AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
LIBERTY BANCSHARES, INC.
AND
FIRST FEDERAL CAPITAL CORP
APRIL 9, 2003
TABLE OF CONTENTS
PAGE
AGREEMENT AND PLAN OF MERGER.....................................................................................1
ARTICLE I - THE MERGER.................................................................................1
Section 1.1 The Merger............................................................................1
Section 1.2 Effective Time........................................................................1
Section 1.3 Effect of the Merger..................................................................2
Section 1.4 Articles of Incorporation; By-Laws....................................................2
Section 1.5 Board of Directors of the Surviving Corporation.......................................2
Section 1.6 Conversion of Securities..............................................................2
Section 1.7 Adjustments for Dilution and Other Matters............................................4
Section 1.8 Exchange of Certificates..............................................................4
Section 1.9 Dissenting Shares.....................................................................6
Section 1.10 Stock Transfer Books..................................................................7
Section 1.11 The Bank Merger.......................................................................7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................9
Section 2.1 Organization and Qualification; Subsidiaries..........................................9
Section 2.2 Articles of Incorporation and By-Laws................................................10
Section 2.3 Capitalization.......................................................................10
Section 2.4 Authority............................................................................10
Section 2.5 No Conflict; Required Filings and Consents...........................................11
Section 2.6 Compliance; Permits..................................................................11
Section 2.7 Compliance with Environmental Laws...................................................12
Section 2.8 Contracts and Agreements.............................................................13
Section 2.9 Agreements with Regulatory Agencies..................................................14
Section 2.10 Loan Loss Reserves...................................................................14
Section 2.11 Banking Reports; Financial Statements................................................14
Section 2.12 Absence of Certain Changes or Events.................................................16
Section 2.13 Absence of Litigation................................................................16
Section 2.14 Employee Benefit Plans...............................................................16
Section 2.15 Registration Statement...............................................................18
Section 2.16 Taxes, Reports, Minutes..............................................................19
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Section 2.17 Company Properties...................................................................20
Section 2.18 Brokers..............................................................................20
Section 2.19 Tax-Free Reorganization..............................................................20
Section 2.20 Vote Required........................................................................20
Section 2.21 Absence of Undisclosed Liabilities...................................................20
Section 2.22 Shareholders of the Company..........................................................21
Section 2.23 Regulatory Filings...................................................................21
Section 2.24 Loans................................................................................21
Section 2.25 Loan Portfolio; Reports..............................................................22
Section 2.26 Mortgage-Backed and Related Securities and Investment Securities.....................22
Section 2.27 Fiduciary Responsibilities...........................................................22
Section 2.28 Other Information....................................................................22
Section 2.29 Insider Interests....................................................................22
Section 2.30 Takeover Restrictions................................................................23
Section 2.31 Insurance............................................................................23
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR............................................23
Section 3.1 Organization and Qualification; Corporate Power......................................23
Section 3.2 Authorization........................................................................24
Section 3.3 Capitalization.......................................................................24
Section 3.4 Financial Statements.................................................................24
Section 3.5 No Violation.........................................................................25
Section 3.6 Consents and Approvals...............................................................25
Section 3.7 Litigation...........................................................................25
Section 3.8 Employee Benefit Plans...............................................................26
Section 3.9 Compliance with Environmental Laws...................................................28
Section 3.10 Shares to be Issued in Merger........................................................29
Section 3.11 Broker's Fees........................................................................29
Section 3.12 Acquiror Information.................................................................29
Section 3.13 SEC Filings..........................................................................29
Section 3.14 Continuity of Business Enterprise....................................................29
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(continued)
PAGE
ARTICLE IV - COVENANTS OF THE COMPANY..................................................................30
Section 4.1 Registration Statement and Shareholders Meeting......................................30
Section 4.2 Conduct of Business, Certain Covenants...............................................30
Section 4.3 Information, Access Thereto..........................................................33
Section 4.4 Confidentiality......................................................................33
Section 4.5 Recommendation of Merger to Shareholders.............................................33
Section 4.6 Litigation Matters...................................................................33
Section 4.7 No Solicitation......................................................................33
Section 4.8 Best Efforts.........................................................................34
ARTICLE V - COVENANTS OF THE ACQUIROR.................................................................34
Section 5.1 Affirmative Covenants................................................................34
Section 5.2 Negative Covenants...................................................................34
Section 5.3 Notice Regarding Breaches............................................................35
Section 5.4 Tax Treatment........................................................................35
Section 5.5 SEC Filings..........................................................................35
Section 5.6 Confidentiality......................................................................35
Section 5.7 Directors' and Officers' Indemnification and Insurance...............................36
ARTICLE VI - ADDITIONAL COVENANTS AND AGREEMENTS.......................................................37
Section 6.1 Regulatory Matters...................................................................37
Section 6.2 Legal Conditions to Merger...........................................................38
Section 6.3 Subsequent Filings; Press Releases...................................................38
Section 6.4 Additional Agreements................................................................39
Section 6.5 Advice of Changes....................................................................39
Section 6.6 Current Information..................................................................39
Section 6.7 Termination of Regulatory Agreements.................................................39
Section 6.8 Tax Returns..........................................................................39
Section 6.9 Compensation and Benefit Plans; Existing Agreements..................................39
Section 6.10 Employment and Noncompetition Agreements.............................................40
Section 6.11 Establishment of Escrow Account......................................................40
Section 6.12 Determination of Interim Earnings....................................................41
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(continued)
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Section 6.13 Escrow Exchange Fund.................................................................41
Section 6.14 Employee Severance Protection........................................................42
Section 6.15 Environmental Investigation..........................................................43
Section 6.16 Pending Litigation...................................................................43
ARTICLE VII - CONDITIONS OF MERGER......................................................................44
Section 7.1 Regulatory Approvals.................................................................44
Section 7.2 Federal Tax Opinion..................................................................44
Section 7.3 Orders, Decrees and Judgments........................................................44
ARTICLE VIII - FURTHER CONDITIONS TO THE OBLIGATIONS OF THE COMPANY......................................45
Section 8.1 Compliance by Acquiror...............................................................45
Section 8.2 Opinion of Counsel...................................................................45
Section 8.3 Officers' Certificate................................................................45
Section 8.4 Litigation...........................................................................45
Section 8.5 Acquiror Changes.....................................................................45
ARTICLE IX - FURTHER CONDITIONS TO THE OBLIGATIONS OF ACQUIROR.........................................45
Section 9.1 Compliance by the Company............................................................45
Section 9.2 Accuracy of Financial Statements.....................................................46
Section 9.3 Net Worth............................................................................46
Section 9.4 Sufficiency of Documents, Proceedings................................................46
Section 9.5 Opinion of Counsel...................................................................46
Section 9.6 Officers' Certificate................................................................46
Section 9.7 Absence of Certain Changes or Events.................................................46
Section 9.8 Litigation...........................................................................47
Section 9.9 Bank Merger Agreement................................................................47
Section 9.10 Consents Under Agreements............................................................47
Section 9.11 Approval by Affirmative Vote of Shareholders; Exercise of Dissenters' Rights.........47
Section 9.12 Agreements of Affiliates.............................................................47
ARTICLE X - TERMINATION AND AMENDMENT.................................................................48
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(continued)
PAGE
Section 10.1 Termination..........................................................................48
Section 10.2 Effect of Termination................................................................49
Section 10.3 Fee..................................................................................49
Section 10.4 Distribution, Escrow Account.........................................................50
ARTICLE XI - MODIFICATIONS, AMENDMENTS AND WAIVER......................................................51
Section 11.1 Modifications, Amendments and Waiver.................................................51
ARTICLE XII - MISCELLANEOUS.............................................................................51
Section 12.1 Closing..............................................................................51
Section 12.2 Articles of Merger...................................................................51
Section 12.3 Further Acts.........................................................................51
Section 12.4 Notices..............................................................................52
Section 12.5 Expenses.............................................................................52
Section 12.6 Nonsurvival of Representations and Warranties........................................53
Section 12.7 Entire Agreement.....................................................................53
Section 12.8 Governing Law........................................................................53
Section 12.9 Binding Effect and Parties in Interest...............................................53
Section 12.10 Captions.............................................................................53
Section 12.11 Severability.........................................................................53
Section 12.12 Publicity............................................................................53
Section 12.13 Counterparts.........................................................................54
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 9, 2003 (the
"Agreement"), between Liberty Bancshares, Inc., a Minnesota corporation (the
"Company"), and First Federal Capital Corp, a Wisconsin corporation (the
"Acquiror").
WHEREAS, the Boards of Directors of the Acquiror and the Company have
each determined that it is fair to and in the best interests of their respective
shareholders for the Company to merge with and into the Acquiror (the "Merger")
upon the terms and subject to the conditions set forth herein and in accordance
with the Minnesota Business Corporation Act (the "MBCA") and the Wisconsin
Business Corporation Law (the "WBCL"); and
WHEREAS, the respective Boards of Directors of the Acquiror and the
Company have each approved the Merger of the Company with and into the Acquiror,
upon the terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, immediately following the Merger, the parties intend to
consummate a merger of the Company's bank subsidiary ("Bank") with and into
Acquiror's savings bank subsidiary ("Acquiror-Bank") (the "Bank Merger"); and
WHEREAS, the Acquiror and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I - THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the MBCA and WBCL, at the
Effective Time (as defined in Section 1.2) the Company shall be merged with and
into the Acquiror. As a result of the Merger, the separate corporate existence
of the Company shall cease and the Acquiror shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.2 EFFECTIVE TIME. As promptly as practicable after
satisfaction or, if permissible, waiver of the conditions set forth in Articles
VII, VIII and IX, the parties hereto shall cause the Merger to be consummated by
filing articles of merger (the "Articles of Merger") with the Minnesota
Secretary of State (the "MSS") in such form as required by, and executed in
accordance with the relevant provisions of, the MBCA (the date and time of such
filing is referred to herein as the "Effective Time").
SECTION 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the MBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the Acquiror and the
Company shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Acquiror and the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.4 ARTICLES OF INCORPORATION; BY-LAWS. At the Effective Time,
the Articles of Incorporation, as amended, of the Acquiror (the "Acquiror
Articles") and the By-Laws, as amended, of the Acquiror ("Acquiror By-Laws"), as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and the By-Laws of the Surviving Corporation.
SECTION 1.5 BOARD OF DIRECTORS OF THE SURVIVING CORPORATION.
(a) From and after the Effective Time, the Board of Directors of the
Surviving Corporation immediately prior to the Effective Time shall be the Board
of Directors of the Surviving Corporation until their respective successors are
duly elected or appointed.
(b) From and after the Effective Time, the officers of the Acquiror
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until their respective successors are duly elected or appointed.
SECTION 1.6 CONVERSION OF SECURITIES. Subject to Section 1.8(e)
regarding fractional shares, at the Effective Time, by virtue of the Merger and
without any action on the part of the Acquiror, the Company or the holder of the
following securities:
(a) Each share of common stock, $0.10 per share par value, of Acquiror
("Acquiror Common Stock," which term shall be deemed to include the rights to
purchase shares of Acquiror preferred stock, $.10 par value under the terms of
the Shareholders' Rights Agreement, dated January 24, 1995, by and between
Acquiror and Xxxxx Fargo Bank), issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged after the Merger;
and
(b) Each share of the common stock, no par value, of the Company
("Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (all such shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time may be referred to herein as the
"Shares") shall cease to be outstanding and shall be converted into and become
the right to receive shares of Acquiror Common Stock and/or cash as elected by
the holder thereof by acceptance of Schedule 1.6, the Consideration Election
Schedule attached hereto; provided, however, that each share of Company Common
Stock held of record by the Liberty State Bank Employee Stock Ownership Plan
(the "ESOP") shall cease to be outstanding and shall be converted into and
become the right to receive cash, at the per Share cash exchange price provided
below, without further election. All such Shares shall no longer be outstanding
and shall immediately be canceled and retired and shall cease to exist, and each
certificate previously representing any such Shares shall thereafter represent
the right to receive
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either a certificate representing shares of Acquiror Common Stock into which
such Shares shall have been converted or cashed. Certificates representing
Shares to be exchanged for certificates representing whole shares of Acquiror
Common Stock shall be exchanged therefor upon the surrender of such certificates
in accordance with the provisions of Section 1.8 hereof, without interest. The
total value of cash (including Interim Earnings) and Acquiror Common Stock
exchanged for the Shares shall be referred to as the "Consideration."
(c) Consideration Election Schedule. Each holder of Company Common
Stock, except the ESOP, shall elect prior to the date of execution of this
Agreement whether to receive cash or Acquiror Common Stock in exchange for their
Shares. Such elections shall be (i) compiled and set forth on the attached
Schedule 1.6 (the "Consideration Election Schedule"), and (ii) binding upon the
person making such election as of the date of execution of this Agreement
(subject to any provision hereof permitting termination of the Agreement).
While no holder of Company Common Stock is required to elect any
specified percentage of cash or Acquiror Common Stock, the total of all such
individual cash elections must result in payment of not less than $22,800,000
nor more than $30,400,000 (plus, in each case, any Interim Earnings) of the
total Consideration being payable in cash, it being understood that the ESOP's
cash consideration shall be included for purposes of determining the amount of
total Consideration paid in cash.
Cash elections shall be paid based on a per Share cash exchange price
of $1,791.00 per Share.
Elections to receive Acquiror Common Stock in exchange for Shares will
have such Shares exchanged for a number of shares of Acquiror Common Stock as
determined by multiplying the applicable number of Shares by the Applicable
Exchange Ratio. The Applicable Exchange Ratio shall be determined, depending on
the Average Closing Price for Acquiror Common Stock as follows:
(i) The Average Closing Price for Acquiror Common Stock
shall be the average daily closing prices for a share
of Acquiror Common Stock as reported on the NASDAQ
Stock Market for the ten (10) trading days beginning
after the close of trading on the fifth (5th) full
trading day following public announcement of the
Merger.
(ii) The Exchange Ratio will be determined by subtracting
from $76,000,000 the total of the cash elections to
arrive at the Stock Balance Amount and by subtracting
from the Company's 42,435 Shares the number of Shares
for which a cash election has been made, to arrive at
the Share Balance. The Stock Balance Amount will then
be divided by the Share Balance to obtain the
Exchange Ratio Dividend.
(1) If the Average Closing Price is between
$18 and $20 per share, the Exchange
Ratio shall be the Exchange Ratio
Dividend divided by the Average Closing
Price.
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(2) If the Average Closing Price is $20.01
or more, but less than $21.51, the
Exchange Ratio shall be determined in
the same manner as in (1) above, except
that the Exchange Ratio shall be
determined using $20 as the Average
Closing Price.
(3) If the Average Closing Price is less
than $18 but not less than $16.50, the
Exchange Ratio shall be determined
using $18 as the Average Closing Price.
(4) If the Average Closing Price is less
than $16.50 the Company, or if it is
$21.51 or more the Acquiror, may elect
pursuant to Section 10.1(i) hereof to
terminate the Merger or to renegotiate
the Exchange Ratio.
(d) In each case, there shall be added to the cash exchange price and
to the Shares exchanged for Company Common Stock a pro rata portion of the
Interim Earnings, determined in accordance with Section 6.12, which shall be
payable in cash and shall constitute part of the Consideration paid for the
Company Common Stock.
(e) Each share of Company Common Stock held as treasury stock shall be
canceled and extinguished without conversion thereof into Acquiror Common Stock
or payment therefor.
SECTION 1.7 ADJUSTMENTS FOR DILUTION AND OTHER MATTERS. If prior to the
Effective Time, (a) the Company shall declare a stock dividend or distribution
upon or subdivide, split up, reclassify or combine the Shares, or declare a
dividend or make a distribution on Shares in any security convertible into
Shares, or (b) the Acquiror shall declare a stock dividend or distribution upon
or subdivide, split up, reclassify or combine Acquiror Common Stock or declare a
dividend or make a distribution on Acquiror Common Stock in any security
convertible into Acquiror Common Stock, appropriate adjustment or adjustments
will be made to the Exchange Ratio.
SECTION 1.8 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, the Acquiror shall
deposit, or shall cause to be deposited with an exchange agent chosen by the
Acquiror (the "Exchange Agent"), for the benefit of the holders of Shares for
exchange in accordance with this Article I, through the Exchange Agent,
certificates representing the shares of Acquiror Common Stock and cash (such
certificates for shares of Acquiror Common Stock, together with the amount of
cash are referred to herein as the "Exchange Fund") payable and issuable
pursuant to Section 1.6 in exchange for outstanding Shares; provided, however,
that $2,500,000 shall be set aside by the Exchange Agent in a separate fund
designated as the Escrow Exchange Fund and distributed pursuant to Section 6.13.
At the option of the Company, the Escrow Exchange Fund may be funded, in whole
or in part, from the Interim Earnings determined pursuant to Section 6.12; in
such event, the cash amount retained from the Exchange Fund shall be
correspondingly reduced.
