AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST FEDERAL SAVINGS BANK OF SIOUXLAND
GFS BANCORP, INC.
AND
XXXXXXXX FEDERAL SAVINGS BANK
Dated: October 16, 1997
TABLE OF CONTENTS
Page No.
ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . .2
THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . .2
1.1. The Reorganization . . . . . . . . . . . . . . . . .2
1.2 Adoption and Execution and Delivery of Documents
providing for the Reorganization. . . . . . . . . . .3
1.3. Effective Time and Closing of the Reorganization. . .3
1.4 Modification of Structure . . . . . . . . . . . . . .3
ARTICLE II.. . . . . . . . . . . . . . . . . . . . . . . . . .4
EFFECT OF THE REORGANIZATION; CERTAIN ACTIONS IN
CONNECTION THEREWITH. . . . . . . . . . . . . . . . . . .4
2.1. Effect of the Reorganization.. . . . . . . . . . . .4
2.2. Effect on Common Stock of the Company and First
Federal. . . . . . . . . . . . . . . . . . . . . . .4
2.3. First Federal to Make Cash Available . . . . . . . .5
2.4. Payment of Cash. . . . . . . . . . . . . . . . . . .5
2.5. Recapitalization or Stock Dividends. . . . . . . . .6
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . .6
REPRESENTATIONS AND WARRANTIES OF GRINNELL. . . . . . . .6
3.1. Corporate Organization.. . . . . . . . . . . . . . .7
3.2. Capitalization.. . . . . . . . . . . . . . . . . . .8
3.3. Authorization. . . . . . . . . . . . . . . . . . . .9
3.4. No Violation.. . . . . . . . . . . . . . . . . . . .9
3.5. Reports and Consolidated Financial Statements. . . 10
3.6. Consents and Approvals.. . . . . . . . . . . . . . 10
3.7. Absence of Certain Changes.. . . . . . . . . . . . 11
3.8. Employee and Employee Benefits Matters.. . . . . . 11
3.9. Litigation.. . . . . . . . . . . . . . . . . . . . 14
0.00.Xxx Matters .. . . . . . . . . . . . . . . . . . . 14
3.11.Information in the Company Proxy Statement . . . . 15
3.12.Environmental Matters .. . . . . . . . . . . . . . 15
0.00.Xxxxxxxxx. . . . . . . . . . . . . . . . . . . . . 17
3.14.Compliance with Laws and Orders. . . . . . . . . . 17
3.15.Governmental Regulation. . . . . . . . . . . . . . 18
3.16.Contracts and Commitments. . . . . . . . . . . . . 18
3.17.Agreements with Directors, Officers and
Stockholders . . . . . . . . . . . . . . . . . . . 18
3.18.Accuracy of Information. . . . . . . . . . . . . . 19
3.19 [Reserved] . . . . . . . . . . . . . . . . . . . . 19
3.20 Allowances for Losses and Real Estate Owned. . . . 19
3.21 Title to Assets; Leases. . . . . . . . . . . . . . 19
0.00.Xxxxxxxx of Grinnell . . . . . . . . . . . . . . . 20
0.00.Xxx Matters. . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV.. . . . . . . . . . . . . . . . . . . . . . . . . 20
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL . . . . 20
4.1. Corporate Organization.. . . . . . . . . . . . . . 20
4.2. Authorization. . . . . . . . . . . . . . . . . . . 21
4.3. No Violation.. . . . . . . . . . . . . . . . . . . 21
4.4. Consents and Approvals.. . . . . . . . . . . . . . 21
4.5. Information Supplied for Inclusion in the
Company Proxy Statement. . . . . . . . . . . . . . 21
4.6. Cash Payment.. . . . . . . . . . . . . . . . . . . 22
4.7. Accuracy of Information. . . . . . . . . . . . . . 22
4.8. Regulatory Approvals and No Adverse Change.. . . . 22
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . 22
COVENANTS OF FIRST FEDERAL. . . . . . . . . . . . . . . 22
5.1. Affirmative Covenants. . . . . . . . . . . . . . . 22
5.2. Negative Covenants.. . . . . . . . . . . . . . . . 22
5.3. Breaches.. . . . . . . . . . . . . . . . . . . . . 23
5.4. Filing of Applications . . . . . . . . . . . . . . 23
5.5. Supplement to First Federal Disclosure Schedule. . 23
5.6. Expenses.. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI.. . . . . . . . . . . . . . . . . . . . . . . . . 23
COVENANTS OF THE COMPANY AND GRINNELL . . . . . . . . . 23
