1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MARCH 19, 2000
BY AND AMONG
XXXXXXX FINANCIAL SERVICES CORPORATION,
BFSC MERGER, N.A.
AND
FRANKLIN BANK, N.A.
2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated MARCH 19, 2000 (the
"Agreement"), is entered into by and among XXXXXXX FINANCIAL SERVICES
CORPORATION, a Michigan corporation ("Xxxxxxx"), BFSC MERGER, N.A., an interim
national banking association to-be-formed ("Merger Sub"), and FRANKLIN BANK,
N.A., a national banking association ("Bank"). Xxxxxxx, Merger Sub and Bank are
referred to collectively in this Agreement as the "Parties" and individually as
a "Party".
RECITALS:
A. Merger Sub is a wholly-owned subsidiary of Xxxxxxx.
B. The Parties desire to merge Merger Sub with and into Bank, with Bank
to be the surviving entity, as a wholly-owned subsidiary of Xxxxxxx (the
"Merger").
C. The respective boards of directors of each of the Parties have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the Merger.
D. The Parties intend that the Merger be treated as a tax-free
"reorganization" under Section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
In consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained in this Agreement, the
Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms are used in this Agreement with the meanings set
forth below:
"Affiliate" has the meaning ascribed to it in Rule 12(b)(2) promulgated
under the Exchange Act.
"Agreement" means this Agreement, as amended or modified from time to
time.
"Attendant Documents" has the meaning set forth in Section 4.01(a).
"BAC" has the meaning set forth in Section 4.02(a).
"Bank" has the meaning set forth in the preamble to this Agreement.
"Bank Act" means the Bank Conservation Act, 12 U.S.C. ss.201 et. seq.,
as amended.
2
3
"Bank Arrangements" has the meaning set forth in Section 5.12.
"Bank Board" means the board of directors of Bank.
"Bank Common Stock" means the common stock, par value $1.00 per share,
of Bank.
"Bank Employee Benefit Plan" means any Pension Plan, Welfare Plan and
any bonus, severance, deferred compensation, annuity, retirement, stock option,
stock purchase, executive compensation, incentive compensation, educational
assistance, insurance or other plan, policy or arrangement providing benefits to
employees of Bank, its Subsidiaries or any Controlled Group Member or with
respect to which Bank or any of its Subsidiaries has any liability or potential
liability, including, if Bank, its Subsidiaries or any Controlled Group Member
is organized under foreign law, any similar plan allowed by any foreign law, and
including any multi-employer plan (as defined in Section 3(37) of ERISA).
"Bank Material Adverse Effect" means, with respect to Bank, any effect
that (i) is material and adverse to the financial position, results of
operations, business, or operations of Bank and its Subsidiaries taken as a
whole, or (ii) would materially impair the ability of Bank to perform its
obligations under this Agreement or otherwise materially impede the consummation
of the Merger; provided, however, that Bank Material Adverse Effect shall not be
deemed to include the impact of (a) changes in thrift, banking and similar laws
of general applicability or interpretations thereof by Governmental Authorities,
or other changes affecting depository institutions generally, including changes
in general economic conditions and changes in prevailing interest and deposit
rates, (b) changes in generally accepted accounting principles or regulatory
accounting requirements applicable to thrifts, banks and their holding companies
generally, (c) any modifications or changes to valuation policies and practices
or restructuring charges, in each case taken pursuant to this Agreement by Bank
or its Subsidiaries and in such event only in accordance with generally accepted
accounting principles, (d) changes resulting from expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement and (e) actions or omissions of Bank taken with the prior written
consent of Xxxxxxx in contemplation of the transactions contemplated hereby.
"Bank Meeting" has the meaning set forth in Section 5.04.
"Bank SEC Documents" has the meaning set forth in Section 4.01(c).
"Bank Stock" means all of the authorized capital stock of Bank.
"Bank Stock Option" has the meaning set forth in Section 3.06(a).
"Bank Stock Plans" means the [1983] Franklin Savings and Loan
Association Directors Stock Option Plan, the [1986] Franklin Savings and Loan
Association Directors Stock Option Plan, the [1994] Franklin Bank, N.A.
Directors Stock Option Plan, the [1986] Franklin Bank Key
3
4
Executive Stock Option Plan and the [1994] Franklin Bank, N.A. Key Executive
Incentive Stock Option Plan.
"Ben Properties" means Ben Properties, Inc., a Michigan corporation,
and a wholly owned subsidiary of Bank.
"Xxxxxxx" has the meaning set forth in the preamble to this Agreement.
"Xxxxxxx Board" means the board of directors of Xxxxxxx.
"Xxxxxxx Common Stock" means the common stock, without par value, of
Xxxxxxx.
"Xxxxxxx Employee Benefit Plan" means any Pension Plan, Welfare Plan
and any bonus, severance, deferred compensation, annuity, retirement, stock
option, stock purchase, executive compensation, incentive compensation,
educational assistance, insurance or other plan, policy or arrangement providing
benefits to employees of Xxxxxxx, its Subsidiaries or any Controlled Group
Member or with respect to which Xxxxxxx or any of its Subsidiaries has any
liability or potential liability, including, if Xxxxxxx, its Subsidiaries or any
Controlled Group Member is organized under foreign law, any similar plan allowed
by any foreign law, and including any multiemployer plan (as defined in Section
3(37) of ERISA).
"Xxxxxxx Material Adverse Effect" means, with respect to Xxxxxxx, any
effect that (i) is material and adverse to the financial position, results of
operations, business, or operations of Xxxxxxx and its Subsidiaries taken as a
whole, or (ii) would materially impair the ability of Xxxxxxx to perform its
obligations under this Agreement or otherwise materially impede the consummation
of the Merger; provided, however, that Xxxxxxx Material Adverse Effect shall not
be deemed to include the impact of (a) any modifications or changes to valuation
policies and practices or restructuring charges, in each case taken pursuant to
this Agreement by Xxxxxxx or its Subsidiaries, taken pursuant to the DFI
Restructuring Plan and in such event, only in accordance with generally accepted
accounting principles, (b) changes resulting from expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement and (c) actions or omissions of Xxxxxxx taken with the prior written
consent of Bank in contemplation of the transactions contemplated hereby.
"Xxxxxxx Meeting" has the meaning set forth in Section 5.04.
"Xxxxxxx SEC Documents" has the meaning set forth in Section 4.02(c).
"Xxxxxxx Stock" means all of the authorized capital stock of Xxxxxxx.
"BSC" has the meaning set forth in Section 4.02(a).
"Closing" has the meaning set forth in Section 7.01.
4
5
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" has the meaning set forth in the Recitals to this Agreement.
"Controlled Group" means (A) a controlled group of corporations as
defined in Section 414(b) of the Code; (B) a group of trades or businesses under
common control as defined in Section 414(c) of the Code; (C) an affiliated
service group as defined in Section 414(m) of the Code; (D) a group of
businesses referred to in Section 414(o) of the Code; (E) a group of trades or
businesses under common control as defined in Section 4001(b) of ERISA; or (F)
any other group under the law, rules or regulations of a foreign country similar
to (A) through (E).
"Controlled Group Member" means a corporation, trade or business that
is a part of the same Controlled Group as Bank or Xxxxxxx, as applicable.
"DFI" has the meaning set forth in Section 4.02(a).
"DFI Alabama" has the meaning set forth in Section 4.02(a).
"DIA" has the meaning set forth in Section 4.02(a).
"DFI Restructuring Plan" means Xxxxxxx'x plan for restructuring the
manufactured home lending businesses, the material terms of which are set forth
on Schedule 5.02(a).
"DOL" means the United States Department of Labor.
"Effective Date" has the meaning set forth in Section 7.01.
"Effective Time" has the meaning set forth in Section 7.01.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Governmental Authority relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource), and/or (ii) the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended; the Resource
Conservation and Recovery Act, as amended; the Clean Air Act, as amended; the
Federal Water Pollution Control Act, as amended; the Toxic Substances Control
Act, as amended; the Emergency Planning and Community Right to Know Act; the
Safe Drinking Water Act; and all comparable state and local laws, and (ii) any
common law (including without limitation common law that may impose strict
liability) that may impose liability or obligations
5
6
for injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" means the Franklin Bank, N.A. Employee Stock Ownership Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04(a).
"Exchange Fund" has the meaning set forth in Section 3.04(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"FRB" means the Board of Governors of the Federal Reserve System.
"Franklin Finance" means Franklin Finance Corporation, a Michigan
corporation, and a wholly-owned subsidiary of Bank.
"Franklin Home" means Franklin Home Lending Group, Inc., a Michigan
corporation, and a wholly-owned subsidiary of Bank.
"Governing Documents" means, with respect to any Person other than an
individual, such Person's articles of incorporation, articles of organization,
articles of association, charter, partnership agreement, operating agreement,
bylaws, or similar governing documents, as applicable.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Holding Company" means the holding company of the Surviving Subsidiary
after the Merger, whether or not such holding company is known as Xxxxxxx
Financial Services Corporation.
"Holding Company Board" means the board of directors of the Holding
Company.
"IRS" means the Internal Revenue Service.
"Knowledge" means the actual knowledge of any director, executive
officer, or officer of Bank and its Subsidiaries or Xxxxxxx and its
Subsidiaries, as applicable, or the existence of any
6
7
facts which any of such persons reasonably should be expected to know, had any
of them conducted a reasonable investigation into the matter.
"Lien" means any title defect, judgment, objection, security interest,
lien, charge, liability, right of redemption, option, mortgage, easement,
restriction, reservation, tenancy, agreement or other obligation or encumbrance
of any nature whatsoever other than (a) mechanic's, materialmen's, and similar
liens, (b) liens for taxes not yet due and payable, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and other liens
arising in the ordinary course of business and not incurred in connection with
borrowings of money.
"Material Contract" means any agreement or series of related agreements
entered into by a Party or any of its Subsidiaries or by which a Party or any of
its Subsidiaries is bound that (i) requires aggregate payments in any
consecutive 12 month period by or to the Party or its Subsidiary of more than
$50,000 and (ii) is not terminable by the Party or its Subsidiary upon notice of
30 days or less; provided, however, that mortgage loans made in the ordinary
course of business shall not be deemed to be Material Contracts.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
"Merger" has the meaning set forth in the Recitals to this Agreement.
"Merger Consideration" means the consideration to be issued to holders
of Bank Common Stock in the Merger.
"Merger Sub" has the meaning set forth in the preamble to this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ National Market" means The Nasdaq National Market System.
"NASDAQ SmallCap" means The Nasdaq SmallCap Market.
"New Certificates" has the meaning set forth in Section 3.04(a).
"1999 Financial Statements" means the internally prepared balance
sheets of the Bank and its Subsidiaries as of December 31, 1999 and the related
statements of income and expenses, retained earnings and cash flows for the 12
months then ended heretofore delivered to Xxxxxxx and its auditors.
"1999 Work Papers" means the work papers of Xxxxx Xxxxxxxx LLP relating
to the audit of the financial statements of the Bank and is Subsidiaries as of,
and for the year ended, December 31, 1999.
7
8
"OCC" means the Office of the Comptroller of the Currency.
"Old Certificates" has the meaning set forth in Section 3.04(a).
"ordinary course of business" and "business in the ordinary and usual
course" and like phrases shall include, with respect to Xxxxxxx and its
Subsidiaries, the sale of loans, in bulk or otherwise, and the securitization of
loans.
"OTS" means the Office of Thrift Supervision.
"OTS Charter" has the meaning set forth in Section 5.08(b).
"Pension Plan" means any employee pension benefit plan as defined in
Section 3(2) of ERISA.
"Person" means any individual, bank, corporation, partnership, limited
liability company, association, joint-stock company, trust or unincorporated
organization.
"Proxy Statement" has the meaning set forth in Section 5.05(a).
"Xxxxxxx Xxxxx" has the meaning set forth in Section 4.01(p).
"Registered Shares" has the meaning set forth in Section 3.04(b).
"Registration Statement" has the meaning set forth in Section 5.05(a).
"Regulator" means the Governmental Authority which will have regulatory
authority over the Surviving Subsidiary after the Merger, to be mutually agreed
upon by the Parties before the Effective Time.
"Regulatory Authority" has the meaning set forth in Section 4.01(e).
"Representatives" means, with respect to any Person, such Person's
guardians, conservators, agents, personal representatives, directors, officers,
employees, accountants, legal or financial advisors or any representatives of
such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
8
9
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Severance Agreements" means those agreements set forth on Schedule
5.14(b).
"Severance Payments" means all cash payments that could become payable
on or before the Effective Date, or within three years of the Effective Date,
under the Severance Agreements.
"Subsidiary" has the meaning ascribed to it in Rule 1-02 of Regulation
S-X of the SEC.
"Surviving Subsidiary" has the meaning set forth in Section 2.01(a).
"Surviving Subsidiary Board" means the board of directors of the
Surviving Subsidiary.
"Takeover Laws" has the meaning set forth in Section 5.09.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with any Governmental Authority with
respect to any Tax.
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts, in each case imposed by any taxing or
Governmental Authority whether arising before, on or after the Effective Date.
"trading-day" means a day that securities are being traded on the
NASDAQ SmallCap.
"Treasury Stock" shall mean shares of Bank Stock held by Bank or any of
its Subsidiaries or Xxxxxxx Stock held by Xxxxxxx or any of its Subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted in good faith.
"Walk Away Date" means December 31, 2000.
"Welfare Plan" means any employee welfare benefit plan as defined in
Section 3(1) of ERISA.
9
10
ARTICLE II
THE MERGER
Section 2.01 The Merger.
(a) Merger. At the Effective Time, Merger Sub will merge with
and into Bank, the separate corporate existence of Merger Sub will cease and
Bank will survive and continue to exist as the surviving entity in the Merger.
Bank, as the surviving entity in the Merger, is sometimes referred to in this
Agreement as the "Surviving Subsidiary".
(b) Conditions to Effectiveness of Merger. The Merger shall be
subject to the satisfaction or waiver of the conditions set forth in Article VI.
(c) Effects of Merger. The Merger shall have the effects set
forth in this Agreement as well as those prescribed under applicable law.
(d) Governing Documents of Surviving Subsidiary. The Governing
Documents of Bank in effect immediately before the Effective Time will be those
of the Surviving Subsidiary immediately after the Effective Time. Before the
Effective Time, the Governing Documents of Bank shall have been amended to adopt
the provisions set forth in Section 5.15(a) to be effective as of the Effective
Time by vote of Bank's shareholders at the Bank Meeting.
(e) Principal Office. The location of the principal office of
the Surviving Subsidiary in the State of Michigan will be 00000 X. 00 Xxxx Xxxx,
Xxxxxxxxxx, XX 00000.
(f) Corporate Structure. Before the Effective Time, Xxxxxxx
and Bank will mutually determine whether Xxxxxxx'x subsidiaries will be direct
subsidiaries of the Holding Company or will be direct subsidiaries of the
Surviving Subsidiary after the Merger is consummated.
(g) Regulation and Name. Xxxxxxx and Bank will mutually agree
before the Effective Time as to which Governmental Authority will be the
Regulator. The Surviving Subsidiary will continue to be named "Franklin Bank".
Section 2.02 Right to Revise Transaction. Xxxxxxx and Bank may at any
time before the Effective Time mutually change the method of effecting the
Merger or change any of the determinations to be made or actions to be taken
under Sections 2.01(d) or 2.01 (f), if and to the extent they deem that change
to be necessary, appropriate or desirable to (a) ensure that the Merger be
treated as a tax-free reorganization under Section 368(a)(2)(D) of the Code, or
(b) obtain the approval of the Regulator to the Merger. In the event the
Regulator shall be other than the OCC the rights and obligations of the Bank and
the Merger Sub under this Agreement may be
10
11
assigned so as to cause the rights and obligations of the Bank and the Merger
Sub under this Agreement to be placed in entities that come under the
jurisdiction of the Regulator.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
Section 3.01 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) Outstanding Bank Common Stock. Each share, excluding
Treasury Stock, of Bank Common Stock issued and outstanding immediately before
the Effective Time shall become and be converted into the right to receive 1.525
shares of Xxxxxxx Common Stock (the "Exchange Ratio").
(b) Outstanding Xxxxxxx Common Stock. Each share of Xxxxxxx
Common Stock issued and outstanding or held in treasury immediately before the
Effective Time shall remain issued and outstanding or held in treasury and will
be unaffected by the Merger.
(c) Treasury Shares. Each share of Bank Common Stock held as
Treasury Stock immediately before the Effective Time will be canceled and
retired at the Effective Time, and no consideration will be issued in exchange
for that Treasury Stock.
Section 3.02 Rights as Shareholders; Stock Transfers. At the Effective
Time, holders of Bank Stock will cease to be, and will have no rights as,
shareholders of Bank, other than to receive the consideration provided under
this Article III. After the Effective Time, there shall be no transfers of
shares of Bank Stock on the stock transfer books of Bank or the Surviving
Subsidiary.
Section 3.03 Fractional Shares. Notwithstanding any other provision of
this Agreement, no fractional shares of Xxxxxxx Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued in the
Merger. Instead, Xxxxxxx will pay to each holder of Bank Common Stock who would
otherwise be entitled to a fractional share of Xxxxxxx Common Stock (after
taking into account all Old Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying the fraction by the closing
per share sale price of Xxxxxxx Common Stock on NASDAQ SmallCap for the last
trading day immediately preceding the Effective Date.
11
12
Section 3.04 Exchange Procedures.
(a) Deposit of New Certificates, Etc. At or before the
Effective Time, Xxxxxxx shall deposit, or shall cause to be deposited, with an
independent exchange agent (the "Exchange Agent") to be mutually selected by
Xxxxxxx and Bank before the Effective Time, for the benefit of the holders of
certificates formerly representing shares of Bank Common Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the shares of Xxxxxxx Common Stock ("New Certificates") and an
amount of cash (that cash and New Certificates, together with any dividends or
distributions with a record date occurring after the Effective Date with respect
thereto (without any interest on any of that cash, dividends or distributions),
is referred to as the "Exchange Fund") to be paid pursuant to this Article III
in exchange for outstanding shares of Bank Common Stock.
(b) Transmittal and Deliveries. As soon as practicable after
the Effective Date (but in no event later than 15 days following the Effective
Date), Xxxxxxx shall send or cause to be sent to each former holder of record of
shares of Bank Common Stock immediately before the Effective Time transmittal
materials (which shall specify that risk of loss and title to Old Certificates
shall pass only upon acceptance of those Old Certificates by Xxxxxxx or the
Exchange Agent) for use in exchanging the shareholder's Old Certificates for
Merger Consideration. Xxxxxxx will cause the New Certificates or uncertificated
shares of Xxxxxxx Common Stock registered on the stock transfer books of Xxxxxxx
("Registered Shares") into which shares of a shareholder's Bank Common Stock are
converted on the Effective Date or any check in respect of any fractional share
interest or dividends or distributions which that person is entitled to receive
to be delivered to that shareholder upon delivery to the Exchange Agent of Old
Certificates representing the shares of Bank Common Stock (or indemnity
reasonably satisfactory to Xxxxxxx and the Exchange Agent, if any of the
certificates are lost, stolen or destroyed) owned by that shareholder. No
interest will be paid on any cash to be paid in lieu of a fractional share
interest or in respect of dividends or distributions that any person is entitled
to receive under this Article III upon delivery. Xxxxxxx and the Exchange Agent
will be entitled to rely upon the stock transfer books of Bank to identify
persons entitled to receive Merger Consideration, which books shall be
conclusive with respect to establishing the identify of those persons. If a
dispute arises with respect to ownership of stock represented by any Old
Certificate, Xxxxxxx or the Exchange Agent will be entitled to deposit any
consideration in respect of that stock in escrow with an independent third party
and thereafter be relieved with respect to any claims to that consideration.
(c) Escheat. Notwithstanding the foregoing, neither the
Exchange Agent nor any Party will be liable to any former holder of Bank Stock
for any amount properly delivered to a public official under applicable
abandoned property, escheat or similar laws.
12
13
(d) Restrictions on the Payment of Dividends and Voting. No
dividends or other distributions with respect to Xxxxxxx Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Old Certificates converted into the right to receive shares of
Xxxxxxx Common Stock until the holder of the Old Certificates becomes entitled
to receive New Certificates or Registered Shares in exchange under the
procedures set forth in this Section 3.04. After becoming so entitled in
accordance with this Section 3.04, the record holder of the Old Certificates
will be entitled to receive any dividends or other distributions, without any
interest, that before that time had become payable with respect to shares of
Xxxxxxx Common Stock the holder had the right to receive upon surrender of the
Old Certificates. Registered holders of unsurrendered Old Certificates will be
entitled to vote after the Effective Time at any meeting of Xxxxxxx shareholders
with a record date at or after the Effective Time the number of whole shares of
Xxxxxxx Common Stock represented by those Old Certificates, regardless of
whether those holders have exchanged their Old Certificates.
(e) Return of Exchange Fund to Xxxxxxx. Any portion of the
Exchange Fund that remains unclaimed by the shareholders of Bank for 12 months
after the Effective Time will be paid to Xxxxxxx. Any shareholder of Bank who
has not complied with this Article III after that 12-month period may look only
to Xxxxxxx for payment of Merger Consideration and unpaid dividends and
distributions on Xxxxxxx Common Stock deliverable in respect of shares of Bank
Common Stock that shareholder holds as determined under this Agreement, in each
case, without any interest.
Section 3.05 [intentionally omitted]
Section 3.06 Options.