(b) Exchange Procedures. No later than five (5) days after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares which were converted
4
into the right to receive shares of Acquiror Common Stock or cash pursuant to
Section 1.6 (a "Certificate" or "Certificates"), (i) a letter of transmittal,
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Acquiror Common Stock or cash.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (i) a certificate representing
that number of whole shares of Acquiror Common Stock which such holder has the
right to receive pursuant to the holder's election as presented on the
Consideration Election Schedule and this Article I, and/or (ii) that portion of
the cash amount such holder then has the right to receive pursuant to the
holder's election as evidenced on the Consideration Election Schedule, after
retention of the Escrow Exchange Fund. The Certificates so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Acquiror Common Stock may be issued
to a transferee if the Certificate representing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and the posting by such person of a
bond in such amount as the Acquiror may reasonably direct as indemnity against
any claim that may be made against it or the Exchange Agent with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate a certificate representing the proper number of shares of
Acquiror Common Stock and/or cash. Until surrendered as contemplated by this
Section 1.8, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of Acquiror Common Stock and/or cash (including cash in lieu
of any fractional shares of Acquiror Common Stock as contemplated by Section
1.8(e)) and other distributions as contemplated by Section 1.8(c).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Acquiror Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Acquiror Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.8(e),
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable Laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Acquiror Common Stock issued in exchange therefor, without interest, (i) the
amount of any cash payable with respect to a fractional share of Acquiror Common
Stock to which such holder is entitled pursuant to Section 1.8(e) and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Acquiror Common Stock.
(d) No Further Rights in the Shares. All shares of Acquiror Common
Stock issued and cash paid upon conversion of the Shares in accordance with the
terms hereof (including any
5
cash paid pursuant to Section 1.8(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Acquiror Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interest will not
entitle the owner thereof to vote or to any rights of a shareholder of the
Acquiror. Each holder of a fractional share interest shall be paid an amount in
cash equal to the product obtained by multiplying such fractional share interest
to which such holder (after taking into account all fractional share interests
then held by such holder) would otherwise be entitled by the Average Closing
Price for Acquiror Common Stock. As soon as reasonably practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
share interests, the Acquiror shall make available such amounts (without
interest) to such holders of fractional shares.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(except for the Escrow Exchange Fund, which shall be distributed in accordance
with Section 6.13) remaining undistributed to the former shareholders of the
Company for two (2) years after the Effective Time shall be delivered to the
Acquiror, upon demand, and any former shareholders of the Company who have not
theretofore complied with this Article 1 shall thereafter look only to the
Acquiror to claim their shares of Acquiror Common Stock, any cash in lieu of
fractional shares of Acquiror Common Stock and any dividends or distributions
with respect to Acquiror Common Stock, in each case without interest thereon,
and subject to Section 1.8(g).
(g) No Liability. Neither the Acquiror nor the Company shall be liable
to any former holder of Shares for any such Shares (or dividends or
distributions with respect thereto) or cash or other payment delivered to a
public official pursuant to any abandoned property, escheat or similar laws.
(h) Withholding Rights. The Acquiror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Shares such amounts as the Acquiror is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Acquiror, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of the
Shares in respect of which such deduction and withholding were made by the
Acquiror.
SECTION 1.9 DISSENTING SHARES.
(a) "Dissenting Shares" means any shares held by any holder who becomes
entitled to payment of the fair value of such shares under Sections 302A.471 and
..473 of the MBCA. Any holder of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of Sections 302A.471 and .473 of the MBCA. Provided, however, that
if, in accordance with Sections 302A.471 and .473 of the MBCA, any holder of
Dissenting Shares shall forfeit such right to payment of the fair value of such
shares, such shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive
Acquiror Common Stock and cash in lieu of fractional shares or cash, at the
Acquiror's election. If such holder of Dissenting Shares shall
6
effectively withdraw or lose (through failure to perfect or otherwise) his or
her right to such payment after the Effective Time, Shares of such holder shall
be converted on a share by share basis into the right to receive Acquiror Common
Stock and cash in lieu of fractional shares in accordance with the applicable
provisions of this Agreement.
(b) The Company shall give Acquiror prompt notice of any written
objections to the Merger and any written demands for the payment of the fair
value of any shares, withdrawals of such demands, and any other instruments
received by the Company pursuant to the MBCA. The Acquiror shall be responsible
for, and shall be given the opportunity to direct all negotiations and
proceedings with respect to, any such demands under the MBCA. The Company shall
not voluntarily make any payment with respect to any demands for payment of fair
value and shall not, except with the prior written consent of Acquiror, settle
or offer to settle any such demands.
(c) In the event any holder of Shares exercises rights with respect to
Dissenting Shares, Acquiror may adjust, pro rata, the elections of other holders
(other than the ESOP) as set forth in the Consideration Election Schedule to the
extent necessary to keep the cash portion of the Consideration between
$22,800,000 and $30,400,000 (exclusive of any increase to such amounts resulting
from the Interim Earnings).
SECTION 1.10 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates shall cease to
have any rights with respect to such Shares except as otherwise provided herein
or by law. On or after the Effective Time, any Certificates presented to the
Exchange Agent or the Acquiror for any reason shall be converted into shares of
Acquiror Common Stock and cash in lieu of fractional shares in accordance with
this Article I.
SECTION 1.11 THE BANK MERGER.
(a) Following the Effective Time, the Bank shall be merged and
consolidated with and into the Acquiror-Bank under the Charter and By-Laws of
Acquiror-Bank, pursuant to the provisions of, and with the effect provided in,
applicable Law, and Acquiror-Bank shall be the surviving bank and the separate
existence of Bank shall thereupon cease (the term "Surviving Bank" shall refer
to Acquiror-Bank following the Bank Merger). Subject to the terms and conditions
specified herein, and upon satisfaction of all requirements of law, the Bank
Merger shall become effective on such date as shall be designated by the
Acquiror following the Effective Time and subsequent to the receipt of approvals
from all applicable governmental authorities authorizing the consolidation (the
"Bank Merger Effective Date").
(b) Surviving Bank.
(i) The Surviving Bank shall continue the banking
business of Bank in its current location as a branch
office of the Surviving Bank.
(ii) The principal office of the Surviving Bank shall be
the principal office of Acquiror-Bank.
7
(iii) At and as of the Bank Merger Effective Date, the
Charter and By-Laws of Acquiror-Bank, as in effect
immediately prior to the Bank Merger Effective Date,
shall be the Charter and By-Laws of the Surviving
Bank until thereafter amended as provided by law.
(iv) On the Bank Merger Effective Date, the Surviving Bank
shall have capital surplus equal to that of Bank and
Acquiror-Bank combined immediately prior to the Bank
Merger and undivided profits, including capital
reserves, which, when combined with the capital and
surplus, will be equal to the capital structure of
Bank and Acquiror-Bank as of the date hereof,
adjusted, however, for normal earnings and expenses
between the date hereof and the Bank Merger Effective
Date and adjusted as of the Bank Merger Effective
Date in accordance with generally accepted accounting
principles to reflect the Bank Merger.
(v) As of the Bank Merger Effective Date, the Board of
Directors of Acquiror-Bank in effect immediately
prior to the Bank Merger shall serve as the Board of
Directors of the Surviving Bank until such time as
their successors have been elected and have
qualified.
(c) Corporate Existence; Assets and Liabilities of Surviving Bank.
Upon the Bank Merger Effective Date:
(i) All rights, franchises and interests of Bank in and
to every type of property (real, personal and mixed)
and chooses in action shall be transferred to and
vested in the Surviving Bank by virtue of the Bank
Merger without any deed or other transfer, and the
Surviving Bank, without any order or other action on
the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises and
interests, including appointments, designations,
nominations, and all other rights and interest as
trustee, executor, administrator, registrar of stocks
and bonds, guardians of estates, assignee, and
receiver of estates of incompetents, and in every
other fiduciary capacity, in the same manner and to
the same extent as such rights, franchises and
interests were held or enjoyed by Bank immediately
prior to the Bank Merger.
(ii) The Surviving Bank shall be liable for all of the
liabilities of Bank and all deposits, debts,
liabilities, obligations and contracts of Bank,
matured or unmatured, whether insured, obsolete,
contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of
account, or records of Bank shall be those of the
Surviving Bank and shall not be relieved or canceled
by the Bank Merger and all rights of creditors and
obligees, and all liens on property of Bank shall be
preserved and unimpaired. All assets of Bank, as they
exist at and as of the Bank Merger Effective Date,
shall pass to and vest in the Surviving Bank, without
any conveyance or other transfer; and the Surviving
Bank shall be responsible
8
for all liabilities of Bank of every kind and
description existing as of the Bank Merger Effective
Date.
(iii) At any time after the Bank Merger Effective Date, the
officers of the Surviving Bank may, in the name of
Bank, execute and deliver all such deeds, assignments
and other instruments and take or cause to be taken
all such further or other action as the Surviving
Bank may deem necessary or desirable in order to
vest, perfect or confirm in the Surviving Bank title
to and possession of all of Bank's property, rights,
privileges, immunities, powers, purposes and
otherwise to carry out the purposes hereof.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company
to the Acquiror prior to execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to the Acquiror that:
SECTION 2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Minnesota, and is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The sole subsidiary of the Company is the Bank, which is a state-chartered bank
duly organized and validly existing under the laws of the state of Minnesota.
Each of the Company and the Bank has the requisite corporate power and authority
and is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders ("Company
Approvals") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, including, without limitation,
appropriate authorizations from Federal Reserve Board ("FRB") the Federal
Deposit Insurance Corporation (the "FDIC") and the Minnesota Department of
Commerce ("MDC") and neither the Company nor Bank has received any notice of
proceedings relating to the revocation or modification of any Company Approvals,
except in each case where the failure to be so existing or to have such power,
authority, Company Approvals and revocations or modifications would not,
individually or in the aggregate, be an Adverse Change in the Company (as
defined in Section 9.7) and the Bank taken as a whole.
(b) Each of the Company and the Bank is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where such failures to be so duly qualified or licensed and in
good standing would not, either individually or in the aggregate, be an Adverse
Change in the Company and the Bank taken as a whole.
(c) The Company owns beneficially and of record all of the outstanding
shares of capital stock of the Bank; the Company does not directly or indirectly
own any equity or similar interests in, or any interests convertible into or
exchangeable or exercisable for any equity or similar interest in, any other
corporation, partnership, joint venture or other business association
9
or entity other than in the ordinary course of business, and in no event in
excess of 5% of the outstanding equity securities of such entity.
SECTION 2.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to the Acquiror a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Company
("Company Articles" or "Company By-Laws") and the Bank. Such Articles of
Incorporation and By-Laws of the Company and the Bank are in full force and
effect. Neither the Company nor the Bank is in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
SECTION 2.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock. As of the date of this
Agreement, (a) 42,435 shares of Company Common Stock are issued and outstanding,
all of which are duly authorized, validly issued, fully paid and non-assessable,
and were not issued in violation of any preemptive right of any Company
shareholder, (b) no shares of Company Common Stock are held in the treasury of
the Company, and (c) no shares of Company Common Stock are reserved for future
issuance pursuant to outstanding employee stock options issued pursuant to the
Company's equity incentive plans. Except as set forth in clause (c) above, there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character pursuant to which the Company or the Bank is a
party, including without limitation voting agreements or arrangements, relating
to the issued or unissued capital stock of the Company or the Bank or obligating
the Company or the Bank to issue or sell any shares of capital stock of, or
other equity interests in, the Company or the Bank. All shares of Company Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and non-assessable. Except
as set forth in Section 2.3 of the Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or the Bank to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or the capital
stock of the Bank or to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in the Bank or any other entity,
except for loan commitments and other funding obligations entered into in the
ordinary course of business and except as required under currently existing
stock option agreements. Each of the outstanding shares of capital stock of the
Bank is duly authorized, validly issued, fully paid and non-assessable and was
not issued in violation of any preemptive rights of any Bank shareholder, and
all such shares owned by the Company are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations of the Company's
voting rights, charges or other encumbrances of any nature whatsoever.
SECTION 2.4 AUTHORITY. The Company has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Company's shareholders in accordance with the MBCA and the Company Articles and
Company By-Laws). The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Company's shareholders in
10
accordance with the MBCA and the Company Articles and Company By-Laws), subject
to satisfaction of the conditions set forth in Article VII. This Agreement has
been duly executed and delivered by, and constitutes a valid and binding
obligation of the Company and, assuming due authorization, execution and
delivery by the Acquiror, is enforceable against the Company in accordance with
its terms, except as enforcement may be limited by laws affecting insured
depository institutions, state banks and bank holding companies regulated by the
Bank Holding Company Act, general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
SECTION 2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement and the transactions contemplated
hereby by the Company shall not, (i) conflict with or violate the Company
Articles or Company By-Laws or the Certificate of Incorporation or By-Laws of
the Bank, (ii) assuming that the consents and approvals referred to in this
Agreement are duly obtained, conflict with or violate any domestic (federal,
state or local) or foreign law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to the Company or the Bank
or by which its or any of their respective properties is bound or affected, or
(iii) assuming that the consents and approvals referred to in this Agreement or
Section 2.5 of the Disclosure Schedule are duly obtained, result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, require the giving of notice to, or the
consent of, any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or the Bank
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or the Bank is a party or by which the Company or the Bank or its or any
of their respective properties is bound or affected, except in the case of
clause (iii) for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, be an Adverse
Change in the Company and the Bank taken as a whole.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws"), the BHC
Act and the filing of appropriate merger or other documents as required by the
MSS, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger or the Bank Merger or otherwise
prevent the Company from performing its obligations under this Agreement and
would not be an Adverse Change in the Company and the Bank taken as a whole.
SECTION 2.6 COMPLIANCE; PERMITS. Neither the Company nor the Bank is in
conflict with, or in default or violation of, (a) any Law applicable to the
Company or the Bank or by which its or any of their respective properties is
bound or affected, or (b) any note, bond,
11
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or the Bank is a party or by
which the Company or the Bank or its or any of their respective properties is
bound or affected, except for any such conflicts, defaults or violations which
would not, individually or in the aggregate, be an Adverse Change in the Company
or the Bank taken as a whole.
SECTION 2.7 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on
Schedule 2.7, to the Company's knowledge, as of the date of this Agreement:
(a) The operations of Company and Bank comply and have complied with
all Environmental Laws; neither the Company nor the Bank's operations are the
subject of, nor is the Company or the Bank a party to, any judicial or
administrative proceeding, pending or threatened, alleging the violation of any
Environmental Laws; neither the Company nor the Bank are the subject of a
federal, state or local investigation, pending or threatened, evaluating whether
any remedial action is needed to respond to a release of any Hazardous
Substance; neither Company nor the Bank has arranged for the treatment or
disposal of any Hazardous Substance; and neither Company nor the Bank has
reported a spill, emission or release of a Hazardous Substance.
(b) Except as set forth on Schedule 2.7, all real property owned
directly by Company and Bank (the "Real Property") is in compliance in all
material respects with all Environmental Laws; neither Company nor the Bank have
any notice or knowledge regarding the Real Property or its past use(s) which
indicates noncompliance, or potential noncompliance, with any Environmental Law;
the Real Property is not subject to any judicial or administrative proceedings
alleging the violation of any Environmental Law; the Real Property is not
contaminated by any Hazardous Substance; the Real Property is not the subject of
a federal, state or local investigation evaluating whether any remedial action
is needed to respond to a release, emission or discharge of any Hazardous
Substance into the environment; neither the Company nor the Bank has transported
any Hazardous Substance to the Real Property or from the Real Property to any
waste treatment, storage or disposal facility; neither Company nor the Bank has
arranged for the treatment or disposal of any Hazardous Substance; the Real
Property and buildings occupied by the Company and Bank contain no
urea-formaldehyde insulation, asbestos or asbestos by-products, lead, or
regulated levels of PCBs; no mold, mildew or other microorganisms are present in
the buildings occupied by the Bank at levels that pose or have the potential to
pose a threat to human health; the Real Property contains no fill material; no
underground or aboveground storage tanks are currently or were formerly located
at the Real Property; and the Real Property does not face any risk of
contamination by a Hazardous Substance from any nearby property.
(c) For purposes of this Agreement, the term "Hazardous Substance"
shall mean any product, substance, chemical, contaminant, pollutant, effluent,
emission, waste or other material which, or the presence, nature, quantity
and/or concentration or toxicity or existence, use, manufacture, disposal,
transportation, emission, discharge, spill, release or effect of which, either
by itself or in combination with other materials located on or associated with
any of the Company Real Property, is defined or listed in, regulated or
monitored by, or otherwise classified pursuant to, any statute, law, ordinance,
rule or regulation applicable to the Company Real Property as "solid waste,"
"hazardous substances," "hazardous materials," "hazardous
12
wastes," "infectious wastes" or "toxic substances." Hazardous Substances shall
include, but not be limited to, (i)(A) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and Liability Act, (B)
any "regulated substance" as defined in the Solid Waste Disposal Act, (C) any
substance subject to regulation pursuant to the Toxic Substances Control Act,
and (D) any hazardous substance as defined in Section 292.01(5) Wis. Stats., in
each case as such laws are now in effect or may be amended through the Closing
Date and any rule, regulation or administrative or judicial policy statement,
guideline, order or decision under such laws, (ii) petroleum and refined
petroleum products, (iii) asbestos and asbestos-containing products, (iv)
flammable explosives, (v) radioactive materials, and (vi) radon.
(d) For purposes of this Agreement, the term "Company Real Property"
means all real property (whether owned or leased) at which the operations of the
Company or the Bank are or at any time were conducted and which is otherwise
held as "real estate owned" (REO) as a result of default by the borrower and
subsequent foreclosure by the Company or the Bank.
SECTION 2.8 CONTRACTS AND AGREEMENTS.
