver, and perform this Agreement and to consummate the
transaction contemplated by this Agreement, subject to any
governmental approvals required by law. The execution, delivery,
and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly
authorized and approved by the boards of directors of Acquiror and
MergerSub. No other corporate proceedings on the part of Acquiror
or MergerSub are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by
Acquiror and MergerSub and constitutes the valid and binding
agreement of Acquiror and MergerSub, enforceable against either of
them in accordance with its terms, except insofar as the
enforceability may be limited by applicable bankruptcy, insolvency,
receivership, and other laws affecting the rights of creditors
generally.
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4.3 No Conflict or Violation. Neither the execution nor
delivery of this Agreement nor the consummation by Acquiror and
MergerSub of the transactions contemplated by this Agreement nor
the compliance with and fulfillment of the terms and provisions of
this Agreement by Acquiror and MergerSub will conflict with, or
result in a breach of, any term, condition, or provision of, or
constitute a default under:
(a) Corporate Documents. The Articles of Incorporation
or Bylaws of Acquiror or MergerSub;
(b) Material Agreements. Any material agreement or
instrument to which Acquiror or Acquiror's Bank is a party or
by which either of them is bound; or
(c) Orders; Liens. Any material order, judgment, or
decree to which Acquiror or Acquiror's Bank is subject, or
result in the creation of any material lien, charge, or
encumbrance on any of their respective properties.
4.4 Proxy Statement.
(a) Accurate Information. None of the information to be
supplied by Acquiror for inclusion, or included, in any
Transaction Document will:
(i) Be false or misleading with respect to any
material fact, or omit to state any material fact
necessary to make the statements therein not misleading
(1) at the respective times such Transaction Documents
are filed; and (2) with respect to the Proxy Statement,
when it is mailed.
(ii) With respect to the Proxy Statement, as it may
be amended or supplemented, at the time of the
Stockholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any
material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of
any proxy for the Stockholders' Meeting.
(b) Compliance of Filings. All documents that Acquiror
is responsible for filing with any regulatory agency in
connection with the Merger or the Bank Consolidation will
comply as to form in all material respects with the provisions
of applicable law.
4.5 Necessary Capital. Based on the financial condition of
Company as reflected in the 1996 Financial Statements, Acquiror has
the necessary capital required by the regulations of the Federal
Reserve Board and FDIC to consummate the transactions contemplated
by this Agreement.
4.6 Compliance with Applicable Law. Acquiror and Acquiror's
Bank each holds all material licenses, franchises, permits, and
authorizations necessary for the lawful conduct of its business,
the lack of which would prevent Acquiror from obtaining regulatory
approval to consummate the Merger. Acquiror and Acquiror's Bank
has each complied with, and is not in material default under,
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any applicable law, statute, order, rule, regulation, policy,
and/or guideline of any federal, state, or local governmental
authority the violation of which would prevent Acquiror from
obtaining regulatory approval to consummate the Merger. Neither
Acquiror nor Acquiror's Bank has received notice of a violation of,
and does not know of any violation of, any applicable law, statute,
order, rule, regulation, policy, and/or guideline of any federal,
state, or local governmental authority the violation of which would
prevent Acquiror from obtaining regulatory approval to consummate
the Merger.
4.7 Litigation. There is no private or governmental suit,
claim, action, or proceeding pending or threatened, or which
reasonably should be expected to be commenced, against Acquiror,
its subsidiaries or against any of their directors or officers that
would impair the ability of Acquiror to perform its obligations
under this Agreement.
4.8 Regulatory Approvals. Acquiror does not know of any
circumstances which would prevent it or Company from obtaining
approval of the Federal Reserve Board, the FDIC, the OTS, or the
FIB of the transactions contemplated by this Agreement, except for
their customary review of competitive effects of the Merger under
applicable laws and regulations.
4.9 No Fact or Condition, Etc. To the knowledge of Acquiror,
no fact or condition exists which Acquiror has reason to believe
will prevent it from obtaining all governmental consents and
approvals required to consummate the Merger or the Bank
Consolidation.
4.10 True and Complete Information. No schedule, statement,
list, certificate, or other information furnished or to be
furnished by Acquiror in connection with this Agreement, including
the Acquiror Disclosure Statement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained therein,
in light of the circumstances in which they are made, not
misleading.
Article V - Additional Covenants and Agreements
Subject to the terms and conditions of this Agreement, Company
and Acquiror further agree that:
5.1 Access to Information.
(a) Permitted Investigation. Between the date of this
Agreement and the Effective Time, Company will afford, and
will cause Bank to afford, to the officers, accountants,
attorneys, and authorized representatives of Acquiror and
Acquiror's Bank reasonable access during normal business hours
to the banking offices, personnel, advisors, consultants,
properties, examination reports (subject to regulatory
approval), contracts, commitments, books and records of
Company and Company's Subsidiaries, whether the documents are
located on the premises of Company or elsewhere. Company
shall furnish Acquiror and Acquiror's Bank with all the
statements (financial and otherwise), records, examination
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reports (to the extent permitted or authorized by the OTS),
and original documents or copies, and other information
concerning the business and affairs of Company and the
Company's Subsidiaries as Acquiror or Acquiror's Bank shall
from time to time reasonably request. Company further agrees
to cause its accountants, attorneys, and other persons as the
parties may agree upon to fully cooperate with Acquiror and
Acquiror's Bank and its representatives in connection with the
right of access granted in this Agreement.
(b) Confidentiality. All information and documents to
which Acquiror or Acquiror's Bank is given access pursuant
hereto shall be subject to the Confidentiality Agreement
executed between the parties dated August 2, 1996. All
information furnished by Company or Company's Subsidiaries to
Acquiror or Acquiror's Bank pursuant hereto shall be treated
as the sole property of Company or Company's Subsidiaries
until consummation of the Merger contemplated by this
Agreement and, if the Merger shall not occur, Acquiror and
Acquiror's Bank shall return to Company or Company's
Subsidiaries all documents or other materials containing,
reflecting, or referring to this information, shall use its
best efforts to keep confidential all of this information, and
shall not directly or indirectly use this information for any
competitive or other commercial purpose. The obligation to
keep this information confidential shall continue for five (5)
years from the date the proposed Merger is abandoned, but
shall not apply to:
(i) Any information which was already in the
possession of Acquiror or Acquiror's Bank prior to its
disclosure by Company or Company's Subsidiaries,
information which was then generally known to the public,
information which became known to the public through no
fault of Acquiror or Acquiror's Bank or its agents;
(ii) Any information disclosed in accordance with
an order of a court of competent jurisdiction;
(iii) Any information received from any other
person who is not affiliated with a party and who is not
under any obligation to keep such information
confidential; or
(iv) Any information reasonably required to be
included in any filing or application required by any
governmental or regulatory agency, including without
limitation Acquiror's application to the Federal Reserve
Board, Acquiror's or Company's reports filed with the
SEC, and Acquiror's or Company's annual report and proxy
statement.