(a) Conversion. At the Effective Time, each option outstanding
on the date of this Agreement to purchase shares of Bank Common Stock under the
Bank Stock Plans (each, a "Bank Stock Option") and remaining outstanding
immediately before the Effective Time will, at the Effective Time, be assumed by
Xxxxxxx and will continue to be outstanding. Each Bank Stock Option will be
converted into an option to purchase shares of Xxxxxxx Common Stock in an amount
and at an exercise price determined as provided below (and otherwise subject to
the terms of the applicable Bank Stock Plan and Bank Stock Option, as they may
be amended from time to time):
(i) the number of shares of Xxxxxxx Common Stock to
be subject to the continuing Bank Stock Option will be equal
to the product of (A) the number of shares of Bank Common
Stock subject to the Bank Stock Option immediately before the
Effective Time and (B) the Exchange Ratio, provided that any
fractional share of Xxxxxxx Common Stock resulting from that
multiplication will be rounded down to the nearest whole
share; and
(ii) the exercise price per share of Xxxxxxx Common
Stock under the continuing Bank Stock Option will be equal to
(A) the exercise price per share of
13
14
Bank Common Stock under the Bank Stock Option immediately
before the Effective Time divided by (B) the Exchange Ratio,
provided that the exercise price will be rounded down to the
nearest cent.
The conversion of Bank Stock Options will be undertaken
consistent with and in a manner that will not constitute a
"modification" under Section 424 of the Code as to any Bank Stock
Option that is an "incentive stock option". Notwithstanding the
foregoing, the Parties agree that the Bank Stock Options and Bank Stock
Plans will be treated as set forth in the attached Schedule 5.01(f);
provided that such treatment shall not result in the Holding Company or
the Surviving Subsidiary having any liability as a result of changing
the tax treatment in connection with the Bank Stock Options or the
exercise thereof.
(b) Reservation of Xxxxxxx Common Stock and Securities
Filings. At all times after the Effective Time, Xxxxxxx will reserve
for issuance the number of shares of Xxxxxxx Common Stock necessary to
permit the exercise of continuing options in the manner contemplated by
this Agreement and the documents under which those options were
granted. Xxxxxxx will make all filings required under federal and state
securities laws including without limitation a filing with the SEC on
Form S-8, promptly after the Effective Time so as to permit the
exercise of the continuing options and the sale of the shares received
by the optionee upon exercise of the options at and after the Effective
Time. Xxxxxxx will continue to make all such filings necessary to
permit the continued exercise of continuing options and sale of shares.
(c) Adoption of Xxxxxxx Stock Option Plan. At the Xxxxxxx
Meeting, Xxxxxxx will present to its shareholders for adoption before
the Effective Time a stock option plan with a sufficient number of
shares of Xxxxxxx Common Stock to enable grants thereunder to be made
to any specified group of officers, directors and/or employees of
Xxxxxxx, the Holding Company and the Surviving Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of Bank. Bank hereby
represents and warrants to Xxxxxxx and Merger Sub, both as of the date of this
Agreement and as of the Effective Date, with the knowledge and expectation that,
in agreeing to enter into this Agreement, Xxxxxxx and Merger Sub are relying on,
and in connection with the consummation of the transactions contemplated in this
Agreement, will rely on, such representations and warranties:
(a) Good Standing and Authority. Bank is a national banking
association, duly organized, validly existing and in good standing
under the Bank Act. Franklin Finance is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Michigan. Franklin Home is a corporation duly organized, validly
14
15
existing and in good standing under the laws of the State of Michigan.
Ben Properties is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan. Each of Bank and
its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which it is
required to be so qualified other than where a failure to so qualify
would not have a Bank Material Adverse Effect. Each such jurisdiction
is listed on Schedule 4.01(a). Bank has all requisite power and
authority to enter into this Agreement and any and all documents
contemplated in this Agreement (the "Attendant Documents") to which it
is a party and to consummate the transactions contemplated in this
Agreement and the Attendant Documents. This Agreement and all of the
Attendant Documents to which Bank is a party, and the consummation of
the transactions contemplated in this Agreement, have been or will be,
on or prior to the Effective Date, duly authorized and approved by the
Bank Board and all other necessary and proper corporate action on the
part of Bank. This Agreement, and all of the Attendant Documents to
which Bank is a party, when executed and delivered, will constitute
legal, valid and binding obligations of Bank enforceable against it in
accordance with their respective terms.
(b) Consents and Approvals; No Defaults.
(i) To the knowledge of Bank, except as set forth on
Schedule 4.01(b), no consent, approval or authorization of, or
designation, declaration or filing with, or notice to, any
Governmental Authority, or any lenders, lessors, creditors,
shareholders or others, is required on the part of Bank or its
Subsidiaries in connection with the valid execution and
delivery of this Agreement and the Attendant Documents or the
consummation of the transactions contemplated in this
Agreement and the Attendant Documents except where the failure
to obtain such consent, approval, authorization, designation,
declaration or filing would not have a Bank Material Adverse
Effect. Before the Effective Time, Bank and its Subsidiaries
(in cooperation with Xxxxxxx, as applicable) shall properly
obtain, perform or give all of the consents, approvals,
authorizations, designations, declarations, filings and
notices set forth on Schedule 4.01(b), and as of the Effective
Time, Bank shall have given Xxxxxxx'x counsel copies or
adequate evidence of all such consents, approvals,
authorizations, designations, declarations, filings and
notices.
(ii) Subject to the receipt or making of the
consents, approvals, authorizations, designations,
declarations, filings and notices referred to in the preceding
paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the
execution, delivery and performance of this Agreement and the
consummation of the Merger do not and will not: (i) (A)
constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, license, indenture or instrument of Bank or of any
of its Subsidiaries or to which Bank or any of its
Subsidiaries or properties is subject or
15
16
bound, (B) constitute a breach or violation of, or a default
under, Bank's Governing Documents, (C) require any consent or
approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement,
license, indenture or instrument or (D) result in any penalty
payment relating to borrowed funds, advances or financial
instruments; and (ii) have a Bank Material Adverse Effect.
(c) Financial Reports, SEC Documents, and Material Adverse
Effect.
(i) Bank's Form 10-K for the period ending December
31, 1998 and all other reports, registration statements,
definitive proxy statements or information statements filed or
to be filed by it or any of its Subsidiaries subsequent to
December 31, 1998 under the Securities Act or the Exchange
Act, in the form filed or to be filed with the SEC or the OCC
(collectively, "Bank SEC Documents"), as of the date filed,
(A) complied or will comply in all material respects with the
applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (B) did not and will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
each of the balance sheets or statements of condition
contained in or incorporated by reference into any such SEC
Document (including the related notes and schedules thereto),
and each of the statements of income or results of operations
and changes in shareholders' equity and cash flows or
equivalent statements in the Bank SEC Documents (including any
related notes and schedules thereto), have been prepared, in
each case, in accordance with generally accepted accounting
principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal
year-end audit adjustments and the absence of footnotes in the
case of unaudited statements.
(ii) The 1999 Financial Statements have been prepared
in accordance with generally accepted accounting principals
applied consistently with the audited statements of the Bank
and its Subsidiaries subject only to normal year-end
adjustments and the absence of footnotes.
(iii) Except as set forth on Schedule 4.01(c), and
except for liabilities incurred in connection with negotiation
of and compliance with this Agreement and otherwise in
connection with the transactions contemplated hereby, since
December 31, 1999 to the date hereof, Bank and its
Subsidiaries have not incurred any material liability other
than in the ordinary course of business consistent with past
practice which would constitute a Bank Material Adverse
Effect.
(iv) Except as set forth on Schedule 4.01(c), since
December 31, 1999, (A) Bank and its Subsidiaries have to the
date hereof conducted their respective businesses in the
ordinary and usual course consistent with past practice
16
17
(excluding matters related to this Agreement and the
transactions contemplated hereby) and (B) there has not
occurred any event or circumstance that, individually or taken
together with all other facts, circumstances and events, would
constitute a Bank Material Adverse Effect.
(d) Litigation. Except as set forth on Schedule 4.01(d), no
material litigation, claim or other proceeding before any Governmental
Authority is pending against Bank or any of its Subsidiaries and, to
Bank's Knowledge, no such litigation, claim or other proceeding has
been threatened.
(e) Regulatory Matters.
(i) Except as set forth on Schedule 4.01(e), neither
Bank nor any of its Subsidiaries or properties is a party to
or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment
letter to, or extraordinary supervisory letter from, any
federal or state Governmental Authority or authority charged
with the supervision or regulation of financial institutions
and trust companies (or their holding companies) or issuers of
securities or engaged in the insurance of deposits (including,
without limitation, the FRB, the OCC, and the FDIC) or the
supervision or regulation of it or any of its Subsidiaries
(collectively, the "Regulatory Authorities").
(ii) Except as set forth on Schedule 4.01(e), neither
Bank nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment
letter, or extraordinary supervisory letter.
(f) Compliance with Laws. Except as set forth on Schedule
4.01(f), and except for violations and acts of noncompliance that would
not have a Bank Material Adverse Effect, each of Bank and its
Subsidiaries:
(i) to Bank's knowledge, is in material compliance
with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees
conducting such businesses, including, without limitation, the
Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices; and
(ii) has received, since December 31, 1998, no
notification or communication from any Governmental Authority
(A) asserting that Bank or any of its Subsidiaries is not in
compliance in any material respect with any of the statutes,
regulations, or ordinances which such Governmental Authority
enforces
17
18
or (B) threatening to revoke any material license, franchise,
permit, or governmental authorization (nor, to Bank's
Knowledge, do any grounds for any of the foregoing exist).
(g) Loan Portfolio; Portfolio Management.
(i) Except as set forth on Schedule 4.01(g) all
evidences of indebtedness reflected as assets in Bank's
financial statements at December 31, 1999 referred to in
Section 4.01(c) hereof, or originated or acquired since such
date, are (except with respect to those assets which are no
longer assets of it or any of its Subsidiaries) binding
obligations of the respective obligors named therein except as
enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally, and except as to the availability of equitable
remedies, including specific performance, which are subject to
the discretion of the court before which a proceeding is
brought, and except where a failure of enforcement will not
have a Bank Material Adverse Effect, and the payment of no
material amount thereof (either individually or in the
aggregate with other evidences of indebtedness) is subject to
any defenses or offsets which have been threatened or asserted
against Bank or any of its Subsidiaries which would
collectively constitute a Bank Material Adverse Effect. All
such indebtedness which is secured by an interest in real
property is secured by a valid and perfected mortgage lien
having the priority specified in the loan documents except in
each case in which, individually or in the aggregate, the
failure to have such a mortgage would not have a Bank Material
Adverse Effect. All such indebtedness which is secured by an
interest in personal property is secured by a valid and
perfected security interest having the priority specified in
the loan documents, except in each case in which, individually
or in the aggregate, the failure to have such a security
interest would not have a Bank Material Adverse Effect. Except
as set forth on Schedule 4.01(g) or except where noncompliance
would not have a Bank Material Adverse Effect, all loans
originated, directly or indirectly, or purchased by Bank or
any of its Subsidiaries were, at the time entered into and at
all times owned by Bank or its Subsidiaries, in compliance in
all material respects with all applicable laws and regulations
(including, without limitation, all consumer protection laws
and regulations). Except where noncompliance would not have a
Bank Material Adverse Effect, Bank and its Subsidiaries (as
applicable), in all material respects, administer their loan
and investment portfolios (including, but not limited to,
adjustments to adjustable mortgage loans) in accordance with
all applicable laws and regulations and the terms of
applicable instruments. Except where noncompliance would not
have a Bank Material Adverse Effect, the records of Bank and
any of its Subsidiaries (as applicable) regarding all loans
outstanding on its books are accurate in all material
respects. With respect to loans for which real property is the
primary collateral, the Bank and its Subsidiaries (as
applicable) maintain or require all borrowers to maintain
adequate insurance on the security property and pay or cause
all borrowers, to pay all taxes or assessments which may be
entitled
18
19
to a Lien with priority over the Bank's Lien in such property.
The Bank maintains insurance against its failure or the
borrower's failure to maintain insurance and pay taxes or
assessments.
(ii) Schedule 4.01(g) sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of
loans, extensions of credit and other assets of Bank and its
Subsidiaries that have been adversely designated, criticized
or classified by Bank, its outside auditors or the OCC as of
November 30, 1999, separated by category of classification or
criticism (the "Bank Asset Classification"); and no amounts of
loans, extensions of credit or other assets that have been
adversely designated, classified or criticized as of the date
hereof, by any representative of any governmental or
regulatory authority as "Special Mention," "Substandard,"
"Doubtful," "Loss" or words of similar import are excluded
from the amounts disclosed in the Bank Asset Classification
other than amounts of loans, extensions of credit or other
assets that were charged off by Bank or any of its
Subsidiaries before the date hereof.
(h) Permits and Licenses. Bank and each of its Subsidiaries
has all franchises, permits, licenses or other authorizations by all
Governmental Authorities, and has made all filings, applications and
registrations with, all Governmental Authorities that are required in
order to permit them to own or lease their properties and to conduct
their businesses as presently conducted except where the failure to
obtain such franchises, permits, licenses or other authorizations would
not have a Bank Material Adverse Effect. Schedule 4.01(h) lists all
franchises, permits, licenses or other authorizations by all
Governmental Authorities held by Bank and its Subsidiaries ("Bank
Licenses"), true and complete copies of all of which have been
delivered to Xxxxxxx. Except as set forth on Schedule 4.01(h), all of
the Bank Licenses are in full force and effect and will not be affected
in any way by, and will continue to be in full force and effect after,
the consummation of the transactions contemplated in this Agreement and
the Attendant Documents to the extent necessary to complete any
required governmental approvals of the transactions contemplated in
this Agreement and the Attendant Documents, and to permit continuous
business operations following consummation of the transactions
contemplated.
20
(i) Labor Matters.
(i) Schedule 4.01(i) contains a complete and accurate list of the
current employees of Bank and its Subsidiaries as of a date no later than 30
days before this representation and warranty is made (the "Bank Employees") and,
with respect to each Bank Employee, his or her salary or hourly rate currently
in effect, annual bonuses (last paid or payable), if any, any other fringe
benefits or incentive paid or payable to him or her and the amount of all cash
compensation accrued through February 29, 2000, but as yet unpaid for each such
Bank Employee. Except as set forth on Schedule 4.01(i), all such Bank Employees
are actively at work, and no such Bank Employee is currently on leave of
absence, layoff, military leave, suspension, workers' compensation, salary
continuance or short or long term disability or otherwise not actively
performing his or her work during all normally scheduled business hours.
(ii) Except as set forth on Schedule 4.01(i), neither Bank nor any of
its Subsidiaries is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is Bank or any of its Subsidiaries the subject of a
proceeding asserting that it or any such Subsidiary has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or
seeking to compel Bank or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving Bank or any of its Subsidiaries pending or, to
Bank's Knowledge, threatened, nor does Bank have any Knowledge of any activity
involving any Bank Employee seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(iii) To the knowledge of Bank, except as set forth on Schedule
4.01(i), hours worked by, and payments made to, all Bank Employees and former
employees of Bank and its Subsidiaries ("Former Bank Employees") have been in
compliance with the Fair Labor Standards Act and other applicable federal, state
and local laws.
(iv) Except as set forth on Schedule 4.01(i), as of the Effective Date,
all payments determined to be due from Bank and its Subsidiaries on account of
any Bank Employee's or Former Bank Employees' work, health or welfare insurance,
under any agreement, whether oral or written, will have been paid or properly
accrued on Bank's financial statements.
(v) Except as set forth on Schedule 4.01(i), there are no vacation
monies or rights to time off which have been earned by any Bank Employee or
Former Bank Employee under any agreement, whether oral or written, that have not
been paid or properly accrued on Bank's financial statements, nor are there
20
21
any severance payments which could become payable by Bank or its Subsidiaries
under the terms of any oral or written agreement or commitment.
(vi) Except as disclosed pursuant to Section 4.01(j), neither Bank nor
any of its Subsidiaries has any material liability with respect to any pension,
profit sharing, retirement or similar plan, or other employee benefit plan.
(vii) Except as set forth on Schedule 4.01(i):
(A) there is no unfair labor practice charge or complaint
concerning Bank or its Subsidiaries or any Bank Employee or Former
Bank Employee pending before any Governmental Authority in any
jurisdiction in which Bank or its Subsidiaries conduct business;
(B) there is no labor strike or slowdown, work stoppage, lockout
or other collective labor action actually pending or, to Bank's
Knowledge, threatened against or affecting the business of Bank or its
Subsidiaries, and neither Bank nor its Subsidiaries has experienced
any strike or slowdown, work stoppage, lockout or other collective
labor action in connection with their business by or with respect to
any Bank Employees or Former Bank Employees;
(C) there is no representation claim or petition concerning the
business of Bank or its Subsidiaries or any Bank Employee or Former
Bank Employee pending before any Governmental Authority in any
jurisdiction in which the business of Bank or its Subsidiaries conduct
business, and no question concerning representation exists relating to
the Bank Employees;
(D) there are no charges with respect to or relating to the
business of Bank or its Subsidiaries pending before the Equal
Employment Opportunity Commission or any Governmental Authority in any
jurisdiction in which Bank or its Subsidiaries conduct business
responsible for the prevention of unlawful employment practices;
(E) neither of Bank nor its Subsidiaries has received formal
notice from any Governmental Authority responsible for the enforcement
of labor or employment laws of an intention to conduct an
investigation of Bank or its Subsidiaries and no such investigation is
currently in progress; and
(F) to Bank's Knowledge, no key Bank Employee or group of Bank
Employees has any plans to terminate employment with Bank or its
Subsidiaries prior to or after Closing.
21
22
(j) Employee Benefits.
(i) Controlled Group: Except as disclosed in Schedule
4.01(j), neither Bank nor any of its Subsidiaries is now, has
ever been or will be at any time prior to the Effective Time, a
member of a Controlled Group.
(ii) Bank Employee Benefit Plans and Documents: Schedule
4.01(j) lists each and every Bank Employee Benefit Plan that
Bank, its Subsidiaries or any Controlled Group Member now, or
will at any time prior to the Effective Date, maintain, sponsor,
participate in or contribute to with respect to the Bank
Employees or the Former Bank Employees, or that Bank, its
Subsidiaries or any Controlled Group Member ever maintained,
sponsored, participated in or made contributions to with respect
to the Bank Employees or the Former Bank Employees. Except as
disclosed in Schedule 4.01(j), neither Bank nor any of its
Subsidiaries or any Controlled Group Member is a party to any
collective bargaining or union contract with respect to the Bank
Employees or the Former Bank Employees. Bank has provided to
Xxxxxxx true and correct copies of all current and prior material
and readily available documents relating to the Bank Employee
Benefit Plans listed in Schedule 4.01(j), including, but not
limited to: (A) plan documents, trust documents and plan and
trust amendments, in each case, which implement, relate to or
amend a Bank Employee Benefits Plan; (B) summary plan
descriptions, amendments thereto, and all other communication
material provided to employees; (C) summaries of material
modifications; (D) insurance (including reinsurance),
administrative services or annuity contracts; (E) collective
bargaining agreements or contracts and all amendments thereto;
(F) the most recent financial statements; (G) with regard to
self-funded Welfare Plans, experience and enrollment data for the
prior three plan years as well as documentation and calculations
demonstrating the preset value of accrued obligations under such
plans as of the Effective Date; (H) if Bank or its Subsidiaries
provide, or have any commitment or obligation to provide, any
Bank Employee Benefit Plan benefits to their retirees, copies of
all documentation and calculations demonstrating the present
value of such obligation or commitment as of the Effective Date;
(I) if Bank, its Subsidiaries or any Controlled Group Member
maintains a defined benefit pension plan, as defined in Section
3(35) of ERISA with respect to the Bank Employees or the Former
Bank Employees, the most recent actuarial valuation for each such
plan and copies of any funding waivers and applications therefor,
and all related correspondence and documentation; (J) the three
most recent annual reports; (K) agreements with respect to leased
or temporary employees; (L) all government rulings and opinions,
if any (and pending requests for rulings and opinions, if any);
and (M) the most recent IRS determination letters with respect to
the Bank Employee Benefit Plans listed in Schedule 4.01(j).
(iii) No Minimum Funding Obligations; No Multiemployer Plan,
Multiple Employer Plan or Post-Employment Welfare Plan Liability.
No Bank
22
23
Employee Benefit Plan is a, and none of Bank, any of its
Subsidiaries or any Controlled Group Member has any material
liability or potential liability (including, with respect to
clauses (B) and (C) of this paragraph any actual or potential
withdrawal liability)with respect to any, (A) Pension Plan that
is subject to the minimum funding requirements of Section 412 of
the Code or Section 302 of ERISA, (B) multiemployer plan (as such
term is defined in Section 3(37) of ERISA), (C) plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413(c)
of the Code (and regulations promulgated thereunder), or (D) plan
which provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or current
or future former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA or applicable state continuation
coverage law.