6.1. Affirmative Covenants. . . . . . . . . . . . . . . 24
6.2. Negative Covenants.. . . . . . . . . . . . . . . . 24
6.3. Report to First Federal. . . . . . . . . . . . . . 27
6.4. Breaches.. . . . . . . . . . . . . . . . . . . . . 27
6.5. Supplement to Disclosure Schedule. . . . . . . . . 28
6.6. Consents and Approvals.. . . . . . . . . . . . . . 28
6.7. Expenses.. . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . 28
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . 28
7.1. Company Shareholders' Meeting. . . . . . . . . . . 28
7.2. Proxy Statement for Company Shareholders' Meeting. 29
7.3. Cooperation; Regulatory Approvals. . . . . . . . . 29
7.4. Reports. . . . . . . . . . . . . . . . . . . . . . 29
7.5. Brokers or Finders.. . . . . . . . . . . . . . . . 30
7.6. Additional Agreements; Reasonable Efforts. . . . . 30
7.7. Release of Information.. . . . . . . . . . . . . . 30
7.8. Directors and Advisory Directors.. . . . . . . . . 30
7.9. Access to Properties and Records; Confidentiality. 30
7.10.Certain Policies . . . . . . . . . . . . . . . . . 31
7.11.Employee Benefit Plans; Employment Arrangements. . 32
0.00.Xxxxxxx Stock Options. . . . . . . . . . . . . . . 34
7.13.D&O Indemnification and Insurance. . . . . . . . . 35
ARTICLE VIII.. . . . . . . . . . . . . . . . . . . . . . . . 36
CONDITIONS TO THE OBLIGATIONS OF FIRST FEDERAL. . . . . 36
8.1. No Material Adverse Change.. . . . . . . . . . . . 36
8.2. Representations and Warranties.. . . . . . . . . . 36
8.3. Performance and Compliance.. . . . . . . . . . . . 36
8.4. No Proceeding or Litigation. . . . . . . . . . . . 36
8.5. Consents Under Agreements. . . . . . . . . . . . . 36
8.6. No Amendments to Resolutions.. . . . . . . . . . . 37
8.7. Certificate of Grinnell Officers.. . . . . . . . . 37
8.8. Corporate Proceedings.. . . . . . . . . . . . . . 37
8.9. Legal Opinion. . . . . . . . . . . . . . . . . . . 37
8.10. Closing Book Value. . . . . . . . . . . . . . 37
ARTICLE IX.. . . . . . . . . . . . . . . . . . . . . . . . . 38
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
GRINNELL. . . . . . . . . . . . . . . . . . . . . . . . 38
9.1. Representations and Warranties.. . . . . . . . . . 38
9.2. Performance and Compliance.. . . . . . . . . . . . 38
9.3 Corporate Proceedings. . . . . . . . . . . . . . . 38
9.4. Certificate of First Federal Officers. . . . . . . 38
9.5. Legal Opinion. . . . . . . . . . . . . . . . . . . 38
9.6. Opinion of Financial Advisor . . . . . . . . . . . 38
ARTICLE X. . . . . . . . . . . . . . . . . . . . . . . . . . 39
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES. . . . . . 39
10.1.Governmental Approvals . . . . . . . . . . . . . . 39
00.0.Xx Injunctions or Restraints . . . . . . . . . . . 39
10.3.Stockholder Approval . . . . . . . . . . . . . . . 39
10.4 Corporate Proceedings. . . . . . . . . . . . . . . 39
ARTICLE XI.. . . . . . . . . . . . . . . . . . . . . . . . . 40
TERMINATION . . . . . . . . . . . . . . . . . . . . . . 40
11.1.Reasons for Termination. . . . . . . . . . . . . . 40
11.2.Effect of Termination. . . . . . . . . . . . . . . 42
ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . 42
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 42
12.1. Nonsurvival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . 42
12.2. Expenses and Termination Fee . . . . . . . . . . 42
12.3. Waivers; Amendments. . . . . . . . . . . . . . . 43
12.4. Assignment; Parties in Interest. . . . . . . . . 43
12.5. Entire Agreement . . . . . . . . . . . . . . . . 43
12.6. Captions and Counterparts. . . . . . . . . . . . 44
12.7. Certain Definitions. . . . . . . . . . . . . . . 44
12.8. Enforcement of this Agreement. . . . . . . . . . 44
12.9. Governing Law. . . . . . . . . . . . . . . . . . 44
12.10. Notices . . . . . . . . . . . . . . . . . . . . 45
SCHEDULES
Schedule 3.1(a)