(c) No Presumption. Company and Acquiror each
acknowledge that each competes with the other in certain lines
of business in a similar market and each agrees that the fact
that a party or a party's Affiliates may in the future conduct
business with a present customer of the other party shall not,
in and of itself, create any presumption or inference that the
party or its Affiliates have used confidential information.
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(d) Acquiror's Nonpublic Information. All nonpublic
information and documents about Acquiror or Acquiror's Bank to
which Company or its agents are provided or given access by
Acquiror pursuant to this Agreement shall forever be treated
confidentially and shall be treated as the sole property of
Acquiror and Acquiror's subsidiaries.
(e) Prohibit Xxxxxxx Xxxxxxx. Acquiror and Company each
shall take responsible steps to assure that any person who
receives nonpublic information concerning the Merger or the
other party will (i) treat the information confidentially as
provided in this Section; and (ii) not directly or indirectly
buy or sell, or advise other persons to buy or sell, the other
party's stock until such information is properly disclosed to
the public.
5.2 Conduct of Business by Company. Company shall operate its
business and cause each of Company's Subsidiaries to operate its
business in the ordinary course and consistent with past practices.
Company will use all reasonable efforts to preserve intact the
present business organizations of Company and Company's
Subsidiaries and maintain in effect all licenses, permits, and
approvals of governmental authorities and agencies necessary for
the conduct of its present business. Except as otherwise
contemplated by this Agreement or as otherwise consented to or
approved by Acquiror in writing, neither Company nor Company's
Subsidiaries shall:
(a) No Issue or Sale. Issue, sell, purchase, or
redeem or commit to issue, sell, purchase, or redeem any
shares of its capital stock other than shares issued pursuant
to the exercise of stock options outstanding on the date of
this Agreement and the conversion of outstanding restricted
shares of Company Common Stock for unrestricted shares
pursuant to the Recognition Plan; or grant any options,
warrants, or rights to purchase shares of its capital stock;
or issue, sell, or authorize the issuance or sale of
securities of any kind convertible into or exchangeable for
shares of its capital stock; or
(b) Dividend Restrictions. Declare, set aside, or pay
any dividend or make any distribution in respect of its
capital stock in excess of $0.11 per quarter, in cash, from
Company to its stockholders. Company's Subsidiaries may pay
dividends to Company in amounts sufficient to enable Company
to pay its ordinary operating expenses and its accrued
liabilities, including (but not limited to) litigation
expenses and accounting, legal, printing, investment banking,
environmental testing and regulatory application fees,
expenses and costs relating to the transactions contemplated
by this Agreement.
(c) Corporate Documents. Amend its Certificate or
Articles of Incorporation (in the case of Company or Non-Bank
Subsidiary), Charter (in the case of Bank), or Bylaws, except
as may be contemplated by this Agreement;
(d) Other Capital Stock Interests. Issue or agree to
issue any additional shares of its capital stock or issue or
create any warrants, obligations, subscriptions, options,
convertible security, or other commitments under which
additional shares of its capital stock of any class might be
directly or indirectly authorized, issued, or transferred from
treasury, except in connection with options previously granted
under the Incentive Plan;
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(e) Compensation. Make any general or unusual increase
in compensation or rate of compensation payable or to become
payable to hourly, salaried, or commissioned employees or
officers, except for those which are normal, reasonable, and
consistent with past practices or as provided for by contracts
in existence and contained in the Company Disclosure
Statement.
(f) Employment Agreements. Enter into any express or
implied, written or oral, employment agreement which by its
terms cannot be terminated on thirty (30) days' notice or less
without penalty;
(g) Employee Benefits. Accrue, set aside, or pay to
any officer or employee any bonus, profit-sharing, severance,
retirement, insurance, death, fringe benefit, or other
extraordinary compensation (except pursuant to pension,
profit-sharing, bonus, and other fringe benefit plans,
agreements, and arrangements presently in effect and in
accordance with past practices) nor adopt or amend any
employee benefit plan (except that Bank may make amendments to
its employee benefit plans as are specifically contemplated by
this Agreement);
(h) Derivatives. Commit to purchase, purchase, or
otherwise acquire any high risk derivative or synthetic
mortgage product or enter into any interest rate swap
transaction, other than the purchase and sale of
collateralized mortgage obligations in the ordinary course of
business and consistent with past practices;
(i) Insider Loans. Make any loan or make any loan
commitment, renewal, or extension to any person which would,
when aggregated with all outstanding loans, commitments,
renewals, or extensions made by Bank to the person and the
person's Immediate Family and Affiliates, exceed $250,000;
provided, however, that this restriction shall not apply to
any renewals or advances on existing lines of credit or the
renegotiation or restructuring of any problem or delinquent
loan or to the making of any residential mortgage loan made
with adjustable rates;
(j) Acquisitions. Acquire any business entity, except
as it relates to a foreclosure or other exercise of creditor's
rights in the usual and ordinary course of its business;
(k) Extraordinary Transactions. Enter into any
contract or agreement to buy, sell, exchange, or otherwise
deal in any assets or series of assets in a single transaction
in excess of $100,000 in aggregate value (including, but not
limited to, options or commodities or any tangible real or
personal properties of Company or Company's Subsidiaries),
except for the origination, purchase, and sale of mortgage
loans and loan participations and the purchase and sale of
readily marketable investment securities in the ordinary
course of business and consistent with past practices, and
sales of real estate owned and other repossessed properties or
acceptance of a deed in lieu of foreclosure;
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(l) Capital Expenditures. Make any one capital
expenditure or any series of related capital expenditures
(other than emergency repairs and replacements), the amount or
aggregate amount of which (as the case may be) is in excess of
$50,000;
(m) No Branching. File, withdraw, or fail to renew any
applications for additional branches or to relocate operations
from existing locations;
(n) No Extraordinary Liabilities. Create or incur any
liabilities in excess of $50,000, other than liabilities
incurred in the ordinary course of business or as contemplated
or permitted by or in connection with this Agreement and the
consummation of the Merger;
(o) No Pledges. Create or incur or suffer to exist any
mortgage, lien, pledge, security interest, charge,
encumbrance, or restriction of any kind against or in respect
of any property or right of Company or Company's Subsidiaries
securing any obligation in excess of $50,000, except for
pledges or security interests given in connection with the
acceptance of repurchase agreements or government deposits;
(p) Material Contracts. Make or become a party to any
contract or commitment in excess of $50,000, or renew, extend,
amend, or modify any contract or commitment in excess of
$50,000, except in the usual and ordinary course of business
or as otherwise contemplated or permitted by this Agreement;
(q) No Discharges. Discharge or satisfy any mortgage,
lien, charge, or encumbrance other than as a result of the
payment of liabilities in accordance with their terms, or
except in the ordinary course of business, if the cost to
Company or Company's Subsidiaries to discharge or satisfy any
mortgage, lien, charge, or encumbrance is in excess of