(iv) Representations: Except as set forth in Schedule
4.01(j):
(A) Qualification: All the Pension Plans required to be
listed on Schedule 4.01(j), and the related trusts, if any,
now meet, and since their inception have met, and as of the
Effective Date shall meet, in all material respects, the
requirements for qualification under Section 401(a) of the
Code and are now, and since their inception have been,
exempt from taxation under Section 501(a) of the Code;
(B) Determination Letters: The IRS has issued a
favorable determination letter with respect to the qualified
status of each such Pension Plan and trust, and has not
taken, nor to the Knowledge of Bank, its Subsidiaries and
Controlled Group Members, has reasonable grounds to take any
action to revoke such letter;
(C) Satisfaction of Obligations: Bank, each of its
Subsidiaries and each Controlled Group Member have
performed, and through the Effective Date shall perform, in
all material respects, all obligations required to be
performed by them under the Bank Employee Benefit Plans
(including, but not limited to, the making of all
contributions), and are not in material default under, or in
material violation of, any of the Bank Employee Benefit
Plans, and none of Bank, its Subsidiaries, or any Controlled
Group Member has Knowledge of any such material default or
violation of any other party to any and all of the Bank
Employee Benefit Plans;
(D) Compliance With Laws: Each Bank Employee Benefit
Plan has been, and through the Effective Date shall be,
maintained, and funded in compliance in all material
respects with ERISA, the Code, the Age Discrimination in
Employment Act (to the extent applicable), COBRA, and each
other applicable federal, state or local laws, and, if
applicable, each foreign law, and each Bank Employee Benefit
Plan is
23
24
valid and binding, in full force and effect, and there are
no material defaults thereunder;
(E) No Prohibited Transactions: None of the Bank
Employee Benefit Plans, nor any trust created thereunder,
any trustee or administrator thereof, nor Bank or any of its
Subsidiaries, nor any other Party dealing with any Bank
Employee Benefit Plan has engaged in any transaction, or
will prior to the Effective Date engage in any transaction,
that would trigger a tax under Section 4975 of the Code, or
violate Section 406 of ERISA, or, if applicable, any similar
provision under foreign law;
(F) No Claims Pending or Threatened: There are not
presently, nor shall there be prior to the Effective Date,
any actions, suits or claims pending (other than routine
claims for benefits) or, to Bank's Knowledge, threatened
against, any Bank Employee Benefit Plan, against the assets
of any Bank Employee Benefit Plan, or against the Bank, any
of its Subsidiaries or any Controlled Group Member for
benefits arising under or pursuant to any Bank Employee
Benefit Plan;
(G) Reporting and Disclosure: With regard to each Bank
Employee Benefit Plan listed in Schedule 4.01(j), Bank and
its Subsidiaries have complied with, and will through the
Effective Date continue to comply with, all reporting and
disclosure requirements of ERISA and the Code in all
material respects;
(H) No Unfunded Liabilities: No Bank Employee Benefit
Plan has any material unfunded liabilities;
(I) No Further Liabilities: Except as provided in
Schedule 4.01 (j), Bank and its Subsidiaries do not, and
shall not as of the Effective Date, have any liability or
obligation to any Bank Employee Benefit Plan or to the
Pension Benefit Guaranty Corporation, DOL, Department of
Treasury or similar agency of a foreign government, any
other plan or entity, or any employee, participant or
beneficiary of any Bank Employee Benefit Plan, arising out
of or pursuant to any Bank Employee Benefit Plan which could
subject Bank or its Subsidiaries to any material liability;
(J) Termination and Amendment: Except as disclosed in
Schedule 4.01(j), each Bank Employee Benefit Plan listed in
Schedule 4.01(j) is, and as of and through the Effective
Date, shall be terminable, and/or subject to amendment by
Bank or its Subsidiaries, at the discretion of Bank or its
Subsidiaries, with no liability for benefits incurred after
such termination or inconsistent with the terms of any
amendment after its effective date.
24
25
(K) Change of Control Payments: Except as set forth in Schedule
4.01(j), none of the Bank Employee Benefit Plans obligates Bank or any
of its Subsidiaries to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change in
control," as such term is contemplated by Section 280G of the Code.
(v) ESOP. None of the execution, delivery and performance of this
Agreement, or the consummation of the transactions, contemplated hereby shall
violate or conflict with any governing document of the ESOP, any contract,
agreement or other arrangement binding upon the ESOP or its assets or any
statute, regulation or other provision of law applicable to the ESOP in any
material respect. During the five years preceding the date hereof, there has not
been any action, suit, proceeding, investigation, audit, or order against or
affecting the ESOP at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. The ESOP is not subject to or bound by any
outstanding orders, judgments or decrees of any court or governmental entity.
(k) Tax Matters.
(i) Except as would not cause a Bank Material Adverse Effect or except
as set forth on Schedule 4.01(k):
(A) Bank, each of its Subsidiaries, each of their affiliated
groups and each of the entities identified on Schedule 4.01(k)
pursuant to Section 4.01(k)(ii)(B) (the "Bank Predecessors") have
filed all Tax Returns which they are required to file under applicable
laws and regulations, and all such Tax Returns are complete and
correct and have been prepared in compliance with all applicable laws
and regulations;
(B) Bank, each of its Subsidiaries, each of their affiliated
groups and each of the Bank Predecessors have paid all Taxes due and
owing by them (whether or not such Taxes are required to be shown on a
Tax Return) and have withheld and paid over to the appropriate taxing
authority all Taxes which they are required to withhold from amounts
paid or owing to any employee, shareholder, creditor or other third
party;
(C) neither Bank or its Subsidiaries, nor any of their affiliated
groups or the Bank Predecessors have waived any statute of limitations
with respect to any Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency;
(D) the accrual for Taxes on Bank's most recent audited balance
sheet would be adequate to pay all Tax liabilities of Bank and its
25
26
Subsidiaries if their current tax year were treated as
ending on the date of such balance sheet (excluding any
amount recorded which is attributable solely to timing
differences between book and Tax income);
(E) since December 31, 1998, neither Bank nor any of its
Subsidiaries has incurred any liability for Taxes with respect to
their businesses other than in the ordinary course;
(F) no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being
conducted with respect to Bank, any of its Subsidiaries, any of
their affiliated groups or any of the Bank Predecessors;
(G) neither Bank or its Subsidiaries, nor any of their
affiliated groups or the Bank Predecessors have received from any
foreign, federal, state or local taxing authority any (1) written
notice indicating an intent to open an audit or other review, or
(2) request for information related to Tax matters; and
(H) there are no material unresolved questions or claims
concerning any Tax liability of Bank, its Subsidiaries, or any of
their affiliated groups or the Bank Predecessors.
(ii) Except as set forth on Schedule 4.01(k), neither Bank nor
any of its Subsidiaries (A) has made an election under Section 341(f)
of the Code, (B) is liable for the Taxes of another person (1) under
Treasury Regulation Section 1.1502-6 (or comparable provisions of
state, local or foreign law), (2) as a transferee or successor, (3) by
contract or indemnity or (4) otherwise, (C) is a party to any tax
sharing agreement or (D) has made any payments, are obligated to make
any payments or is a party to an agreement that could obligate it to
make any payments that would not be deductible under Section 280G of
the Code.
(l) Environmental Matters. To Bank's Knowledge, neither the conduct
nor operation of Bank or its Subsidiaries nor any condition of any property
currently or previously owned or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
Lien, results or resulted in a violation of any Environmental Laws and to Bank's
Knowledge, no condition has existed or event has occurred with respect to any of
them or any such property that, with notice or the passage of time, or both, is
reasonably likely to result in any liability to Bank or any of its Subsidiaries
under or by reason of any Environmental Laws or Materials of Environmental
Concern except where the conduct, operation, condition or event would not have a
Bank Material Adverse Effect. To Bank's Knowledge, except for any notice for
which, in Bank's reasonable judgment, there is no reasonable basis, neither Bank
nor any of its Subsidiaries has received any notice from any person or entity
that Bank or its Subsidiaries or the operation or condition of any property ever
owned, operated, or held
26
27
as collateral or in a fiduciary capacity by any of them are or were in violation
of or otherwise are alleged to have liability under any Environmental Law or
relating to Materials of Environmental Concern, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of Materials of Environmental Concern at, on, beneath, or
originating from any such property.
(m) Risk Management Instruments. Except as set forth on Schedule
4.01(m), all material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for Bank's own account, or for the account of one or more
of Bank's Subsidiaries or their customers have been previously disclosed to
Xxxxxxx and were entered into (i) in accordance with prudent business practices
and in all material respects in compliance with all applicable laws, rules,
regulations and regulatory policies and (ii) with parties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of Bank or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither Bank
nor its Subsidiaries, nor to Bank's Knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement in any
material respect.
(n) Insurance. Except as set forth on Schedule 4.01(n), Bank and its
Subsidiaries have maintained and now maintain insurance with respect to their
assets and businesses covering property damage by fire or other casualty, and
against such liabilities, claims and risks, including, without limitation,
workers compensation, and in such amounts as is customary or appropriate in the
industry. Schedule 4.01(n) contains a true and correct summary of all such
insurance policies maintained by Bank and its Subsidiaries, presently or at any
point during the last five years, setting forth the names of the insured and the
insurer, policy numbers, the types of coverage, premium payments or basis of
payment, deductible amounts and limits of coverage. Except as set forth on
Schedule 4.01(n), to the knowledge of Bank no such policy of insurance is
subject to any deductible, self-insured retention, retrospective rating
agreement, indemnification agreement or any other method or device by which the
insured person is subject to all or any part of the liability for any or all
claims. Concurrently with or prior to the execution of this Agreement, Bank and
its Subsidiaries have delivered to Xxxxxxx true, correct and complete copies of
all such insurance policies. Except as set forth on Schedule 4.01(n), all such
insurance policies will be in full force and effect through the Effective Date.
To the knowledge of Bank, except as set forth on Schedule 4.01(n), there is no
state of facts and no event has occurred forming the basis for any present
property, casualty or fidelity claim against Bank or its Subsidiaries that is
not fully covered by insurance. Schedule 4.01(n) contains loss runs for the last
five years setting forth all property, general and products liability and
workers compensation claim activity against the businesses of Bank and its
Subsidiaries, including the date and place of the occurrence, the claimant's
name, reserves, amounts paid, a brief description of the incident and whether
the claim is open
27
28
or closed. Except as set forth on Schedule 4.01(n), Bank has no Knowledge of any
occurrence, circumstance, or event which could reasonably be expected to result
in any such claim.
(o) Governmental Reviews. Except as set forth on Schedule 4.01(o), no
investigation or review by any Governmental Authority with respect to Bank, any
Bank Subsidiary or any of their officers or directors is pending or, to the
Knowledge of Bank, threatened, nor has any Governmental Authority indicated to
Bank or any Bank Subsidiary an intention to conduct the same, other than normal
or routine regulatory examinations.
(p) Fairness Opinion. On the date of this Agreement, Xxxxxxx Xxxxx &
Associates, Inc. ("Xxxxxxx Xxxxx") has provided to the Bank Board a written
fairness opinion to the effect that the Exchange Ratio is fair to the
shareholders of Bank from a financial point of view.
(q) Compliance with Servicing Obligations. Except as set forth on
Schedule 4.01(q), and except for violations and acts of noncompliance that would
not have a Bank Material Adverse Effect, to the best of Bank's Knowledge, Bank
and the Bank Subsidiaries are in compliance in all material respects with all
contract, agency and investor requirements and guidelines, and all applicable
laws, rules and regulations of Governmental Authorities, relating to the
servicing and administration of loans by them, or any of them, including but not
limited to, properly and timely making interest rate adjustments to adjustable
rate loans.
(r) Intellectual Property. Schedule 4.01(r) sets forth all patents,
trade names, service names, trademarks, service marks, copyrights, or any other
intellectual or intangible property or applications ("Intellectual Property")
Bank and its Subsidiaries own or use in their businesses ("Bank Intellectual
Property"). Bank and its Subsidiaries are the sole owners (except for licensed
property for which valid and subsisting licenses exist) of the Bank Intellectual
Property, free of all Liens. Except as set forth on Schedule 4.01(r), to Bank's
Knowledge, there is no claim against Bank or any of its Subsidiaries that the
Bank Intellectual Property or any of its operations, activities, products or
publications infringes any material patent, trademark, trade name, copyright or
other proprietary or intellectual property right of any third party or that any
of them is illegally using the material trade secrets or property rights of
others in any material respect. To the knowledge of Bank, neither Bank nor any
of its Subsidiaries has any disputes with or claims against, or any basis for
claims against, any third party for infringement by such third party of any Bank
Intellectual Property.
(s) Material Contracts. Schedule 4.01(s) identifies all of the
Material Contracts of Bank and its Subsidiaries, true and complete copies of all
of which have been delivered to Xxxxxxx. Except as set forth on Schedule
4.01(s), and except for any default which would not constitute a Bank Material
Adverse Effect, (i) Bank and each of its Subsidiaries has complied in all
material respects with the provisions of, and is not in
28
29
default under, each such Material Contract to which it is a party or any such
default has been waived, and (ii) to the Knowledge of Bank, no other party to
any such Material Contract has failed to comply in any material respect with, or
is in default under, the provisions of any such Material Contract.
(t) Real Property Owned.
(i) Other than the real property described on Schedule 4.01(t)
(the "Bank Owned Real Property") or real property of a type classified
as OREO (other real estate owned) on the Bank's financial statements
(i.e., foreclosed property not owned for the operation of the Bank's
business), Bank and its Subsidiaries own no real property. Schedule
4.01(t) contains a true and accurate legal description of the Bank
Owned Real Property. Bank and its Subsidiaries have good and
marketable fee simple title to the Bank Owned Real Property free and
clear of all Liens other than those identified on Schedule 4.01(t).
(ii) Except as set forth on Schedule 4.01(t), no substantial work
has been performed on or materials supplied with respect to the Bank
Owned Real Property within any applicable statutory period which could
give rise to mechanics' or materialmen's liens; all bills and claims
for substantial labor performed and materials furnished to or for the
benefit of the Bank Owned Real Property for all periods prior to the
Effective Time have been, or prior to the Effective Time, will be,
paid or properly accrued on Bank's financial statements in full, and
Bank has no Knowledge of any mechanics' or materialmen's Liens,
whether or not perfected, on or affecting any portion of the Bank
Owned Real Property.
(iii) There is no pending or, to Bank's Knowledge, threatened
condemnation or eminent domain proceeding with respect to the Bank
Owned Real Property.
(iv) Except as set forth on Schedule 4.01(t), (A) there are no
taxes or special assessments other than ordinary real estate taxes
pending or payable against the Bank Owned Real Property, and to the
knowledge of Bank there are no contingencies existing under which any
assessment for real estate taxes may be retroactively filed against
the Bank Owned Real Property; (B) Bank has no Knowledge of any
proposed special assessment that may affect the Bank Owned Real
Property or any part thereof; (C) there are no penalties due with
respect to real estate taxes and/or impositions, and all real estate
taxes and/or impositions (excepting those for the current year that
are not yet due and payable) with respect to the Bank Owned Real
Property have been paid in full; and (D) there are no taxes, permit
fees or connection fees which must be paid respecting existing curb
cuts, sewer hookups, water-main hookups or services of a like nature.
29
30
(v) Except as set forth on Schedule 4.01(t), the Bank Owned Real
Property materially complies with the requirements of all building,
zoning, subdivision, health, safety, environmental, pollution control,
waste products, sewage control and all other applicable statutes,
laws, codes, ordinances, rules, orders, regulations and decrees of any
and all government agencies. There is no uncured breach of any
material condition or requirement imposed by, or pursuant to, any
permit or license issued with respect to the Bank Owned Real Property.
(vi) Except as set forth on Schedule 4.01(t), no property insurer
or similar body has made any recommendations with respect to any
parcel of Bank Owned Real Property which have not been complied with,
and all structures on the Bank Owned Real Property meet all
qualifications for "highly protected risk" classification for fire
insurance purposes.
(vii) Except as set forth on Schedule 4.01(t), and except for
real property of the type classified as OREO (other real estate owned)
on the Bank's financial statements (i.e., foreclosed property not
owned for the operation of the Bank's business), Bank and its
Subsidiaries have never owned any real property.
(u) Real Property Leased. Schedule 4.01(u) sets forth the legal
description for all real properties leased or subleased to Bank or its
Subsidiaries (the "Bank Leased Real Property"). Bank has delivered to Xxxxxxx
true, correct and complete copies of the leases and subleases listed on Schedule
4.01(u). Except as set forth on Schedule 4.01(u), neither Bank nor any of its
Subsidiaries has leased or subleased any real property during the past three
years. Except as set forth on Schedule 4.01(u), with respect to each such lease
or sublease:
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect in all material respects;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect in all material
respects on identical terms following the Closing;
(iii) neither Bank, its Subsidiaries, nor, to Bank's Knowledge,
any other party to the lease or sublease is in breach or default, and
no event has occurred which, with notice or lapse of time, would
constitute such a breach or default or permit termination,
modification or acceleration under the lease or sublease;
(iv) to Bank's Knowledge, no party to the lease or sublease has
repudiated any of its provisions;
(v) there are no material disputes, oral agreements or
forbearance programs in effect as to the lease or sublease;
30
31
(vi) neither Bank nor any of its Subsidiaries, as applicable, has
assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered all or any portion of their interest in the leasehold or
subleasehold;
(vii) to Bank's Knowledge, all facilities leased or subleased
under the lease or sublease have been operated and maintained in
accordance with applicable laws, rules and regulations in all material
respects;
(viii) all facilities leased or subleased under the lease or
sublease are supplied with utilities and other services reasonably
necessary for the operation of such facilities;
(ix) all facilities leased or subleased under the lease or
sublease are in good operating condition, and would not, with ordinary
wear and tear, require major repair or replacement during the
remainder of the lease term; and
(x) no property insurer or similar body has made any
recommendations with respect to any parcel of Bank Leased Real
Property which have not been complied with, and all structures on the
Bank Leased Real Property meet all qualifications for "highly
protected risk" classification for fire insurance purposes.
(v) Liens. Except as set forth on Schedule 4.01(v), Bank and its
Subsidiaries own and have good, marketable and unencumbered title to, or an
unencumbered interest in, each item comprising their assets, free and clear of
any and all Liens.
(w) Good Condition. Except as set forth on Schedule 4.01(w), all
facilities used in connection with the operation of the businesses of Bank and
its Subsidiaries and all of the material assets of Bank and its Subsidiaries,
except real property of a type classified as OREO (other real estate owned) on
the Bank's financial statements (i.e., foreclosed property not owned for the
operation of the Bank's business), are free from material defects (normal wear
and tear excepted) and have been maintained in accordance with normal industry
practice.
(x) No Undisclosed Liabilities. Except as and to the extent set forth
on Schedule 4.01(x) or reflected in the 1999 Financial Statements, and except
for current liabilities incurred by Bank or its Subsidiaries in connection with
the operation of or with respect to their businesses in the ordinary course,
since December 31, 1999, neither Bank nor its Subsidiaries has incurred any
debts, liabilities or obligations of any nature or kind (whether absolute,
accrued, contingent, unliquidated or otherwise, whether or not known to Bank,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into, at or prior to the Closing, or any action or inaction
at or prior to the Closing or any state of facts existing at or prior to the
Closing and which could have a Bank Material Adverse Effect. Except as set forth
on Schedule 4.01(x), Bank has no Knowledge of any existing, proposed or
threatened change which could have a Bank Material Adverse Effect. There are no
contingent or other liabilities of Bank or its
31
32
Subsidiaries that have not been disclosed in the Schedules to this Agreement
which could have a Bank Material Adverse Effect.
(y) Recent Conduct of Business; Interim Operations. Except as set
forth on Schedule 4.01(y), since December 31, 1999, there has not been, and
through the Effective Time, there shall not be, any Bank Material Adverse
Effect. Except as set forth on Schedule 4.01(y) or any other Schedule to this
Agreement, since December 31, 1999, Bank and its Subsidiaries have caused their
businesses to be conducted only in the ordinary course. Except as set forth on
Schedule 4.01(y) or any other Schedule to this Agreement, since December 31,
1999, Bank and its Subsidiaries have not done any of the actions described in
Sections 5.01(a) through (g), 5.01(l) through (v) or 5.01(w) as Section 5.01(w)
relates to Sections 5.01(a) through (g) and 5.01(l) through (v).
(z) Brokerage or Finder's Fee. Except for XxXxxxxxx, Xxxx & Dowens,
Inc. and Xxxxxxx Xxxxx, no broker, finder, agent or similar intermediary has
acted for or on behalf of Bank in connection with this Agreement or the
transactions contemplated hereby and, except for the fee payable to Xxxxxxx
Xxxxx by Bank, no broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in connection
therewith based on any agreement, arrangement or understanding with Bank or any
action taken by Bank.
(aa) [intentionally omittted].
(bb) Disclosure. No representation or warranty by Bank contained in
this Agreement and no statement contained in any of the Attendant Documents or
any other certificate or instrument furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated in this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact, necessary in order to make any of
the statements not misleading.
(cc) Capitalization. Bank has two classes of capital stock, common
stock, $1.00 par value, and preferred stock, $1.00 par value. Franklin Finance
has two classes of capital stock, common stock, $300.00 par value, and preferred
stock $10.00 par value. Franklin Home has one class of capital stock, common
stock, $1.00 par value. Ben Properties has one class of capital stock, common
stock, no par value. Schedule 4.01(cc) sets forth the number of authorized and
the number of issued and outstanding shares of capital capital stock of each of
its Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and were issued by Bank and its Subsidiaries without
violating any requirements of law. Except as set forth on Schedule 4.01(cc), (i)
there are no preemptive or first refusal rights to purchase or otherwise acquire
shares of Bank Stock or capital stock of any of Bank's Subsidiaries pursuant to
the Governing Documents of Bank or its Subsidiaries, by agreement or otherwise,
(ii) there are no outstanding agreements, commitments, rights, options, warrants
or claims of any nature whatsoever for the issuance, sale, purchase or
redemption of any shares of
32
33
Bank Stock or capital stock of any of Bank's Subsidiaries or any
securities convertible into or exchangeable for such shares and (iii)
there are no stock appreciation rights or phantom stock rights
outstanding with respect to Bank stock or the capital stock of any of
Bank's Subsidiaries.
(dd) No Knowledge. Except as set forth in Schedule 4.01(dd), Bank
has no Knowledge whatsoever that any of the representations or
warranties of Xxxxxxx or Merger Sub are untrue in any material
respect.
(ee) Affiliate Transactions. Except as set forth on Schedule
4.01(ee), Bank has not entered into any business transactions with any
of its Affiliates.
Section 4.02 Representations and Warranties of Xxxxxxx and Merger Sub.