Schedule 3.2
Schedule 3.5
Schedule 3.6
Schedule 3.7
Schedule 3.8(a)
Schedule 3.8(b)
Schedule 3.9
Schedule 3.10
Schedule 3.12(f)
Schedule 3.13
Schedule 3.14
Schedule 3.15
Schedule 3.16
Schedule 3.17
Schedule 3.21(b)
Schedule 7.5
Schedule 7.11(c)
Schedule 7.11(f)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of
October 16, 1997 (the "Agreement"), is entered into by and
between First Federal Savings Bank of Siouxland ("First
Federal"), GFS Bancorp, Inc. (the "Company" or "GFS") and
Xxxxxxxx Federal Savings Bank ("Grinnell").
R E C I T A L S:
1. First Federal is a federally-chartered stock savings
bank headquartered in Sioux City, Iowa, 53.8% of the
issued and outstanding capital stock of which is owned
by First Federal Bankshares, M.H.C. ("Bancorp"), a
federally-chartered mutual holding company.
2. GFS is a company organized under the laws of the State
of Delaware, is registered with the Office of Thrift
Supervision as a unitary savings and loan holding
company, and owns 100% of the issued and outstanding
common stock of Grinnell.
3. Grinnell is a federally-chartered savings bank
headquartered in Xxxxxxxx, Iowa.
4. The parties desire to provide for First Federal's
acquisition of Grinnell pursuant to the transactions
set forth in this Agreement on or after the Effective
Time (as defined in Section 1.3 hereof).
5. In connection with the Reorganization, as defined
herein, the outstanding capital stock of the Company
will be converted into the right to receive cash and,
subject to certain regulatory conditions or approvals,
if applicable, the outstanding stock options of the
Company will be converted into First Federal stock
options.
6. It is intended that First Federal and Grinnell will be
merged such that First Federal will be the surviving
bank and that the resulting savings institution will
expand its market area and achieve certain economies
of scale and efficiencies as a result of the
Reorganization, as defined herein.
In consideration of the premises and the mutual covenants,
representations, warranties, and agreements herein contained,
and in order to set forth the conditions upon which the
foregoing Reorganization, as defined herein, will be carried
out, the parties, intending to be legally bound, hereby
agree as follows:
ARTICLE I.
THE REORGANIZATION
1.1. The Reorganization. Subject to the terms and
conditions of this Agreement, and in accordance with the
provisions of Section 18(c) of the Federal Deposit Insurance Act
(12 U.S.C. 1828(c)), as amended (the "Bank Merger Act"), the
Home Owners' Loan Act (the "HOLA"), and the rules and
regulations promulgated thereunder including 12 C.F.R. 563.22
and 574.3(a) (the "Thrift Regulations"), at the Effective Time,
the parties hereby agree that the following corporate
transactions (collectively referred to herein as the
"Reorganization") shall occur substantially concurrently in the
order set forth below in accordance with applicable laws and
regulations and the provisions of this Agreement:
(a) Pursuant to the Agreement of Merger, attached hereto
as Exhibit A, among First Federal, the Company, and a
to-be-formed Delaware corporation which is to be wholly owned by
First Federal, such to-be-formed corporation shall be merged
with and into the Company (the "Company Merger") and, in
connection therewith, and subject to the rights of dissenting
stockholders which have been asserted and duly perfected in
accordance with the provisions of Section 262 of the Delaware
General Corporation Law, each share of common stock, $.01 par
value per share, of the Company ("Common Stock") outstanding
immediately prior to the effective time of the Company Merger
shall be canceled in exchange for the right to receive the cash
payments specified in such Agreement of Merger, with the
result that the Company will become a wholly owned subsidiary of
First Federal.