$50,000, unless the discharge or satisfaction is covered by
general or specific reserves;
(r) Satisfaction of Liabilities. Pay any obligation or
liability, absolute or contingent, in excess of $50,000 except
liabilities shown on the 1996 Financial Statements or except
in the usual and ordinary course of business or in connection
with the transactions contemplated by this Agreement;
(s) Claims and Settlements. Institute, settle, or agree
to settle any claim, action, or proceeding involving an
expenditure in excess of $50,000 before any court or
governmental body;
(t) Real Estate. Invest in any real estate, except for
investments in real estate owned as a result of foreclosure or
deed in lieu of foreclosure;
(u) Environmental Precautions. Take title to any real
estate, as legal or beneficial owner or as trustee, without
first obtaining an environmental assessment of the property;
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(v) Material Purchases. Enter into or amend any
continuing contract or series of related contracts in excess
of $50,000 for the purchase of materials, supplies, equipment,
or services which cannot be terminated without cause and
without payment of any amount as a penalty, bonus, premium, or
other compensation for termination except as contemplated or
permitted by this Agreement;
(w) Insider Contracts. Enter into or amend any
contract, agreement, or other transaction with any officer,
director, or principal shareholder of Company or any Affiliate
of the person except as contemplated or permitted by this
Agreement;
(x) Policies and Procedures. Change any basic policies
and practices with respect to liquidity management,
asset/liability management or interest rate sensitivity, cash
flow planning, marketing, deposit origination, lending,
budgeting, profit and tax planning, personnel practices,
accounting, or any other material aspect of its business or
operations, except for any changes which, in the opinion of
management of Company, are required to respond to then current
market conditions (as to deposit origination and lending only)
and requirements of applicable governmental authorities; or
(y) Defaults. Knowingly default in any material respect
under any agreement or understanding to which Company or
Company's Subsidiaries are a party, and which, individually or
together with other agreements or understandings with respect
to which a default exists, would materially adversely affect
the financial condition, net income, business, or operations
of Company and Company's Subsidiaries, taken as a whole.
5.3 Regulatory Matters.
(a) Proxy Statement. Acquiror and Company will
cooperate in the preparation and filing by Company as soon as
practicable of the Proxy Statement with the SEC under the 1934
Act to be used by Company for the solicitation of proxies in
order to approve this Agreement and the Merger and will use
their best efforts to obtain permission from the SEC to mail
the Proxy Statement to Company's stockholders as soon as
possible following the execution of this Agreement.
(b) Regulatory Filings. Acquiror and Company will
cooperate with each other and use all reasonable efforts to
prepare as expeditiously as possible all necessary
documentation, to effect all necessary filings, and to obtain
at the earliest practicable date all necessary permits,
consents, approvals, and authorizations of all third parties
and governmental bodies necessary to consummate the
transactions contemplated by this Agreement. Acquiror and
Company shall each have the right to review and approve in
advance all characterizations of the information relating to
Acquiror or Company, as the case may be, and any of their
respective subsidiaries, which appear in any filing made in
connection with the transactions contemplated by this
Agreement with any governmental body. This Section shall not,
however, obligate Acquiror or Acquiror's Bank to divest all or
any part of its current business operations.
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(c) Necessary Information. Acquiror and Company will
furnish each other with all information concerning themselves,
their subsidiaries, directors, officers, and stockholders and
other matters as may be necessary or advisable in connection
with the Proxy Statement, or any other statement or
application made by or on behalf of Acquiror or Company to any
governmental body in connection with the Merger and the other
transactions contemplated by this Agreement.
5.4 Stockholder Approval. Company will take all steps
necessary to duly call, give notice of, convene, and hold the
Stockholders' Meeting as soon as practicable after the date of this
Agreement. At the Stockholders' Meeting, in the Proxy Statement,
and in all proxy materials used in connection with the meeting, the
board of directors of Company shall recommend adoption of this
Agreement and approval of the Merger by the stockholders; provided,
that the recommendation is not inconsistent with the proper
exercise of the fiduciary duties of the directors to the stock-
holders of Company.
5.5 Updated Financial Information. As soon as reasonably
available, Company shall deliver to Acquiror complete copies of all
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K,
Annual Reports on Form 10-KSB, and any amendments of past filings,
as and when these reports are filed hereafter with the SEC pursuant
to the 1934 Act. The financial statements contained in the reports
will be prepared in accordance with generally accepted accounting
principles consistently applied (except for changes required by
applicable governmental authorities or by generally accepted
accounting principles) and will present fairly the consolidated
financial condition of Company and the Company's Subsidiaries as of
the dates indicated and for the periods then ended.
5.6 Acquisition Proposals. Company shall not, nor shall it
authorize or permit any of Company's Subsidiaries, or any of their
respective officers, directors, investment bankers, attorneys,
representatives, or agents to initiate, solicit, or encourage,
directly or indirectly, any inquiries or the making of any proposal
with respect to a tender offer, exchange offer, merger,
consolidation, sale of shares, sale of assets, or assumption of
liabilities not in the ordinary course, or other business
combination involving Company or Company's Subsidiaries other than
the Merger (an "Acquisition Proposal"). Company shall notify
Acquiror immediately of the details of any indication of interest
from any persons with respect to the foregoing of which any
executive officer or director of Company becomes aware.
Notwithstanding the foregoing, nothing in this Agreement shall
prohibit Company's board of directors from fulfilling their
fiduciary duties under Delaware or federal law to the stockholders
of Company and it shall not be a breach of this Agreement for
Company's board of directors to do so.
5.7 Further Assurances. Subject to the terms and conditions
in this Agreement, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper, or advisable
under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. In case
at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement
shall take all
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necessary action. In addition, each party agrees to notify the
other by telephone within forty-eight (48) hours of receipt of any
inquiry with respect to a proposed merger, consolidation, asset
acquisition, tender offer, or other takeover transaction involving
Company and another person or receipt of a request for information
from the OTS, FDIC, the United States Department of Justice, or any
other governmental authority with respect to a proposed acquisition
of Company by another party.
5.8 Employment Agreements. On and after the Effective Time,
Acquiror and Acquiror's Bank agree to honor and be bound by all
employment agreements with Company's or Company's Subsidiaries'
senior officers which are contained in the Company Disclosure
Statement. Prior to March 25, 1997, Company shall cause Bank to
give each senior officer the notice required under Section 2, Term,
of each employment agreement that, subject to the consummation of
the Merger, the term of the employment agreement will not be
extended for any additional period.