Xxxxxxx and Merger Sub hereby represent and warrant to Bank, both as of the date
of this Agreement and as of the Effective Date, with the knowledge and
expectation that, in agreeing to enter into this Agreement, Bank is relying on,
and in connection with the consummation of the transactions contemplated in this
Agreement, will rely on, such representations and warranties:
(a) Good Standing and Authority. Xxxxxxx and each of its Subsidiaries
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan, except for (i) Merger Sub, which,
prior to the Effective Time, will be an interim national banking
association, duly organized, validly existing and in good standing under
the Bank Act, (ii) Dynex Financial, Inc. ("DFI"), Dynex Financial of
Alabama, Inc. ("DFI Alabama") and Dynex Insurance Agency, Inc. ("DIA"),
which are corporations duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, and (iii)
Bloomfield Acceptance Company, L.L.C. ("BAC") and Bloomfield Servicing
Company, L.L.C. ("BSC"), which are limited liability companies duly
organized, validly existing and in good standing under the laws of the
State of Michigan. Xxxxxxx and each of its Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which it is required to be so qualified other than where a
failure to so qualify would not have a Xxxxxxx Material Adverse Effect.
Each such jurisdiction is listed on Schedule 4.02(a). Xxxxxxx has, and
Merger Sub will, prior to the Effective Time, have, all requisite power and
authority to enter into this Agreement and any Attendant Documents to which
it is a party and to consummate the transactions contemplated in this
Agreement and the Attendant Documents. This Agreement and all of the
Attendant Documents to which Xxxxxxx and Merger Sub is a party, and the
consummation of the transactions contemplated in this Agreement, have been
or will be, on or prior to the Effective Date, duly authorized and approved
by the Xxxxxxx Board or the board of directors of Merger Sub, as necessary,
and all other necessary and proper corporate action on the part of Xxxxxxx
and Merger Sub. This Agreement, and all of the Attendant Documents to which
Xxxxxxx or Merger Sub is a party, when executed and delivered, will
constitute legal, valid and binding obligations of Xxxxxxx, and, when
Merger Sub is organized, of Merger Sub, enforceable against them in
accordance with their respective terms.
33
34
(b) Consents and Approvals; No Defaults.
(i) To the knowledge of Xxxxxxx, except as set forth on Schedule
4.02(b) and except for filings or approvals required under state "Blue
Sky" laws, no consent, approval or authorization of, or designation,
declaration or filing with, or notice to, any Governmental Authority,
or any lenders, lessors, creditors, shareholders or others, is
required on the part of Xxxxxxx or its Subsidiaries in connection with
the valid execution and delivery of this Agreement and the Attendant
Documents or the consummation of the transactions contemplated in this
Agreement and the Attendant Documents except where the failure to
obtain such consent, approval, authorization, designation, declaration
or filing would not have a Xxxxxxx Material Adverse Effect. Before the
Effective Time, Xxxxxxx and its Subsidiaries (in cooperation with
Bank, as applicable) shall properly obtain, perform or give all of the
consents, approvals, authorizations, designations, declarations,
filings and notices set forth on Schedule 4.02(b), and as of the
Effective Time, Xxxxxxx shall have given Bank's counsel copies or
adequate evidence of all such consents, approvals, authorizations,
designations, declarations, filings and notices.
(ii) Subject to the receipt or making of the consents, approvals,
authorizations, designations, declarations, filings and notices
referred to in the preceding paragraph, and expiration of related
waiting periods, and required filings under federal and state
securities laws, the execution, delivery and performance of this
Agreement and the consummation of the Merger do not and will not: (i)
(A) constitute a breach or violation of, or a default under, or give
rise to any Lien, any acceleration of remedies or any right of
termination under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, license,
indenture or instrument of Xxxxxxx or of any of its Subsidiaries or to
which Xxxxxxx or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under,
Xxxxxxx'x or Merger Sub's Governing Documents, (C) require any consent
or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, license, indenture
or instrument or (D) result in any penalty payment relating to
borrowed funds, advances or financial instruments; and (ii) have a
Xxxxxxx Material Adverse Effect.
(c) Financial Reports, SEC Documents, and Material Adverse Effect.
(i) Xxxxxxx'x Form 10-K for the period ending September 30, 1999
and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it or any
of its Subsidiaries subsequent to September 30, 1999 under the
Securities Act or the
34
35
Exchange Act, in the form filed or to be filed with the SEC
(collectively, "Xxxxxxx SEC Documents"), as of the date filed, (A)
complied or will comply in all material respects with the applicable
requirements under the Securities Act or the Exchange Act, as the case
may be, and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and each of
the balance sheets or statements of condition contained in or
incorporated by reference into any such SEC Document (including the
related notes and schedules thereto), and each of the statements of
income or results of operations and changes in shareholders' equity
and cash flows or equivalent statements in the Xxxxxxx SEC Documents
(including any related notes and schedules thereto), have been
prepared, in each case, in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments and the absence of footnotes in the
case of unaudited statements.
(ii) Except as set forth on Schedule 4.02(c), and except for
liabilities incurred in connection with negotiation of and compliance
with this Agreement and otherwise in connection with the transactions
contemplated hereby, since September 30, 1999 to the date hereof,
Xxxxxxx and its Subsidiaries have not incurred any material liability
other than in the ordinary course of business consistent with past
practice which would constitute a Xxxxxxx Material Adverse Effect.
(iii) Except as set forth on Schedule 4.02(c), since September
30, 1999, (A) Xxxxxxx and its Subsidiaries have to the date hereof
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding matters related to this
Agreement and the transactions contemplated hereby) and (B) there has
not occurred any event or circumstance that, individually or taken
together with all other facts, circumstances and events, would
constitute a Xxxxxxx Material Adverse Effect.
(d) Litigation. Except as set forth on Schedule 4.02(d), no material
litigation, claim or other proceeding before any Governmental Authority is
pending against Xxxxxxx or any of its Subsidiaries and, to Xxxxxxx'x
Knowledge, no such litigation, claim or other proceeding has been
threatened.
(e) Regulatory Matters.
(i) Except as set forth on Schedule 4.02(e), neither Xxxxxxx nor
any of its Subsidiaries or properties is a party to or is subject to
any order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter to, or extraordinary
supervisory letter from, any federal or state Governmental Authority
or Regulatory Authority.
(ii) Except as set forth on Schedule 4.02(e), neither Xxxxxxx nor
any of its Subsidiaries has been advised by any Regulatory Authority
that such
35
36
Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding, commitment
letter, or extraordinary supervisory letter.
(f) Compliance with Laws. Except as set forth on Schedule 4.02(f), and
except for violations and acts of noncompliance that would not have a Xxxxxxx
Material Adverse Effect, each of Xxxxxxx and its Subsidiaries:
(i) to Xxxxxxx'x Knowledge is in material compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices; and
(ii) has received, since September 30, 1999, no notification or
communication from any Governmental Authority (A) asserting that Xxxxxxx or
any of its Subsidiaries is not in compliance in any material respect with
any of the statutes, regulations, or ordinances which such Governmental
Authority enforces or (B) threatening to revoke any material license,
franchise, permit, or governmental authorization (nor, to Xxxxxxx'x
Knowledge, do any grounds for any of the foregoing exist).
(g) Loan Portfolio; Portfolio Management.
(i) Except as set forth on Schedule 4.02(g) all evidences of
indebtedness reflected as assets in Xxxxxxx'x financial statements at
September 30, 1999 referred to in Section 4.02(c) hereof, or originated or
acquired since such date, are (except with respect to those assets which
are no longer assets of it or any of its Subsidiaries) binding obligations
of the respective obligors named therein except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except as to the
availability of equitable remedies, including specific performance, which
are subject to the discretion of the court before which a proceeding is
brought, and except where a failure of enforcement will not have a Xxxxxxx
Material Adverse Effect, and the payment of no material amount thereof
(either individually or in the aggregate with other evidences of
indebtedness) is subject to any defenses or offsets which have been
threatened or asserted against Xxxxxxx or any of its Subsidiaries which
would collectively constitute a Xxxxxxx Material Adverse Effect. All such
indebtedness which is secured by an interest in real property is secured by
a valid and perfected mortgage lien having the priority specified in the
loan documents except in each case in which, individually or in the
aggregate, the failure to have such a mortgage would not have a Xxxxxxx
Material Adverse
36
37
Effect. All such indebtedness which is secured by an interest in
personal property is secured by a valid and perfected security
interest having the priority specified in the loan documents, except
in each case in which, individually or in the aggregate, the failure
to have such a security interest would not have a Xxxxxxx Material
Adverse Effect. Except as set forth on Schedule 4.02(g), or except
where noncompliance would not have a Xxxxxxx Material Adverse Effect,
all loans originated, directly or indirectly, or purchased by Xxxxxxx
or any of its Subsidiaries were, at the time entered into and at all
times owned by Xxxxxxx or its Subsidiaries, in compliance in all
material respects with all applicable laws and regulations (including,
without limitation, all consumer protection laws and regulations).
Except where noncompliance would not have a Xxxxxxx Material Adverse
Effect, Xxxxxxx and its Subsidiaries (as applicable), in all material
respects, administer their loan and investment portfolios (including,
but not limited to, adjustments to adjustable mortgage loans) in
accordance with all applicable laws and regulations and the terms of
applicable instruments. Except where noncompliance would not have a
Xxxxxxx Material Adverse Effect, the records of Xxxxxxx and any of its
Subsidiaries (as applicable) regarding all loans outstanding on its
books are accurate in all material respects. With respect to loans for
which real property is the primary collateral, Xxxxxxx and its
Subsidiaries (as applicable) maintain or require all borrowers to
maintain adequate insurance on the security property and pay or cause
all borrowers, to pay all taxes or assessments which may be entitled
to a Lien with priority over the Xxxxxxx'x Xxxx in such property.
Other than in connection with commercial loans, Xxxxxxx maintains
insurance against its failure or the borrower's failure to maintain
insurance and pay taxes or assessments.
(ii) Schedule 4.02(g) sets forth a list, accurate and complete in
all material respects, of the aggregate amounts of loans, extensions
of credit and other assets of Xxxxxxx and its Subsidiaries that have
been adversely designated, criticized or classified by Xxxxxxx or its
outside auditors as of December 31, 1999, separated by category of
classification or criticism (the "Xxxxxxx Asset Classification"); and
no amounts of loans, extensions of credit or other assets that have
been adversely designated, classified or criticized as of the date
hereof, by any representative of any governmental or regulatory
authority as "Special Mention," "Substandard," "Doubtful," "Loss" or
words of similar import are excluded from the amounts disclosed in the
Xxxxxxx Asset Classification other than amounts of loans, extensions
of credit or other assets that were charged off by Xxxxxxx or any of
its Subsidiaries before the date hereof.
(h) Permits and Licenses. Xxxxxxx and each of its Subsidiaries has all
franchises, permits, licenses or other authorizations by all Governmental
Authorities, and has made all filings, applications and registrations with,
all Governmental Authorities that are required in order to permit them to
own or lease their properties and to conduct their businesses as presently
conducted except where the failure to obtain such consent, approval,
authorization, designation, declaration or filing would not have a Xxxxxxx
37
38
Material Adverse Effect. Schedule 4.02(h) lists all franchises,
permits, licenses or other authorizations by all Governmental
Authorities held by Xxxxxxx and its Subsidiaries ("Xxxxxxx Licenses"),
true and complete copies of all of which have been delivered to Bank.
Except as set forth on Schedule 4.02(h), all of the Xxxxxxx Licenses
are in full force and effect and will not be affected in any way by,
and will continue to be in full force and effect after, the
consummation of the transactions contemplated in this Agreement and
the Attendant Documents to the extent necessary to complete any
required governmental approvals of the transactions contemplated in
this Agreement and the Attendant Documents, and to permit continuous
business operations following consummation of the transactions
contemplated.
(i) Labor Matters.
(i) Schedule 402(i) contains a complete and accurate list of
the current employees of Xxxxxxx and its Subsidiaries as of a
date no later than 30 days before this representation and
warranty is made (the "Xxxxxxx Employees") and, with respect to
each Xxxxxxx Employee, his or her salary or hourly rate currently
in effect, annual bonuses (last paid or payable), if any, any
other fringe benefits or incentive paid or payable to him or her
and the amount of all cash compensation accrued through February
29, 2000, but as yet unpaid for each such Xxxxxxx Employee.
Except as set forth on Schedule 4.02(i), all such Xxxxxxx
Employees are actively at work, and no such Xxxxxxx Employee is
currently on leave of absence, layoff, military leave,
suspension, workers' compensation, salary continuance or short or
long term disability or otherwise not actively performing his or
her work during all normally scheduled business hours.
(ii) Except as set forth on Schedule 4.02(i), neither
Xxxxxxx nor any of its Subsidiaries is a party to or is bound by
any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor is
Xxxxxxx or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair
labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel Xxxxxxx or any such
Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor
dispute involving Xxxxxxx or any of its Subsidiaries pending or,
to Xxxxxxx'x Knowledge, threatened, nor does Xxxxxxx have any
Knowledge of any activity involving any Xxxxxxx Employee seeking
to certify a collective bargaining unit or engaging in other
organizational activity.
(iii) To the knowledge of Xxxxxxx, except as set forth on
Schedule 4.02(i), hours worked by, and payments made to, all
Xxxxxxx Employees and former employees of Xxxxxxx and its
Subsidiaries ("Former Xxxxxxx Employees") have been in compliance
with the Fair Labor Standards Act and other applicable federal,
state and local laws.
38
39
(iv) Except as set forth on Schedule 4.02(i), as of the
Effective Date, all payments determined to be due from Xxxxxxx
and its Subsidiaries on account of any Xxxxxxx Employee's or
Former Xxxxxxx Employees' work, health or welfare insurance,
under any agreement, whether oral or written, will have been paid
or properly accrued on Xxxxxxx'x financial statements.
(v) Except as set forth on Schedule 4.02(i), there are no
vacation monies or rights to time off which have been earned by
any Xxxxxxx Employee or Former Xxxxxxx Employee under any
agreement, whether oral or written, that have not been paid or
properly accrued on Xxxxxxx'x financial statements, nor, except
for payments in connection with the DFI Restructuring Plan, are
there any severance payments which could become payable by
Xxxxxxx or its Subsidiaries under the terms of any oral or
written agreement or commitment.
(vi) Except as disclosed pursuant to Section 4.02(j),
neither Xxxxxxx nor any of its Subsidiaries has any material
liability with respect to any pension, profit sharing, retirement
or similar plan, or other employee benefit plan.
39
40
(vii) Except as set forth on Schedule 4.02(i):
(A) there is no unfair labor practice charge or complaint
concerning Xxxxxxx or its Subsidiaries or any Xxxxxxx Employee or
Former Xxxxxxx Employee pending before any Governmental Authority
in any jurisdiction in which Xxxxxxx or its Subsidiaries conduct
business;
(B) there is no labor strike or slowdown, work stoppage,
lockout or other collective labor action actually pending or, to
Xxxxxxx'x Knowledge, threatened against or affecting the business
of Xxxxxxx or its Subsidiaries, and neither Xxxxxxx nor its
Subsidiaries has experienced any strike or slowdown, work
stoppage, lockout or other collective labor action in connection
with their business by or with respect to any Xxxxxxx Employees or
Former Xxxxxxx Employees;
(C) there is no representation claim or petition concerning
the business of Xxxxxxx or its Subsidiaries or any Xxxxxxx
Employee or Former Xxxxxxx Employee pending before any
Governmental Authority in any jurisdiction in which the business
of Xxxxxxx or its Subsidiaries conduct business, and no question
concerning representation exists relating to the Xxxxxxx
Employees;
(D) there are no charges with respect to or relating to the
business of Xxxxxxx or its Subsidiaries pending before the Equal
Employment Opportunity Commission or any Governmental Authority in
any jurisdiction in which Xxxxxxx or its Subsidiaries conduct
business responsible for the prevention of unlawful employment
practices;
(E) neither of Xxxxxxx nor its Subsidiaries has received
formal notice from any Governmental Authority responsible for the
enforcement of labor or employment laws of an intention to conduct
an investigation of Xxxxxxx or its Subsidiaries and no such
investigation is currently in progress; and
(F) to Xxxxxxx'x Knowledge, no key Xxxxxxx Employee or group
of Xxxxxxx Employees has any plans to terminate employment with
Xxxxxxx or its Subsidiaries prior to or after Closing.
(j) Employee Benefits.
(i) Controlled Group: Except as disclosed in Schedule 4.02(j),
neither Xxxxxxx nor any of its Subsidiaries is now, has ever been or
will be at any time prior to the Effective Time, a member of a
Controlled Group.
40
41
(ii) Xxxxxxx Employee Benefit Plans and Documents: Schedule
4.02(j) lists each and every Xxxxxxx Employee Benefit Plan that
Xxxxxxx, its Subsidiaries or any Controlled Group Member now, or will
at any time prior to the Effective Date, maintain, sponsor, participate
in or contribute to with respect to the Xxxxxxx Employees or the Former
Xxxxxxx Employees, or that Xxxxxxx, its Subsidiaries or any Controlled
Group Member ever maintained, sponsored, participated in or made
contributions to with respect to the Xxxxxxx Employees or the Former
Xxxxxxx Employees. Except as disclosed in Schedule 4.02(j), neither
Xxxxxxx nor any of its Subsidiaries or any Controlled Group Member is a
party to any collective bargaining or union contract with respect to
the Xxxxxxx Employees or the Former Xxxxxxx Employees. Xxxxxxx has
provided to Bank true and correct copies of all current and prior
material and readily available documents relating to the Xxxxxxx
Employee Benefit Plans listed in Schedule 4.02(j), including, but not
limited to: (A) plan documents, trust documents and plan and trust
amendments, in each case, which implement, relate to, or amend a
Xxxxxxx Employee Benefits Plan; (B) summary plan descriptions,
amendments thereto, and all other communication material provided to
employees; (C) summaries of material modifications; (D) insurance
(including reinsurance), administrative services or annuity contracts;
(E) collective bargaining agreements or contracts and all amendments
thereto; (F) the most recent financial statements; (G) with regard to
self-funded Welfare Plans, experience and enrollment data for the prior
three plan years as well as documentation and calculations
demonstrating the preset value of accrued obligations under such plans
as of the Effective Date; (H) if Xxxxxxx or its Subsidiaries provide,
or have any commitment or obligation to provide, any Xxxxxxx Employee
Benefit Plan benefits to their retirees, copies of all documentation
and calculations demonstrating the present value of such obligation or
commitment as of the Effective Date; (I) if Xxxxxxx, its Subsidiaries
or any Controlled Group Member maintains a defined benefit pension
plan, as defined in Section 3(35) of ERISA with respect to the Xxxxxxx
Employees or the Former Xxxxxxx Employees, the most recent actuarial
valuation for each such plan and copies of any funding waivers and
applications therefor, and all related correspondence and
documentation; (J) the three most recent annual reports; (K) agreements
with respect to leased or temporary employees; (L) all government
rulings and opinions, if any (and pending requests for rulings and
opinions, if any); and (M) the most recent IRS determination letters
with respect to the Xxxxxxx Employee Benefits Plans listed on Schedule
4.02(j).
(iii) No Minimum Funding Obligations; No Multiemployer Plan,
Multiple Employer Plan or Post-Employment Welfare Plan Liability. No
Xxxxxxx Employee Benefit Plan is a, and none of Xxxxxxx, any of its
Subsidiaries or any Controlled Group Member has any material liability
or potential liability (including, with respect to clauses (B) and (C)
of this paragraph any actual or potential withdrawal liability)with
respect to any, (A) Pension Plan that is subject to the minimum funding
requirements of Section 412 of the Code or Section 302 of ERISA, (B)
multiemployer plan (as such term is defined in Section 3(37) of
41
42
ERISA), (C) plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413(c) of the Code (and regulations promulgated
thereunder), or (D) plan which provides health, life insurance,
accident or other "welfare-type" benefits to current or future retirees
or current or future former employees, their spouses or dependents,
other than in accordance with Section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA or applicable state continuation
coverage law.