Section 2.8 of the Company Disclosure Schedule lists and briefly
describes each Contract (the "Company Existing Contracts") to which the Company
or the Bank is a party or by which its assets are bound and which constitutes:
(a) a lease of, or agreement to purchase or sell, any capital
assets;
(b) any management, consulting, employment, personal service,
severance, agency or other contract or contracts providing for employment or
rendition of services and which: (i) provide for any form of payment or
compensation in the event of a termination of employment, or (ii) create other
than an at will employment relationship; or (iii) provide for any commission,
bonus, profit sharing, incentive, retirement, consulting or additional
compensation;
(c) any agreement, notes, lines of credit, borrowing
agreements or other pledges or obligations evidencing any obligations or
indebtedness of the Company or the Bank, and which exceeds $100,000 and is other
than a deposit or reverse repurchase obligation or other indebtedness incurred
by the Bank in the ordinary course of business;
(d) a power of attorney (whether revocable or irrevocable)
given to any individual or entity by the Company or the Bank that is in force;
(e) an agreement by the Company or the Bank not to compete in
any business or in any geographical area;
(f) an agreement restricting the right of the Company or the
Bank to use or disclose any information in its possession;
(g) a partnership, joint venture or similar arrangement;
(h) a license;
13
(i) an agreement or arrangement with any Affiliate (as
Affiliate is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the SEC under the Securities Act of 1933, as amended);
(j) an agreement for data processing services;
(k) any assistance agreement, supervisory agreement,
memorandum of understanding, consent order, cease and desist order or other
regulatory order or decree with or by the FRB, FDIC, MDC, or any other
regulatory authority.
(l) any other agreement or set of related agreements or series
of agreements which is not in the ordinary course of business of the Company or
the Bank and involves an amount in excess of $100,000.
SECTION 2.9 AGREEMENTS WITH REGULATORY AGENCIES. Neither the Company
nor the Bank is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of the FRB, the FDIC, MDC or any other applicable federal or
state regulatory agency having jurisdiction over the Company or the Bank or its
business ("Regulatory Agency"), that currently restricts the conduct of its
business or that relates to its capital adequacy, compliance with laws, its
credit policies, its management or its business (each a "Regulatory Agreement"),
nor has the Company or the Bank been advised by any Regulatory Agency that it is
considering issuing or requesting any such Regulatory Agreement.
SECTION 2.10 LOAN LOSS RESERVES. The reserves for possible loan losses
shown on the December 31, 2002 Consolidated Reports of Condition and Income
(call report) filed with a Regulatory Agency for the Company's Subsidiaries were
determined by application of the Bank's policies and procedures on a basis
consistently applied from prior periods and represents management's good faith
estimate of reasonably expectable losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued interest
receivable) as of that date.
SECTION 2.11 BANKING REPORTS; FINANCIAL STATEMENTS.
(a) The Company and the Bank have filed all forms, reports and
documents required to be filed with the FRB, MDC, the FDIC and any other
applicable federal or state securities or banking authorities (all such reports
and statements are collectively referred to as the "Company Reports"). The
Company Reports, including all Company Reports filed after the date of this
Agreement, (x) were or will be prepared in all material respects in accordance
with the requirements of applicable Law and (y) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Except as set forth on Schedule 2.11(b), the Company has furnished
to Acquiror true, correct and complete copies of: (i) the audited Consolidated
Statements of Financial
14
Condition of the Company as of the fiscal years ended March 31, 2002, 2001 and
2000, and the related Consolidated Statements of Earnings, Consolidated
Statements of Shareholders' Equity and Consolidated Statements of Cash Flows for
each of said fiscal years, including the respective notes thereto, and has
authorized McGladrey & Xxxxxx LLP ("McGladrey") to make available to Acquiror,
upon Acquiror's request, the reports and work papers of McGladrey relating
thereto; and (ii) the unaudited Consolidated Statements of Financial Condition
as of December 31, 2002 and the related unaudited Consolidated Statements of
Cash Flow for the periods then ended (together the "Company Financial
Statements"). Such Company Financial Statements fairly present the financial
position of the Company and the Subsidiaries as of and for the periods ended on
their respective dates and the operating results of the Company and the
Subsidiaries for the indicated periods in conformity with GAAP applied on a
consistent basis. Since December 31, 2002 through the date of execution of this
Agreement, there have not been, to the best of the Company's knowledge and
belief, any adverse material changes in its or the Subsidiaries' consolidated
financial condition, assets, liabilities or business, other than changes in the
ordinary course of business and as set forth in the Company Financial
Statements.
(c) The Company will furnish Acquiror with copies of its audited and
unaudited Consolidated Statements of Financial Condition, Consolidated
Statements of Earnings, Consolidated Statements of Shareholders' Equity and
Consolidated Statements of Cash Flows for each quarterly and yearly period
subsequent to December 31, 2002, and each financial report it or any of its
Subsidiaries files with the Federal Reserve Board, the FDIC, the MDC, or other
regulatory authority, subsequent to December 31, 2002 until the Effective Time
(the "Subsequent Company Financial Statements").
(d) Except as set forth on Schedule 2.11(b), all of the aforesaid
Company Financial Statements have been and, with respect to the Subsequent
Company Financial Statements, will be, prepared in accordance with GAAP,
utilizing accounting practices consistent with prior years except as otherwise
disclosed. Except as set forth on Schedule 2.11(b), all of the aforesaid Company
Financial Statements present fairly, and all of the Subsequent Company Financial
Statements will present fairly, the financial position of the Company and the
Subsidiaries taken as a whole and the results of its and their operations and
changes in its and their financial position as of and for the periods ending on
their respective dates. Except as set forth on Schedule 2.11(b), the books and
records of the Company have been and are being maintained in all material
respects in accordance with GAAP and all other applicable legal and accounting
requirements. Subject to such changes which may result from an audit of any
Subsequent Company Financial Statements (which changes in the aggregate will not
result in an Adverse Change in the Company), the allowance for loan losses in
such Company Financial Statements is, and, with respect to the Subsequent
Company Financial Statements will be, determined by application of the Bank's
policies and procedures on a basis consistently applied from prior periods and
represents management's good faith estimate of reasonably expectable loses.
Except with respect to this Agreement and the transactions contemplated herein,
there are, and with respect to the Subsequent Financial Statements will be, no
agreements, contracts or other instruments to which the Company or the
Subsidiaries are a party or by which it or they or (to the knowledge of the
Company) any of the officers, directors, employees or shareholders of the
Company or the Subsidiaries have rights which would have a material adverse
effect on the consolidated financial position of the Company or the financial
position of the Company which
15
are not disclosed herein or reflected in the Company Financial Statements and
the Subsequent Company Financial Statements.
SECTION 2.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Company Financial Reports provided at the time of execution of this
Agreement or set forth in Section 2.12 of the Company Disclosure Schedule and
except for the transactions contemplated by this Agreement, since December 31,
2002, to the date of this Agreement, the Company and the Bank have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since December 31, 2002, there has not been (a) any change in
the financial condition, results of operations or business of the Company and
the Bank constituting an Adverse Change in the Company and the Bank taken as a
whole, (b) any damage, destruction or loss (whether or not covered by the
insurance) with respect to any assets of the Company or the Bank constituting an
Adverse Change in the Company and the Bank taken as a whole, (c) any change by
the Company in its accounting methods, principles or practices, (d) any
revaluation by the Company of any of its assets in any material respect, (e) to
the date of this Agreement, any entry by the Company or the Bank into any
commitment or transactions material to the Company and the Bank taken as a
whole, or (f), any declaration, setting aside or payment of any dividends or
distributions in respect of shares of Bank and/or Company Common Stock or any
redemption, purchase or other acquisition of any of its securities or any of the
securities of the Bank (except for the extraordinary cash dividends on Bank and
Company Common Stock of this Agreement as contemplated in Section 6.12).
SECTION 2.13 ABSENCE OF LITIGATION.
(a) Except as set forth in Section 2.13 of the Company Disclosure
Schedule, neither the Company nor the Bank is a party to any, and there are no
pending or threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against the Company or the Bank or challenging the validity or propriety of the
transactions contemplated by this Agreement or which, if adversely determined
would, individually or in the aggregate, be an Adverse Change in the Company and
the Bank taken as a whole. Schedule 2.13 accurately describes all litigation
against the Company or Subsidiaries in which the amount claimed is in excess of
$25,000.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company, the Bank or the assets of the Company or
of the Bank which constitutes an Adverse Change in the Company and the Bank
taken as a whole.
SECTION 2.14 EMPLOYEE BENEFIT PLANS.
(a) Plans of the Company. Section 2.14(a) of the Company Disclosure
Schedule lists all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all material
employment, termination, severance or other employment contracts or employment
agreements, with respect to which the Company or the Bank has any obligation
(collectively, the "Company Plans"). The Company has furnished or made available
to the Acquiror a complete and accurate
16
copy of each Company Plan (or a description of the Company Plan, if the Company
Plan is not in writing) and a complete and accurate copy of each material
document prepared in connection with each such Company Plan, including, without
limitation, and where applicable, a copy of (i) each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications as currently in effect, (iii) the three (3) most recently filed
IRS Forms 5500, Forms PBGC-1 and related schedules, and (iv) the most recently
issued IRS determination letter for each such Company Plan.
(b) Absence of Certain Types of Plans. No member of the Company's
"controlled group," within the meaning of Section 40l(a)(14) of ERISA, maintains
or contributes to, or within the five (5) years preceding the date of this
Agreement has maintained or contributed to, an employee pension benefit plan
subject to Title IV of ERISA which will not be fully funded on the basis
reflected in the Bank's Financial Statements pursuant to the disclosure
requirements of FAS 87 as of December 31, 2002. Except as disclosed in Section
2.14(b) of the Company Disclosure Schedule, none of the Company Plans obligates
the Company or the Bank to pay material separation, severance, termination or
similar type benefits (or provides for enhanced or accelerated benefits) solely
as a result of any transaction contemplated by this Agreement or as a result of
any "change in the ownership or effective control" of the Company or of the Bank
within the meaning of such term under Section 280G of the Code. Except as
disclosed in Section 2.14(b) of the Company Disclosure Schedule, or as required
by group health plan continuation coverage requirements of Section 4980B of the
Code ("COBRA"), none of the Company Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or the Bank. Each of the Company
Plans is subject only to the laws of the United States or a political
subdivision thereof.
(c) Compliance with Applicable Laws. Except as disclosed in Section
2.14(c) of the Company Disclosure Schedule, each Company Plan has been operated
in all material respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Company Plans and
all Company Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA)
have acted in accordance with the provisions of all applicable Law, except where
such violations of applicable Law would not, individually or in the aggregate,
be an Adverse Change in the Company and the Bank taken as a whole. The Company
and the Bank have performed all obligations required to be performed by any of
them under, are not in any respect in default under or in violation of, and the
Company and the Bank have no knowledge of any default or violation by any party
to, any Company Plan, except where such failures, defaults or violations would
not, individually or in the aggregate, be an Adverse Change in the Company and
the Bank taken as a whole.
(d) Qualification of Certain Plans. Each Company Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) upon which the Company and the Bank can rely that it is so qualified,
and, except as disclosed in Section 2.14(d) of the Company Disclosure Schedule,
no event has occurred since the date of such determination letter that would
affect adversely the qualified status of any such Company Plan. Except as
disclosed in Section 2.14(d) of the Company Disclosure Schedule, no trust
maintained or contributed to by the Company or the Bank is
17
intended to be qualified as a voluntary employees' beneficiary association or is
intended to be exempt from Federal income taxation under Section 50l(c)(9) of
the Code.
(e) Absence of Certain Liabilities and Events. Except for matters
disclosed in Section 2.14(e) of the Company Disclosure Schedule, there has been
no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Company Plan. Neither the
Company nor the Bank has incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code that would individually or in the aggregate be
an Adverse Change in the Company and the Bank taken as a whole.
(f) Plan Contributions. All contributions, premiums or payments
required to be made prior to the Effective Time with respect to any Company Plan
will have been made on or before the Effective Time. A pro rata portion of all
current annual contributions, premiums and payments shall be made on or before
the Effective Time.
(g) Stock Options. The Company has no outstanding options to any
current or former employee, officer or director of the Company or the Bank or to
any other person or entity granting any right or option to purchase Company
Common Stock as of the date of this Agreement.
(h) Employment Contracts. Except as disclosed in Section 2.14(h) of the
Company Disclosure Schedule, neither the Company nor the Bank is a party to any
employment, severance, consulting or other similar contracts with any employees,
consultants, officers or directors of the Company or the Bank. Neither the
Company nor the Bank is a party to any collective bargaining agreements.
SECTION 2.15 REGISTRATION STATEMENT. The information supplied by the
Company for inclusion in the Registration Statement referred to in Section 6.1
shall not at the time such Registration Statement is declared effective contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by the Company for inclusion in the proxy
statement/prospectus or comparable document (the "Proxy Statement/Prospectus")
to be sent to Company shareholders to consider the Merger (the "Company
Shareholders' Meeting") shall not at the date of the Proxy Statement/Prospectus
(or the date of any amendment or supplement thereto) is first mailed to
shareholders, at the time of the Company Shareholders' meeting or at the
Effective Time, be false or misleading with respect to any material fact
required to be stated therein, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
would be set forth in an amendment to the Registration Statement or a supplement
to the Proxy Statement/Prospectus, the Company shall promptly inform the
Acquiror. Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information about, or supplied or omitted by, the
Acquiror which is contained in any of the foregoing documents.
18
SECTION 2.16 TAXES, REPORTS, MINUTES.
(a) The Company and the Bank have filed all material Tax Returns (as
defined below) required to be filed by them, and the Company and the Bank have
paid and discharged all material Taxes (as defined below) shown to be due in
connection with or with respect to the filing of such Tax Returns, except such
as are being contested in good faith by appropriate proceedings and with respect
to which the Company is maintaining reserves adequate for their payment or where
the failure to pay would not result in an Adverse Change in the Company. Each
such Tax Return is correct and complete in all material respects and adequately
reflects the Taxes required to be reflected on such Tax Return. For purposes of
this Agreement. "Tax" or "Taxes" shall mean taxes, charges, fees, levies, and
other governmental assessments and impositions of any kind, payable to any
federal, state, local or foreign governmental entity or taxing authority or
agency, including, without limitation, (i) income, franchise, profits, gross
receipts, estimated, ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, (ii) customs duties, imposts, charges, levies
or other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports, and information statements with respect to Taxes required to
be filed with the United States Internal Revenue Service (the "IRS") or any
other governmental entity or taxing authority or agency, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
Except as otherwise disclosed in Section 2.16 of the Company's Disclosure
Schedule, neither the IRS nor any other governmental entity or taxing authority
or agency is now asserting, either through audits, administrative proceedings or
court proceedings, any deficiency or claim for additional Taxes. Except as
otherwise disclosed in Section 2.16 of the Company's Disclosure Schedule,
neither the Company nor the Bank has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of
any Tax. Except as otherwise disclosed in Section 2.16 of the Company's
Disclosure Schedule and except for statutory liens for current taxes not yet
due, there are no material tax liens on any assets of the Company or the Bank.
Except as otherwise disclosed in Section 2.16 of the Company's Disclosure
Schedule neither the Company nor the Bank has received a ruling or entered into
an agreement with the IRS or any other taxing authority that would be an Adverse
Change in the Company or the Bank, taken as a whole, after the Effective Time.
Except as otherwise disclosed in Section 2.16 of the Company's Disclosure
Schedule, no agreements relating to allocating or sharing of Taxes exist among
the Company and the Bank. Neither the Company nor the Bank has made an election
under Section 341(f) of the Code.
(b) Copies of the Federal and State tax returns for the calendar years
ended December 31, 2002, 2001 and 2000 of the Company, have been provided to
Acquiror for review, and the Company has authorized McGladrey to make available
to Acquiror, upon Acquiror's request, the corresponding work papers for such
returns.
(c) Copies of all minutes of the Company's and Bank's Boards of
Directors and Committees, from July 1, 1999 through the date of execution of
this Agreement have been made available to Acquiror for review.
19
SECTION 2.17 COMPANY PROPERTIES.
(a) Schedule 2.17 accurately identifies: (i) all real property owned,
beneficially or otherwise, or controlled by the Company, whether owned outright,
as a joint venture, owned or controlled in a fiduciary capacity, or controlled
through the participation in the management thereof, including properties now
held by the Company as a result of foreclosure or repossession or carried on the
books of the Company as "other real estate owned" ("ORE") or leased by the
Company (all of which shall be defined as "Real Estate") and such Schedule 2.17
sets forth a complete legal description of the Real Estate and a brief
description of any buildings located thereon. No complaints have been received
by the Company, and to the best of the Company's knowledge none are threatened,
that the Company is in violation of applicable building, zoning, environmental,
safety, or similar laws, ordinances, or regulations in respect of their
buildings or equipment, or the operation thereof, and to the best of the
Company's knowledge, the Company is not in violation of any such law, ordinance,
or regulation, (except as disclosed on Schedule 2.17) the violation of which
would result in an Adverse Change in the Company.
(b) Except as set forth on Schedule 2.17, the Company has to the best
of its knowledge good and marketable title to all of its real and personal
property, free, clear and discharged of, and from, any and all liens, mortgages,
charges, encumbrances and/or security interests of any kind.
(c) The Company, as lessee, has the right under valid and subsisting
leases to occupy, use, possess and control all property leased by the Company
and to permit use of such space by the Acquiror as a successor in interest.
SECTION 2.18 BROKERS. Except as disclosed on Schedule 2.18, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Company.