5.9 Treatment of ESOP.
(a) ESOP Amendments. Prior to the Effective Time, the
ESOP may be amended to provide for (i) full vesting of
benefits by participants; and (ii) elimination of the
requirement for a participant to be employed on the last day
of the year to receive an employer contribution, other annual
additions or allocations, in each case effective as of the
Effective Time. Company shall make no other amendments to the
ESOP without the prior written consent of Acquiror and shall
only make additional contributions to the ESOP at levels
consistent with prior practice and applied to the ESOP
indebtedness (the "ESOP Debt").
(b) Wind-up of the ESOP. Any cash received by the ESOP
trustee in the course of the Merger with respect to
unallocated shares of Company Common Stock shall be applied by
the trustee to the repayment of the ESOP Debt. The balance of
the cash, if any, received by the ESOP trustee in the course
of the Merger with respect to unallocated shares of Company
Common Stock shall be allocated to the accounts of all
participants in the ESOP who have accounts remaining under the
ESOP (whether or not the participants are then actively
employed) and beneficiaries in proportion to the account
balances of the 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 ESOP, except to the extent that any portion of
the balance of the cash received by the ESOP trustee would be
subject to the limitations of Section 415 of the Code for that
year. Prior to the allocation contemplated by the preceding
sentence, the administrative and other authority previously
exercised with respect to the ESOP by the board of directors
of Company or Company's Subsidiaries shall be exercised solely
by a committee appointed by the board of directors of Company
and in place under the terms of the ESOP at the Effective Time
(the "Committee"), which authority shall include the authority
to appoint and remove trustees of the ESOP. If the ESOP is
required to be maintained for a transition period after the
Effective Time in order to fully allocate to participants the
cash received in the Merger with respect to unallocated shares
of Company Common Stock, Acquiror agrees to cause the ESOP to
be so continued for a period of up to 24 months after the
Effective Time for the benefit of its
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participants to the extent permitted by ERISA, the Code, and
other applicable laws and regulations; provided, however, in
such event the ESOP shall be amended, effective as of the
Effective Time, to provide that there shall be no new
participants in the plan on or after the Effect Time. Upon
the making of all allocations in this Agreement, the ESOP
shall be terminated and the account balances therein will be
distributed to participants or their beneficiaries, with the
right of tax-free rollover, to the extent permitted by law, to
an individual retirement account or another tax-qualified plan
of Acquiror, at the election of the distributee. As a
condition to any distributions, Acquiror may secure a
favorable determination letter for termination from the IRS
relating to that termination and distribution. If a
determination letter is secured, all distributions will be
made in strict compliance therewith. Notwithstanding the
foregoing: (i) Company shall be entitled to file with the IRS
an application, at any time prior to the Effective Time, for
an advance determination letter relating to termination of the
ESOP and/or the methodology for allocating proceeds; and (ii)
if at the expiration of the full transition period for
continued maintenance of the ESOP there remain unallocated
proceeds, then Acquiror may take any action it deems
appropriate with respect to the ESOP, including (but not
limited to) terminating the ESOP and making distributions
therefrom or merging the ESOP into another Acquiror
tax-qualified plan.
5.10 Conduct of Business. Acquiror and Company each
covenants not to take any action or fail to take any action which
would jeopardize its ability to consummate the transactions
contemplated by this Agreement, including obtaining all required
regulatory approvals for the Merger and the Bank Consolidation, or
which would cause any of its representations and warranties to
become untrue prior to the Effective Time.
5.11 Indemnification. Acquiror acknowledges that any and all
rights to indemnification now existing in favor of the directors
and officers of Company and each of Company's Subsidiaries under
their respective certificate of incorporation, charter, articles of
incorporation, or bylaws shall survive the Merger and shall
continue with respect to acts or omissions occurring before the
Effective Time with the same force and effect as prior to the
Effective Time.
5.12 Subsequent Disclosures. If, subsequent to the date of
this Agreement and prior to the Closing Date, an event occurs that
renders untrue any representation or warranty of Company made in
this Agreement (a "Subsequent Event"), Company shall promptly
deliver to Acquiror an amended or supplemental disclosure which
will contain a detailed description of the Subsequent Event within
five (5) business days after Company learns of the Subsequent Event
but in no event later than the third business day prior to the
Closing. The submission of an amended or supplemental disclosure,
and the existence of the Subsequent Event, shall not constitute a
default or breach by Company of any of its representations or
warranties under this Agreement; provided, however, that all
matters therein disclosed, together with all other events,
circumstances, and occurrences may be taken into account by
Acquiror in determining whether the condition set forth in
Subsection 6.1(b) (No Adverse Change) has been satisfied; and
provided further, that this Section 5.12 is not intended to permit
Company to alter or amend its representations and warranties as
made in this Agreement, including any disclosure contained in the
Company Disclosure Statement, and any amended or supplemental
disclosures provided by Company pursuant to this
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Section 5.12 shall not cure the inaccuracy of any representation or
warranty as of the date of this Agreement for any purpose under
this Agreement. Unless waived by the other party in writing, party
in breach of a representation or warranty shall use all reasonable
efforts to take remedial or preventative action in order that such
representations and warranties will be true and complete at the
Closing.
5.13 WARN Act. Company agrees that, if requested by
Acquiror, it shall, on behalf of Acquiror and Acquiror's Bank,
issue any notice required under the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") or any
similarly applicable state or local law, in connection with
Acquiror's intended closing of one or more of the banking offices
of Bank on or after the Effective Time. Each notice shall be given
sufficiently in advance of any time of closing of an office so that
neither Acquiror nor Bank shall be liable under the WARN Act for
any penalty or payment in lieu of notice to any employee or
governmental entity. Acquiror and Company shall cooperate in the
preparation and giving of any notice and no notice shall be given
without the approval of Acquiror.
5.14 Dissenting Stockholders' Appraisal Rights. Acquiror and
Company, as applicable, will comply with all applicable
notification and other provisions of regulations or statutes
relating to Dissenting Shares.
5.15 Data Processing and Related Contracts. Until the
Effective Time, Company shall advise Acquiror of all anticipated
renewals or extensions of existing data processing service
agreements, data processing software license agreements, and data
processing hardware lease agreements with independent vendors.
Company agrees to cooperate with Acquiror in negotiating with those
vendors the length of any extension or renewal term of those
agreements, which, unless otherwise agreed with Acquiror, shall not
exceed one year from the date of renewal. Company agrees to send
to each vendor, as and when due, such notices of nonrenewal as may
be necessary or appropriate under the terms of the applicable
agreements to prevent those agreements from automatically renewing
for a term of more than one year from the date of renewal, except
as otherwise agreed between Company and Acquiror.