(iv) Representations: Except as set forth in Schedule 4.02(j):
(A) Qualification: All the Pension Plans required to be
listed on Schedule 4.02(j), and the related trusts, if any, now
meet, and since their inception have met, and as of the Effective
Date shall meet, in all material respects, the requirements for
qualification under Section 401(a) of the Code and are now, and
since their inception have been, exempt from taxation under
Section 501(a) of the Code;
(B) Determination Letters: The IRS has issued a favorable
determination letter with respect to the qualified status of each
such Pension Plan and trust, and has not taken, nor to the
Knowledge of Xxxxxxx, its Subsidiaries and Controlled Group
Members, has reasonable grounds to take any action to revoke such
letter;
(C) Satisfaction of Obligations: Xxxxxxx, each of its
Subsidiaries and each Controlled Group Member have performed, and
through the Effective Date shall perform, in all material
respects, all obligations required to be performed by them under
the Xxxxxxx Employee Benefit Plans (including, but not limited to,
the making of all contributions), and are not in material default
under, or in material violation of, any of the Xxxxxxx Employee
Benefit Plans, and none of Xxxxxxx, its Subsidiaries, or any
Controlled Group Member has Knowledge of any such material default
or violation of any other party to any and all of the Xxxxxxx
Employee Benefit Plans;
(D) Compliance With Laws: Each Xxxxxxx Employee Benefit Plan
has been, and through the Effective Date shall be, maintained, and
funded in compliance in all material respects with ERISA, the
Code, the Age Discrimination in Employment Act (to the extent
applicable), COBRA, and each other applicable federal, state or
local laws, and, if applicable, each foreign law, and each Xxxxxxx
Employee Benefit Plan is valid and binding, in full force and
effect, and there are no material defaults thereunder;
(E) No Prohibited Transactions: None of the Xxxxxxx Employee
Benefit Plans, nor any trust created thereunder, any trustee or
administrator thereof, nor Xxxxxxx or any of its Subsidiaries, nor
any
42
43
other Party dealing with any Xxxxxxx Employee Benefit Plan has
engaged in any transaction, or will prior to the Effective Date
engage in any transaction, that would trigger a tax under Section
4975 of the Code, or violate Section 406 of ERISA, or, if
applicable, any similar provision under foreign law;
(F) No Claims Pending or Threatened: There are not presently,
nor shall there be prior to the Effective Date, any actions, suits
or claims pending (other than routine claims for benefits) or, to
Xxxxxxx'x Knowledge, threatened against, any Xxxxxxx Employee
Benefit Plan, against the assets of any Xxxxxxx Employee Benefit
Plan, or against the Xxxxxxx, any of its Subsidiaries or any
Controlled Group Member for benefits arising under or pursuant to
any Xxxxxxx Employee Benefit Plan;
(G) Reporting and Disclosure: With regard to each Xxxxxxx
Employee Benefit Plan listed in Schedule 4.02(j), Xxxxxxx and its
Subsidiaries have complied with, and will through the Effective
Date continue to comply with, all reporting and disclosure
requirements of ERISA and the Code in all material respects;
(H) No Unfunded Liabilities: No Xxxxxxx Employee Benefit Plan
has any material unfunded liabilities;
(I) No Further Liabilities: Except as provided in Schedule
4.02 (j), Xxxxxxx and its Subsidiaries do not, and shall not as of
the Effective Date, have any liability or obligation to any
Xxxxxxx Employee Benefit Plan or to the Pension Benefit Guaranty
Corporation, DOL, Department of Treasury or similar agency of a
foreign government, any other plan or entity, or any employee,
participant or beneficiary of any Xxxxxxx Employee Benefit Plan,
arising out of or pursuant to any Xxxxxxx Employee Benefit Plan
which could subject Xxxxxxx or its Subsidiaries to any material
liability;
(J) Termination and Amendment: Except as disclosed in
Schedule 4.02(j), each Xxxxxxx Employee Benefit Plan listed in
Schedule 4.02(j) is, and as of and through the Effective Date,
shall be terminable, and/or subject to amendment by Xxxxxxx or its
Subsidiaries, at the discretion of Xxxxxxx or its Subsidiaries,
with no liability for benefits incurred after such termination or
inconsistent with the terms of any amendment after its effective
date.
(K) Change of Control Payments: Except as set forth in
Schedule 4.02(j), none of the Xxxxxxx Employee Benefit Plans
obligates Xxxxxxx or any of its Subsidiaries to pay separation,
severance, termination or similar-type benefits solely as a result
of any transaction
43
44
contemplated by this Agreement or solely as a result of a "change
in control," as such term is contemplated by Section 280G of the
Code.
(k) Tax Matters.
(i) Except as would not cause a Xxxxxxx Material Adverse Effect or
except as set forth on Schedule 4.02(k):
(A) Xxxxxxx, each of its Subsidiaries, each of their
affiliated groups and each of the entities identified on Schedule
4.02(k) pursuant to Section 4.02(k)(ii)(B) (the "Xxxxxxx
Predecessors") have filed all Tax Returns which they are required
to file under applicable laws and regulations, and all such Tax
Returns are complete and correct and have been prepared in
compliance with all applicable laws and regulations;
(B) Xxxxxxx, each of its Subsidiaries, each of their
affiliated groups and each of the Xxxxxxx Predecessors have paid
all Taxes due and owing by them (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authority all Taxes which they are
required to withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party;
(C) neither Xxxxxxx or its Subsidiaries, nor any of their
affiliated groups or the Xxxxxxx Predecessors have waived any
statute of limitations with respect to any Taxes or agreed to any
extension of time with respect to any Tax assessment or
deficiency;
(D) the accrual for Taxes on Xxxxxxx'x most recent audited
balance sheet would be adequate to pay all Tax liabilities of
Xxxxxxx and its Subsidiaries if their current tax year were
treated as ending on the date of such balance sheet (excluding any
amount recorded which is attributable solely to timing differences
between book and Tax income);
(E) since September 30, 1999, neither Xxxxxxx nor any of its
Subsidiaries has incurred any liability for Taxes with respect to
their businesses other than in the ordinary course;
(F) no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being
conducted with respect to Xxxxxxx, any of its Subsidiaries, any of
their affiliated groups or any of the Xxxxxxx Predecessors;
(G) neither Xxxxxxx or its Subsidiaries, nor any of their
affiliated groups or the Xxxxxxx Predecessors have received from
any foreign, federal, state or local taxing authority any (1)
written notice
44
45
indicating an intent to open an audit or other review, or (2)
request for information related to Tax matters; and
(H) there are no material unresolved questions or claims
concerning any Tax liability of Xxxxxxx, its Subsidiaries, or any
of their affiliated groups or the Xxxxxxx Predecessors.
(ii) Except as set forth on Schedule 4.02(k), neither Xxxxxxx nor
any of its Subsidiaries (A) has made an election under Section 341(f)
of the Code, (B) is liable for the Taxes of another person (1) under
Treasury Regulation Section 1.1502-6 (or comparable provisions of
state, local or foreign law), (2) as a transferee or successor, (3) by
contract or indemnity or (4) otherwise, (C) is a party to any tax
sharing agreement or (D) has made any payments, are obligated to make
any payments or is a party to an agreement that could obligate it to
make any payments that would not be deductible under Section 280G of
the Code.
(l) Environmental Matters. To Xxxxxxx'x Knowledge, neither the conduct
nor operation of Xxxxxxx or its Subsidiaries nor any condition of any
property currently or previously owned or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, results or resulted in a violation of any
Environmental Laws and to Xxxxxxx'x Knowledge, no condition has existed or
event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely to result
in any liability to Xxxxxxx or any of its Subsidiaries under or by reason
of any Environmental Laws or Materials of Environmental Concern except
where the conduct, operation, condition or event would not have a Xxxxxxx
Material Adverse Effect. To Xxxxxxx'x Knowledge, except for any notice for
which, in Xxxxxxx'x reasonable judgment, there is no reasonable basis,
neither Xxxxxxx nor any of its Subsidiaries has received any notice from
any person or entity that Xxxxxxx or its Subsidiaries or the operation or
condition of any property ever owned, operated, or held as collateral or in
a fiduciary capacity by any of them are or were in violation of or
otherwise are alleged to have liability under any Environmental Law or
relating to Materials of Environmental Concern, including, but not limited
to, responsibility (or potential responsibility) for the cleanup or other
remediation of Materials of Environmental Concern at, on, beneath, or
originating from any such property.
(m) Risk Management Instruments. Except as set forth on Schedule
4.02(m), all material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management
arrangements, whether entered into for Xxxxxxx'x own account, or for the
account of one or more of Xxxxxxx'x Subsidiaries or their customers have
been previously disclosed to Bank and were entered into (i) in accordance
with prudent business practices and in all material respects in compliance
with all applicable laws, rules, regulations and regulatory policies and
(ii) with parties believed to be financially responsible at the time; and
each of them constitutes the valid and legally binding obligation of
Xxxxxxx or one of its Subsidiaries, enforceable in
45
46
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and is in full force
and effect. Neither Xxxxxxx nor its Subsidiaries, nor to Xxxxxxx'x
Knowledge any other party thereto, is in breach of any of its obligations
under any such agreement or arrangement in any material respect.
(n) Insurance. Except as set forth on Schedule 4.02(n), Xxxxxxx and its
Subsidiaries have maintained and now maintain insurance with respect to
their assets and businesses covering property damage by fire or other
casualty, and against such liabilities, claims and risks, including,
without limitation, workers compensation, and in such amounts as is
customary or appropriate in the industry. Schedule 4.02(n) contains a true
and correct summary of all such insurance policies maintained by Xxxxxxx
and its Subsidiaries, presently or at any point during the last five years,
setting forth the names of the insured and the insurer, policy numbers, the
types of coverage, premium payments or basis of payment, deductible amounts
and limits of coverage. Except as set forth on Schedule 4.02(n), to the
knowledge of Xxxxxxx no such policy of insurance is subject to any
deductible, self-insured retention, retrospective rating agreement,
indemnification agreement or any other method or device by which the
insured person is subject to all or any part of the liability for any or
all claims. Concurrently with or prior to the execution of this Agreement,
Xxxxxxx and its Subsidiaries have delivered to Bank true, correct and
complete copies of all such insurance policies. Except as set forth on
Schedule 4.02(n), all such insurance policies will be in full force and
effect through the Effective Date. To the knowledge of Xxxxxxx, except as
set forth on Schedule 4.02(n), there is no state of facts and no event has
occurred forming the basis for any present property, casualty or fidelity
claim against Xxxxxxx or its Subsidiaries that is not fully covered by
insurance. Schedule 4.02(n) contains loss runs for the last five years
setting forth all property, general and products liability and workers
compensation claim activity against the businesses of Xxxxxxx and its
Subsidiaries, including the date and place of the occurrence, the
claimant's name, reserves, amounts paid, a brief description of the
incident and whether the claim is open or closed. Except as set forth on
Schedule 4.02(n), Xxxxxxx has no Knowledge of any occurrence, circumstance,
or event which could reasonably be expected to result in any such claim.
(o) Governmental Reviews. Except as set forth on Schedule 4.02(o), no
investigation or review by any Governmental Authority with respect to
Xxxxxxx, any Xxxxxxx Subsidiary or any of their officers or directors is
pending or, to the Knowledge of Xxxxxxx, threatened, nor has any
Governmental Authority indicated to Xxxxxxx or any Xxxxxxx Subsidiary an
intention to conduct the same, other than normal or routine regulatory
examinations.
(p) Fairness Opinion. On the date of this Agreement, Xxxxx Xxxxxxxx &
Xxxxx, Inc. ("Xxxxx Xxxxxxxx") has provided to the Xxxxxxx Board a written
fairness opinion to the effect that the Exchange Ratio is fair to the
shareholders of Xxxxxxx from a financial point of view.
46
47
(q) Compliance with Servicing Obligations. Except as set forth on
Schedule 4.02(q) and except for violations and acts of noncompliance that
would not have a Xxxxxxx Material Adverse Effect, to the best of Xxxxxxx'x
Knowledge, Xxxxxxx and the Xxxxxxx Subsidiaries are in compliance in all
material respects with all contract, agency and investor requirements and
guidelines, and all applicable laws, rules and regulations of Governmental
Authorities, relating to the servicing and administration of loans by them,
or any of them, including but not limited to, properly and timely making
interest rate adjustments to adjustable rate loans.
(r) Intellectual Property. Schedule 4.02(r) sets forth all Intellectual
Property Xxxxxxx and its Subsidiaries own or use in their businesses
("Xxxxxxx Intellectual Property"). Xxxxxxx and its Subsidiaries are the
sole owners (except for licensed property for which valid and subsisting
licenses exist) of the Xxxxxxx Intellectual Property, free of all Liens.
Except as set forth in Schedule 4.02(r), to Xxxxxxx'x Knowledge, there is
no claim against Xxxxxxx or any of its Subsidiaries that the Xxxxxxx
Intellectual Property or any of its operations, activities, products or
publications infringes any material patent, trademark, trade name,
copyright or other proprietary or intellectual property right of any third
party or that any of them is illegally using the material trade secrets or
property rights of others in any material respect. To the knowledge of
Xxxxxxx, neither Xxxxxxx nor any of its Subsidiaries has any disputes with
or claims against, or any basis for claims against, any third party for
infringement by such third party of any Xxxxxxx Intellectual Property.
(s) Material Contracts. Schedule 4.02(s) identifies all of the Material
Contracts of Xxxxxxx and its Subsidiaries, true and complete copies of all
of which have been delivered to Bank. Except as set forth on Schedule
4.02(s), and except for any default which would not constitute a Xxxxxxx
Material Adverse Effect, (i) Xxxxxxx and each of its Subsidiaries has
complied in all material respects with the provisions of, and is not in
default under, each such Material Contract to which it is a party or any
such default has been waived, and (ii) to the Knowledge of Xxxxxxx, no
other party to any such Material Contract has failed to comply in any
material respect with, or is in default under, the provisions of any such
Material Contract.
(t) Real Property Owned. Neither Xxxxxxx nor any of its Subsidiaries
own any real property and, except as set forth on Schedule 4.02(t), and
except for real property of the type classified as OREO (other real estate
owned) on the Xxxxxxx'x financial statements (i.e., foreclosed property not
owned for the operation of Xxxxxxx'x business), none of them has ever owned
any real property.
(u) Real Property Leased. Schedule 4.02(u) sets forth the legal
description for all real properties leased or subleased to Xxxxxxx or its
Subsidiaries (the "Xxxxxxx Leased Real Property"). Xxxxxxx has delivered to
Bank true, correct and complete copies of the leases and subleases listed
on Schedule 4.02(u). Except as set forth on Schedule 4.02(u), neither
Xxxxxxx nor any of its Subsidiaries has leased or subleased any real
47
48
property during the past three years. Except as set forth on Schedule
4.02(u), with respect to each such lease or sublease:
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect in all material respects;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect in all material
respects on identical terms following the Closing;
(iii) neither Xxxxxxx, its Subsidiaries, nor, to Xxxxxxx'x
Knowledge, any other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time,
would constitute such a breach or default or permit termination,
modification or acceleration under the lease or sublease;
(iv) to Xxxxxxx'x Knowledge, no party to the lease or sublease
has repudiated any of its provisions;
(v) there are no material disputes, oral agreements or
forbearance programs in effect as to the lease or sublease;
(vi) neither Xxxxxxx nor any of its Subsidiaries, as applicable,
has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered all or any portion of their interest in the leasehold or
subleasehold;
(vii) to Xxxxxxx'x Knowledge, all facilities leased or subleased
under the lease or sublease have been operated and maintained in
accordance with applicable laws, rules and regulations in all material
respects;
(viii) all facilities leased or subleased under the lease or
sublease are supplied with utilities and other services reasonably
necessary for the operation of such facilities;
(ix) all facilities leased or subleased under the lease or
sublease are in good operating condition, and would not, with ordinary
wear and tear, require major repair or replacement during the remainder
of the lease term; and
(x) no property insurer or similar body has made any
recommendations with respect to any parcel of Xxxxxxx Leased Real
Property which have not been complied with, and all structures on the
Xxxxxxx Leased Real Property meet all qualifications for "highly
protected risk" classification for fire insurance purposes.
(v) Liens. Except as set forth on Schedule 4.02(v), Xxxxxxx and its
Subsidiaries own and have good, marketable and unencumbered title to, or an
48
49
unencumbered interest in, each item comprising their assets, free and
clear of any and all Liens.
(w) Good Condition. Except as set forth on Schedule 4.02(w), all
facilities used in connection with the operation of the businesses of
Xxxxxxx and its Subsidiaries and all of the material assets of Xxxxxxx
and its Subsidiaries except real property of a type classified as OREO
(other real estate owned) on the Xxxxxxx'x financial statements (i.e.,
foreclosed property not owned for the operation of the Xxxxxxx'x
business) are free from material defects (normal wear and tear
excepted) and have been maintained in accordance with normal industry
practice.
(x) No Undisclosed Liabilities. Except as and to the extent set
forth on Schedule 4.02(x) or reflected in the Xxxxxxx SEC Documents,
and except for current liabilities incurred by Xxxxxxx or its
Subsidiaries in connection with the operation of or with respect to
their businesses in the ordinary course, since September 30, 1999,
neither Xxxxxxx nor its Subsidiaries has incurred any debts,
liabilities or obligations of any nature or kind (whether absolute,
accrued, contingent, unliquidated or otherwise, whether or not known to
Xxxxxxx, whether due or to become due and regardless of when asserted)
arising out of transactions entered into, at or prior to the Closing,
or any action or inaction at or prior to the Closing or any state of
facts existing at or prior to the Closing and which could have a
Xxxxxxx Material Adverse Effect. Except as set forth on Schedule
4.02(x), Xxxxxxx has no Knowledge of any existing, proposed or
threatened change which could have a Xxxxxxx Material Adverse Effect.
There are no contingent or other liabilities of Xxxxxxx or its
Subsidiaries that have not been disclosed in the Schedules to this
Agreement which could have a Xxxxxxx Material Adverse Effect.
(y) Recent Conduct of Business; Interim Operations. Except as set
forth on Schedule 4.02(y), since September 30, 1999, there has not
been, and through the Effective Time, there shall not be, any Xxxxxxx
Material Adverse Effect. Except as set forth on Schedule 4.02(y) or any
other Schedule to this Agreement, since September 30, 0000, Xxxxxxx and
its Subsidiaries have caused their businesses to be conducted only in
the ordinary course. Except as set forth on Schedule 4.02(y) or any
other Schedule to this Agreement, since September 30, 0000, Xxxxxxx and
its Subsidiaries have not done any of the actions described in Sections
5.02 (a) through (g), 5.02 (l) through (u) or 5.02(v) as Section
5.02(v) relates to Sections 5.02(a) through (g) and 5.02(l) through
(u).
(z) Brokerage or Finder's Fee. Except for Xxxxx Xxxxxxxx, no
broker, finder, agent or similar intermediary has acted for or on
behalf of Xxxxxxx in connection with this Agreement or the transactions
contemplated hereby and, except for the fee payable to Xxxxx Xxxxxxxx
by Xxxxxxx, no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission
in connection therewith based on any agreement, arrangement or
understanding with Xxxxxxx or any action taken by Xxxxxxx.
49
50
(aa) Disclosure. No representation or warranty by Xxxxxxx
contained in this Agreement and no statement contained in any of the
Attendant Documents or any other certificate or instrument furnished or
to be furnished pursuant to this Agreement or in connection with the
transactions contemplated in this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state
a material fact, necessary in order to make any of the statements not
misleading.
(bb) Capitalization. Xxxxxxx and each of its Subsidiaries has one
class of capital stock, common stock, without par value, except for (i)
DFI Alabama and DIA, which each have one class of capital stock, common
stock, $0.01 par value per share, (ii) Xxxxxxx & Xxxxxxx Mortgage
Associates, Inc., which has one class of capital stock, common stock,
$1.00 par value per share, and (iii) BAC and BSC, which are limited
liability companies with one class of ownership interest. Schedule
4.02(bb) sets forth the number of authorized and the number of issued
and outstanding shares of common stock of Xxxxxxx and each of its
Subsidiaries. All of the shares of Xxxxxxx Stock and all of the shares
of capital stock of each of its Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and were issued
by Xxxxxxx and its Subsidiaries without violating any requirements of
law. Except as set forth on Schedule 4.02(bb), (i) there are no
preemptive or first refusal rights to purchase or otherwise acquire
shares of Xxxxxxx Stock or capital stock of any of Xxxxxxx'x
Subsidiaries pursuant to the Governing Documents of Xxxxxxx or its
Subsidiaries, by agreement or otherwise, (ii) there are no outstanding
agreements, commitments, rights, options, warrants or claims of any
nature whatsoever for the issuance, sale, purchase or redemption of any
shares of Xxxxxxx Stock or capital stock of any of Xxxxxxx'x
Subsidiaries or any securities convertible into or exchangeable for
such shares, and (iii) there are no stock appreciation rights or
phantom stock rights outstanding with respect to the capital stock of
Xxxxxxx or any of its Subsidiaries.
(cc) No Knowledge. Except as set forth in Schedule 4.02(cc),
Xxxxxxx has no Knowledge whatsoever that any of the representations or
warranties of Bank are untrue in any material respect.
(dd) Affiliate Transactions. Except as set forth on Schedule
4.02(dd), Xxxxxxx has not entered into any business transactions with
any of its Affiliates.
ARTICLE V
COVENANTS
Section 5.01 Bank's Forbearances From the date of this Agreement until
the Effective Time, except as expressly contemplated by this Agreement,
without the prior written consent of Xxxxxxx, Bank will not, and will cause
each of its Subsidiaries not to:
50
51
(a) Ordinary Course. Conduct the business of Bank and its
Subsidiaries other than in the ordinary and usual course consistent
with past practice or fail to use reasonable efforts to (i) preserve
intact in any material respect their business organizations and assets,
and (ii) maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any
action reasonably likely to materially impair Bank's ability to perform
any of its obligations under this Agreement. Notwithstanding the fact
that it has customarily done so in the past, Bank shall not make,
declare, pay or set aside for payment any stock dividend on shares of
Bank Stock; provided, however, that Bank may redeem its subordinated
debt in accordance with the terms of the documents evidencing such
debt.
(b) Bank Stock. Other than pursuant to Bank Stock Options
outstanding on the date of this Agreement as disclosed on Schedule
5.01(b) or Bank Stock Options issued to officers, employees or
directors in the ordinary course of business, (i) issue, sell or
otherwise permit to become outstanding, or authorize the creation of,
any additional shares of Bank Stock or any Rights, or (ii) enter into
any agreement with respect to the foregoing, provided, however, that
Bank Stock Options and Bank Stock Plans may be amended in the ordinary
course of business or as contemplated by this Agreement.
(c) Other Securities. Issue any other capital securities, capital
stock of any Subsidiary, debentures, or subordinated notes other than
in the ordinary course of business.
(d) Dividends, Etc. (i) Except for quarterly dividends (common or
preferred) in the ordinary course of business, make, declare, pay or
set aside for payment any dividend (other than dividends from
wholly-owned Subsidiaries to Bank or another wholly-owned Subsidiary of
Bank) on or in respect of, or declare or make any distribution on any
shares of Bank Stock or (ii) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares
of its capital stock or Rights.