SECTION 2.19 TAX-FREE REORGANIZATION. The liabilities of the Company to
be assumed by Acquiror were incurred by Company in the ordinary course of
business; no intercorporate debt exists between Company and Acquiror that was
issued, acquired or will be settled at a discount; the Company is not an
"investment company" or under the jurisdiction of a court in a Title 11 or
similar case.
SECTION 2.20 VOTE REQUIRED. The affirmative vote of a majority of the
votes that holders of the outstanding shares of Company Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Company capital stock necessary to approve the Merger.
SECTION 2.21 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent fully reflected or reserved against in the Company Financial Statements
or the Subsequent Company Financial Statements, or those which would not result
in an Adverse Change in the Company, the Company has no liabilities or
obligations, of any nature, secured or unsecured (whether accrued, absolute,
contingent or otherwise) including, without limitation, any tax liabilities due
or to become due. Except as set forth on Schedule 2.21, the Company further
represents and warrants
20
that it does not know or have reason to believe that there is or will be any
basis for assertion against it as of the date of execution of this Agreement, or
as of the date of any Subsequent Company Financial Statements, of any material
liability or obligation of any nature or any amount not fully reflected or
reserved against in the Company Financial Statements as of said dates and for
subsequent periods or in the footnotes thereto.
SECTION 2.22 SHAREHOLDERS OF THE COMPANY. Schedule 2.22 will be
provided as of the date of execution of the Agreement and will to the best of
the Company's knowledge accurately identify the names and addresses of all
shareholders of the Company and the number of shares of Company Common Stock
beneficially owned by each such shareholder. From that date until the Effective
Time, any transfer of ownership of Shares shall be subject to the elections set
forth on Schedule 1.6 and Acquiror may rely upon Schedule 1.6 and the
Consideration Election Schedule for purposes of allocation and payment of the
Consideration.
SECTION 2.23 REGULATORY FILINGS. Accurate and complete copies of each
report, schedule, and shareholder communication used, circulated or filed since
July 1, 1999 by the Company have been or will be made available for Acquiror's
review. Subject to restrictions under applicable law and regulation, each
report, schedule or correspondence received since July 1, 1999 by the Company
from any governmental or regulatory agency have been provided to Acquiror for
review. The Company has, to the best of its knowledge, filed and will continue
to file in a timely manner all required filings and reports with (a) the FDIC,
(b) the FRB, and (c) the MDC (and will furnish Acquiror with copies of all such
filings and reports made subsequent to the date hereof until the Effective
Time), and all such filings were or will be complete and accurate in all
material respects as of the dates of the filings and reports, with no such
filing or report making any untrue statement of a material fact or omitting to
state a material fact necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading, and the Company has
paid all fees and assessments due and payable in connection with such filings
and reports.
SECTION 2.24 LOANS. All loans and loan commitments extended by the
Company and its Subsidiaries have to the best of their knowledge been made in
accordance with customary lending standards in the ordinary course of business.
The loans and loan commitments are evidenced by appropriate and sufficient
documentation (including any and all documentation required by applicable
banking laws, except where the absence of such documents would not result in an
Adverse Change in the Company), and to the best of the Company's knowledge
constitute valid and binding obligations of the borrowers enforceable in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
and remedies generally from time to time in effect and by applicable law which
may affect the availability of equitable remedies. All such loans and loan
commitments are, and at the Effective Time will be, to the best of the Company's
knowledge, free and clear of any security interest, lien, encumbrance or other
charge, and the Company has to the best of its knowledge complied, and at the
Effective Time will have complied, in all material respects with all laws and
regulations, including Truth-in-Lending and other consumer protection laws,
relating to such loans and loan commitments. Except as set forth on Schedule
2.24, the loans and loan commitments are not, as of the date hereof, subject to
any offsets, or to the knowledge of the Company, claims of offset, or claims of
other liability on the part of the Company.
21
SECTION 2.25 LOAN PORTFOLIO; REPORTS. Schedule 2.25 provides a listing
of all loans in excess of $300,000 and the Company has provided Acquiror with an
update regarding the status of each listed loan, together with having made
available for Acquiror's review the file or files for each such loan. Schedule
2.25 also lists all loans and obligations which, as of the date hereof, are
classified, whether internally or by regulators, as "Substandard," "Doubtful,"
"Loss" or "Classified" or are in any respect non-performing or delinquent. The
Company will promptly notify Acquiror regarding any loans which subsequently fit
within either of the groupings described in the preceding two (2) sentences of
this section 2.25, but which were not in existence or not in such grouping as of
the date of execution of this Agreement. For purposes of this Section 2.25, the
term "loans" includes all lines of credit, letters of credit, commitments, or
other obligations of the Company, whether drawn upon or not as of the date of
this Agreement. In determining whether the $300,000 threshold is met, all loans
to one party (including loans to related or otherwise affiliated parties) shall
be aggregated and treated as a single loan.
SECTION 2.26 MORTGAGE-BACKED AND RELATED SECURITIES AND INVESTMENT
SECURITIES. Schedule 2.26 sets forth the book and market value as of December
31, 2002 of the mortgage-backed and related securities, securities held for sale
and investment securities of the Company and its Subsidiaries. Schedule 2.26
also lists a mortgage-backed and related securities and investment securities
report which lists the securities descriptions, CUSIP numbers, pool face values,
book values, coupon rates and current market values. Except for pledges to
secure trust deposits, FHLB borrowings, and reverse repurchase agreements
entered into in arms'-length transactions pursuant to normal commercial terms
and conditions and other pledges required by law, none of the investments
reflected in the balance sheet of the Company at December 31, 2002 is, to the
Company's knowledge, subject to any restriction (contractual, statutory or
otherwise) that would materially impair the ability of the entity holding the
investment freely to dispose of such investment at any time.
SECTION 2.27 FIDUCIARY RESPONSIBILITIES. The Company and its
Subsidiaries have to the best of their knowledge performed all of their duties
in their capacities as trustees, executors, administrators, registrars,
guardians, custodians, escrow agents, receivers or any other fiduciary capacity
in a manner which complies in all material respects with all applicable laws,
regulations, orders, agreements, xxxxx, instruments and common law standards.
The Company, in the capacity as fiduciary of an XXX account or other tax
qualified plan maintained with the Company, has not exercised discretion in the
acquisition of shares of Company Common Stock into any such XXX account or plan
and has permitted such acquisition only pursuant to the specific direction of
the accountholder or plan administrator.
SECTION 2.28 OTHER INFORMATION. No representation or warranty by the
Company contained in this Agreement, or disclosure in any Schedule hereto
prepared by the Company, certificate or other instrument or document furnished
or to be furnished by or on behalf of the Company pursuant to this Agreement or
the regulatory filings contains or will to the knowledge of the Company contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated herein or therein which is necessary to make
the statements contained herein or therein not misleading.
SECTION 2.29 INSIDER INTERESTS. All loans, extensions of credit and
other contractual arrangements (including deposit relationships) between the
Company and any executive officer
22
or director, of the Company, or any affiliate of any such executive officer or
director, conform (except where failure to conform would not result in any
Adverse Change in the Company) to applicable rules and regulations and
requirements of all applicable regulatory agencies, and all such loans,
extensions of credit and other contractual arrangements which aggregate in
excess of $100,000 for any such officer director, and/or affiliate are described
on Schedule 2.29.
SECTION 2.30 TAKEOVER RESTRICTIONS. The Company has or will take all
actions required or necessary to exempt this Agreement and the transactions
contemplated hereby from any applicable federal, state or organizational
document anti-takeover laws or provisions.
SECTION 2.31 INSURANCE. Schedule 2.31 contains a true, correct and
complete list of all insurance policies and bonds maintained by the Company. As
of the date hereof, the Company has not received any notice of cancellation or
amendment of any such policy or bond is not in default under any such policy or
bond, has no coverage thereunder in dispute, and all claims thereunder have been
filed in a timely fashion and all premiums due thereon on or prior to the date
of Closing have been paid as and when due, except where the notice, amendment,
default, dispute, filing or payments do not result in an Adverse Change in the
Company.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
Except as set forth in the Disclosure Schedule delivered by the
Acquiror to the Company prior to execution of this Agreement (the "Acquiror
Disclosure Schedule") the Acquiror hereby represents and warrants to the Company
that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; CORPORATE POWER.
(a) The Acquiror is a corporation validly existing and in good standing
(meaning that it has filed its most recent required annual report and has not
filed articles of dissolution) under the laws of the state of Wisconsin, and
each direct or indirect subsidiary of Acquiror ("Acquiror Subsidiary" or
"Acquiror Subsidiaries") set forth on Schedule 3.1 is a corporation validly
existing and in good standing under the laws of the jurisdiction in which the
subsidiary is incorporated, and Acquiror and each of its subsidiaries is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted or the properties or assets owned or leased
by it makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on Acquiror. Acquiror is a
registered savings and loan holding company under the Home Owners' Loan Act of
1933, as amended ("HOLA"). Acquiror and each of its subsidiaries has the
corporate power and authority to carry on its and their business as now
conducted, and to own, lease and operate its and their properties. The Articles
of Incorporation and Bylaws of Acquiror, copies of which previously have been
made available to the Company, are true, correct and complete copies of such
documents in effect as of the date of this Agreement.
(b) Acquiror-Bank is a federally-chartered stock savings association
duly organized and in existence under the laws of the United States.
(c) Acquiror and each of its subsidiaries hold all licenses,
certificates, permits, franchises and rights from all appropriate federal, state
or other public authorities necessary for the conduct
23
of its and their businesses, except where the failure to so hold would not have
a material adverse effect on Acquiror.
SECTION 3.2 AUTHORIZATION. At the Effective Time, the execution,
delivery and performance of this Agreement by Acquiror will have been duly
authorized and approved by all necessary corporate action, and this Agreement
and the Plan of Merger will be legally binding on and enforceable against
Acquiror in accordance with their terms, subject to the receipt of all required
regulatory, shareholder or other governmental approvals and the conditions set
forth in Article Seven, and except as enforceability may be limited by
bankruptcy laws, insolvency laws or other laws affecting creditors' rights
generally. The execution and delivery of this Agreement and the Plan of Merger
do not, and the consummation of the Merger will not, violate the provisions of
Acquiror's Articles of Incorporation or Bylaws.
SECTION 3.3 CAPITALIZATION. The authorized capital stock of Acquiror
consists of 100,000,000 shares of Acquiror Common Stock, par value $0.10 per
share, of which 19,702,712 shares (net of 513,221 shares of Acquiror Common
Stock held as treasury shares) were issued and outstanding as of the date of
this Agreement; and 5,000,000 shares of Preferred Stock, par value $0.10 per
share ("Acquiror Preferred Stock") of which none are issued and outstanding as
of the date hereof. Except pursuant hereto, the Acquiror's stock option plan and
the Rights Agreement, dated January 24, 1995 by and between Acquiror and Xxxxx
Fargo (the "Rights Agreement"), there are no outstanding warrants, options,
rights, calls or other commitments of any nature relating to the issuance or
sale of any other class of equity securities of Acquiror, as of the date hereof.
All of the 19,702,712 outstanding shares of Acquiror Common Stock are duly
authorized, validly issued, fully paid and nonassessable, subject to a
limitation contained in Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, which provides that shareholders of Wisconsin corporations may be
personally liable for all debts owing to employees of the corporation for
services performed for such corporation for up to six months' service in any one
case, but not in an amount greater than the consideration paid for such shares.
SECTION 3.4 FINANCIAL STATEMENTS.
(a) Acquiror has furnished to the Company true, correct and complete
copies of the audited Consolidated Balance Sheets of Acquiror as of the fiscal
years ended December 31, 2002 and 2001 and the related Consolidated Statements
of Income, Consolidated Statements of Changes in Shareholders' Equity and the
Consolidated Statements of Cash Flows for each of the three fiscal years ended
December 31, 2002, 2001 and 2000, including the respective notes thereto,
together with the reports of Ernst & Young LLP relating thereto (the "Acquiror
Financial Statements"). Such Financial Statements fairly present the
consolidated financial position of Acquiror as of and for the periods ended on
their respective dates and the consolidated operating results and changes in
financial position of Acquiror for the indicated periods in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis.
Since December 31, 2002, to the best of Acquiror's knowledge, there have not
been any material changes in Acquiror's consolidated financial condition,
assets, liabilities or business, other than changes in the ordinary course of
business.
(b) Acquiror will furnish the Company with copies of its unaudited
Quarterly Reports on Form 10-Q as filed with the Securities and Exchange
Commission (the "SEC") for each
24
quarterly period subsequent to December 31, 2002 until the Effective Time Date
("Subsequent Acquiror Financial Statements").
(c) All of the aforesaid Acquiror Financial Statements have been, and
with respect to the Subsequent Acquiror Financial Statements, will be, prepared
in accordance with GAAP, utilizing accounting practices consistent with prior
years except as otherwise disclosed, and comply or will comply with applicable
accounting requirements of the SEC.
SECTION 3.5 NO VIOLATION. Except as set forth on Schedule 3.5, neither
the execution and delivery of this Agreement by the Acquiror, the consummation
by Acquiror and Acquiror - Bank of the transactions contemplated hereby or
thereby, nor compliance by the Acquiror with any of the terms or provisions
hereof or thereof, will (a) violate any provision of the Articles of
Incorporation or Bylaws of Acquiror or the stock charter, bylaws or similar
governing documents of Acquiror - Bank, or (b) assuming that the consents and
approvals referred to in Section 3.6 hereof are duly obtained, (i) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Acquiror or Acquiror - Bank, or (ii) violate, conflict
with, result in a breach of any material provision of or the loss of any
material benefit constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any material lien, pledge, security
interest, charge or other encumbrance upon any of the respective properties or
assets of Acquiror or Acquiror - Bank or any of their subsidiaries under any of
the material terms, conditions or provisions of any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Acquiror or Acquiror - Bank is a party, except
for such violations, conflicts, breaches or defaults which, either individually
or in the aggregate, would not have or be reasonably likely to have a material
adverse effect on Acquiror.
SECTION 3.6 CONSENTS AND APPROVALS. Except for (a) the filing of
applications, notices or other documents necessary to obtain, and the receipt
of, the Requisite Regulatory Approvals, (b) the filing with the SEC of the
Registration Statement (as defined in Section 6.01), (c) the filing of Articles
of Merger with the MSS pursuant to the provisions of the MBCA, (d) such filings
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the shares
of Acquiror Common Stock pursuant to this Agreement, and (e) such filings,
authorizations or approvals as may be set forth on Schedule 3.6, no consents or
approvals of or filings or registrations with any governmental entity or with
any third party are necessary in connection with the execution and delivery by
Acquiror of this Agreement, or the consummation by Acquiror of the Merger.
SECTION 3.7 LITIGATION. As of the date of this Agreement, except as set
forth on Schedule 3.7, there are no legal, administrative or other actions,
suits, proceedings or investigations of any kind or nature pending or, to the
knowledge of Acquiror, threatened against Acquiror that challenge the validity
or propriety of the transactions contemplated by this Agreement or which would
have a material adverse effect on Acquiror's consolidated financial condition,
assets, liabilities or business. Neither Acquiror nor Acquiror - Bank is subject
to, or in default with respect to, nor are any of its or their assets subject
to, any outstanding judgment, order or decree of any court or of any
governmental agency or instrumentality that has or is
25
reasonably expected to have a material adverse effect on Acquiror's consolidated
financial condition, assets, liabilities or business.
SECTION 3.8 EMPLOYEE BENEFIT PLANS.
(a) Plans of the Acquiror. Section 3.8(a) of the Acquiror Disclosure
Schedule lists all employee benefit plans (as defined in Section 3(3) of ERISA),
and all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
material employment, termination, severance or other employment contracts or
employment agreements, with respect to which the Acquiror or any Acquiror
Subsidiary has any obligation (collectively, the "Acquiror Plans"). The Acquiror
has furnished or made available to the Company a complete and accurate copy of
each Acquiror Plan (or a description of the Acquiror Plan, if the Acquiror Plan
is are not in writing) and a complete and accurate copy of each material
document prepared in connection with each such Acquiror Plan, including, without
limitation, and where applicable, a copy of (i) each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications as currently in effect, (iii) the three (3) most recently filed
IRS Forms 5500, Forms PBGC-1 and related schedules, and (iv) the most recently
issued IRS determination letter for each such Acquiror Plan.
(b) Absence of Certain Types of Plans. Except as disclosed in Section
3.8(b) of the Acquiror Disclosure Schedule, none of the Acquiror Plans obligates
the Acquiror or any of the Acquiror Subsidiaries to pay material separation,
severance, termination or similar type benefits (or provides for enhanced or
accelerated benefits) solely as a result of any transaction contemplated by this
Agreement or as a result of any "change in the ownership or effective control"
of the Acquiror or of any of the Acquiror Subsidiaries within the meaning of
such term under Section 280G of the Code. Except as disclosed in Section 3.8(b)
of the Acquiror Disclosure Schedule, or as required by group health plan
continuation coverage requirements of Section 4980B of the Code ("COBRA"), none
of the Acquiror Plans provides for or promises retiree medical, disability or
life insurance benefits to any current or former employee, officer or director
of the Acquiror or any of the Acquiror Subsidiaries. Each of the Acquiror Plans
is subject only to the laws of the United States or a political subdivision
thereof.