(b) Pursuant to the Agreement of Merger, attached hereto
as Exhibit B, between Grinnell and First Federal, Grinnell shall
merge with and into First Federal (the "Bank Merger")
immediately following consummation of the transactions referred
to in Section 1.1(a) hereof, with the result that First Federal
will acquire all of the assets and liabilities of Grinnell and
Grinnell shall cease to exist.
(c) Pursuant to the Plan of Complete Liquidation and
Dissolution (the "Plan"), attached hereto as Exhibit C, the
Company shall be liquidated into First Federal simultaneously
with consummation of the transaction referred to in Sections 1.1
(b) hereof, with the result that First Federal will acquire all
of the assets and liabilities of the Company and the Company
shall cease to exist.
(d) Upon the consummation of the Reorganization, the
separate existence of the Company and Grinnell shall cease, and
First Federal shall continue as the surviving institution in the
Bank Merger.
2
1.2 ADOPTION AND EXECUTION AND DELIVERY OF DOCUMENTS
PROVIDING FOR THE REORGANIZATION. Promptly following the
formation of the to-be-formed corporation referred to in
Section 1.1(a) hereof, the Company shall execute and deliver the
Agreement of Merger included as Exhibit A hereto and First
Federal and such to-be-formed corporation shall execute and
deliver such Agreement of Merger, as applicable. Promptly upon
consummation of the transactions contemplated by Section 1.1(a)
hereof, First Federal and Grinnell shall execute and deliver the
Agreement of Merger included as Exhibit B hereto and the Company
shall adopt such agreement in its capacity as the sole
stockholder of Grinnell. Promptly upon consummation of the
transactions contemplated in Sections 1.1(a) and (b) hereof,
First Federal shall adopt the Plan in its capacity as sole
stockholder of the Company.
1.3. EFFECTIVE TIME AND CLOSING OF THE REORGANIZATION.
As soon as practicable after each of the conditions set forth in
Articles VIII, IX and X hereof have been satisfied or waived,
First Federal and Grinnell will file, or cause to be filed,
articles of combination with the Office of Thrift Supervision
(the "OTS"), which articles of combination shall be in the form
required by and executed in accordance with the Thrift
Regulations. The Bank Merger shall become effective at the time
the articles of combination for such merger are endorsed by the
OTS pursuant to Section 552.13(k) of the Thrift Regulations (the
"Effective Time"). If (a) this Agreement and the transactions
contemplated hereby have been duly approved as required by the
stockholders of the Company, and (b) all relevant conditions of
this Agreement have been satisfied or waived and all applicable
waiting periods have expired, the closing (the "Closing") shall
take place within thirty (30) business days thereafter, on such
date as First Federal and Grinnell shall agree, at the executive
offices of First Federal or at such other location mutually
acceptable to First Federal and Grinnell. At the Closing, the
parties hereto will exchange certificates, letters and other
documents as required hereby and will cause the filing described
in this Section 1.3 with respect to the Bank Merger to be made.
The date on which the Closing occurs is hereinafter referred to
as the "Closing Date."
1.4 MODIFICATION OF STRUCTURE. Notwithstanding any
provision of this Agreement to the contrary, First Federal may
elect, subject to the filing of all necessary applications and
the receipt of all required regulatory approvals, to modify the
structure of the transactions contemplated hereby so long as (i)
there are no adverse federal income tax consequences to the
stockholders of the Company as a result of such modification,
(ii) the consideration to be paid to holders of Company Common
Stock under this Agreement is not thereby changed in kind or
reduced in amount because of such modification, and (iii) such
modification will not be likely to materially delay or
jeopardize receipt of any required regulatory approvals required
hereunder, or otherwise impede the consummation of the
transactions contemplated hereby.
3
ARTICLE II.