(e) Compensation; Employment Agreements, Etc. Except (i) for oral
at will employment agreements, (ii) for normal individual increase in
compensation to employees in the ordinary course of business consistent
with past practice, (iii) for other changes that are required by
applicable law, (iv) to satisfy contractual obligations existing as of
the date hereof that are disclosed on Schedule 5.01(e) in the ordinary
course of business, (v) otherwise in the ordinary course of business,
or (vi) as contemplated by this Agreement, enter into or amend or renew
any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Bank or its
Subsidiaries, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments).
(f) Benefit Plans. Except in the ordinary course of business and
consistent with past practice, to provide incentive to directors,
officers or employees, enter into, establish, adopt, renew, or amend
(except as may be required by applicable law) any
51
52
pension, profit sharing, employee stock ownership, retirement, stock
option, stock appreciation, phantom stock, stock purchase, savings,
deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement,
or any trust agreement (or similar arrangement) related thereto, in
respect of any director, officer or employee of Bank or its
Subsidiaries, or take any action to accelerate the vesting or
exercisability of stock options or other compensation or benefits
payable thereunder. Notwithstanding the foregoing, Bank shall expressly
be allowed to amend its Bank Stock Options and Bank Stock Plans as set
forth in the attached Schedule 5.01(f); provided, however, such
amendment shall not result in the Holding Company or the Surviving
Subsidiary having any liability as a result of changing the tax
treatment in connection with the Bank Stock Options or the exercise
thereof. Further, notwithstanding the foregoing, the Bank shall
expressly be allowed to enter into a trust agreement establishing and
funding trusts contemplated in the Severance Agreements; provided that
such trust agreement shall provide that at such time as Severance
Payments or Bank Board Severance Payments (defined below) are no longer
payable to a beneficiary of the trusts established under such trust
agreement, an amount equal to such Severance Payments or Bank Board
Severance Payment, less the amount of trust funds used to pay such
Severance Payments or Bank Board Severance Payments, shall be released
from the trusts established under such trust agreement and paid to the
Surviving Subsidiary; provided further, such trusts will be funded with
funds of the Bank and the trustee of the trusts established under such
trust agreement shall be reasonably acceptable to Xxxxxxx; and provided
further, such trust agreement shall specifically provide that the
trustee shall pay over the earnings of the trusts established
thereunder to the Surviving Subsidiary as and when earned or as
otherwise acceptable to Xxxxxxx.
(g) Dispositions. Except as set forth in Schedule 4.01(y), sell,
transfer, mortgage, encumber or otherwise dispose of or discontinue any
of its material assets, deposits, business or properties except in the
ordinary course of business for fair value consistent with past
practice.
(h) Acquisitions. Except in the ordinary and usual course of
business consistent with past practice, acquire all or any portion of,
the assets, business, deposits or properties of any Person or entity.
(i) Governing Documents. Except as contemplated in this Agreement,
amend the Governing Documents of Bank or any of its Subsidiaries.
(j) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles.
(k) Material Contracts. Except as permitted by Sections 5.01(e)
and 5.01(f), and to renew real and personal property leases in the
ordinary course of business where the renewal option would otherwise
expire, enter into or terminate any Material Contract
52
53
or amend or modify in any material respect or renew any of its existing
Material Contracts.
(l) Claims. Except in the ordinary course of business consistent
with past practice or involving an amount not in excess of $100,000,
settle any claim, action or proceeding.
(m) Foreclosure. Foreclose upon or otherwise take title to or
possession or control of any real property without first having an
environmental report thereon.
(n) Deposit Taking and Other Bank Activities. In the case of Bank
(i) voluntarily make any material changes in or to its deposit mix;
(ii) increase or decrease the rate of interest paid on time deposits or
on certificates of deposit, except in a manner consistent with
prevailing banking practice or the Bank's existing strategic plan and
year 2000 budget; or (iii) incur any liability or obligation relating
to retail banking and branch merchandising, marketing and advertising
activities and initiatives materially in excess of the amounts
previously disclosed to Xxxxxxx.
(o) Facilities. Except as disclosed on Schedule 5.01(o) or as
contemplated in the Bank's existing strategic plan and year 2000
budget, or as required for technology or facility upgrades, open any
new offices or facilities or expand, close or relocate any existing
office or facility.
(p) Investments. Enter into any material securities transaction
for its own account or purchase or otherwise acquire any material
amount of investment securities for its own account except purchases
and sales of securities consistent with past practice (including the
Bank's existing strategic plan and year 2000 budget) in order to
maintain investment portfolios at Bank and its Subsidiaries that have
risk and asset mix characteristics substantially similar to those of
the respective investment portfolios as of the date of this Agreement.
(q) Capital Expenditures. Purchase or lease fixed assets where the
amount paid or committed is in excess of $50,000 individually or
$250,000 in the aggregate.
(r) Lending. Except as required by action of any Regulatory
Authority (i) make any material changes in its policies concerning loan
underwriting or which persons may approve loans as previously provided
in writing to Xxxxxxx (except in the ordinary course of business
consistent with past practice or prevailing banking practices) or fail
to materially comply with such policies; or (ii) make or commit to make
any new loan or letter of credit, or any new or additional
discretionary advance under any existing loan or letter of credit, or
restructure any existing loan or letter of credit in a manner
inconsistent with past practice or customary safe and sound standards.
53
54
(s) Acquisition of Loans. Except in the ordinary course of
business and consistent with current policies and guidelines in effect
as previously disclosed to Xxxxxxx, purchase any loan, loan
participation or other interest in any loan.
(t) Adverse Actions. (i) Take any action or fail to take any
action while knowing that such action or inaction would, or is
reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code; or
(ii) knowingly take any action or fail to take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time except as expressly permitted by this Agreement, (B) any
of the conditions to the Merger set forth in Article VI not being
satisfied except as expressly permitted by this Agreement or (C) a
material violation of any provision of this Agreement except, in each
case, as may be required by applicable law or regulation.
(u) Risk Management. Except as required by applicable law or as
contemplated by the Bank's existing strategic plan and year 2000
budget, regulation, (i) implement or adopt any material change in its
interest rate and other risk management policies, procedures or
practices; (ii) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate and other risk; or
(iii) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
(v) Indebtedness. Incur any indebtedness for borrowed money other
than in the ordinary course of business.
(w) Commitments. Agree or commit to do any of the foregoing.
Section 5.02 Xxxxxxx'x Forbearances. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of Bank, Xxxxxxx will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Xxxxxxx and its
Subsidiaries other than in the ordinary and usual course consistent
with past practice or fail to use reasonable efforts to (i) preserve
intact in any material respect their business organizations and assets,
and (ii) maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any
action reasonably likely to materially impair Xxxxxxx'x or Merger Sub's
ability to perform any of their respective obligations under this
Agreement. Without limiting the foregoing, Xxxxxxx may not make,
declare, pay or set aside for payment any stock dividend on shares of
Xxxxxxx'x capital stock. Notwithstanding the foregoing, Xxxxxxx may
effectuate the DFI Restructuring Plan substantially on the terms set
forth on Schedule 5.02(a) and may enter into commercially reasonable
whole loan sales or loan securitizations.
54
55
(b) Xxxxxxx Stock. Other than pursuant to options to purchase
shares of Xxxxxxx Stock ("Xxxxxxx Stock Options") outstanding on the
date of this Agreement as disclosed on Schedule 5.02(b) or Xxxxxxx
Stock Options and other stock awards issued to officers, employees or
directors in the ordinary course of business, (i) issue, sell or
otherwise permit to become outstanding, or authorize the creation of,
any additional shares of Xxxxxxx Stock or any Rights, or (ii) enter
into any agreement with respect to the foregoing, provided, however,
that options to purchase Xxxxxxx stock and Xxxxxxx'x stock option plans
may be amended in the ordinary course of business or as contemplated by
this Agreement.
(c) Other Securities. Issue any other capital securities, capital
stock of any Subsidiary, debentures, or subordinated notes.
(d) Dividends, Etc. (i) Except for dividends in the ordinary
course of business, make, declare, pay or set aside for payment any
dividend (other than dividends from wholly-owned Subsidiaries to
Xxxxxxx or another wholly-owned Subsidiary of Xxxxxxx) on or in respect
of, or declare or make any distribution on any shares of Xxxxxxx Stock
or (ii) directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital
stock or Rights.
(e) Compensation; Employment Agreements, Etc. Except (i) for oral
at will employment agreements, (ii) for normal individual increase in
compensation to employees in the ordinary course of business consistent
with past practice, (iii) for other changes that are required by
applicable law, (iv) to satisfy contractual obligations existing as of
the date hereof that are disclosed on Schedule 5.02(e) in the ordinary
course of business, (v) otherwise in the ordinary course of business,
or (vi) as contemplated by this Agreement, enter into or amend or renew
any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Xxxxxxx or its
Subsidiaries, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments)
(f) Benefit Plans. Except in the ordinary course of business and
consistent with past practice to provide incentives to directors,
officers or employees, enter into, establish, adopt, renew, or amend
(except as may be required by applicable law) any pension, profit
sharing, employee stock ownership, retirement, stock option, stock
appreciation, phantom stock, stock purchase, savings, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of
any director, officer or employee of Xxxxxxx or its Subsidiaries, or
take any action to accelerate the vesting or exercisability of stock
options or other compensation or benefits payable thereunder.
Notwithstanding the foregoing, Xxxxxxx shall expressly be allowed to
adopt a new stock option plan to enable grants thereunder to be made to
its officers, directors and employees both before and after the
Effective Time.
55
56
(g) Dispositions. Except as set forth on Schedule 4.02(y), sell,
transfer, mortgage, encumber or otherwise dispose of or discontinue any
of its material assets, deposits, business or properties except in the
ordinary course of business for fair value consistent with past
practice.
(h) Acquisitions. Except as set forth in Schedule 5.02(h) acquire
all or any substantial portion of, the assets, business, deposits or
properties of any Person or entity.
(i) Governing Documents. Except as contemplated in this Agreement,
amend the Governing Documents of Xxxxxxx or any of its Subsidiaries.
(j) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles.
(k) Material Contracts. Except as permitted by Section 5.02(e),
and to renew real and personal property leases in the ordinary course
of business where the renewal option would otherwise expire, enter into
or terminate any Material Contract or amend or modify in any material
respect or renew any of its existing Material Contracts.
(l) Claims. Except: (i) in the ordinary course of business
consistent with past practice; (ii) involving an amount not in excess
of $100,000; or (iii) in connection with the DFI Restructuring Plan
which, in the aggregate, involves an amount not in excess of
$5,000,000, settle any claim, action or proceeding.
(m) Foreclosure. Foreclose upon or otherwise take title to or
possession or control of any real property without first having an
environmental report thereon.
(n) Facilities. Except as disclosed on Schedule 5.02(n), or as
contemplated in Xxxxxxx'x year 2000 budget or as required for
technology or facility upgrades, open any new offices or facilities or
expand, close or relocate any existing office or facility.
(o) Investments. Enter into any material securities transaction
for its own account or purchase or otherwise acquire any material
amount of investment securities for its own account except purchases
and sales of securities consistent with past practice (including
Xxxxxxx'x year 2000 budget) in order to maintain investment portfolios
at Xxxxxxx and its Subsidiaries that have risk and asset mix
characteristics substantially similar to those of the respective
investment portfolios as of the date of this Agreement.
(p) Capital Expenditures. Except as set forth on Schedule 5.02(p),
purchase or lease fixed assets where the amount paid or committed is in
excess of $50,000 individually or $250,000 in the aggregate.
(q) Lending. Except as required by action of any Regulatory
Authority (i) make any material changes in its policies concerning loan
underwriting or which persons
56
57
may approve as previously provided in writing to Bank (except in the
ordinary course of business consistent with past practice or prevailing
lending practices) loans or fail to materially comply with such
policies; or (ii) make or commit to make any new loan or letter of
credit, or any new or additional discretionary advance under any
existing loan or letter of credit, or restructure any existing loan or
letter of credit in a manner inconsistent with past practice or
customary safe and sound standards.
(r) Acquisition of Loans. Except in the ordinary course of
business and consistent with current policies and guidelines in effect
as previously disclosed to Bank, purchase any loan, loan participation
or other interest in any loan.
(s) Adverse Actions. (i) Take any action or fail to take any
action while knowing that such action or inaction would, or is
reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code; or
(ii) knowingly take any action or fail to take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time except as expressly permitted by this Agreement, (B) any
of the conditions to the Merger set forth in Article VI not being
satisfied except as expressly permitted by this Agreement or (C) a
material violation of any provision of this Agreement except, in each
case, as may be required by applicable law or regulation.
(t) Risk Management. Except as required by applicable law or
regulation or as contemplated by Xxxxxxx'x year 2000 budget, (i)
implement or adopt any material change in its interest rate and other
risk management policies, procedures or practices; (ii) fail to follow
its existing policies or practices with respect to managing its
exposure to interest rate and other risk; or (iii) fail to use
commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk.
(u) Indebtedness. Incur any indebtedness for borrowed money other
than in the ordinary course of business.
(v) Commitments. Agree or commit to do any of the foregoing.
Section 5.03 Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each Party agrees to use its reasonable efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, desirable, or advisable to consummate the Merger and
all other transactions contemplated in this Agreement as promptly as
practicable. Each Party will cooperate fully with the other Parties to that end.
A Party's reasonable efforts will include, without limitation, (a) using
reasonable efforts to obtain all necessary consents, approvals or waivers from
Regulatory Authorities necessary to consummate the Merger, including without
limitation making any revisions to loan reserves required by the Regulator, and
(b) opposing vigorously any litigation or administrative proceeding or directive
relating to this Agreement or the Merger, including, if necessary, promptly
appealing any adverse court or agency order.
57
58
Section 5.04 Shareholder Approvals. Xxxxxxx and Bank agree to take, in
accordance with applicable law and NASD rules and their Governing Documents, all
action necessary to convene an appropriate meeting of their shareholders to
consider and vote upon, in the case of Bank, the adoption of this Agreement, the
approval of the Merger and the amendment of its Governing Documents as
contemplated in Section 2.01(d), and in the case of Xxxxxxx to approve the
issuance of Xxxxxxx Common Stock to be issued in the Merger, the adoption of a
stock option plan as contemplated in Section 3.06 (c) and a plan to reconstitute
the Holding Company Board as set forth in Section 5.14(a), and in each case any
other matter required to be approved by shareholders to consummate the Merger
(including any adjournment or postponement, the "Xxxxxxx Meeting" or "Bank
Meeting", as applicable), in each case as promptly as practicable after the
Registration Statement is declared effective. The Xxxxxxx Board and the Bank
Board shall each recommend adoption or approval, and Xxxxxxx and Bank shall take
all reasonable, lawful action to solicit adoption or approval by its
shareholders, except to the extent that their fiduciary obligations require them
to do otherwise.
Section 5.05 Registration Statement.
(a) Xxxxxxx and Bank agree to jointly promptly prepare a
registration statement on Form S-4 (the "Registration Statement") to be
filed by them with the SEC in connection with the issuance of Xxxxxxx
Common Stock in the Merger (including the joint proxy statement and
prospectus and other necessary proxy solicitation materials of Xxxxxxx and
Bank (the "Proxy Statement") and all related documents). Subject to
compliance by Xxxxxxx and Bank with Sections 5.05(b) and (c), the
Registration Statement will comply in all material respects with applicable
federal securities laws. Xxxxxxx and Bank agree to cooperate, and to cause
their Subsidiaries to cooperate, with each other, their counsel and their
accountants, in preparing the Registration Statement and the Proxy
Statement. Xxxxxxx and Bank agree to file the Registration Statement (or
the form of the Proxy Statement) in preliminary form with the SEC as
promptly as reasonably practicable and will use reasonable efforts to cause
the filing to occur within 45 days after the Parties execute this
Agreement. If the Proxy Statement is filed in preliminary form, the
Registration Statement will be filed with the SEC as soon as reasonably
practicable after any SEC comments with respect to the preliminary Proxy
Statement are resolved. Each of Bank and Xxxxxxx agrees to use all
reasonable efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably practicable
after it is filed. Each of Bank and Xxxxxxx also agrees to use reasonable
efforts to obtain, before the effective date of the Registration Statement,
all state securities law or "Blue Sky" permits and approvals required to
consummate the Merger. Each of Bank and Xxxxxxx agrees to give the other
all information concerning it, its Subsidiaries, officers, directors and
shareholders that the other reasonably requests in connection with the
foregoing.
(b) Each of Bank and Xxxxxxx agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement to it, if any, becomes effective under the Securities Act,
58
59
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement and any
amendment or supplement to it will, at the date of mailing to shareholders
and at the time of the Xxxxxxx Meeting or the Bank Meeting, as the case may
be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or any statement that, in the light of
the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or that will omit to state
any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
statement in the Proxy Statement or any amendment or supplement thereto.
Each of Bank and Xxxxxxx further agrees to promptly inform the other if it
becomes aware before the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false
or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or
misleading, and to take the necessary steps to correct the Proxy Statement.
(c) Xxxxxxx agrees to advise Bank, promptly after it receives
notice thereof, if (i) any stop order has been issued or the Xxxxxxx Common
Stock for offering or sale has been suspended or qualified in any
jurisdiction or (ii) a threat of any proceeding for any such purpose has
been initiated.
Section 5.06 Proxy Solicitors. Each of Xxxxxxx and Bank, in consultation
with the other, will employ professional proxy solicitors to assist it in
contacting shareholders in connection with soliciting votes on the matters to be
considered and voted upon at the Xxxxxxx Meeting and Bank Meeting. Bank and
Xxxxxxx shall share equally all costs and fees associated with the retention of
proxy solicitors.
59
60
Section 5.07 Access; Information.
(a) Each of Bank and Xxxxxxx agrees that upon reasonable notice it
shall afford the other Party and the other Party's Representatives such
access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, Tax
Returns and work papers of independent auditors), properties, personnel and
to such other information as any Party may reasonably request. During that
period, it shall furnish promptly to the other Party (i) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all
other information concerning the business, properties and personnel of it
and its Subsidiaries as the other Party may reasonably request.
(b) During the period from the date of this Agreement to the
Effective Time, each of Xxxxxxx and Bank agrees to promptly give to the
other copies of all monthly and other interim financial statements produced
in the ordinary course of business as they become available.
(c) Notwithstanding anything to the contrary set forth in this
Section 5.07 or otherwise, except with respect to the obligation of the
Bank to provide the 1999 Work Papers to Xxxxxxx and its auditors, and
Xxxxxxx and its auditors having the opportunity to review and approve the
same, and except as set forth in a letter dated the date hereof directed to
the Bank by Xxxxxxx, each of Bank and Xxxxxxx acknowledges that it has
completed its respective due diligence investigations in connection with
the Merger and is satisfied with the results thereof. Accordingly, each
agrees that neither has the right to terminate this Agreement except as
provided in Article VIII or the letter described in the preceding sentence.
Section 5.08 Exclusivity.
(a) From and after the date of this Agreement until the Effective
Time, neither Bank nor Xxxxxxx shall offer to sell its business, stock or
assets to (a "Unilateral Offer"), or carry on negotiations with respect to
the sale of its business, stock or assets with, any party other than the
other Party or the other Party's Affiliates. Notwithstanding the foregoing
sentence, either the Bank Board or the Xxxxxxx Board may consider
unsolicited bona fide third-party offers to purchase its business, stock or
assets ("Unsolicited Offers") if it determines in good faith after
consultation with legal counsel that such action is necessary for it to act
in a manner consistent with fiduciary duties under applicable law. If
either Xxxxxxx or Bank receives an Unsolicited Offer, it must within 24
hours of its receipt advise the other Party that it has received the
Unsolicited Offer, disclose its terms (including the identity of the person
making the Unsolicited Offer), and advise the other Party of any material
developments concerning the Unsolicited Offer immediately as they occur.
60
61
(b) Bank acknowledges that Xxxxxxx has filed an application with
the OTS seeking a charter (the "OTS Charter") to become a Federal Savings
Bank. Bank acknowledges that Xxxxxxx'x pursuit of the Merger may jeopardize
attainment of the OTS Charter and that significant incurred expenses will
be lost by Xxxxxxx without benefit. In consideration of these events,
Xxxxxxx'x execution of this Agreement, Xxxxxxx'x expenses incurred in
connection with this Agreement and the Merger, and lost opportunities
incurred by Xxxxxxx as the result of pursuing the Merger, Bank shall pay
$3,000,000 to Xxxxxxx as liquidated damages (and not as a penalty) if
before the Effective Time, (i) Bank makes a Unilateral Offer or enters into
negotiations with respect to a Unilateral Offer or an Unsolicited Offer,
and (ii) the Merger is abandoned or terminated by Bank as a result of
considering that Unilateral Offer or Unsolicited Offer. Xxxxxxx and Bank
acknowledge that Xxxxxxx'x damages if the Merger is abandoned or terminated
as described in this clause would be incapable of accurate calculation and
that $3,000,000 is a reasonable estimate of Xxxxxxx'x actual damages.
(c) In consideration of Bank's execution of this Agreement, Bank's
expenses incurred in connection with this Agreement and the Merger, and
lost opportunities incurred by Bank as the result of pursuing the Merger,
Xxxxxxx shall pay $3,000,000 to Bank as liquidated damages (and not as a
penalty) if before the Effective Time, (i) Xxxxxxx makes a Unilateral Offer
or enters into negotiations with respect to a Unilateral Offer or an
Unsolicited Offer, and (ii) the Merger is abandoned or terminated by
Xxxxxxx as a result of considering that Unilateral Offer or Unsolicited
Offer. Xxxxxxx and Bank acknowledge that Bank's damages if the Merger is
abandoned or terminated as described in this clause would be incapable of
accurate calculation and that $3,000,000 is a reasonable estimate of Bank's
actual damages.