5.16 Environmental Investigation. Acquiror shall be
permitted to conduct an environmental assessment of each parcel of
Company's Real Properties and, at Acquiror's option: (i) any
other real estate formerly owned by Company or Company's
Subsidiaries; and (ii) acquired by Company's Subsidiaries in
satisfaction of a debt previously contracted. As to each such
property:
(a) Preliminary Environmental Assessments. Acquiror
may, at its expense, engage an environmental consultant
acceptable to Company to conduct a preliminary ("Phase I")
assessment of the property. Company and Company's
Subsidiaries shall provide reasonable assistance, including
site access and a knowledgeable contact person, to the
consultant for purposes of conducting the Phase I assessments.
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(b) Environmental Risks. If there are any facts or
conditions identified in a Phase I assessment which, in its
discretion, Acquiror believes could potentially pose a current
or future risk of a material adverse effect on the financial
condition, net income, business, or operations of Company and
Company's Subsidiaries, taken as a whole, then Acquiror shall
identify that risk to Company, identify the facts or
conditions underlying that risk, and provide Company with a
copy of the Phase I assessment for that property (an
"Environmental Risk").
(c) Phase II and III Work. Acquiror may obtain one or
more estimates of the proposed scope of work and cost of any
further environmental investigation, remediation, or other
follow-up work it reasonably deems necessary or appropriate to
assess and, if necessary or appropriate, remediate an
Environmental Risk if remediation would be required by
applicable law or if a failure to do so could result in a
material adverse effect on the financial condition, net
income, business, or operations of Company and Company's
Subsidiaries, taken as a whole ("Phase II and III Work").
Acquiror shall provide copies of those estimates to Company.
Acquiror and Company shall cooperate in the review, approval,
and implementation of all work plans for Phase II and III
Work. All work plans for any Phase II and III Work shall be
mutually satisfactory to Acquiror and Company. Mutually
agreed upon Phase II and III Work shall be undertaken and
completed as quickly as possible and shall be completed prior
to the Closing. If the expenses of any Phase II and III Work
or proposed work plans or removal or remediation actions would
entail a material cost to complete, Acquiror and Company shall
discuss a mutually acceptable allocation of that expense or
modification to this Agreement.
(d) Acquiror's Termination Rights. If Acquiror and
Company are unable to agree upon a course of action to
promptly complete any Phase II and III Work, an acceptable
allocation of related expenses, and/or an acceptable
modification to this Agreement, then Acquiror may give Company
notice of the unacceptable Environmental Risk. Company shall
have thirty (30) days following receipt of that notice to cure
that Environmental Risk, if possible, to Acquiror's reasonable
satisfaction. If not so cured within that thirty (30) days,
then Acquiror may terminate this Agreement as provided in
Subsection 7.1(b)(v) (Environmental Risk).
5.17 Tax Ruling. Acquiror shall promptly seek to obtain from
the IRS a private letter ruling providing assurance that neither
Acquiror nor Company will be required to recapture Bank's pre-1988
bad debt reserves following the Merger and the Bank Consolidation.
In lieu of the IRS's private letter ruling, Acquiror may choose to
accept an opinion from tax counsel or tax accountants to the same
effect.
5.18 Employee Agreements. Acquiror and Company shall
promptly seek to obtain from each employee of Company who, as a
result of the change of control of Company in the Merger, would be
entitled to any compensation in excess of the limitations
prescribed by Section 280G of the Code (an "Excess Parachute
Payment"), a mutually satisfactory amendment to any employment
agreement, severance agreement, stock option agreement, restricted
stock agreement, or other
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compensation agreement to (i) adjust the aggregate amount of
compensation due; (ii) extend the time period
over which the compensation is payable; (iii) amend other terms and
conditions; or (iv) any combination of these changes; all in order
to prevent all compensation payable under such agreements from
being characterized as an Excess Parachute Payment.
Article VI - Conditions
6.1 Conditions to Obligations of Acquiror. The obligations
of Acquiror to consummate the transactions provided for by this
Agreement are subject to the satisfaction at or prior to the
Closing of each of the following conditions, any one or more of
which may, to the extent waivable, be waived by Acquiror:
(a) Representations and Warranties. The representations
and warranties of Company contained in this Agreement, as
amended or supplemented pursuant to Section 5.12 (Subsequent
Disclosures), shall be true and correct in all material
respects when made as of the date of this Agreement and as
made again as of the Closing, except as to any representation
or warranty which specifically relates to an earlier date;
provided, however, that for purposes of satisfying this
condition (but not for purposes of determining whether or not
a breach has occurred), any representation which contains a
knowledge qualification shall be read without that
qualification to verify at Closing whether the representation
was true and correct on the date of this Agreement. Company
shall have performed all agreements and covenants required by
this Agreement to be performed by it. At the Closing there
shall be delivered to Acquiror a certificate signed by the
chief executive and chief financial officers of Company to the
foregoing effect.
(b) No Adverse Change. There shall not have occurred
any event, development, or circumstance related to the
business, condition (financial or otherwise), capitalization,
or properties of Company or Company's Subsidiaries that has
had or could reasonably be expected to have a material adverse
effect on the financial condition, net income, business, or
operations of Company and Company's Subsidiaries, taken as a
whole, whether or not the event, development, circumstance,
change, or effect is reflected in the Company Disclosure
Statement, as amended or supplemented after the date of this
Agreement, other than: (i) an adverse effect caused solely by
a change in laws or regulations or other factors (including,
but not limited to, a special SAIF premium assessment or a
change in general economic conditions or interest rates, and
the "xxxx to market" implications of those events) affecting
the financial condition, net income, business, or operations
of thrift or banking institutions generally; or (ii) legal,
accounting, and investment bankers' expenses incurred by
Company in connection with Company's negotiation of this
Agreement and the consummation of the Merger.
(c) Consents. All consents, approvals, and waivers from
governmental agencies (including, without limitation, the
Federal Reserve Board, the FDIC, the FIB, and the OTS as
required by 12 U.S.C. Section 1467a(e)(1)), necessary to
permit the transactions contemplated
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by this Agreement shall have been obtained or provided for,
all waiting periods prescribed by applicable law or regulation
shall have expired, and the United States Department of
Justice shall not have taken any adverse action within the
period allowed under 12 U.S.C. Section 1828(c)(6).
(d) No Litigation. Neither Acquiror nor Company shall
be subject to any order, decree, or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
(e) Continued IRS Status. Acquiror shall have received
an opinion from Xxxxx Xxxxxx & Co., L.L.P., independent
auditors for Company, in form and substance satisfactory to
Acquiror, to the effect that, immediately prior to the
Effective Time, the Bank qualifies as a "domestic building and
loan association" within the meaning of Section 7701(a)(19) of
the Code.
(f) Opinion of Counsel. Acquiror shall have received
the opinion of Silver, Xxxxxxxx & Taff, L.L.P., counsel to
Company, substantially in the form and content set forth in
Exhibit C. Any certificate relied upon by Company's counsel
shall also be addressed to Acquiror.