EFFECT OF THE REORGANIZATION; CERTAIN ACTIONS IN CONNECTION
THEREWITH
2.1. EFFECT OF THE REORGANIZATION.
(a) First Federal, as the surviving institution in
the Bank Merger, shall possess all of the properties and rights
and be subject to all of the liabilities and obligations of
Grinnell, all as more fully described in the Merger Agreement
and the Thrift Regulations. The name of First Federal, as the
surviving institution in the Bank Merger, shall remain "First
Federal Savings Bank of Siouxland."
(b) At the Effective Time, each share of capital
stock of GFS issued and outstanding immediately prior thereto
(except shares as to which the holders have perfected
dissenters' rights in accordance with Section 262 of the
Delaware General Corporation Law) shall, by virtue of the
Reorganization, be canceled. No new shares of the capital stock
or other securities or obligations of First Federal shall be
issued or be deemed issued with respect to or in exchange for
such canceled shares, and such canceled shares of capital stock
shall not be converted into any shares or other securities or
obligations of First Federal.
(c) The Charter and Bylaws of First Federal, as in
effect immediately prior to the Effective Time, shall be the
Charter and Bylaws of First Federal, as the surviving
institution of the Bank Merger.
(d) Except as otherwise contemplated hereby, the
directors and officers of First Federal immediately prior to the
Effective Time shall be the directors and officers of First
Federal, as the surviving institution of the Bank Merger, and
shall continue in office until their successors are duly
elected or otherwise duly selected.
(e) All deposit accounts of Grinnell existing
immediately prior to the Bank Merger shall, upon consummation of
the Bank Merger, remain insured by the Federal Deposit Insurance
Corporation ("FDIC") to the fullest extent permitted by law and
regulation.
2.2. EFFECT ON COMMON STOCK OF THE COMPANY AND FIRST
FEDERAL.
(a) As of the Effective Time, by virtue of the
Reorganization and without any action except as specified herein
on the part of the holders of shares of common stock, $.01 par
value, of the Company ("Company Common Stock"), each issued and
outstanding share of Company Common Stock (except with respect
to the rights of dissenting shareholders of GFS) shall be
converted into the right to receive $17.65 in cash (the
"Purchase Price"), and all outstanding certificates representing
Company Common Stock shall thereafter represent solely the right
to receive the Purchase Price. Any holders of dissenting shares
shall be entitled to payment for such shares only to the extent
permitted by and in accordance with the provisions of Section
262 of the Delaware General Corporation Law,
4
with funds provided by First Federal. The Company shall give
First Federal prompt notice of any written demand for the
payment of the fair value of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments served
pursuant to the Delaware General Corporation Law and received
by the Company. The Company shall give First Federal the
opportunity to participate in all negotiations and proceedings
with respect to such demands, and shall not voluntarily
make any payment with respect to any demands for payment of fair
value or settle or offer to settle any such demands. All shares
of Company Common Stock which are held in the treasury of the
Company or Grinnell or by any direct or indirect wholly-owned
subsidiary of the Company and any shares of Company Common Stock
owned by First Federal or any direct or indirect wholly-owned
subsidiary or parent of First Federal shall be canceled and no
consideration shall be paid or delivered in exchange therefor.
At the Effective Time, the stock transfer books of the Company
shall be closed and no transfer of Company Common Stock by any
holder thereof shall thereafter be made or recognized.
(b) The aggregate purchase price payable under
Section 2.2(a) hereof shall be increased by $1,900 per day for
each day from May 1, 1998 to the date of Closing (the "Purchase
Price Adjustment"). The per share purchase price shall be
increased by an amount equal to the Purchase Price Adjustment
divided by the number of shares of Company Common Stock
outstanding, excluding stock options and treasury shares,
rounded to the nearest $.01.
2.3. FIRST FEDERAL TO MAKE CASH AVAILABLE. At the
Effective Time, First Federal shall make available to the
Exchange Agent (as defined in Section 2.4(a) hereof) hereof, the
amount of cash payable pursuant to Section 2.2 hereof.