(c) Compliance with Applicable Laws. Except as disclosed in Section
3.8(c) of the Acquiror Disclosure Schedule, each Acquiror Plan has been operated
in all material respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Acquiror Plans and
all Acquiror Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA)
have acted in accordance with the provisions of all applicable Law, except where
such violations of applicable Law would not, individually or in the aggregate,
be a material adverse effect on the Acquiror and the Acquiror Subsidiaries taken
as a whole. The Acquiror and the Acquiror Subsidiaries have performed all
obligations required to be performed by any of them under, are not in any
respect in default under or in violation of, and the Acquiror and the Acquiror
Subsidiaries have no knowledge of any default or violation by any party to, any
Acquiror Plan, except where such failures, defaults or violations would not,
individually or in the aggregate, have a material adverse effect on the Acquiror
and the Acquiror Subsidiaries taken as a whole.
26
(d) Qualification of Certain Plans. Each Acquiror Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and, except as disclosed in Section 3.8(d) of
the Acquiror Disclosure Schedule, no event has occurred since the date of such
determination letter that would affect adversely the qualified status of any
such Acquiror Plan. Except as disclosed in Section 3.8(d) of the Acquiror
Disclosure Schedule, no trust maintained or contributed to by the Acquiror or
any of the Acquiror Subsidiaries is intended to be qualified as a voluntary
employees' beneficiary association or is intended to be exempt from Federal
income taxation under Section 50l(c)(9) of the Code.
(e) Acquiror Plans Subject to Title IV of ERISA. Section 3.8(e) of the
Acquiror Disclosure Schedule lists all employee pension benefit plans subject to
Title IV of ERISA which are maintained by, contributed to, or within the five
(5) years preceding the date of this Agreement have been maintained by or
contributed to, a member of the Acquiror's "controlled group," within the
meaning of Section 4001(a)(14) of ERISA (the "Title IV Plans").
(i) Neither the Acquiror nor any Acquiror Subsidiary has
any liability to the PBGC with respect to any Title
IV Plan nor has any liability under Section 502 or
4071 of ERISA.
(ii) With respect to each Title IV Plan, the Acquiror and
any Acquiror Subsidiary has met the minimum funding
standard, and has made all contributions required,
under Section 302 of ERISA and Section 402 of the
Code.
(iii) Neither the Acquiror nor any Acquiror Subsidiary has
filed a notice of intent to terminate any Title IV
Plan nor has adopted any amendment to treat a Title
IV Plan as terminated. The PBGC has not instituted
proceedings to treat any Title IV Plan as terminated.
No event has occurred or circumstance exists that may
constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee
to administer, any Title IV Plan.
(iv) No amendment has been made, or is reasonably expected
to be made, to any Title IV Plan that has required or
could require the provision of security under Section
307 of ERISA or Section 401(a)(29) of the Code.
(v) No accumulated funding deficiency, whether or not
waived, exists with respect to any Title IV Plan; no
event has occurred or circumstance exists that may
result in an accumulated funding deficiency as of the
last day of the current plan year of any such Title
IV Plan.
(vi) The actuarial report for each Title IV Plan fairly
presents the financial condition and the results of
operations of each such Title IV Plan in accordance
with GAAP.
27
(vii) No reportable event (as defined in Section 4043 of
ERISA and in regulations issued thereunder) has
occurred with respect to any Title IV Plan.
(viii) Neither Acquiror nor any Acquiror Subsidiary has
knowledge of any facts or circumstances that may give
rise to any liability of Acquiror, any Acquiror
Subsidiary, Company, or the Bank, to the PBGC under
Title IV of ERISA.
(f) Absence of Certain Liabilities and Events. Except for matters
disclosed in Section 3.8(f) of the Acquiror Disclosure Schedule, there has been
no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Acquiror Plan. The Acquiror and
each of the Acquiror Subsidiaries has not incurred any liability for any excise
tax arising under Section 4972 or 4980B of the Code that would individually or
in the aggregate be a material adverse effect on the Acquiror and the Acquiror
Subsidiaries taken as a whole.
(g) Plan Contributions. All contributions, premiums or payments
required to be made prior to the Effective Time with respect to any Acquiror
Plan will have been made on or before the Effective Time.
SECTION 3.9 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on
Schedule 3.9, to Acquiror's knowledge, as of the date of this Agreement:
(a) The operations of Acquiror and Acquiror Subsidiaries comply and
have complied with all Environmental Laws; none of the Acquiror or any of its
subsidiaries' operations are the subject of, nor is the Acquiror or any Acquiror
Subsidiary a party to, any judicial or administrative proceeding, pending or
threatened, alleging the violation of any Environmental Laws; neither the
Acquiror nor any Acquiror subsidiary are the subject of a federal, state or
local investigation, pending or threatened, evaluating whether any remedial
action is needed to respond to a release of any Hazardous Substance; neither
Acquiror nor any Acquiror Subsidiary has arranged for the treatment or disposal
of any Hazardous Substance; and neither Acquiror nor any of its subsidiaries
have reported a spill, emission or release of a Hazardous Substance.
(b) Except as set forth on Schedule 3.9, all real property owned
directly by Acquiror and Acquiror Subsidiaries (the "Real Property") is in
compliance in all material respects with all Environmental Laws; neither
Acquiror nor the Acquiror Subsidiaries have any notice or knowledge regarding
the Real Property or its past use(s) which indicates noncompliance, or potential
noncompliance, with any Environmental Law; the Real Property is not subject to
any judicial or administrative proceedings alleging the violation of any
Environmental Law; the Real Property is not contaminated by any Hazardous
Substance; the Real Property is not the subject of a federal, state or local
investigation evaluating whether any remedial action is needed to respond to a
release, emission or discharge of any Hazardous Substance into the environment;
neither the Acquiror nor any Acquiror Subsidiary has transported any Hazardous
Substance to the Real Property or from the Real Property to any waste treatment,
storage or disposal facility; neither Acquiror nor any Acquiror Subsidiary has
arranged for the treatment or disposal of any Hazardous Substance; the Real
Property and buildings occupied by the Acquiror and Acquiror
28
subsidiaries contain no urea-formaldehyde insulation, asbestos or asbestos
by-products that are currently in a condition considered friable as that term is
used or defined in any Environmental Law, lead or regulated levels of PCBs; no
mold, mildew or other microorganisms are present in the buildings occupied by
the Acquiror Subsidiaries at levels that pose or have the potential to pose a
threat to human health; the Real Property contains no fill material; no
underground or above ground storage tanks are currently or were formerly located
at the Real Property; and the Real Property does not face any risk of
contamination by a Hazardous Substance from any nearby property.
SECTION 3.10 SHARES TO BE ISSUED IN MERGER. The Acquiror Common Stock,
which certain shareholders of the Company will be entitled to receive upon
consummation of the Merger pursuant to the terms of the Plan of Merger, will, at
the Effective Time, be duly authorized and will, when issued pursuant to the
Plan of Merger, be validly issued, fully paid and nonassessable (subject to the
limitations provided in Section 180.0622(2)(b) of the WBCL).
SECTION 3.11 BROKER'S FEES. Neither Acquiror, nor any of its
subsidiaries, nor any of their respective officers or directors, has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement.
SECTION 3.12 ACQUIROR INFORMATION. The information relating to Acquiror
and its subsidiaries provided to the Company for use in connection with, or
incorporated into, any materials related to its meeting of shareholders held for
the purpose of considering the Merger or to be included in the Registration
Statement (as defined in Section 6.01) will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein not misleading. The Registration Statement (except for such
portions thereof that relate only to the Company or any of its subsidiaries)
will comply in all material respects with the provisions of the Securities Act
of 1933, as amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations thereunder.
SECTION 3.13 SEC FILINGS. Acquiror has timely filed all registration
statements, prospectuses, forms, reports and documents and related exhibits
required to be filed by it under the Securities Act or the Exchange Act, as the
case may be, since January 1, 1999 (collectively, the "Acquiror SEC Filings")
except where a failure to have so filed would not have a material adverse effect
on the Acquiror. The Acquiror SEC Filings (a) were prepared, in all material
respects, in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (b) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Acquiror Subsidiary is subject to the periodic reporting
requirements of the Exchange Act.
SECTION 3.14 CONTINUITY OF BUSINESS ENTERPRISE. Acquiror has no
intention as of the date of execution of this Agreement of disposing of the
assets of the Company or the Bank, except in the normal course of business of
the Company and the Bank.
29
ARTICLE IV - COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with Acquiror as follows:
SECTION 4.1 REGISTRATION STATEMENT AND SHAREHOLDERS MEETING. The
Company shall cause the Company Shareholders' Meeting to be held after the
execution of this Agreement and upon availability of the Proxy
Statement/Prospectus (as defined in Section 2.15) for the purpose of acting upon
this Agreement and the Plan of Merger, and in connection therewith shall
distribute the Proxy Statement/Prospectus and any amendments or supplements
thereto and shall solicit proxies from its shareholders in accordance with
applicable law.
SECTION 4.2 CONDUCT OF BUSINESS, CERTAIN COVENANTS.
(a) From and after the execution and delivery of this Agreement and
until the Effective Time, the Company and Bank shall:
(i) conduct its and their business and operate only in the
usual and ordinary course of business in accordance with prudent and
sound banking practices;
(ii) maintain an allowance for loan losses determined by
application of Company Bank's policies and procedures on a basis
consistently applied from prior periods and representing management's
good faith estimate of reasonably expectable losses;
(iii) remain in good standing with all applicable federal and
state regulatory authorities and preserve each of its and their
existing banking locations;
(iv) use its and their best efforts (but without any
obligation to pay additional or increased compensation of any type) to
retain the services of its and their present officers and employees
identified by Acquiror, so that its and their goodwill and business
relationships with customers and others are not adversely affected;
(v) maintain usual and customary insurance covering the
performance of its and their duties by its and their directors,
officers, and employees and maintaining full force and effect all of
the insurance policies reflected on Schedule 2.31 hereto;
(vi) take no action which would adversely affect or delay the
ability of the Company or Acquiror to obtain any necessary approvals,
consents or waivers of any governmental authority required for the
transactions contemplated hereby; and
(vii) take no action which would cause the termination or
cancellation by the FDIC of insurance in respect of the Bank's
deposits.
(b) From and after the execution and delivery of this Agreement and
until the Effective Time, the Company and Bank shall not, without the prior
consent of Acquiror:
(i) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its or their capital
stock, or issue or grant any stock options, warrants,
30
rights, calls or commitments of any character calling for or permitting
the issue or sale of its or their capital stock (or securities
convertible into or exchangeable, with or without additional
consideration, for shares of such capital stock) or any stock
appreciation rights;
(ii) declare and/or pay any cash or non-cash dividend, or
institute any other form of dividend or distribution, with respect to
the Company's capital stock; except that the Company may pay a
preclosing dividend as provided in Section 6.12.
(iii) increase or reduce the number of shares of its or their
capital stock issued or outstanding by repurchase, split-up, reverse
split, reclassification, distribution of stock dividends, or change of
par or stated value;
(iv) acquire Company Common Stock, purchase, permit the
conversion of or otherwise acquire or transfer (other than in its role
as transfer agent for the Company Common Stock) for any consideration
any outstanding shares of its or their capital stock or securities
carrying the right to acquire, or convert into or exchange for such
stock, with or without additional consideration;
(v) make or grant any general or individual wage, bonus or
salary increase or fringe benefit increase (except the semiannual wage
increases effective May and November in the usual and ordinary course
of business and in accordance with past pay practices for employees who
are not executive officers or directors of the Company or Bank and
except that the Bank may pay `staying bonuses' to employees insofar as
such expenses are fully accrued as of the calculation of Interim
Earnings);
(vi) transfer or lease any of its or their assets or property
except in the ordinary course of business;
(vii) transfer or grant any rights under any leases, licenses
or agreements, other than in the usual and ordinary course of business;
(viii) make any payment to any director, officer, employee or
independent contractor, in connection with or as a result of the
transactions contemplated by this Agreement, or otherwise, that is not
deductible under either Sections 162(a)(1) or 404 of the Code or is not
an ordinary business expense for travel, meals or entertainment
authorized by the Company in furtherance of the duties of the director,
officer or employee;
(ix) not create or incur any liabilities, in a single
transaction or series of related transactions, in excess of $100,000
other than (i) the pending data processing contract with Xxxx Xxxxx &
Associates, Inc. (the "Xxxx Xxxxx Contract") and (ii) the taking of
deposits and other liabilities incurred in the ordinary course of
business or consistent with past practices, or permit or suffer the
imposition on any shares of stock held by it or by the Bank of any
material lien, charge or encumbrance;
(x) enter into or amend any continuing contract or series of
related contracts involving in excess of $50,000 for the purchase of
materials, supplies, equipment or services which cannot be terminated
without cause with less than ninety (90) days' notice
31
and without payment of any amount as a penalty bonus, premium or other
compensation for such termination except (i) the Xxxx Xxxxx Contract or
(ii) as contemplated or permitted by this Agreement;
(xi) adopt or amend in any material respect any collective
bargaining, employee pension, profit-sharing, retirement, employee
stock ownership, insurance, incentive compensation, severance,
vacation, stock option, or other plan, agreement, trust, fund or
arrangement for the benefit of employees, except as contemplated
herein;
(xii) amend their respective Articles of Incorporation,
Charters, or by-laws, except as contemplated by this Agreement;
(xiii) enter into, increase or materially modify any (A) loan
secured by lease receivables, (B) loan secured by commercial real
estate in an amount in excess of $500,000, or in any amount which, when
aggregated with any and all loans to the same borrower, would be in
excess of $1,000,000, (C) business loan in an amount in excess of
$500,000, or in any amount which, when aggregated with any and all
loans to the same borrower, would be in excess of $1,000,000, (D) loan
or credit commitment to (including letters of credit and including
investments in, or agreements to invest in) any person or entity who is
listed as a borrower on a "watch list" or similar internal report of
the Company or the Bank, (E) syndicated loan, shared national credit or
other loan participation, (F) other loan or credit commitment which is
secured by property located outside of their normal market area, or (G)
loan or credit commitment in an amount in excess of $500,000, or in any
amount which, when aggregated with any and all loans to the same
borrower would be in excess of $1,000,000. The failure by the Acquiror
to object to a proposed loan by the close of business of the second
business day following receipt of the pertinent credit file shall be
deemed consent to the loan;
(xiv) implement or adopt any material change in its interest
rate and other risk management policies, procedures or practices, fail
to follow its existing policies or practices with respect to managing
its exposure to interest rate and other risk, or fail to use
commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk;
(xv) change in any material respect any basic policies and
practices with respect to liquidity management and cash flow planning,
marketing, deposit origination, lending, budgeting, profit and tax
planning, personnel practices, accounting or any other material aspect
of its business or operations, except for such changes as may be
appropriate in the opinion of the Chief Executive Officer of the
Company or the Bank or other appropriate senior management of the
Company or the Bank, as the case may be, in each case to respond to
then current business, market or economic conditions or as may be
required by the rules of the AICPA or the FASB or by Governmental
Authorities or by law;
(xvi) knowingly or intentionally default under the terms of
any agreement to which the Company or the Bank is party;
32
(xvii) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties being
or becoming untrue in any material respect, or in any of the conditions
to the Merger set forth in Articles V, VI or VII not being satisfied,
or a violation of any provision of this Agreement, except, in every
case, as may be required by applicable law.
SECTION 4.3 INFORMATION, ACCESS THERETO. Upon 2 business days' advance
notice to the Company, Acquiror, Acquiror-Bank and its representatives and
agents shall, at reasonable times during normal business hours prior to the
Effective Time, have access to the facilities, employees, operations, records
and properties of the Company and Company Bank necessary to confirm and
facilitate the transactions contemplated by this Agreement. Upon request, the
Company and its Subsidiaries will furnish Acquiror or its representatives or
agents, its and their attorneys, responses to auditors' requests for information
and such financial and operating data and other information reasonably requested
by Acquiror, developed by the Company its auditors, accountants or attorneys,
and will permit Acquiror, its representatives or agents accompanied by a company
representative to discuss such information directly with any individual or firm
performing auditing or accounting functions for the Company.
SECTION 4.4 CONFIDENTIALITY. Company will cause all internal, nonpublic
financial and business information obtained by it from the Acquiror and Acquiror
Subsidiaries to be treated confidentially (exercising the same degree of care as
it uses to preserve and safeguard its own confidential information); provided,
however, that notwithstanding the foregoing, nothing contained herein shall
prevent or restrict Company from making such disclosure thereof as may be
required by law or as may be required in the performance of this Agreement.
Furthermore, Company shall have no obligation to keep confidential any
information that (a) was already known to Company and was received from a source
other than the Acquiror or any of its Subsidiaries, directors, officers,
employees or agents which is not otherwise subject to a confidentiality
agreement, or (b) is required to be disclosed to the SEC, the OTS, the FDIC, the
FRB or any other governmental agency or authority or regulatory authority, or is
otherwise required to be disclosed by law. If the Merger shall not be
consummated, all nonpublic financial statements, documents and materials and all
copies thereof shall be returned to the Acquiror or destroyed by Company and
shall not be used by Company in any way the Company reasonably believes would be
detrimental to the Acquiror.
SECTION 4.5 RECOMMENDATION OF MERGER TO SHAREHOLDERS. The Board of
Directors of the Company will, except in the event of termination of this
Agreement by the Company pursuant to Section 10.1(h), unanimously recommend in
the Proxy Statement/Prospectus approval of the Merger and all transactions
related thereto and such other matters as may be submitted in connection with
this Agreement, to all shareholders of the Company entitled to vote thereon.