Section 5.09 Takeover Laws. No Party may take any action that would cause
the transactions contemplated by this Agreement to be subject to requirements
imposed by any "moratorium", "control share", "fair price", "affiliate
transactions", "business combination" or other anti-takeover laws or regulations
("Takeover Laws") and each Party will take all necessary steps within its
control to exempt (or ensure the continued exemption of) the transactions
contemplated by this Agreement from, or if necessary, challenge the validity or
applicability of, any applicable Takeover Law, as now or hereafter in effect.
Section 5.10 Listing. Xxxxxxx agrees to use its reasonable efforts before
the Effective Time and subject to official notice of issuance, to list all
shares of Xxxxxxx Common Stock, including the shares to be issued in the Merger,
on the NASDAQ National Market.
Section 5.11 Regulatory Applications.
(a) Xxxxxxx and Bank and their respective Subsidiaries will
cooperate and use their reasonable efforts to (i) promptly prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement, and (ii) file within 45 days of the date of this Agreement, the
applications
61
62
necessary to obtain the permits, consents, approvals and authorizations of
all Regulatory Authorities necessary to consummate the Merger. Each of
Xxxxxxx and Bank may review in advance, and to the extent practicable each
will consult with the other with respect to all material written
information submitted to any third party or any Governmental Authority in
connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each Party agrees to act reasonably and as
promptly as practicable. Each of Xxxxxxx and Bank agrees that it will
consult with the other with respect to the obtaining of all material
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement. Each of Xxxxxxx and Bank will
keep the other apprised of the status of material matters relating to
completion of the transactions contemplated by this Agreement.
(b) Each of Xxxxxxx and Bank agrees, upon request, to furnish the
other with all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with any filing, notice or application
made by or on behalf of such other party or any of its Subsidiaries to any
third party or Governmental Authority.
Section 5.12 Benefit Plans. At the Effective Time, Xxxxxxx shall be
substituted for Bank or a Bank Subsidiary as the sponsoring employer under those
employee benefit and welfare plans with respect to which Bank or any of its
Subsidiaries is a sponsoring employer, and any other employee benefit programs,
policies, agreements and arrangements of Bank or its Subsidiaries in effect
immediately prior to the Effective Time (collectively, the "Bank Arrangements").
Xxxxxxx shall assume and be vested with all of the powers, rights, duties,
obligations and liabilities previously vested in Bank or the applicable Bank
Subsidiary with respect to each such Bank Arrangement. Except as otherwise
provided in this Agreement, and except as otherwise covered under the Bank
Arrangements, each such Bank Arrangement shall be continued in effect by Xxxxxxx
after the Effective Time without a termination or discontinuance thereof as a
result of the Merger, subject to the power reserved to Xxxxxxx under each such
Bank Arrangement to subsequently amend or terminate the Bank Arrangement, which
amendments or terminations shall comply with applicable law. Bank, each Bank
Subsidiary, and Xxxxxxx will use all reasonable efforts (i) to effect said
substitutions and assumptions, and such other actions contemplated under this
Agreement, and (ii) to amend such Bank Arrangements to the extent necessary to
provide for said substitutions and assumptions, and such other actions
contemplated under this Agreement.
Section 5.13 Notification of Certain Matters. Each of Bank and Xxxxxxx
shall give prompt notice to the other of any fact, event or circumstance known
to it that (a) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Bank
Material Adverse Effect or Xxxxxxx Material Adverse Effect, respectively, (b)
would cause or constitute a material breach of any of its representations,
warranties, covenants or agreements in this Agreement as of the date of this
Agreement or (c) would cause or constitute a material breach of any of its
representations, warranties, covenants or agreements in this Agreement, arising
from events or circumstances after the date of this Agreement or otherwise.
62
63
Section 5.14 Holding Company Board
(a) At the Effective Time, Xxxxxxx shall cause the Holding Company
Board to be reconstituted to consist of twelve directors, six of which
will be designated by Xxxxxxx and five of which will be designated by Bank
prior to the Effective Time. Of the five directors appointed by Bank, the
term of two will expire on the date of the first annual meeting of the
Holding Company after the Effective Date, the terms of two will expire on
the date of the second annual meeting of the Holding Company after the
Effective Date, and the term of the fifth will expire on the date of the
third annual meeting of the Holding Company after the Effective Date. The
twelfth director shall be the CEO of the Surviving Subsidiary. Before the
Effective Time, Bank and Xxxxxxx shall identify their designees for the
Holding Company Board on Schedule 5.14(a), which Schedule shall also set
forth the initial term of each director.
(b) Schedule 5.14(b) lists all the Severance Agreements, the
amount of all Severance Payments, and the amount of the Severance Payments
that would be due to each of the current non-employee directors of Bank
(the "Current Non-Employee Bank Directors") if each such Current
Non-Employee Bank Director were to be terminated on December 31, 2000 (the
"Bank Board Severance Payments"). At or before the Effective Time, any
Current Non-Employee Bank Director that is designated by Bank to serve as
a director of the Holding Company after the Effective Time pursuant to
Section 5.14(a) above, shall enter into a new severance agreement with the
Holding Company substantially in the form of Exhibit A attached hereto
(the "New Holding Company Severance Agreement") which provides, among
other things, that (i) such Current Non-Employee Bank Director's current
Severance Agreement with Bank will be terminated if he or she is elected
to the Holding Company Board at or around the Effective Date and will be
replaced with the New Holding Company Severance Agreement; (ii) the
aggregate amount of Bank Board Severance Payments payable to such Current
Non-Employee Bank Director at any time after the Effective Time will not
exceed the aggregate amount of Bank Board Severance Payments to be paid to
such person as shown on Schedule 5.14(b); (iii) subject to clause (v) of
this Section 5.14(b), such Current Non-Employee Bank Director who serves
as a Holding Company director after the Effective Date shall be entitled
to receive the Bank Board Severance Payments shown for such person on
Schedule 5.14(b) if he or she resigns from, fails to be re-elected to or
is removed from the Holding Company Board within two years of the
Effective Date, and the New Holding Company Severance Agreement with such
Current Non-Employee Bank Director who serves as a Holding Company
director after such two-year period shall thereupon terminate and he or
she shall not be entitled to any Bank Board Severance Payments whatsoever;
(iv) subject to clause (v) of this Section 5.14(b), any Current
Non-Employee Bank Director who is elected to a term on the Holding Company
Board expiring more than two years after the Effective Date but who dies
before the second anniversary of the Effective Date shall be entitled to
receive the Bank Board Severance Payments shown for such person on
Schedule 5.14(b); (v) notwithstanding any provisions of clauses (iii) or
(iv) of this Section 5.14(b) to the contrary, in the event a Current
Non-Employee Bank Director who is elected to serve on the Holding Company
Board for a term expiring on
63
64
the date of the first annual meeting of the Holding Company after the
Effective Date and who is also serving on the Surviving Subsidiary Board
on the Effective Date shall be elected to serve on the Holding Company
Board after the first annual meeting of the Holding Company after the
Effective Date, such Current Non-Employee Bank Director shall no longer be
entitled to any Bank Board Severance Payments whatsoever, provided,
however, that such person will not lose his eligibility for Bank Board
Severance Payments by virtue of serving a second and/or third year on the
Surviving Subsidiary Board as long as he is not then serving on the
Holding Company Board; and (vi) such Current Non-Employee Bank Director
shall not be entitled to cancel his or her Bank Stock Options and receive
payments in connection therewith by reason of the occurrence of the
Merger, or otherwise, unless Xxxxxxx elects to have such Bank Stock
Options cancelled and cause payments to be made in connection therewith.
Section 5.15 Surviving Subsidiary Board
(a) At the Effective Time, the Surviving Subsidiary Board shall
be reconstituted. Four members of the Surviving Subsidiary Board will be
designated by Bank plus one shall be the CEO of the Surviving Subsidiary,
who shall be selected with the mutual consent of Xxxxxxx and Bank. The
remaining six members of the Surviving Subsidiary Board will be designated
by Xxxxxxx. In addition to designating four of the Surviving Subsidiary
directors after the Closing, Bank will be entitled to designate one
non-voting observer to the Surviving Subsidiary Board to serve at the
Surviving Subsidiary Board's discretion, who shall be entitled to receive
all materials and information provided to the Surviving Subsidiary
directors, shall be entitled to attend Surviving Subsidiary Board meetings
and shall be paid as if he were a Surviving Subsidiary director. Before
the Effective Time, Bank and Xxxxxxx shall identify their designees for
the Surviving Subsidiary Board on Schedule 5.15(a). Xxxxxxx shall use its
reasonable efforts to re-nominate the members of the Surviving Subsidiary
Board designated by the Bank for two successive one year terms following
the term commencing on, or running at the time of, the Effective Date.
(b) At or before the Effective Time, any Current Non-Employee
Bank Director that is designated by Bank to serve as a director of Bank
after the Effective Time pursuant to Section 5.15(a) above, shall enter
into a new severance agreement with Bank substantially in the form of
Exhibit B attached hereto (the "New Bank Severance Agreement") which
provides, among other things, that (i) such Current Non-Employee Bank
Director's current Severance Agreement with Bank will be terminated if he
or she is elected to the Bank Board at or around the Effective Date and
will be replaced with the New Bank Severance Agreement; (ii) the aggregate
amount of Bank Board Severance Payments payable to each such Current
Non-Employee Bank Director at any time after the Effective Time will not
exceed the aggregate amount of Bank Board Severance Payments to be paid to
such person as shown on Schedule 5.14(b); (iii) such Current Non-Employee
Bank Director who serves as a director of the Surviving Subsidiary but not
as a director of the Holding Company after the Effective Date shall be
entitled to receive all Bank Board Severance Payments shown for such
person on Schedule 5.14(b)
64
65
if he or she resigns from, is removed from or fails to be re-elected to
the Surviving Subsidiary Board through a period ending three years after
the Effective Date; (iv) at the expiration of that three-year period, the
New Bank Severance Agreement with such Current Non-Employee Bank Director
shall terminate if he or she continues to serve as a director of Surviving
Subsidiary and he or she shall not be entitled to any Bank Board Severance
Payments whatsoever; and (v) such Current Non-Employee Bank Director shall
not be entitled to cancel his or her Bank Stock Options and receive
payments in connection therewith by reason of the occurrence of the
Merger, or otherwise, unless Xxxxxxx elects to have such Bank Stock
Options cancelled and cause payments to be made in connection therewith.
Notwithstanding anything to the contrary set forth in this Section
5.15(b), in the event that any Current Non-Employee Bank Director shall no
longer be entitled to any Bank Board Severance Payments pursuant to clause
(v) of Section 5.14(b) above, such Current Non-Employee Bank Director
shall not be entitled to any Bank Board Severance Payments by virtue of
any provision of this Section 5.15(b).
Section 5.16 Management
(a) Xxxxxxx and Bank contemplate that, after the Effective Date
(i) Xxxxxx X. Xxxxx will continue to be the President and CEO of the
Holding Company, (ii) Xxxx X. Xxxxxxxx will continue to be the Chairman of
the Board of the Holding Company and (iii) Xxxxx X. Xxxxx will be an
Executive Vice President of the Holding Company.
(b) Before the Effective Time, the person who will serve as the
CEO of the Surviving Subsidiary after the Effective Date will be appointed
with the consent of both Xxxxxxx and Bank. Xxxxxxx and Bank contemplate
that Xxxxx X. Xxxxx will continue to serve as Chairman of the Board of the
Surviving Subsidiary after the Effective Date in accordance with the terms
and conditions of his employment agreement with Bank.
Section 5.17 Appointment of Independent ESOP Trustee; Meeting of
ESOP Participants. Bank shall appoint an independent trustee of the ESOP
(the "ESOP Trustee") to take all actions necessary in accordance with
applicable law and the terms of the ESOP to convene a meeting of the ESOP
participants to consider the approval of this Agreement and the
transactions contemplated hereby (including the Merger and issuance of
Xxxxxxx Common Stock to be issued in the Merger), before the Bank Meeting.
The ESOP Trustee shall vote any and all shares of Bank Common Stock owned
by the ESOP pursuant to the terms of the ESOP and applicable law
(including, without limitation, securities laws and applicable provisions
of ERISA, the Code and regulations promulgated thereunder).
ARTICLE VI
CLOSING CONDITIONS
Section 6.01 Conditions Precedent to Each Party's Obligation. The
respective obligation of each of Xxxxxxx, Merger Sub and Bank to consummate the
transactions contemplated in this Agreement at the Closing is subject to the
satisfaction of all of the following
65
66
conditions, any of which may be waived (but only in writing, except as set forth
in Section 7.1(d)):
(a) Shareholder Approvals. (i) This Agreement shall have been duly
adopted by the requisite vote of the shareholders and directors of Bank
and Merger Sub under their Governing Documents and applicable law, (ii)
the issuance of Xxxxxxx Common Stock as contemplated by this Agreement and
the adoption of a stock option plan as contemplated in Section 3.06(c)
shall have been approved by the requisite vote of the Xxxxxxx shareholders
and directors under NASD rules and Xxxxxxx'x Governing Documents, and
(iii) the amendments to Bank's Governing Documents as contemplated in
Section 2.1(d) shall have been approved by the requisite vote of Bank's
shareholders under Bank's Governing Documents and the Bank Act.
b) Regulatory Approvals. The Regulator shall have approved the
Merger in accordance with applicable law. All consents, approvals,
authorizations, designations, declarations, filings and notices set forth
on Schedules 4.01(b) and 4.02(b) shall have been obtained or made and
shall remain in full force and effect and all statutory waiting periods
with respect thereto shall have expired and no such approvals shall
contain (i) any conditions, restrictions or requirements which the Xxxxxxx
Board or the Bank Board reasonably determines would either before or after
the Effective Time have a Xxxxxxx Material Adverse Effect or a Bank
Material Adverse Effect or (ii) any conditions, restrictions or
requirements that are not customary and usual for approvals of such type
and which the Xxxxxxx Board or the Bank Board reasonably determines would
either before or after the Effective Time be unduly burdensome.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the Merger.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the SEC.
(e) Blue Sky Approvals. All permits and other authorizations
under state securities laws necessary to consummate the transactions
contemplated hereby and to issue the shares of Xxxxxxx Common Stock to be
issued in the Merger shall have been received and be in full force and
effect.
(f) Listing. The shares of Xxxxxxx Common Stock to be issued in
the Merger shall have been approved for listing on the NASDAQ National
Market, subject to official notice of issuance.
66
67
(g) Litigation. There shall not be any litigation, action, suit,
claim, proceeding, order, investigation or inquiry pending or threatened
before any court or quasi-judicial or administrative agency to, or
pursuant to which a judgment, order, decree, stipulation, injunction or
charge could be entered, which could enjoin or prevent the consummation of
the Merger or cause any of the transactions contemplated in this Agreement
or the Attendant Documents to be rescinded following consummation thereof.
(h) Surviving Subsidiary CEO. The Xxxxxxx Board and the Bank Board
shall have each approved the selection of, and compensation arrangement
for, the Surviving Subsidiary's CEO.
(i) No Change to Business Plan. There shall have been no material
change to the business plan of the Surviving Subsidiary previously
approved by the Xxxxxxx Board and the Bank Board, unless the Xxxxxxx Board
and the Bank Board approve such change before the Effective Time.
(j) The Holding Company Board and the Surviving Subsidiary Board
shall have been reconstituted as provided in Sections 5.14(a) and 5.15(a),
respectively. The persons identified on Schedules 5.14(a) and 5.15(a) and
Sections 5.16(a) and 5.16(b) shall have been appointed to the Holding
Company Board and the Surviving Subsidiary Board or to serve as an officer
of the Holding Company or the Surviving Subsidiary, as applicable, to
serve until their respective successors are duly elected and have
qualified.
Section 6.02 Conditions Precedent to Bank's Obligation. The obligation of
Bank to consummate the transactions contemplated in this Agreement at the
Closing is subject to the satisfaction of all of the following conditions, any
of which may be waived in writing by Bank:
(a) Representations and Warranties. All representations and
warranties made by Xxxxxxx and Merger Sub in this Agreement shall have
been true and correct in all material respects on the date of this
Agreement and shall be true and correct in all material respects as of the
Effective Date with the same force and effect as if they had been made on
and as of such date.
(b) Performance of Obligations of Xxxxxxx. Xxxxxxx and its
Subsidiaries shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Effective Time.
(c) Approvals. Xxxxxxx and Merger Sub shall have obtained,
performed or given all of the consents, approvals, authorizations,
designations, declarations, filings and notices set forth on Schedule
4.02(b), in accordance with the terms and conditions of this Agreement.
(d) Updating of Disclosure Schedules. From the date of this
Agreement until the Effective Time, Xxxxxxx and Merger Sub shall have
updated all of the Schedules to this Agreement and shall have promptly
notified Bank of any changes or additions or
67
68
events which may cause any material change or addition to any such
Schedules or in any representation or warranty made pursuant to Section
4.02. Subject to the other provisions of this Section 6.02(d), neither the
immediately preceding sentence nor any notice by Xxxxxxx or Merger Sub
pursuant to this Section 6.02(d) shall be deemed in any way to constitute
a waiver by Bank of the condition set forth in Section 6.02(a).
(e) Termination. This Agreement shall not have been terminated
pursuant to Article VIII.
(f) Delivery of Closing Documents. Xxxxxxx and Merger Sub shall
have executed and delivered, or caused to be executed and delivered, all
of the documents described in Section 7.03. All documents relating to the
transactions contemplated in this Agreement shall be reasonably
satisfactory in form and content to Bank and its legal counsel.
(g) Operation of Business and Material Adverse Effect. Xxxxxxx and
its Subsidiaries shall have continued to operate their businesses in the
ordinary course through the Effective Time. Since the date of this
Agreement, no change shall have occurred which could have a Xxxxxxx
Material Adverse Effect.
Section 6.03 Conditions to Xxxxxxx'x Obligation. The obligation of Xxxxxxx
and Merger Sub to consummate the transactions contemplated in this Agreement at
the Closing is subject to the satisfaction of all of the following conditions,
any of which may be waived in writing by Xxxxxxx:
(a) Representations and Warranties. All representations and
warranties made by Bank in this Agreement shall have been true and correct
in all material respects on the date of this Agreement and shall be true
and correct in all material respects as of the Effective Date with the
same force and effect as if they had been made on and as of such date.
(b) Performance of Obligations of Bank. Bank shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time.
(c) Approvals. Bank shall have obtained, performed or given all of
the consents, approvals, authorizations, designations, declarations,
filings and notices set forth on Schedule 4.01(b), in accordance with the
terms and conditions of this Agreement.
(d) Updating of Disclosure Schedules. From the date of this
Agreement until the Effective Time, Bank shall have updated all of the
Schedules to this Agreement and shall have promptly notified Xxxxxxx of
any changes or additions or events which may cause any material change or
addition to any such Schedules or in any representation or warranty made
pursuant to Section 4.01. Subject to the other provisions of this Section
68
69
6.03(d), neither the immediately preceding sentence nor any notice by Bank
pursuant to this Section 6.03(d) shall be deemed in any way to constitute
a waiver by Xxxxxxx or Merger Sub of the condition set forth in Section
6.03(a).
(e) Termination. This Agreement shall not have been terminated
pursuant to Article VIII.
(f) Delivery of Closing Documents. Bank shall have executed and
delivered, or caused to be executed and delivered, all of the documents
described in Section 7.02. All documents relating to the transactions
contemplated in this Agreement shall be reasonably satisfactory in form
and content to Xxxxxxx and its legal counsel.
(g) Operation of Business and Material Adverse Change. Bank and
its Subsidiaries shall have continued to operate their businesses in the
ordinary course through the Effective Time. Since the date of this
Agreement, no change shall have occurred which could have a Bank Material
Adverse Effect.
(h) Compensation Amendments. The New Holding Company Severance
Agreements and the New Bank Severance Agreements as contemplated by
Sections 5.14(b) and 5.15(b) shall have been executed and delivered by the
applicable Current Non-Employee Bank Directors.
(i) ESOP Compliance. The ESOP Trustee shall have complied with all
provisions of the Governing Documents of the ESOP and all provisions of
applicable law necessary for the consummation of the transactions
contemplated by this Agreement.
ARTICLE VII
CLOSING
Section 7.01 Closing. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place as soon as reasonably possible
following execution of the Agreement and the satisfaction of each of the
conditions precedent set forth in Article VI; provided, however, that in no
event shall the Closing take place after the Walk Away Date. The Parties shall
mutually agree on the date of the Closing consistent with the immediately
preceding sentence. As used in this Agreement, the "Effective Date" means the
date on which the Closing actually occurs and "Effective Time" means the time on
the Effective Date when the Merger becomes effective. The Closing shall take
place at the offices of Xxxxxxx'x counsel, Jaffe, Raitt, Heuer & Xxxxx,
Professional Corporation, Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, or
at such other location and in such other manner as the Parties may mutually
agree.
Section 7.02 Deliveries at Closing by Bank. At the Closing, Bank shall
properly execute (if necessary) and deliver to Xxxxxxx, or cause to be executed
and delivered to Xxxxxxx, the following:
69
70
(a) An opinion of Xxxxxx, Xxxxxxx & Xxxxxxx LLP, counsel to Bank,
addressed to Xxxxxxx and Merger Sub, in form and substance reasonably
satisfactory to Xxxxxxx and its counsel to the effect that, among other
things: (i) the Merger will qualify as a tax-free "reorganization" under
Section 368(a) of the Internal Revenue Code, (ii) no gain or loss will be
recognized by Bank or Xxxxxxx by reason of the Merger, (iii) no gain or
loss will be recognized by any shareholder of Bank upon the exchange of
Bank Common Stock solely for Xxxxxxx Common Stock in the Merger, (iv) the
basis of the Xxxxxxx Common Stock received by each Bank shareholder who
exchanges Bank Common Stock for Xxxxxxx Common Stock in the Merger will be
the same as the shareholder's basis in the Bank Common Stock surrendered
in exchange therefor (subject to any adjustments required as the results
of receipt of cash in lieu of a fractional share of Xxxxxxx Common Stock),
(v) the holding period of the Xxxxxxx Common Stock received by each Bank
shareholder in the Merger will include the holding period of the Bank
Common Stock surrendered in exchange therefor, provided that such shares
of Bank Common Stock were held as a capital asset by such shareholder at
the Effective Time, (vi) cash received by each Bank shareholder in lieu of
a fractional share interest of Xxxxxxx Common Stock as part of the Merger
will be treated as having been received as a distribution in full payment
in exchange for the fractional share interest of Xxxxxxx Common Stock
which such shareholder would otherwise be entitled to receive and will
qualify as capital gain or loss (assuming the Bank Common Stock was a
capital asset in such shareholder's hands at the Effective Time), and
(vii) Franklin Finance qualifies as a real estate investment trust under
the Code.