(g) Tax Opinion. Acquiror shall have received the
opinion of Xxxxxx Xxxxxxxx & Xxxx LLP, counsel to Acquiror,
relating to the tax consequences of the transactions
contemplated under this Agreement, in form and content
reasonably satisfactory to Acquiror.
(h) Certificate as to Outstanding Shares. Acquiror
shall have received one or more certificates dated as of the
Closing date and signed by the secretary of Company on behalf
of Company, and by the transfer agent for Company Common
Stock, certifying (i) the total number of shares of capital
stock of Company issued and outstanding as of the close of
business on the day immediately preceding the Closing; and
(ii) with respect to the secretary's certification, the number
of shares of Company Common Stock, if any, which are issuable
on or after that date, all in such form as Acquiror may
reasonably request.
(i) Change of Control Waivers. Acquiror shall have
received evidence of the waiver of any material rights and the
waiver of the loss of any material rights which may be
triggered by the change of control of Company upon
consummation of the Merger under any agreements, contracts,
mortgages, deeds of trust, leases, commitments, indentures,
notes, or other instruments described in the Company
Disclosure Statement, the breach of which would cause a
material adverse effect on the financial condition, net
income, business, or operations of Company and Company's
Subsidiaries, taken as a whole, all in form and substance
reasonably satisfactory to Acquiror.
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(j) Environmental Risk. All investigation and
remediation with respect to any Environmental Risk identified
during its Phase I assessments and all related Phase II and
III Work shall have been substantially completed to Acquiror's
reasonable satisfaction, all as provided in Section 5.16
(Environmental Investigation).
(k) Executive Employment and Compensation. Acquiror
shall have received definitive statements substantially in the
form contained in Exhibit E. Each definitive statement shall
be separately signed and acknowledged as being true, correct,
and complete by each person.
(l) Tax Ruling. Acquiror shall have received from the
IRS a private letter ruling, or a satisfactory opinion from
tax counsel or tax accountants, regarding Bank's pre-1988 bad
debt reserves as described in Section 5.17 (Tax Ruling).
(m) Employee Agreements. Acquiror and Company shall
have received from Company's employees all required amendments
to employment agreements, severance agreements, stock option
agreements, restricted stock agreements, or other compensation
agreements with respect to Excess Parachute Payments as
described in Section 5.18 (Employee Agreements).
(n) Other Closing Transaction Documents. Company shall
have delivered to Acquiror at the Closing such other
certificates, instruments, and documents as may be reasonably
requested by Acquiror prior to the Closing.
6.2 Conditions to Obligations of Company. The obligations of
Company to consummate the transactions provided for by this
Agreement are subject to the satisfaction at or prior to the
Closing of each of the following conditions, any one or more of
which may be waived, to the extent waivable:
(a) Stockholder Approval. The affirmative vote of
holders of at least a majority of the outstanding shares of
Company's Common Stock entitled to vote on the adoption of
this Agreement shall have been duly received at the
Stockholders' Meeting.
(b) Consents. All consents, approvals, and waivers from
third parties and governmental agencies necessary to permit
the transactions contemplated by this Agreement shall have
been obtained or provided for, and all waiting periods shall
have expired, as provided in Subsection 6.1(c) (Consents).
(c) Representations and Warranties. The representations
and warranties of Acquiror contained in this Agreement shall
be true and correct in all material respects when made as of
the date of this Agreement and as made again as of the
Closing, except as to any representation or warranty which
specifically relates to an earlier date. Acquiror shall have
performed all agreements and covenants required by this
Agreement to be performed by it.
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At the Closing there shall be delivered to Company a
certificate signed by the chief executive and chief financial
officers of Acquiror to the foregoing effect.
(d) No Litigation. Neither Acquiror nor Company shall
be subject to any order, decree, or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
(e) Opinion of Counsel. Company shall have received the
opinion of Xxxxxx Xxxxxxxx & Xxxx LLP, counsel to Acquiror,
substantially in the form and content set forth in Exhibit D.
(f) Other Closing Transaction Documents. Acquiror shall
have delivered to Company at the Closing such other
certificates, instruments, and documents as may be reasonably
requested by Company prior to the Closing.
Article VII - Termination
7.1 Termination. This Agreement and the Merger may only be
terminated and the transactions contemplated by this Agreement may
be abandoned at any time prior to the Closing (notwithstanding that
this Agreement has been adopted by Company's stockholders):
(a) Mutual Action. By agreement authorized by the
boards of directors of Acquiror and Company, or duly
authorized committees of the boards; or
(b) Acquiror's Termination Rights. By the board of
directors, or a duly authorized committee of the board, of
Acquiror if:
(i) Failure of Conditions. At any time after the
Closing could otherwise be called, there has been a
failure by Company to satisfy its conditions precedent
set forth in Subsections 6.1 (a) (Representations and
Warranties), (b) (No Adverse Change), (e) (Continued IRS
Status), (f) (Opinion of Counsel), (g) (Tax Opinion), (h)
(Certificate as to Outstanding Shares), (i) (Change of
Control Waivers), (j) (Environmental Risk), (k)
(Executive Employment and Compensation), (m) (Employee
Agreements), or (n) (Other Closing Transaction Documents)
which notice has been given in writing by Acquiror and
which has not been cured within thirty (30) business days
of receipt of notice, or
(ii) Upset Date. The Effective Time has not
occurred prior to September 30, 1997, without material
fault on the part of Acquiror; or
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(iii) Acquisition Proposals. The board of
directors of Company shall have withdrawn, or modified,
or changed in a manner adverse to Acquiror, its approval
or recommendation of this Agreement or the Merger, or
shall have recommended an Acquisition Proposal or offer,
or shall have executed an agreement in principle (or
similar agreement), or definitive agreement providing for
a tender offer or exchange offer for any shares of
capital stock of Company, or a merger, consolidation, or
other business combination of Company or Bank or a sale
of more than 25 percent of the assets of Company or Bank
with or to a person or entity other than Acquiror or its
affiliates (or the board of directors of Company resolves
to do any of the foregoing); or
(iv) Acquiring Persons. It shall have been
publicly disclosed or Acquiror shall have learned that
any person, entity, or "group" (as that term is defined
in Section 13(d)(3) of the Exchange Act) (an "Acquiring
Person"), other than Acquiror or its affiliates or any
group of which any of them is a member, shall have
acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the 0000 Xxx) of more than
19.9 percent of any class or series of capital stock of
Company through the acquisition of stock, the formation
of a group or otherwise, or shall have been granted an
option, right, or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 19.9 percent of
any class or series of capital stock of Company; or
(v) Environmental Risks. If Acquiror has given
Company notice of an unacceptable Environmental Risk
pursuant to Section 5.16 (Environmental Investigation),
and it is not cured within the thirty- (30) day period,
or any extension thereof, as provided in Subsection
5.16(d) (Acquiror's Termination Rights).