SECTION 4.6 LITIGATION MATTERS. The Company will consult with Acquiror
about any proposed settlement or lack thereof, or any disposition of, any
litigation matter in which it or its Subsidiaries is or becomes involved as
defendant and the amount involved exceeds $25,000.
SECTION 4.7 NO SOLICITATION. From and after the date hereof until
termination of this Agreement, neither the Company, nor any of their respective
officers, directors, employees,
33
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company) will,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing nonpublic information or assistance), or take any other action
to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal;
provided, however, that the Company may provide third parties with nonpublic
information or, otherwise facilitate any effort or attempt by any third party
relating to any unsolicited Acquisition Proposal if the Company, after having
consulted with and considered the advice of outside counsel, has determined in
good faith that such actions are necessary to the discharge of the fiduciary
duties of the Company's Board of Directors. The Company shall notify Acquiror
orally (within one business day) and in writing (as promptly as practicable) of
all relevant details relating to all inquiries and proposals which it or any
such officer, director, employee, investment banker, financial advisor,
attorney, accountant or other representative may receive relating to any of such
matters and if such inquiry or proposal is in writing, the Company shall deliver
promptly to Acquiror a copy of such inquiry or proposal. For purposes of this
Agreement, "Acquisition Proposal" shall mean any of the following, or any
proposal of any of the following, involving the Company (other than the
transactions contemplated hereunder): (a) any merger, consolidation, share
exchange, business combination or other similar transaction; (b) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more
of the assets of the Company and Bank, taken as a whole, in a single transaction
or series of transactions; (c) any tender offer or exchange offer for 10% or
more of the outstanding shares of capital stock of the Company or the filing of
a registration statement under the Securities Act in connection therewith; or
(d) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 4.8 BEST EFFORTS. The Company agrees to use its reasonable best
efforts to cause the conditions contained in Articles VII, VIII and IX to be
satisfied and to effect the Merger.
ARTICLE V - COVENANTS OF THE ACQUIROR
SECTION 5.1 AFFIRMATIVE COVENANTS. The Acquiror hereby covenants and
agrees with the Company that prior to the Effective Time, unless the prior
written consent of the Company shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Acquiror Subsidiary to:
(a) operate its business only in the ordinary course consistent with
past practices:
(b) take such reasonable actions as are requested by the Company to
complete the Merger.
SECTION 5.2 NEGATIVE COVENANTS. Except as otherwise contemplated by
this Agreement, from the date of this Agreement until the Effective Time, the
Acquiror shall not do, or agree to commit to do, or permit any Acquiror
Subsidiaries to do, without the prior written consent of the Company any of the
following:
34
(a) declare or pay any extraordinary or special dividends on or make
any other extraordinary or special distributions in respect of any of its
capital stock unless appropriate adjustment or adjustments are made to the
Exchange Ratio as set forth in Section 1.6 hereof;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Articles VII and VIII not being satisfied, or in a
violation of any provision of this Agreement except, in every case, as may be
required by applicable Law;
(c) take or cause to be taken any action, or omit to take any action,
which as a result would disqualify the Merger as a tax free reorganization under
Section 368 of the Code:
(d) amend its Articles of Incorporation or By-Laws or other governing
instrument in a manner which would adversely affect in any manner the terms of
the Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby; or
(e) agree in writing or otherwise to do any of the foregoing.
SECTION 5.3 NOTICE REGARDING BREACHES.
The Acquiror shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to the Company and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.4 TAX TREATMENT. The Acquiror will use its best efforts to
cause the Merger to qualify as a reorganization under Section 368 of the Code.
SECTION 5.5 SEC FILINGS. The Surviving Corporation shall make all
filings with the SEC that are described in subsection (c) of Rule 144 under the
Securities Act for a period of two years following the Effective Time. The
provisions of this Section 5.5 are intended to be for the benefit of, and shall
be enforceable by, each Affiliate and his or her heirs and representatives (it
being expressly agreed that each such person to whom this Section 5.5 applies
shall be a third-party beneficiary of this Section 5.5).
SECTION 5.6 CONFIDENTIALITY. Acquiror will cause all internal,
nonpublic financial and business information obtained by it from the Company and
Company to be treated confidentially (exercising the same degree of care as it
uses to preserve and safeguard its own confidential information); provided,
however, that notwithstanding the foregoing, nothing contained herein shall
prevent or restrict Acquiror from making such disclosure thereof as may be
required by law in connection with the offering and sale of Acquiror Common
Stock pursuant to this Agreement or as may be required in the performance of
this Agreement. Furthermore, Acquiror shall have no obligation to keep
confidential any information that (a) was already known to Acquiror and was
received from a source other than the Company or any of its Subsidiaries,
directors, officers, employees or agents which is not otherwise subject to a
35
confidentiality agreement, or (b) is required to be disclosed to the SEC, the
OTS, the FDIC, the FRB or any other governmental agency or authority or
regulatory authority, or is otherwise required to be disclosed by law. If the
Merger shall not be consummated, all nonpublic financial statements, documents
and materials and all copies thereof shall be returned to the Company or
destroyed by Acquiror and shall not be used by Acquiror in any way the Acquiror
reasonably believes would be detrimental to the Company.
SECTION 5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director, officer or employee of the Company or the Bank (including in his/her
role as a fiduciary of the employee benefit plans of the Company or the Bank, if
applicable) (the "Indemnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee of
the Company, the Bank or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and use their best efforts to defend against and respond thereto.
It is understood and agreed that for a period of six (6) years from and after
the Effective Time, the Acquiror shall indemnify and hold harmless, to the
fullest extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel satisfactory to them; provided,
however, that (A) Acquiror shall have the right to assume the defense thereof
and upon such assumption the Acquiror shall not be liable to any indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if the Acquiror elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between the Acquiror and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Acquiror shall
pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (B) Acquiror shall in all cases be obligated pursuant to this Section
5.7 (a) to pay for only one firm of counsel for all Indemnified Parties, (C)
Acquiror shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and (D)
Acquiror shall have no obligation hereunder to any Indemnified party when and if
a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that indemnification of
such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 5.7, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Acquiror thereof,
36
provided that the failure to so notify shall not affect the obligations of the
Acquiror under this Section 5.7 except to the extent such failure to notify
materially prejudices the Acquiror.
(b) The Surviving Corporation shall purchase, and for a period of up to
six (6) years after the Effective Time maintain in effect directors and officers
liability insurance coverage with respect to wrongful acts and/or omissions
committed or allegedly committed by any of the officers or directors of the
Company prior to the Effective Time ("D&O Coverage"). In the event the Acquiror
or the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of the Acquiror or the Surviving
Corporation, as the case may be, assume the obligations set forth in this
section.
(c) In addition to the other indemnification obligations set forth in
this Section 5.7, the Acquiror will indemnify directors and officers of the
Company and the Bank to the same extent as provided in the Company Articles and
Bylaws as if they were to continue to exist and apply to the directors and
officers of the Company and Bank for six (6) years from the Effective Time.
(d) The provisions of this Section 5.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives, it being expressly agreed that each such officer,
director or employee to whom this Section 5.7 applies shall be a third-party
beneficiary of this Section 5.7.
ARTICLE VI - ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 6.1 REGULATORY MATTERS.
(a) Shares of Acquiror Common Stock to be issued in the Merger will be
issued to Company shareholders as a private placement based on available
exemptions from registration under the Securities Act of 1933, as amended, and
applicable state securities laws. The Acquiror shall prepare and file with the
SEC within thirty (30) days of the Effective Time a registration statement on
Form S-3 covering the resale of shares of Acquiror Common Stock to be issued
pursuant to the Plan of Merger (the "Registration Statement"), and the Company
shall give to Acquiror all information concerning the Company which is required
for inclusion in the Registration Statement. Each of the Acquiror and the
Company shall use its best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing.
Until the Registration Statement is declared effective, Shareholders of the
Company shall have piggyback registration rights with respect to their shares of
Acquiror Common Stock pursuant to a Registration Rights Agreement to be entered
into in the form of Exhibit 6.1 hereto.
(b) The Acquiror shall prepare and submit all applications, notices and
statements with the appropriate regulatory agencies and governmental entities to
obtain the Requisite Regulatory Approvals (as defined in Section 7.1) for
approval of the transactions contemplated by this Agreement.
37
(c) Within forty-five (45) days of the date hereof, the parties hereto
shall cooperate with each other and use their reasonable best efforts to
promptly prepare and file all necessary documentation, effect all applications,
notices, petitions and filings, and obtain as promptly as practicable all
Requisite Regulatory Approvals, permits, consents, approvals and authorizations
of all third parties, regulatory agencies and governmental entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. The Company and Acquiror shall have the right to review in advance,
and to the extent practicable each will consult the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information relating to the Company or Acquiror, as the case may be, and any of
their respective subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party, regulatory agency or governmental
entity in connection with the transactions contemplated by this Agreement;
provided, however, that nothing contained herein shall be deemed to provide
either party with a right to review any information provided to any regulatory
agency or governmental entity on a confidential basis in connection with the
transactions contemplated hereby. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable.
(d) Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Registration Statement or any other
statement, filing, notice or application made by or on behalf of Acquiror, the
Company or any of their respective subsidiaries to any regulatory agency or
governmental entity in connection with the Merger and the other transactions
contemplated by this Agreement.
(e) The Acquiror and the Company shall promptly advise each other upon
receiving any communication from any regulatory agency or governmental entity
whose consent or approval is required for consummation of the transactions
contemplated by this Agreement which causes such party to believe that there is
a reasonable likelihood that the Requisite Regulatory Approval (as defined in
Section 7.1) will not be obtained or the receipt of any such approval will be
materially delayed.
SECTION 6.2 LEGAL CONDITIONS TO MERGER. Each of Acquiror and the
Company shall, and shall cause their subsidiaries to, use their best efforts (a)
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its subsidiaries with respect to the Merger and, subject to the conditions
set forth in Articles VII, VIII and IX hereof, to consummate the transactions
contemplated by this Agreement, and (b) to obtain (and to cooperate with the
other party to obtain) any Requisite Regulatory Approvals, consent,
authorization, order or approval of, or any exemption by, any governmental
entity and any other third party which is required to be obtained by the Company
or Acquiror or any of their respective subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement.
SECTION 6.3 SUBSEQUENT FILINGS; PRESS RELEASES. As soon as reasonably
available, but in no event more than three business days after the filing
thereof with the SEC, Acquiror will deliver to the Company its Forms 8-K, 10-Q,
10-K, and proxy, as filed with the SEC under the Exchange Act. In addition, from
and after the date of this Agreement through the
38
Effective Time, the Company shall promptly deliver to Acquiror, but in no event
more than three business days after filing or mailing, copies of all press
releases issued by it or the Bank, together with copies of all filings or
submissions to any regulatory agency, and copies of all communications with
shareholders (including copies of the notice, proxy statement and accompanying
materials prepared in connection with any meeting of the Company's shareholders,
including the meeting to be held to consider and vote upon approval of the
transactions contemplated by this Agreement).
SECTION 6.4 ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, or to vest the Acquiror with full title to all
properties, assets, rights, approvals, immunities and franchises of the Company
or the Bank, the proper officers and directors of each party to this Agreement
and their respective subsidiaries shall take all such necessary action as may be
requested by Acquiror.
SECTION 6.5 ADVICE OF CHANGES. The Acquiror and Company shall each
promptly advise the other of any change or event having a material adverse
effect (or in the case of the Company, an Adverse Change in the Company) on it
or which it believes would or would be reasonably likely to cause or constitute
a material breach of any of its representations, warranties or covenants
contained herein. From time to time prior to the Effective Time, the Acquiror
and Company will promptly supplement or amend the Disclosure Schedules delivered
in connection with the execution of this Agreement to reflect any matter which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedules or which is
necessary to correct any information in such Disclosure Schedules which has been
rendered inaccurate thereby.
SECTION 6.6 CURRENT INFORMATION. During the period from the date of
this Agreement to the Effective Time, the Company will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of Acquiror and to report (a) the general
status of the ongoing operations of the Company and the Bank, and (b) the status
of those loans held by the Company or the Bank which, individually or in
combination with one or more other loans to the same borrower thereunder, have
an unpaid principal amount of $300,000 or more and are non-performing assets.
The Company will promptly notify Acquiror of any Adverse Change in the Company.
SECTION 6.7 TERMINATION OF REGULATORY AGREEMENTS. The Company and the
Company Bank shall cause all regulatory agreements to which the Company or
Company Bank is or becomes subject to be terminated and to be of no further
force and effect at or prior to the Effective Time.
SECTION 6.8 TAX RETURNS. The Acquiror shall prepare and file any tax
returns on behalf of the Company with respect to the Merger; provided, however,
that the Company shall prepare and file, as approved or as may be directed by
Acquiror, any tax returns on behalf of the Company due prior to the Effective
Time.
SECTION 6.9 COMPENSATION AND BENEFIT PLANS; EXISTING AGREEMENTS. Except
with respect to the qualified plans of Acquiror and as otherwise provided
herein, the Employees of the
39
Company and its Subsidiaries (the "Employees") shall be entitled to participate
in Acquiror's employee benefit plans in which similarly situated employees of
Acquiror participate, to the same extent as comparable employees of Acquiror. As
soon as administratively practicable after the Effective Time, Acquiror shall
permit the Employees to participate in Acquiror's group hospitalization,
medical, life and disability insurance plans, severance plan and similar plans
on the same terms and conditions as applicable to comparable employees of
Acquiror (including the waiver of pre-existing condition prohibitions), giving
effect to years of service with the Company and Bank (to the extent the relevant
Company Plans gave effect) as if such service were with Acquiror, for purposes
of eligibility and vesting, but not for benefit accrual purposes (except as
regards to vacation, severance and short-term disability accruals). Acquiror
shall permit Employees to participate in the tax-qualified retirement plans of
the Acquiror as soon as administratively feasible following the effective date,
giving effect to years of service with the Company and Bank (to the extent the
relevant Company Plans gave effect) as if such service were with Acquiror for
purposes of eligibility and vesting, but not for benefit accrual purposes.
Notwithstanding anything in this Section 6.9 to the contrary, participation by
the Employees in employee benefit plans and programs of Acquiror with respect to
which eligibility for employees of Acquiror to participate is at the discretion
of Acquiror, shall also be at the sole discretion of Acquiror. Also
notwithstanding anything in this Section 6.9 to the contrary, Acquiror shall
have sole discretion with respect to the determination as to whether to
terminate, merge or continue any Company Plans; provided, however, that Acquiror
shall continue to maintain Company Plans until the Employees are permitted to
participate in Acquiror's plans. At the Effective Time, Acquiror or an Acquiror
Subsidiary shall be substituted for the Company as the sponsoring employer under
those Company Plans with respect to which the Company or the Bank is a
sponsoring employer immediately prior to the Effective Time, and shall assume
and be vested with all of the powers, rights, duties, obligations and
liabilities previously vested in the Company with respect to each such Company
Plan.
SECTION 6.10 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. The Company
agrees to utilize its best efforts to cause its Employees identified on Exhibit
6.10 to accept continued employment with the Acquiror. In addition to the
Employees identified on Schedule 6.10, Messrs. Xxxxx and Xxxxxxx agree to accept
employment with the Acquiror at their current levels of compensation from the
Effective Time through December 31, 2004, pursuant to the terms of the
Employment Agreements attached hereto as Exhibits 6.10A and B; provided,
further, that Messrs. Xxxxx and Xxxxxxx also agree to enter into, as of the
Effective Date, post-employment consulting and/or non-compete agreements,
binding for a period of twenty-four (24) months following the dates of their
respective terminations of employment, as attached hereto as Exhibits 6.10C and
D.
SECTION 6.11 ESTABLISHMENT OF ESCROW ACCOUNT. Upon execution of the
Agreement, Acquiror and Company shall each deposit $250,000 into an escrow
account (the escrow deposits, together with interest thereon, on hereinafter
referred to as the "Escrow Account" to be maintained by a third-party escrow
agent selected by Acquiror and acceptable to the Company. Upon completion of the
Merger such escrow deposits shall be paid, with interest, to the Surviving
Corporation. If this Agreement is terminated prior to completion of the Merger
pursuant to Section 10.1(a), or if the Merger is not completed October 31, 2003
(or by such extended date as may be agreed to by the parties), and if neither
party is at such time entitled to a distribution of the Escrow Account under
Section 10.4, the respective escrow deposits shall be
40
returned, with interest, to the respective depositors. In the event of a breach
or other termination of this Agreement as provided in Section 10.4, the Escrow
Account shall be dispersed as provided therein.