(b) A copy of each of Bank's Governing Documents, certified when
applicable by the OCC, and a Certificate of Good Standing (or analogous
document) for Bank issued by every state in which it is authorized to do
business. All such documents shall be dated not earlier than 30 days prior
to the Effective Date.
(c) The resignations of each officer and director of Bank and its
Subsidiaries other than those who, with Xxxxxxx'x and Bank's consent,
desire to remain as officers or directors of the Surviving Subsidiary and
its Subsidiaries.
(d) Bank's Certificates.
(i) A "Closing Certificate", executed by an officer of Bank,
to the effect that (A) all of the representations and
warranties made by Bank in this Agreement are true and correct
in all material respects on the Effective Date with the same
force and effect as though made on and as of the Effective
Date, (B) Bank has performed and complied in all material
respects with all of its obligations under this Agreement which
are to have been performed or complied with on or before the
Effective Date, (C) since the date of this Agreement, Bank and
its Subsidiaries have operated their businesses only in the
ordinary course, and (D) there has been no Bank Material
Adverse Effect from the date of this Agreement to the Effective
Date.
70
71
(ii) A "Secretary's Certificate", executed by the Secretary or
Assistant Secretary of Bank, attaching a copy of Bank's Governing
Documents and copies of the resolutions of the Bank Board and the
Bank's shareholders approving the transactions contemplated in this
Agreement. The officer executing such certificate shall certify
that, as of the Effective Date, such Governing Documents and
resolutions are true, complete and correct, have not been altered
or repealed and are in full force and effect.
(e) Such other documents and instruments as are contemplated in
this Agreement (or as the Parties have contemplated in connection with
this Agreement) or as Xxxxxxx or its counsel may reasonably request in
order to evidence or consummate the transactions contemplated in this
Agreement or to effectuate the purpose or intent of this Agreement.
Section 7.03 Deliveries at Closing by Xxxxxxx. At the Closing, Xxxxxxx and
Merger Sub shall properly execute (if necessary) and deliver to Bank, or cause
to be executed and delivered to Bank, the following:
(a) An opinion of Jaffe, Raitt, Heuer & Xxxxx, Professional
Corporation, counsel to Xxxxxxx and Merger Sub, addressed to Bank, in form
and substance reasonably satisfactory to Bank and its counsel to the
effect that, among other things: (i) the Merger will qualify as a tax-free
"reorganization" under Section 368(a) of the Internal Revenue Code, (ii)
no gain or loss will be recognized by Bank or Xxxxxxx by reason of the
Merger, (iii) no gain or loss will be recognized by any shareholder of
Bank upon the exchange of Bank Common Stock solely for Xxxxxxx Common
Stock in the Merger, (iv) the basis of the Xxxxxxx Common Stock received
by each Bank shareholder who exchanges Bank Common Stock for Xxxxxxx
Common Stock in the Merger will be the same as the shareholder's basis in
the Bank Common Stock surrendered in exchange therefor (subject to any
adjustments required as the results of receipt of cash in lieu of a
fractional share of Xxxxxxx Common Stock), (v) the holding period of the
Xxxxxxx Common Stock received by each Bank shareholder in the Merger will
include the holding period of the Bank Common Stock surrendered in
exchange therefor, provided that such shares of Bank Common Stock were
held as a capital asset by such shareholder at the Effective Time, and
(vi) cash received by each Bank shareholder in lieu of a fractional share
interest of Xxxxxxx Common Stock as part of the Merger will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest of Xxxxxxx Common Stock which such shareholder
would otherwise be entitled to receive and will qualify as capital gain or
loss (assuming the Bank Common Stock was a capital asset in such
shareholder's hands at the Effective Time) and (vii) Franklin Finance
qualifies as a real estate investment trust under the Code.
(b) The Merger Consideration to the Exchange Agent.
(c) A copy of Xxxxxxx'x articles of incorporation, certified by the
Michigan Department of Consumer and Industry Services, a copy of Merger
Sub's Governing
71
72
Documents, certified, when applicable, by the appropriate Governmental
Authority and a Certificate of Good Standing (or analogous document) for
Xxxxxxx and Merger Sub issued by every state in which each is authorized
to do business. All such documents shall be dated not earlier than 30 days
prior to the Effective Date.
(d) Xxxxxxx'x Certificates.
(i) A "Closing Certificate", executed by an officer of
Xxxxxxx, to the effect that (A) all of the representations and
warranties made by Xxxxxxx in this Agreement are true and correct
in all material respects on the Effective Date with the same force
and effect as though made on and as of the Effective Date, (B)
Xxxxxxx has performed and complied in all material respects with
all of its obligations under this Agreement which are to have been
performed or complied with on or before the Effective Date, (C)
since the date of this Agreement, Xxxxxxx and its Subsidiaries have
operated their businesses only in the ordinary course, and (D)
there has been no Xxxxxxx Material Adverse Effect from the date of
this Agreement to the Effective Date.
(ii) "Secretary's Certificates", executed by the Secretary or
Assistant Secretary of each of Xxxxxxx and Merger Sub, attaching a
copy of the Governing Documents of such company and, in the case of
Xxxxxxx, a copy of the resolutions of the Xxxxxxx Board approving
the transactions contemplated in this Agreement and a copy of the
resolutions of Xxxxxxx'x shareholders approving the issuance of
Xxxxxxx Common Stock to be issued in the Merger, and, in the case
of Merger Sub, a copy of the resolutions of its board of directors
and shareholders approving the transactions contemplated in this
Agreement. The officer executing each such certificate shall
certify that, as of the Effective Date, such Governing Documents
and resolutions are true, complete and correct, have not be altered
or repealed and are in full force and effect.
(e) Such other documents and instruments as are contemplated
in this Agreement (or as the Parties have contemplated in
connection with this Agreement) or as Bank or its counsel may
reasonably request in order to evidence or consummate the
transactions contemplated in this Agreement or to effectuate the
purpose or intent of this Agreement.
ARTICLE VIII
TERMINATION
Section 8.01 Termination. This Agreement may be terminated:
(a) at any time before the Effective Time by the mutual
consent of the Parties;
72
73
(b) at any time before the Effective Time by Bank (i) if any
of the conditions set forth in Sections 6.01 or 6.02 have not been
fulfilled, satisfied or waived by the Walk Away Date, or (ii) if
Xxxxxxx or Merger Sub materially breaches any representation,
warranty, covenant or agreement set forth in this Agreement;
(c) at any time before the Effective Time by Xxxxxxx and
Merger Sub (i) if any of the conditions set forth in Sections 6.01
or 6.03 have not been fulfilled, satisfied or waived by the Walk
Away Date, or (ii) if Bank materially breaches any representation,
warranty, covenant or agreement set forth in this Agreement;
(d) by Bank or by Xxxxxxx, if such Party's board of directors
so determines by a vote of a majority of the members of its entire
board, in the event (i) the approval of any Governmental Authority
required for consummation of the Merger shall have been denied by
final nonappealable action of such Governmental Authority or (ii)
any shareholder approval required by Section 5.04 is not obtained
at the Bank Meeting or the Xxxxxxx Meeting;
(e) at any time prior to the Bank Meeting, by Xxxxxxx if the
Bank Board shall have failed to recommend adoption of this
Agreement to the Bank shareholders, withdrawn such recommendation
or modified or changed such recommendation in a manner adverse in
any respect to the interests of Xxxxxxx;
(f) at any time prior to the Xxxxxxx Meeting, by Bank, if the
Xxxxxxx Board shall have failed to recommend to the Xxxxxxx
shareholders approval of the issuance of Xxxxxxx Common Stock to be
issued pursuant to the Merger, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse in any
respect to the interests of Bank; or
(g) by Bank, if for any 20-consecutive-trading-day period
between the date of this Agreement and the date the Shareholders of
the Bank approve the Merger, the price of Xxxxxxx'x stock does not
trade or close at or above $8.00 per share.
(h) no later than the close of business seven days after the
1999 Work Papers are delivered or made available (with such
availability being confirmed by written notice to Xxxxxx X. Xxxxx)
to Xxxxxxx and its auditors, by Xxxxxxx, if Xxxxxxx reasonably
determines that the 1999 Work Papers do not support any information
set forth in the 1999 Financial Statements; provided, however, such
determination cannot be based on methodology, if such methodology
was used in the preparation of prior audited statements of the
Bank.
Section 8.02 Effect of Termination. If terminated in accordance
with Section 8.01, this Agreement shall be null and void and have no further
force or effect, except as provided in Section 9.13.
73
74
ARTICLE IX
MISCELLANEOUS
Section 9.01 Expenses. Except as provided in Section 5.08 and this Section
9.01, and the next sentence, regardless of whether the closing actually occurs,
each Party will bear the expenses incurred by it in connection with the
preparation and negotiation of this Agreement and the Attendant Documents and
the consummation of the transactions contemplated in this Agreement and the
Attendant Documents. Notwithstanding the foregoing, Bank and Xxxxxxx shall share
equally (a) all printing expenses and filing fees related to the Proxy Statement
and the Registration Statement, (b) all filing fees payable to Regulatory
Authorities in connection with the Merger, and (c) all Xxxx-Xxxxx-Xxxxxx fees
incurred by the Parties in connection with the Merger, (d) all costs, expenses
and fees of proxy solicitors incurred under Section 5.06, and (e) all other
costs and expenses incurred by any Party in connection with a collaborative
effort among the Parties (other than fees of legal counsel and accountants), the
purpose of which is to effectuate the Merger. Further, while Xxxxxxx shall be
responsible for paying the compensation of the Surviving Subsidiary's CEO during
the time from his or her retention to the Effective Date, if for any reason,
this Agreement is terminated and the Merger shall not be consummated, the Bank
shall reimburse Xxxxxxx for one-half of all compensation paid to such CEO.
Section 9.02 Dispute Resolution. Any and all disputes between the Parties
arising out of any provision of this Agreement shall be resolved in accordance
with the procedure set forth in this Section 9.02; provided, however, that a
Party may seek a preliminary injunction or other provisional judicial relief if,
in its judgment, such action is necessary to avoid irreparable damage or to
preserve the status quo. Despite any such action, the Parties will continue to
participate in good faith in the procedures set forth in this Section 9.02. The
Parties shall submit all disputes under this Agreement or any of the Attendant
Documents to arbitration. Such arbitration shall be conducted in accordance with
the rules of the American Arbitration Association by one arbitrator. Xxxxxxx
shall appoint one arbitrator and Bank shall appoint one arbitrator, who shall
mutually select a third arbitrator to conduct the arbitration. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C., Sections 1 -
16, and judgment on the award rendered by the arbitrators may be entered by any
court having jurisdiction thereof. The place of the arbitration shall be the
metropolitan Detroit area. The arbitrators shall make written findings of fact
and conclusions of law, and the decision of the arbitrators shall be final. Each
Party shall pay its own expenses of arbitration and the expense of the
arbitrators shall be equally shared; provided, however, that if in the opinion
of the arbitrators any claim under this Agreement or any defense in objection
thereto was unreasonable, the arbitrators may assess, as part of their award,
all or any part of the arbitration expenses (including reasonable attorney's
fees) of the other Party and of the arbitrators against the Party raising such
unreasonable claim, defense or objection. The Parties agree that discovery shall
be permitted as authorized in the Michigan Court Rules of 1985, as amended.
Section 9.03 Notices. All notices, requests and other communications under
this Agreement to a Party shall be in writing and shall be deemed given if
personally delivered, telecopied (with confirmation) or mailed by registered or
certified mail (return receipt requested)
74
75
to the Party at its address set forth below or such other address as it may
specify by notice to the other Parties.
If to Bank, to: With a required copy to:
Franklin Bank, X.X. Xxxxxx, Xxxxxxx & Xxxxxxx LLP
00000 X. 00 Xxxx Xx. 34th Floor, 000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx Attention: Xxxxxxxx X. Xxxxxx
Fax: 000-000-0000 Fax: 000-000-0000
If to Xxxxxxx or Merger Sub, to: With required copies to:
Jaffe, Raitt, Heuer & Xxxxx,
Xxxxxxx Financial Services Corporation Professional Corporation
000 X. Xxxxx Xxxxxx, Xxxxx 000 Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx Attn: Xxxxx Sugar
Fax: 000-000-0000 Fax: 000-000-0000
Section 9.04 Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Michigan without regard to its
conflicts of law principles. This Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party. The headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. References in
this Agreement to Sections, Exhibits or Schedules shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
Section 9.05 No Assignment; Benefit. No Party may assign its rights and
obligations under this Agreement without the prior written consent of the other
Parties. This Agreement shall be binding on and inure to the benefit of the
Parties and their respective successors and permitted assigns.
Section 9.06 Entire Agreement. This Agreement, including the Exhibits and
the Schedules attached or to be attached to it, is and shall be deemed to be the
complete and final expression of the agreement between the Parties as to the
matters contained in and related to this Agreement and supersedes any previous
agreements between the Parties pertaining to such matters.
Section 9.07 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same
75
76
agreement. Photostatic or facsimile reproductions of this Agreement may be made
and relied upon to the same extent as originals.
Section 9.08 Waiver. Before the Effective Time, any provision of this
Agreement may be (i) waived in writing by the Party benefited by the provision.
The waiver by any Party of any breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent or similar breach.
Section 9.09 Amendment. This Agreement may only be amended by written
agreement executed by all of the Parties, except that after the Bank Meeting,
the consideration to be received by the Bank shareholders for each share of Bank
Common Stock shall not thereby be decreased.
Section 9.10 Brokerage or Finder's Fee. Any and all brokerage fees due and
payable to any broker, finder, agent or similar intermediary in connection with
this Agreement or the transactions contemplated hereby, including but not
limited to the fee payable to Xxxxxxx Xxxxx by Bank as described in Section
4.01(z) and the fee payable to Xxxxx Xxxxxxxx by Xxxxxxx as described in Section
4.02(z), shall be borne by the Party responsible for retaining, or claimed to be
responsible for retaining, such broker, finder, agent or similar intermediary.
Section 9.11 Confidentiality. The Parties agree to keep in strict
confidence the fact of and the content of the negotiations and the agreements
concerning the transactions contemplated in this Agreement until such time as
the Parties agree on a joint public announcement or consent, in writing, to the
other Party's proposed public announcement, which consent shall not be
unreasonably withheld, conditioned or delayed. Each of the Parties agrees that
it will not, and will cause its Representatives not to, use any information
obtained pursuant to this Agreement (as well as any other information obtained
before the date of this Agreement in connection with the entering into of this
Agreement) for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Each Party will keep confidential, and will
cause its Representatives to keep confidential, all information and documents
obtained pursuant to this Agreement (as well as any other information obtained
before the date of this Agreement in connection with the entering into of this
Agreement) unless such information (i) was already known to such Party, (ii)
becomes available to such Party from other sources not known by such Party to be
bound by a confidentiality obligation, (iii) is disclosed with the prior written
approval of the Party to which such information pertains, (iv) is or becomes
readily ascertainable from published information or trade sources or (v) is
required to be disclosed by law or regulation, as determined in good faith by
the Party making the disclosure, provided the disclosing Party advises the other
Parties in writing prior to making the disclosure. If this Agreement is
terminated or the transactions contemplated by this Agreement are otherwise not
consummated, each Party shall promptly cause all copies of documents, extracts
thereof or notes, analyses, compilations, studies or other documents containing
information and data as to another Party to be returned to the Party that
furnished the same.
Section 9.12 No Third Party Beneficiaries. Except for Sections 5.12, 5.14,
5.15, 5.16, and 9.14, the rights and obligations of the Parties under this
Agreement are for the benefit of the
76
77
Parties only, and neither any creditor of any of the Parties nor any other
person or entity (other than a successor in interest to any of the Parties),
shall have the right to rely on or enforce the provisions of this Agreement as a
third-party beneficiary or otherwise.
Section 9.13 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive beyond the Effective Time
(other than the agreements and covenants contained in Sections 3.03, 3.04(b),
3.04(c), 3.04(d), 3.04(e), 3.06(b), 5.05, 5.14, 5.15 and 5.16 and this Article
IX) or the termination of this Agreement if this Agreement is terminated prior
to the Effective Time (other than Sections 5.08(b) and (c), and this Article IX)
Section 9.14 Indemnification.
(a) For a period of six years from and after the Effective Time,
the Surviving Subsidiary will take no action which would diminish the
right of any officer or director of the Bank or any of its Subsidiaries
who shall have served in such capacity prior to the Effective Time from
being indemnified in accordance with the provisions of the Bank's or the
Bank's Subsidiaries Governing Documents in effect prior to the Effective
Time from and against any losses, claims, damages, costs, expenses
(including reasonable attorney fees), liabilities or judgments arising, in
whole or in part, out of the fact that such person was a director or
officer of the Bank or a Subsidiary of the Bank prior to the Effective
Time, and pertaining to any matter or fact arising, existing or occurring
before the Effective Time.
(b) For a period of six years from and after the Effective Date,
the Surviving Subsidiary, to the extent commercially available and
reasonable, shall maintain directors and officers liability insurance
comparable to that which is maintained by the Bank immediately prior to
the Effective Date covering the liability described in Section 9.14(a)
above. Directors and officers liability insurance shall be deemed to be
available on a commercially reasonable basis at any time, if, at such
time, such insurance is obtainable at rates comparable to the rates then
being paid for directors and officers liability insurance then covering
either the directors of the Holding Company or the Surviving Subsidiary.
(c) Xxxxxxx agrees that after the Merger those persons designated
by the Bank to serve on the Holding Company Board or the Surviving
Subsidiary Board will be afforded the same protection against claims and
liability arising from such service, through indemnification agreements,
insurance or otherwise, as is afforded to those persons designated by
Xxxxxxx to serve on the Holding Company Board or the Surviving Subsidiary
Board, respectively.
(d) The obligations of the Surviving Subsidiary under this Section
9.14 are intended to be enforceable against the Surviving Subsidiary and
shall be binding on all respective successors and permitted assigns of the
Surviving Subsidiary.
77
78
The Parties have executed this Agreement and Plan of Merger as of the
day and year first written above.
Xxxxxxx Financial Services Corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Its: CEO
------------------------------------------
BFSC Merger, N.A., an interim national banking
association to-be-formed
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Its:
------------------------------------------
Franklin Bank, N.A.
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Its: Chairman
------------------------------------------
78
79
LIST OF SCHEDULES AND EXHIBITS
Exhibit Description
------- -----------
A New Holding Company Severance Agreement
B New Bank Severance Agreement
Schedule Description
-------- -----------
4.01(a) Good Standing and Authority
4.01(b) Consents and Approvals; No Defaults
4.01(c) Financial Reports, SEC Documents and Material Adverse Effect
4.01(d) Litigation
4.01(e) Regulatory Matters
4.01(f) Compliance with Laws
4.01(g) Loan Portfolio
4.01(h) Permits and Licenses
4.01(i) Labor Matters
4.01(j) Employee Benefits
4.01(k) Tax Matters
4.01(m) Risk Management Instruments
4.01(n) Insurance
4.01(o) Governmental Reviews
4.01(q) Compliance with Servicing Obligations
4.01(r) Intellectual Property
4.01(s) Material Contracts
4.01(t) Real Property Owned
4.01(u) Real Property Leased
4.01(v) Liens
4.01(w) Good Condition
4.01(x) Undisclosed Liabilities
4.01(y) Recent Conduct of Business
4.01(cc) Capitalization
4.01(dd) No Knowledge
4.01(ee) Affiliate Transactions
4.02(a) Good Standing and Authority
4.02(b) Consents and Approvals; No Defaults
4.02(c) Financial Reports, SEC Documents and Material Adverse Effect
4.02(d) Litigation
4.02(e) Regulatory Matters
4.02(f) Compliance with Laws
4.02(g) Loan Portfolio; Portfolio Management
4.02(h) Permits and Licenses
4.02(i) Labor Matters
4.02(j) Employee Benefits
79
80
4.02(k) Tax Matters
4.02(m) Risk Management Instruments
4.02(n) Insurance
4.02(o) Governmental Reviews
4.02(q) Compliance with Servicing Obligations
4.02(r) Intellectual Property
4.02(s) Material Contracts
4.02(t) Real Property Owned
4.02(u) Real Property Leased
4.02(v) Liens
4.02(w) Good Condition
4.02(x) Undisclosed Liabilities
4.02(y) Recent Conduct of Business; Interim Operations
4.02(bb) Capitalization
4.02(cc) No Knowledge
4.02(dd) Affiliate Transactions
5.01(b) Bank Stock
5.01(e) Compensation; Employment Agreements, Etc.
5.01(f) Benefit Plans
5.01(o) Facilities
5.02(a) Ordinary Course
5.02(b) Xxxxxxx Stock
5.02(e) Compensation; Employment Agreements
5.02(h) Acquisitions
5.02(n) Facilities
5.02(p) Capital Expenditures
5.14(a) Holding Company Board Designees
5.14(b) Severance Agreements
5.15(a) Surviving Subsidiary Board Designees
80