(c) Company's Termination Rights. By the board of
directors, or a duly authorized committee of the board, of
Company if:
(i) Failure of Conditions. At any time after the
Closing could otherwise be called, there has been a
failure by Acquiror to satisfy its conditions precedent
set forth in Subsection 6.2 (c) (Representations and
Warranties), (e) (Opinion of Counsel), or (f) (Other
Closing Transaction Documents) of which notice has been
given in writing by Company and which has not been cured
within thirty (30) business days of receipt of notice;
(ii) Upset Date. The Effective Time has not
occurred prior to September 30, 1997, without material
fault on the part of Company; or
(iii) Delayed Regulatory Approval. On or after
June 30, 1997, the Effective Time has not occurred and
the Federal Reserve Board has not yet approved the
Merger.
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(d) Reciprocal Termination Rights. By the board of
directors, or a duly authorized committee of the board, of
either Acquiror or the Company at any time after the date that
(i) holders of a majority of the shares of Company Common
Stock present, in person or by proxy, at the Stockholder
Meeting vote against adoption of this Agreement or expressly
abstain from voting; (ii) any governmental consent or approval
specified in Subsection 6.1(c) (Consents) is denied by final
order; or (iii) either Acquiror or Company is subject to any
order, decree, or injunction of a court or agency of competent
jurisdiction which permanently enjoins or prohibits the
consummation of the Merger.
7.2 Effect of Termination.
(a) No Release of Liability. No termination of this
Agreement under this Article VII for any reason or in any
manner shall release, or be construed as so releasing, either
party from its obligations under Subsections 5.1 (b)
(Confidentiality), (c) (No Presumption), (d) (Acquiror's
Nonpublic Information), and (e) (Prohibit Xxxxxxx Xxxxxxx) and
Section 8.12 (Expenses) or any party hereto from any liability
to any other party under this Section 7.2.
(b) Termination Notice. In the event of the termination
of this Agreement as provided in Section 7.1 (Termination),
notice shall immediately be given to the other party or
parties specifying the provision of this Agreement pursuant to
which termination is made. After the expiration of any
applicable cure period without the grounds for termination
being cured, this Agreement shall immediately become null and
void, and there shall be no liability on the part of Acquiror
or Company except (i) for fraud or for willful and material
breach of this Agreement and (ii) as set forth in this Section
7.2 and Section 8.12 (Expenses).
(c) Termination Fee. If (i) the board of directors of
Acquiror shall terminate this Agreement pursuant to Subsection
7.1(b)(iii) (Acquisition Proposals), or (ii) the board of
directors of Acquiror shall terminate this Agreement pursuant
to Subsection 7.1(b)(iv) (Acquiring Persons) and within one
year of termination, the Acquiring Person shall acquire or
beneficially own a majority of the then outstanding shares of
Company Common Stock or shall have obtained representation of
two or more directors on Company's board of directors or shall
enter into a definitive agreement with Company with respect to
an Acquisition Proposal or similar business combination, then
in any case described in clauses (i) or (ii) of this
Subsection (each referred to as an "Acquiror Trigger Event"),
Company shall pay to Acquiror (not later than two business
days after termination of this Agreement) an amount equal to
$2,000,000.
(d) Company Breach. If the board of directors of
Acquiror shall terminate this Agreement pursuant to Subsection
7.1(b)(i) (Failure of Conditions) due to (i) a willful and
material breach of any of the representations and warranties
of Company set forth in this Agreement; or (ii) a willful and
material breach of any material obligation, agreement, or
covenant contained in this Agreement by Company (also
"Acquiror Triggering Events"), Company shall pay to Acquiror
(not later than two (2) business days after termination of
this Agreement) an amount equal to $750,000.
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(e) Acquiror's Expenses. In addition to any other
amount due, upon the termination of this Agreement due to the
occurrence of a Trigger Event, Company agrees that it shall
promptly assume and pay, or reimburse Acquiror for, all
reasonable fees and expenses incurred, or to be incurred by
Acquiror and Acquiror's Bank (including the fees and expenses
of legal counsel, accountants, financial advisors, other
consultants, and financial printers) in connection with this
Agreement, the Merger, and the other transactions contemplated
by this Agreement, in an amount not to exceed $250,000 in the
aggregate.
(f) Acquiror Breach. If the board of directors of
Company shall terminate this Agreement pursuant to Subsection
7.1(c)(i) (Failure of Conditions) due to (i) a willful and
material breach of any of the representations and warranties
of Acquiror set forth in this Agreement; or (ii) a willful and
material breach of any material obligation, agreement, or
covenant contained in this Agreement by Acquiror (each
referred to as a "Company Triggering Event"), then in any such
event, Acquiror shall pay to Company (not later than two (2)
business days after termination of this Agreement) an amount
equal to $750,000.
(g) Company's Expenses. In addition to any other amount
due, upon the termination of this Agreement due to the
occurrence of a Company Trigger Event or Company's termination
of this Agreement pursuant to Subsections 7.1(c)(i) (Failure
of Conditions), 7.1(c)(iii) (Delayed Regulatory Approval) or
7.1(d)(ii) (Reciprocal Termination Rights), Acquiror agrees
that it shall promptly assume and pay, or reimburse Company
for, all reasonable fees and expenses incurred, or to be
incurred by Company and Company's Subsidiaries (including the
fees and expenses of legal counsel, accountants, financial
advisors, other consultants, and financial printers) in
connection with this Agreement, the Merger, and the other
transactions contemplated by this Agreement, in an amount not
to exceed $250,000 in the aggregate.
Article VIII - General
Subject to the terms and conditions of this Agreement,
Acquiror and Company further agree as follows:
8.1 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered or sent and received
by a fax transmission (if receipt by the intended recipient is
confirmed by telephone and if hard copy is delivered by overnight
delivery service the next day), a hand delivery, or a nationwide
overnight delivery service (all fees prepaid) to the following
addresses:
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If to Acquiror, addressed to: With a copy to:
Shoreline Financial Corporation Xxxxxx X. Xxxxx, Esq.
Attention: Xx. Xxx X. Xxxxx Xxxxxx Xxxxxxxx & Xxxx LLP
000 Xxxxxxxxx Xx. 000 Xxx Xxxx Xxxxxxxx
Xxxx Xxxxxx Xxx 0000 111 Lyon Street, N.W.
Xxxxxx Xxxxxx, XX 00000-0000 Xxxxx Xxxxxx, Xxxxxxxx
00000-0000
If to Company, addressed to: With a copy to:
SJS Bancorp, Inc. Xxxxx X. Xxxxxxxxx, P.C.
Attention: Xx. Xxxxxx X. Xxxxxx Silver, Xxxxxxxx & Xxxx, L.L.P.
000 Xxxxx Xxxxxx Xxxxxxx Xxxxx Xxxx
Xx. Xxxxxx, XX 00000-0000 0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
or to such other place and with such other copies as either party
may designate as to itself by written notice to the others.