SECTION 6.12 DETERMINATION OF INTERIM EARNINGS. There shall be included
in the Consideration an amount equal to 100% of the combined earnings of the
Company and Bank from January 1, 2003, through the Effective Time (the "Interim
Earnings"). The combined earnings of the Company and Bank as determined for
Interim Earnings purposes shall be calculated in all respects in accordance with
the Company and Bank's past practice and generally accepted accounting
principles, and shall in addition be adjusted to reflect the tax-adjusted impact
of the following (i) assets (exclusive of loans and leases incurred in the
ordinary course) of questionable or doubtful value, (ii) all amounts in excess
of $150,000 relating to the acquisition or pending acquisition by the Company or
Company-Bank of new software, and/or related data processing components and
which are or are expected to be forfeited or rendered valueless as a result of
the cancellation or other discontinuance of the Company-Bank's present data
processing contract or arrangement as a result of the Bank-Merger, (iii) to the
extent they exceed $20,000.00 as of the last day of the month preceding the
Effective Time, the total of (A) amounts deemed uncollectable from deposit
customers, (B) unidentified account reconciling items, and/or (C) differences
between the Company or Company-Bank's primary books of record and its supporting
system balances, (iv) an accrual of $165,206 with respect to the Bank's defined
benefit pension plan (made as of March 31, 2003), together with an accrual of
$11,172 per month from January 1, 2003 (prorated through the Effective Time for
the month in which Closing occurs), (v) loan loss provisions necessary to
maintain the Company Bank's allowance for loan loss at the greater of $2,624,000
or 1.00% of gross loans and leases outstanding as of the last day of the month
preceding the Effective Time (with gross loans and leases outstanding being
defined for purposes of this section as the amount which would otherwise appear
on Line 4b of Schedule HC of Form FR Y-9C), and (vi) all paid and accrued costs
and expenses of the Company and Bank with respect to the Merger and any tax
liability arising therefrom. The Company shall provide the Acquiror with a copy
of the calculations made to arrive at the amount of the Interim Earnings within
ten (10) business days following the Effective Time.
SECTION 6.13 ESCROW EXCHANGE FUND. The Acquiror shall establish by
deposit with the Exchange Agent an Escrow Exchange Fund equal to $2,500,000
withheld from the amount of cash to be paid to Company shareholders based on (i)
the Interim Earnings as estimated through the last day of the month preceeding
the Effective Time, and (ii)the Consideration Election Schedule (exclusive of
any cash amount payable on account of fractional shares). Upon verification by
Acquiror as to the calculation of the Interim Earnings (which verification shall
be of the estimated Interim Earnings through the last day of the month
preceeding the Effective Time and of any additional Interim Earnings from such
date through the Effective Time (the "Stub Earnings")), there shall be paid
within ninety (90) days of the Effective Time (the "Initial Escrow
Distribution"), prorata to those former Company shareholders having an interest
therein, together with their prorata shares of interest earned on the Initial
Escrow Distribution, any portion of the Escrow Exchange Fund in excess of
$1,250,000, plus verified Stub Earnings; provided, that the Company-sponsored
employee stock ownership plan and the BRAAI Profit Sharing Plan shall, to the
extent they elect so to do, receive the full amount of their prorata interest in
the Escrow Exchange Fund (subject to any verification or other adjustment made
within the ninety (90) day period following the Effective
41
Time) as part of the Initial Escrow Distribution; and further provided that if
such distributions, including the distributions to the aforesaid stock ownership
and profit sharing plans, would reduce the remaining Escrow Exchange Fund
balance to below $1,000,000, the other distribution recipients shall have their
distributions reduced pro-rata to the extent necessary to maintain said Escrow
Exchange Fund balance at not less than $1,000,000. The Initial Escrow
Distribution may be further reduced (or delayed beyond ninety (90) days to
determine whether any further reduction is required) (i) if Acquiror reasonably
believes there has been a breach of a representation or warranty made by the
Company and/or Bank pursuant to Article II hereof, or (ii) pursuant to Section
6.15 and/or 6.16. The amount of the Initial Escrow Distribution delayed may not
exceed Acquiror's reasonable estimate of the cost to it of the breach (or
believed breach) in question together with any amount delayed pursuant to
Sections 6.15 and/or 6.16.
Within thirty (30) days of expiration of the Company and/or Bank's
representations and warranties under Article II, Acquiror shall distribute
(subject to any delay pursuant to Section 6.15 and/or 6.16) to those former
Company shareholders having an interest in the Escrow Exchange Fund their
respective remaining prorata interests, together with their prorata shares of
interest earned on the Escrow Exchange Fund prior to distribution (the "Final
Distribution"). The amount of such Final Distribution shall be adjusted to
reflect Acquiror's reasonable estimate of the cost to it of any breach (or
believed breach) of the Company and/or Bank's representations and warranties
under Article II and/or potential costs or exposures under Sections 6.15 and/or
6.16.
In the event Acquiror believes there has been any breach of a
representation or warranty requiring adjustment of the Initial Distribution or
Final Distribution hereunder, it shall give each affected former shareholder of
the Company notice of the breach or alleged breach and an estimate of the
anticipated cost to Acquiror. If former Company shareholder's representing the
majority of the balance of the Escrow Exchange Fund object to the adjustment
proposed by Acquiror within ten (10) days of receipt of notice from Acquiror, it
is agreed that the issues of the breach or alleged breach and of the proposed
adjustment will be submitted for determination by KPMG, Peat Marwick or other
independent accounting firm agreed upon by the parties; in such event, Acquiror
shall promptly cooperate with reasonable requests by the Shareholders for
information, documents and files of the Company or Bank relating to the proposed
adjustment.
The Aquiror shall give the former Company shareholders at least ten
(10) business days' notice of any settlement or compromise proposed in
connection with the litigation under Section 6.16, which, if effected, would
result in a claim by Acquiror against the Escrow Exchange Fund. If former
Company Shareholders representing the majority of the Escrow Exchange Fund
object to such settlement or compromise within the ten (10) day period by notice
in writing to Acquiror, they shall be entitled to assume, direct and control the
defense of the Bank in the proceeding. In such event, the Shareholders shall
additionally be liable to Acquiror for the amount by which actual costs,
expenses, damage and compensation awards exceed the proposed settlement or
compromise.
SECTION 6.14 EMPLOYEE SEVERANCE PROTECTION. Acquiror shall make
available to any Company or Bank regular full-time employee (or any regular
part-time employee scheduled to work at least twenty (20) hours per week)
terminated within twelve (12) months of the Effective Time and other than for
cause (as determined in accordance with Acquiror's normal
42
employment practices), severance pay in an amount equal to one (1) week of
regular base pay for each full year of service with the Company or Bank, with a
minimum of two (2) and a maximum of thirteen (13) weeks of pay. Acquiror will
not, for a period of twelve (12) months from the Effective Time terminate any
Company or Bank employee except (i) for cause, or (ii) upon a review of the
employee's job function by Messrs. Xxxxx and Xxxxx and reasonable agreement
between them that the position occupied by such employee has become largely
unnecessary or redundant as a result of consolidations and/or efficiencies
arising from the Merger, and there are no other suitable positions available.
SECTION 6.15 ENVIRONMENTAL INVESTIGATION.
(a) Acquiror has received a preliminary ("Phase I") environmental
assessment of owned real estate used in the operation of the businesses of the
Company and any Company Subsidiaries, and of other real estate owned by the
Company or Company Subsidiaries (the "Properties"), and will engage an
environmental consultant to conduct a further Phase II and asbestos assessment.
The Company shall fully cooperate with Purchaser to provide the consultant
reasonable access to the premises under assessment.
(b) If any environmental conditions are found or tend to be indicated
by the Phase II report of the consultant which indicate a necessity for work
plans, removal or remediation actions with respect to the Properties and which
are estimated to have a potential cost of more than $350,000 (individually or in
the aggregate) Acquiror may postpone Escrow Exchange Fund distributions to the
extent it determines to be reasonably necessary to protect itself from the
amount of potential costs in excess of $350,000.
SECTION 6.16 PENDING LITIGATION. The Bank is named as a defendant in a
civil action (County Court File No. 62-C6-02-003294) filed in Xxxxxx County,
Minnesota (the "Action"). While the Bank believes such case is without merit, it
is agreed that in the event Acquiror (as successor to the Bank) becomes liable
for costs, expenses, or for any award of damages, or compensation of any type or
nature in connection with the Action, Acquiror may deduct such amounts from the
Final Distribution to be made from the Escrow Exchange Fund. Acquiror may not
defer distribution of amounts from the Escrow Exchange Fund beyond the Final
Distribution date on account of the Action, unless there is an outstanding
judgment against the Bank which remains unsatisfied or is on appeal (in which
case Acquiror may defer an amount equal to whichever is applicable of (i) the
amount of unsatisfied judgment plus costs, or (ii) the amount of the judgment on
appeal plus anticipated costs).
43
ARTICLE VII - CONDITIONS OF MERGER
Conditions to Obligations of Each of the Parties
SECTION 7.1 REGULATORY APPROVALS. Except for necessary Bank Merger
approvals, the parties hereto shall have received all regulatory approvals,
consents and waivers required to consummate the transactions contemplated by
this Agreement from the appropriate regulatory agencies and governmental
entities, including the OTS, the FDIC, the FRB, the MDC, and any other state and
banking authorities, and each such approval shall remain in full force and
effect and all statutory waiting periods in connection therewith shall have
expired and such approvals and the transactions contemplated thereby shall not
have been contested by any federal or state governmental authority or any other
third party by formal proceeding; provided, however, that no approval, consent
or waiver shall be deemed to have been received if it shall include any
condition or requirement that, in the reasonable opinion of the Acquiror, would
so adversely affect the economic or business benefits of the transactions
contemplated by this Agreement to Acquiror so as to render inadvisable the
consummation of the Merger (all such approvals and expiration of applicable
waiting periods referred to as "Requisite Regulatory Approvals").
SECTION 7.2 FEDERAL TAX OPINION. The Company and Acquiror shall have
received from Xxxxxxx Xxxx & Xxxxxxxxx L.L.P., an opinion, dated the Effective
Time, in form and substance reasonably satisfactory to the Company and Acquiror,
to the effect that, on the basis of the facts, representations and assumptions
set forth in such opinion, (a) the Merger will for federal income tax purposes
constitute a reorganization within the meaning of Section 368, or any successor
thereto, of the Code and the Acquiror and Company are parties to a
reorganization within the meaning of Section 368(b) of the Code, and (b) that,
except with respect to holders of Company Common Stock who exercise dissenters'
rights or receive cash in exchange for their shares and except for cash payments
in lieu of a fractional share interest, (i) no gain or loss will be recognized
by a holder of Company Common Stock upon conversion in the Merger of Company
Common Stock into Acquiror Common Stock, (ii) the basis of Acquiror Common Stock
to be received in the Merger by a holder of Company Common Stock will be the
same as such holder's basis in the Company Common Stock exchanged therefor, and
(iii) the holding period of Acquiror Common Stock to be received in the Merger
by a holder of Company Common Stock will include the period during which such
holder held the Company Common Stock exchanged therefor, provided that such
Company Common Stock was held as a capital asset immediately prior to the
consummation of the Merger. In rendering such opinion, Xxxxxxx Xxxx & Friedrich
may rely upon representations contained in certificates of officers of Acquiror,
the Company and others.
SECTION 7.3 ORDERS, DECREES AND JUDGMENTS. Consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or governmental body having competent jurisdiction. No
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger or any of the other transactions contemplated by this Agreement
shall be in effect. No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any governmental
entity which prohibits, materially restricts or makes illegal the consummation
of the Merger.
44
ARTICLE VIII - FURTHER CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the transactions contemplated by
this Agreement is further subject to the satisfaction of the following
conditions:
SECTION 8.1 COMPLIANCE BY ACQUIROR. (a) All the terms, covenants and
conditions of this Agreement required to be complied with and satisfied by
Acquiror at or prior to the Effective Time shall have been duly complied with
and satisfied in all material respects, and (b) the representations and
warranties made by the Acquiror, as may be updated pursuant to Section 6.5
hereof, shall be true and correct in all material respects at and as of the
Effective Time, except for those specifically relating to a time or times other
than the Effective Time (which shall be true and correct in all material
respects at such time or times), with the same force and effect as if made at
and as of the Effective Time. The Company shall have received a certificate
signed on behalf of the Acquiror by the Chief Executive Officer and the Chief
Financial Officer to the foregoing effects..
SECTION 8.2 OPINION OF COUNSEL. There shall have been delivered and
addressed to the Company an opinion of Xxxxxxx Xxxx & Xxxxxxxxx, substantially
in the form attached as Exhibit 8.2, dated as of the Closing Date.
SECTION 8.3 OFFICERS' CERTIFICATE. Acquiror shall deliver to the
Company a certificate signed by its President or any Senior Vice President and
by its Secretary or Assistant Secretary, dated the Closing Date, certifying to
his or her respective best knowledge and belief, that Acquiror has met and
complied with all conditions necessary to make this Agreement and the Plan of
Merger effective as to it.
SECTION 8.4 LITIGATION. Acquiror shall not be made a party to, or to
the knowledge of Acquiror threatened by, any actions, suits, proceedings,
litigation or legal proceedings which, in the reasonable opinion of the Company,
have or are likely to have a material adverse effect on the consolidated assets,
properties, business, operations or condition, financial or otherwise, of
Acquiror. No action, suit, proceeding or claim shall have been instituted, made
or threatened by any person relating to the Merger or the validity or propriety
of the transactions contemplated by this Agreement or the Plan of Merger which
would make consummation of the Merger inadvisable in the reasonable opinion of
the Company.
SECTION 8.5 ACQUIROR CHANGES. Acquiror shall not have suffered any
material adverse change in its business, financial condition, operating results
or prospects as determined in the reasonable opinion of the Company and its
outside counsel.
ARTICLE IX - FURTHER CONDITIONS TO THE OBLIGATIONS OF ACQUIROR
The obligation of Acquiror to consummate the transactions contemplated by this
Agreement is further subject to the satisfaction of the following conditions:
SECTION 9.1 COMPLIANCE BY THE COMPANY. (a) All the terms, covenants and
conditions of this Agreement required to be complied with and satisfied by the
Company at or prior to the Effective Time shall have been duly complied with and
satisfied, and (b) the
45
representations and warranties made by the Company, as may be updated pursuant
to Section 6.5 hereof, shall be true and correct at and as of the Effective
Time, except for those specifically relating to a time or times other than the
Effective Time (which shall be true and correct at such time or times), with the
same force and effect as if made at and as of the Effective Time. The Acquiror
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer to the foregoing effects.
SECTION 9.2 ACCURACY OF FINANCIAL STATEMENTS. Except for matters
described on Schedule 2.11(b), the Company Financial Statements and Subsequent
Company Financial Statements heretofore or hereafter furnished to Acquiror shall
not be inaccurate in any material respect.
SECTION 9.3 NET WORTH. The Company's net worth (exclusive of any FASB
115 adjustment), as of the Effective Time, shall not be less than $35,129,862.
The Company shall deliver to Acquiror a certificate signed by its Chief
Financial Officer, dated the Closing Date, certifying to such effect.
SECTION 9.4 SUFFICIENCY OF DOCUMENTS, PROCEEDINGS. All documents
delivered by and proceedings of the Company in connection with the transactions
contemplated by this Agreement and the Plan of Merger shall be reasonably
satisfactory to Acquiror.
SECTION 9.5 OPINION OF COUNSEL. There shall have been delivered and
addressed to Acquiror an opinion of Xxxxxxxxx & Xxxxxx PLLP, legal counsel to
the Company, substantially in the form attached as Exhibit 9.5, dated the
Closing Date.
SECTION 9.6 OFFICERS' CERTIFICATE. Company shall deliver to the
Acquiror a certificate signed by its President or any Senior Vice President and
by its Secretary or Assistant Secretary, dated the Closing Date, certifying to
his or her respective best knowledge and belief, that the Company has met and
complied with all conditions necessary to make this Agreement and the Plan of
Merger effective as to it.
SECTION 9.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. As of the Closing
Date, there shall have been no "Adverse Change in the Company" (as defined
below) from that which was represented and warranted on the date of this
Agreement pursuant to this Agreement and the Schedules provided on the date of
this Agreement, it being understood that no update provided pursuant to any
other Section of this Agreement shall constitute a waiver or other consent to
any Adverse Change in the Company. For purposes of this Agreement, an "Adverse
Change in the Company" shall mean an effect or effects or change or changes
which have occurred or may occur between the date of this Agreement and the
Effective Time and result in or cause (a) any material adverse change in the
business, financial condition, operating results or prospects of the Company and
the Bank; or (b) the existence of any pending or threatened litigation or
administrative action which (i) creates any reasonable possibility that the
Company or the Bank may incur a material loss that has not been reserved
against; (ii) challenges any portion of the Merger and which, in the reasonable
opinion of Acquiror, would be likely to enjoin consummation, or result in
rescission, of any part of the Merger; or (iii) Acquiror's board of directors
reasonably determines, in the exercise of its fiduciary duty, would be so
materially
46
adverse as to render consummation of the Merger adverse to the best interests of
Acquiror's shareholders.
SECTION 9.8 LITIGATION. Company shall not be made a party to, or to the
knowledge of Company threatened by, any actions, suits, proceedings, litigation
or legal proceedings which, in the reasonable opinion of the Acquiror, have or
are likely to result in an Adverse Change in the Company. No action, suit,
proceeding or claim shall have been instituted, made or threatened by any person
relating to the Merger or the validity or propriety of the transactions
contemplated by this Agreement or the Plan of Merger which would make
consummation of the Merger inadvisable in the reasonable opinion of the
Acquiror.
SECTION 9.9 BANK MERGER AGREEMENT. The Bank Merger shall have been duly
authorized and approved by the Bank and the other terms and conditions of the
Bank Merger, except for receipt of necessary regulatory approvals (which may
have been obtained, but receipt of which as of the Effective Time of the Merger
shall not be required) shall have been satisfied so as to permit the Bank Merger
to be consummated as contemplated thereby.