8.2 Waiver. Any of the terms or conditions of this Agreement
may be waived in writing at any time by action taken by the board
of directors of a party, a duly authorized committee thereof, or a
duly authorized officer of such party. The failure of any party at
any time or times to require performance of any provision of this
Agreement shall in no manner affect such party's right at a later
time to enforce the same provision. No waiver by any party of any
condition, or of the breach of any term, covenant, representation,
or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition
or breach, or as a waiver of any other condition, or of the breach
of any other term, covenant, representation, or warranty.
8.3 Choice of Law. This Agreement shall be governed by,
construed, interpreted, and the rights of the parties determined in
accordance with the applicable laws of the United States and the
State of Michigan; matters of corporate law applicable to Company
shall be governed by, construed, and interpreted according to the
DGCL and related laws of the State of Delaware.
8.4 Specific Enforcement. The parties each agree that,
consistent with the terms and conditions of this Agreement, in the
event of a breach by a party to this Agreement, money damages will
be inadequate and not susceptible of computation because of the
unique nature of Company, Company's Subsidiaries, and the Merger.
Therefore, the parties each agree that a federal or state court of
competent jurisdiction shall have authority, subject to the rules
of law and equity, to specifically enforce the provisions of this
Agreement by injunctive order or such other equitable means as may
be determined in the court's discretion. In no event shall a party
be entitled to a recovery under this Section for damages or
expenses recovered under another section of this Agreement.
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8.5 Jurisdiction; Venue; Jury. Acquiror and Company each
agree to the jurisdiction and venue of any state court located in
Berrien County, Michigan. Acquiror and Company each hereby waive
their right to a trial by jury.
8.6 Entire Agreement. The Company Disclosure Statement, the
Acquiror Disclosure Statement, the updates to such disclosure
statements, the exhibits, and the agreements expressly identified
in this Agreement are an integral part of this Agreement. This
Agreement contains the entire agreement between the parties with
respect to the Merger. This Agreement supersedes all prior written
and oral arrangements, agreements, or understandings with respect
to its subject matter. The parties have not relied upon any
written or oral statements or representations other than as stated
in this Agreement, the Company Disclosure Statement, the Acquiror
Disclosure Statement, or the updates to such disclosure statements.
The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon Acquiror and Company and their
respective successors. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than these
parties any rights, remedies, obligations, or liabilities under or
by reason of this Agreement.
8.7 Headings, Etc. The article headings and section headings
contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this
Agreement.
8.8 Counterparts. This Agreement may be executed in one or
more counterparts, which taken together shall constitute one and
the same instrument. Executed counterparts of this Agreement shall
be deemed to have been fully delivered and shall become legally
binding if and when executed signature pages are received by fax
from a party. If so delivered by fax, the parties agree to
promptly send original, manually executed copies by nationwide
overnight delivery service.
8.9 Amendment. Subject to applicable law, this Agreement may
be amended, modified, or supplemented by, and only by, written
agreement of Acquiror and Company, or by the respective officers
thereunto duly authorized, at any time prior to the Effective Time.
8.10 No Assignment. Neither party may assign any of its
rights or obligations under this Agreement to any other person.
8.11 Severability. If any term, provision, covenant, or
restriction contained in this Agreement is held by a final and
unappealable order of a court of competent jurisdiction to be
invalid, void, or unenforceable, then the remainder of the terms,
provisions, covenants, and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated unless the effect would be to
cause this Agreement to not achieve its essential purposes.
8.12 Expenses. Except as otherwise provided in Section 7.2
(Effect of Termination), the costs and expenses of Acquiror and
Company shall be allocated as follows:
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(a) Acquiror's Expenses. Acquiror shall bear all fees
and expenses of its counsel, accountants, and investment
bankers, and all other costs and expenses incurred by it in
the review and negotiation of this Agreement and the Bank
Consolidation Agreement, the investigation of Company, the
preparation and prosecution of its application for regulatory
approval, the Phase I assessments, and all costs and expenses
of any appeals therefrom. In addition, all filing and
application fees to be paid by either party or its
subsidiaries to governmental or regulatory authorities in
connection with the transactions contemplated by this
Agreement shall be borne by Acquiror.
(b) Company's Expenses. Company or Company's
Subsidiaries shall bear all fees and expenses of its counsel,
accountants, and investment bankers, the costs of printing and
mailing the Proxy Statement for use at the Stockholders'
Meeting, and all other costs and expenses incurred by such
persons or firms in the preparation of this Agreement, the
calling, noticing, and holding of the Stockholders' Meeting
and the furnishing of information or other cooperation to
Acquiror in connection with the preparation of regulatory
applications.
8.13 Publicity. Until the Effective Time, all announcements,
press releases, and other communications with stockholders or
employees of Company shall be made only after consultation by the
parties as to the content and timing of such communications. Until
the Effective Time, any such announcements or communications by
Company or Acquiror with third parties or representatives of the
press or news media shall be made only with the prior approval of
the other party hereto, except as and to the extent reasonably
required for a party to comply with disclosure obligations imposed
upon that party under applicable securities laws and related rules
and regulations, or otherwise required by law.
8.14 Survival. The representations and warranties of the
parties hereto shall expire at the Effective Time and shall not
survive the consummation of the Merger or the Bank Consolidation.
All covenants and agreements contemplated to be performed prior to
the Effective Time shall expire at the Effective Time and shall not
survive the consummation of the Merger or the Bank Consolidation,
and all covenants and agreements of Acquiror contemplated to be
performed, partially or in full, after the Effective Time, shall
survive the Effective Time and the consummation of the transactions
contemplated by this Agreement.
8.15 Calculation of Dates and Deadlines. Unless otherwise
specified, any period of time to be determined under this Agreement
shall be deemed to commence at 12:01 a.m. on the first full day
after the specified starting date, event, or occurrence. Any
deadline, due date, expiration date, or period-end to be calculated
under this Agreement shall be deemed to end at 5 p.m. on the last
day of the specified period. The time of day shall be determined
with reference to the then current local time in Benton Harbor,
Michigan.
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In Witness Whereof, Acquiror and MergerSub have each caused
this Agreement and Plan of Merger to be executed in this
counterpart by their respective, duly authorized officers as of the
date first above written.
Shoreline Financial Corporation
By: /s/ Xxx X. Xxxxx
----------------------------------
Xxx X. Xxxxx, Chairman of the
Board, President, and Chief
Executive Officer
SJS Acquisition Corporation
By: /s/ Xxx X. Xxxxx
----------------------------------
Xxx X. Xxxxx, President
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In Witness Whereof, Company has caused this Agreement and Plan
of Merger to be executed in this counterpart by its duly authorized
officer as of the date first above written.
SJS Bancorp, Inc.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx, President
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