SECTION 9.10 CONSENTS UNDER AGREEMENTS. The consent, approval or waiver
of each person whose consent or approval shall be required in order to permit
the succession by the Surviving Corporation pursuant to the Merger or by the
Acquiror - Bank pursuant to the Bank Merger to any obligation, right or interest
of the Company or any of its Subsidiaries under any loan or credit agreement,
note, mortgage, indenture, lease, license or other agreement or instrument shall
have been obtained, except where the failure to obtain such consent, approval or
waiver would not materially adversely affect the economic or business benefits
of the transactions contemplated by this Agreement to Acquiror.
SECTION 9.11 APPROVAL BY AFFIRMATIVE VOTE OF SHAREHOLDERS; EXERCISE OF
DISSENTERS' RIGHTS. This Agreement and the Plan of Merger shall have been duly
approved, confirmed and ratified by the requisite majority vote of the
shareholders of the Company. In addition, there shall not be more holders of
Company Common Stock that have properly exercised their dissenters' rights as of
the Effective Time then can be satisfied by payment in cash (assuming payment in
cash for the Shares held by the Company-sponsored employee stock ownership plan
and after prorata adjustment of the elections evidenced on the Consideration
Election Schedule attached as Schedule 1.6 hereto) without exceeding the maximum
forty percent (40%) of Consideration limit applicable to cash.
SECTION 9.12 AGREEMENTS OF AFFILIATES. As soon as practicable after the
date of mailing of the Proxy Statement/Prospectus, the Company shall deliver to
Acquiror a letter identifying all persons who the Company believes to be, at the
time this Agreement is submitted to a vote of the shareholders of the Company,
"affiliates" of the Company for purposes of `Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each person who is identified as
an "affiliate" in the letter referred to above to deliver to Acquiror prior to
the Effective Time a written agreement, in substantially the form attached
hereto as Exhibit 9.12, providing that teach such person will agree not to sell,
pledge, transfer or otherwise dispose of the shares of Acquiror Common Stock to
be received by such person in the Merger (i) (except in compliance with the
applicable provisions of the Securities Act, and (ii) in any event, not to sell,
47
transfer (except by will or descent) more than fifty percent (50%) of such
Acquiror Common Stock within the first twelve (12) months following the
Effective Time.
ARTICLE X - TERMINATION AND AMENDMENT
SECTION 10.1 TERMINATION. This Agreement may be terminated and the Plan
of Merger abandoned at any time prior to the filing of the Articles of Merger
(whether before or after approval of this Agreement and the Plan of Merger by
the shareholders of the Company):
(a) by written agreement between Acquiror and the Company authorized by
a majority of the entire Board of Directors of each;
(b) by Acquiror, provided Acquiror has used its best efforts to ensure
that all of the conditions set forth in Articles VII and VIII have been
fulfilled, if any of the conditions set forth in Articles VII or IX hereof shall
not have been fulfilled and shall not have been waived or shall have become
impossible of fulfillment;
(c) by the Company, provided the Company has used its best efforts to
ensure that all of the conditions set forth in Articles VII and IX have been
fulfilled, if any of the conditions set forth in Articles VII or VIII hereof
shall not have been fulfilled and shall not have been waived or shall have
become impossible of fulfillment;
(d) by either Acquiror or the Company if the Merger is not consummated
on or before October 31, 2003 (or such extended date as may be agreed to by the
parties), unless the failure to consummate shall be due to the failure of the
party seeking to terminate to perform or observe the covenants and agreements of
such party set forth herein;
(e) by either Acquiror or the Company upon written notice to the other
party (i) 90 days after the date on which any request for application shall have
been withdrawn at the request or recommendation of the regulatory agency or
governmental entity which must grant a Requisite Regulatory Approval, or a
Requisite Regulatory Approval shall have been denied, unless within the 90-day
period following such denial or withdrawal, a petition for rehearing or an
amended application has been filed with the applicable regulatory agency or
governmental entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 10.1(e) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein; or (ii) if any court, regulatory
agency or governmental entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement;
(f) by Acquiror if notice of changes to any of the Company's Disclosure
Schedules is provided by the Company, and Acquiror reasonably determines that
such changes would constitute an Adverse Change in the Company as defined in
Section 9.7;
(g) by the Company if notice of changes to any of Acquiror's Disclosure
Schedules is provided by Acquiror and the Company reasonably determines that
such changes would have a
48
material adverse effect upon the business of Acquiror and its subsidiaries if
the transactions contemplated by this Agreement were consummated.
(h) by the Company upon three days' prior written notice to Acquiror
if, as a result of an Acquisition Proposal (as defined in Section 4.7) by a
party other than the Acquiror or its affiliates, the Board of Directors of the
Company determines in good faith that its failure to accept such takeover
proposal could reasonably be deemed to constitute a breach of its fiduciary
obligations under applicable law after consultation with and receipt of advice
from outside counsel; provided, however, that, prior to any such termination,
the Company (after disclosing to the Acquiror the identity of the party making
the takeover proposal and the financial terms thereof) shall, and shall cause
its financial and legal advisors to, negotiate with the Acquiror to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein on such adjusted
terms.
(i) by the Company if the Average Closing Price of the Acquiror Common
Stock calculated pursuant to Section 1.6(c)(i) is less than $16.50 or by the
Acquiror if the Average Closing Price for Acquiror Common Stock calculated
pursuant to Section 1.6(c)(i) is greater than $21.50.
SECTION 10.2 EFFECT OF TERMINATION. In the event this Agreement and the
Plan of Merger are terminated as provided herein, this Agreement and the Plan of
Merger shall become void and of no further force and effect without any
liability on the part of the terminating party or parties or their respective
shareholders, directors or officers; provided, however, that Sections 4.4, 5.8,
10.2, 10.3, 12.5 and 12.11 of this Agreement shall survive any such termination
and that no party shall be relieved or released from any liability or damages
arising out of its willful breach of any provision of this Agreement. In the
event of termination of this Agreement, written notice thereof and the reasons
therefor shall be given to the other parties by the terminating party.
SECTION 10.3 FEE.
(a) The Company hereby agrees to pay Acquiror and Acquiror shall be
entitled to receipt of a fee (the "Fee") of $2,280,000 following the signing by
the Company of a definitive agreement in connection with an Acquisition Proposal
received prior to termination of this Agreement pursuant to Section 10.1(h), or
the occurrence of a Company Purchase Event (as defined below). Such payment
shall be made in immediately available funds within five business days after
delivery of notice of entitlement by Acquiror.
(b) The term "Company Purchase Event" shall mean:
(i) The Company or Bank agreeing orally or in writing, to
enter into an agreement relating to any of the
following transactions, occurring after the date
hereof and before the Effective Time or occurring
within eighteen (18) months of the date of
termination of this Agreement pursuant to Article Ten
(other than pursuant to Section 10.1(a),(c),(d),
(e),(f) or (g)):
(A) the acquisition by any person, other than
Acquiror or any of its subsidiaries, alone or
together with such person's affiliates and
49
associates or any group, of beneficial
ownership of 50% or more of the Company
Common Stock (for purposes of this Subsection
(b)(i), the terms "group" and "beneficial
ownership" shall be as defined in Section
13(d) of the Exchange Act and regulations
promulgated thereunder as interpreted
thereunder);
(B) a merger, consolidation, share exchange,
business combination or any other similar
transaction involving the Company or the
Bank;
(C) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 50% or more
of the assets of the Company or the Bank, in
a single transaction or series of
transactions; or
(ii) Termination by the Company of this Agreement pursuant
to Section 10.1(h); or
(iii) Failure by the Board of Directors of the Company to
recommend approval of the Merger and the transactions
contemplated thereby to their shareholders, unless
Acquiror has materially breached its representations,
warranties or covenants provided herein and has not
attempted to cure such breach to the reasonable
satisfaction of the Company.
(c) The Company shall notify Acquiror promptly in writing of its
knowledge of the occurrence of any Company Purchase Event; provided, however,
that the giving of such notice by the Company shall not be a condition to the
right of Acquiror to the Fee.
SECTION 10.4 DISTRIBUTION, ESCROW ACCOUNT. If Acquiror terminates this
Agreement other than in accordance with its rights under Sections 10.1 (a), (b),
(d), (f), or (i), or if Acquiror otherwise fails to perform its obligations
pursuant to this Agreement, the Company shall be entitled to receive
distribution of the Escrow Account thirty (30) days after having provided
written notice of its claim therefor to both Acquiror and the Escrow Agent (and
absent written objection from the Acquiror to both the Company and Escrow Agent
within such thirty (30) day period). If the Company terminates this Agreement
other than in accordance with its rights under Sections 10.1 (a),(c),(d),(e),
(g), or (i), or if the Company otherwise fails to perform its obligations
pursuant to this Agreement, the Acquiror shall be entitled to receive
distribution of the Escrow Account thirty (30) days after having provided
written notice of its claim therefor to both the Company and the Escrow Agent
(and absent written objection from the Company to both the Acquiror and Escrow
Agent within such thirty (30) day period). If either party objects to a claim
submitted by the other, the parties agree to submit the claim for arbitration by
the American Arbitration Association, the arbitration to be held in
Minneapolis-St. Xxxx, Minnesota.
The receipt or award of the Escrow Account to either party shall
constitute liquidated damages and shall be the parties sole and exclusive remedy
for breach; provided, however, that such receipt by or award to the Acquiror
shall be in addition to any right of the Acquiror to receipt of a fee pursuant
to Section 10.3.
50
ARTICLE XI - MODIFICATIONS, AMENDMENTS AND WAIVER
SECTION 11.1 MODIFICATIONS, AMENDMENTS AND WAIVER. At any time prior to
the Effective Time and before or after shareholder approval of this Agreement
and the Plan of Merger by the Company's shareholders, the Company and Acquiror
may (a) by written agreement executed by a duly authorized officer of each,
extend the time for the performance of any of the obligations or other acts of
the parties hereto, (b) by written notice executed by a duly authorized officer
of the party adversely affected waive compliance in whole or in part with any of
the covenants, agreements or conditions contained in this Agreement or the Plan
of Merger, or (c) by written agreement executed by a duly authorized officer of
each, make any other amendment or modification of this Agreement or the Plan of
Merger; provided, however, that, after Company shareholder approval of this
Agreement, no such extension, waiver, amendment or modification shall adversely
affect the amount of the consideration to be received in the Merger by the
shareholders of the Company. Any such extension, waiver, amendment or
modification shall be conclusively evidenced by the execution and delivery of
the same by the President or any Senior Vice President in the case of Acquiror,
or the President or Chairman in the case of the Company, attested to by the
Secretary or Assistant Secretary of each party. The failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect such party's right at a later time to enforce the same. No waiver by any
party of any condition or of the breach of any term contained in this Agreement
or the Plan of Merger, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or a waiver of any other condition or of the breach of any
other term of this Agreement or the Plan of Merger.
ARTICLE XII - MISCELLANEOUS
SECTION 12.1 CLOSING. A closing (the "Closing") of the transactions
provided for herein shall take place on a date chosen by Acquiror, which shall
be no later than 30 days after all approvals required hereby have been received
and all applicable waiting periods have expired, or on such later day as the
parties may agree. The Closing shall be held at the offices of Xxxxxxx Xxxx &
Friedrich LLP in Milwaukee, Wisconsin or at such other location (or
electronically if feasible) as the parties may agree. In the event the Closing
does not take place on the date referred to in the preceding sentence because
any condition to the obligations of any party under this Agreement and the Plan
of Merger is not met on that date, the other parties to this Agreement may
postpone the Closing to any designated subsequent business day by giving the
nonperforming party to this Agreement notice of the postponed date. At the
Closing, the parties will exchange the certificates, opinions and other
documents called for herein. Subject to the terms and conditions hereof,
consummation of the Merger in the manner described herein shall be accomplished
as soon as practicable after the exchange of the documents at the Closing has
been completed.
SECTION 12.2 ARTICLES OF MERGER. Subject to the provisions of this
Agreement, at Closing, as herein defined, the Articles of Merger shall be
signed, verified and affirmed as required by the MBCA and duly filed with the
MSS.
SECTION 12.3 FURTHER ACTS. Each of the parties (a) shall perform such
further acts and execute such further documents as may be reasonably required to
effect the Merger
51
(including, without limitation, the certification, execution, acknowledgement
and filing of the Plan of Merger) and to effect the Bank Merger, and (b) shall
use all best efforts to satisfy or obtain the satisfaction of the conditions set
forth in Articles VII, VIII and IX hereof.
SECTION 12.4 NOTICES. All documents, notices, requests, demands and
other communications that are required or permitted to be delivered or given
under this Agreement and the Plan of Merger shall be in writing and shall be
deemed to have been duly delivered or given upon the delivery or mailing
thereof, as the case may be, if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid:
(a) if to the Company, to:
Xxxxxx X. Xxxxxxx
Executive Vice President
Liberty State Bank
000 Xxxxxxxx Xxxxxx Xxxxx
Xx. Xxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxxxx
Xxxxxxxxx & Xxxxxx, PLLP
4200 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
(b) and if to Acquiror to:
Xxxx X. Xxxxx, President, Chief
Executive Officer
First Federal Capital Corp
000 Xxxxx Xxxxxx
Xx Xxxxxx, Xxxxxxxxx 00000
with a copy to:
W. Xxxxxxx Xxxxxxx
Xxxxxxx Xxxx & Friedrich, LLP
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
or to such other person or address as a party hereto shall specify hereunder.
SECTION 12.5 EXPENSES. Unless otherwise specifically referred herein,
the Company and Acquiror each shall pay all of their own fees and expenses
incident to the negotiation, preparation, execution and performance of this
Agreement, the Bank Merger Agreement and the Shareholders' Meeting, including
the fees and expenses of their own counsel, accountants, investment bankers and
other experts, whether or not the transactions contemplated by this Agreement
are consummated.
52
SECTION 12.6 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and agreements in this Agreement or in any
instrument delivered by the Company or the Acquiror pursuant to or in connection
with this Agreement shall survive for a period of twenty-four (24) months
following the Effective Time, except that the agreements of the parties which by
their terms are to be performed in whole or in part after expiration of such
twenty-four (24) month period shall survive until performed.
SECTION 12.7 ENTIRE AGREEMENT. This Agreement (including the Acquiror
and Company Disclosure Schedules and Exhibits attached hereto and as
subsequently may be amended pursuant to the terms hereof), the Plan of Merger
and the Bank Merger constitute the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and thereby,
supersede any and all prior agreements and understandings relating to the
subject matter hereof and thereof and may not be modified, amended or terminated
except in writing signed by each of the parties hereto.
SECTION 12.8 GOVERNING LAW. This Agreement, the Plan of Merger and the
Bank Merger Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Wisconsin as such laws are applied to
contracts entered into to be performed entirely within Wisconsin.
SECTION 12.9 BINDING EFFECT AND PARTIES IN INTEREST. This Agreement and
the Plan of Merger may not be assigned by any party hereto without the written
consent of the other parties. This Agreement and the Plan of Merger shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement and the
Plan of Merger otherwise than as specifically provided herein.
SECTION 12.10 CAPTIONS. The caption headings of the Articles, Sections
and subsections of this Agreement are for convenience of reference only and are
not intended to be, and should not be construed as, a part of this Agreement or
the Plan of Merger.
SECTION 12.11 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
SECTION 12.12 PUBLICITY. Except as otherwise required by law, so long
as this Agreement is in effect, neither Acquiror nor the Company shall, or shall
permit any of its Subsidiaries to, issue or cause the publication of any press
release or other written statement for general circulation with respect to the
transactions contemplated by this Agreement, without the consent of the other
party, which consent shall not be unreasonably withheld.
53
SECTION 12.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute a single agreement.
IN WITNESS WHEREOF, the Acquiror and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
FIRST FEDERAL CAPITAL CORP
Dated: ___________, 2003 By: ________________________________
Xxxx X. Xxxxx, President and
Chief Executive Officer
Attest: ___________________________
LIBERTY BANCSHARES, INC.
Dated: ___________, 2003 By: _______________________________
Attest: ___________________________
54
COMPANY DISCLOSURE SCHEDULE
Section 2.1(c) Listing of Subsidiaries
Section 2.7 Environmental Matters
Section 2.8 Contracts and Agreements
Section 2.11(b) Financial Statements Exception
Section 2.12 Disclosure of Certain Changes or Events
Section 2.13 Litigation Disclosure
Section 2.14(a) Disclosure of Benefit Plans
Section 2.14(b) Disclosure of Severance, Separation, Termination
Benefits
Section 2.14(c) Disclosure of Any Non-Compliance of Company Plans
with Applicable Law
Section 2.14(d) Disclosure of Adverse Effect Upon Favorable
Determination Letter
Section 2.14(e) Disclosure of Prohibited Transactions
Section 2.14(g) Listing of Outstanding Stock Options
Section 2.14(h) Disclosure of Employment Contracts
Section 2.16 Disclosure of Tax Issues
Section 2.17 Identification of Real Property Owned, Controlled,
or Leased
Section 2.18 Disclosure of Broker/Financial Advisor
Section 2.21 Disclosure of Liabilities or Obligations Reflected
on Company Financial Statements.
Section 2.22 List of Shareholders of Company
Section 2.24 Claims or Offsets Relating to Loans.
Section 2.25 Listing of Loans in Excess of $300,000
Section 2.26 Listing of Mortgage-Backed and Related Securities
Held for Sale or Investment.
55
Section 2.29 Disclosure of Insider Interests
Section 2.31 Listing of Insurance Policies and Bonds
56