2.4. PAYMENT OF CASH.
(a) At least twenty (20) days before the Effective
Time, First Federal shall designate an exchange agent (the
"Exchange Agent") in connection with the Reorganization. As
soon as practicable after the Effective Time, but in no event
later than ten (10) days thereafter, the Exchange Agent shall
send a notice and form of letter of transmittal to each holder
of record of Company Common Stock at the Effective Time advising
such stockholder of the effectiveness of the Reorganization and
the procedures for surrendering to the Exchange Agent
outstanding certificates formerly evidencing shares of Company
Common Stock. Each holder of shares of Company Common
Stock who thereafter delivers his or her certificate or
certificates representing such shares to the Exchange Agent
shall be mailed a check for an amount, without interest, equal
to the number of shares represented by the certificate or
certificates so surrendered to the Exchange Agent multiplied by
the Purchase Price. Upon surrender, each certificate evidencing
Company Common Stock shall be canceled. Until so surrendered,
each outstanding certificate which prior to the Effective Time
evidenced shares of Company Common Stock will be deemed for all
purposes (except as otherwise provided in Section 2.2 hereof) to
evidence the right to receive cash, without interest, equal to
number of shares represented by the certificate or certificates
multiplied by the Purchase Price. After the Effective Time,
there shall be no further registration of transfers on the
records of the Company of shares of Company Common Stock and, if
a certificate evidencing such shares is presented for transfer,
it shall be canceled in exchange for a check (except as
otherwise provided in Section 2.2 hereof) in the
5
appropriate amount as calculated above. Notwithstanding any
provision of this Agreement, neither the Exchange Agent nor any
person, firm or entity shall be liable or obligated to any
former holder of any share of Company Common Stock (or to anyone
claiming through any such former holder) with respect
to amounts to which any such holder would have been entitled as
a consequence of the Reorganization, if such amounts have been
paid, or are payable, to any public official pursuant to any
abandoned property, escheat or similar laws.
(b) If delivery of all or any part of the cash to be
paid in connection with the Reorganization is to be paid to a
person other than the person in whose name the certificate
surrendered in exchange therefor is registered, it shall be a
condition to such delivery that the certificate surrendered
in exchange shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such a delivery
pay to the Exchange Agent any transfer or other taxes required
by reason of such delivery in any name other than that of the
registered holder of the certificate surrendered or establish to
the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(c) In the event any certificate for Company Common
Stock shall have been lost, stolen or destroyed, the Exchange
Agent shall deliver (except as otherwise provided in Section
2.2hereof) in exchange for such lost, stolen or destroyed
certificate, upon the making of an affidavit of that fact by the
holder thereof, the cash to be paid in the Reorganization as
provided for herein; provided, however, that First Federal may,
in its sole discretion and as a condition precedent to the
delivery thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such reasonable sum
as First Federal may direct as indemnity against any claim that
may be made against First Federal, the Company, the Exchange
Agent or any other party with respect to the certificate
alleged to have been lost, stolen or destroyed.
2.5. RECAPITALIZATION OR STOCK DIVIDENDS. If between
the date of this Agreement and the Effective Time, a share of
Company Common Stock shall be changed into a different number
of shares of Company Common Stock or a different class of shares
by reason of reclassification, recapitalization, split-up,
exchange of shares or readjustment, or if a stock dividend shall
be declared with a record date within such period, then the
Purchase Price shall be appropriately and proportionately
adjusted.
6
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF GRINNELL AND THE COMPANY
Grinnell and the Company hereby represent and warrant
to First Federal as follows:
3.1. CORPORATE ORGANIZATION.
(a) The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware. The
Company has the full corporate power and authority to own or
lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the
operations, assets, or financial condition of the Company and
its subsidiaries taken as a whole. The Company is duly
registered with the OTS under the HOLA as a unitary savings and
loan holding company. Other than as set forth in Company
Disclosure Schedule 3.1(a) and shares of capital stock in
Grinnell and its subsidiaries, as identified below
(collectively, the "Company Subsidiaries") the Company does not
own or control or have the right to acquire, directly or
indirectly, an equity interest in any corporation, company,
association, partnership, joint venture or other entity.
(b) Grinnell is a stock savings bank organized, validly
existing and in good standing under the laws of the United
States, has the full corporate power and authority to own or
lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the
operations, assets, or financial condition of the Company and
the Company Subsidiaries taken as a whole. All eligible
accounts of depositors in Grinnell are insured by the Savings
Association Insurance Fund ("SAIF") administered by the FDIC
to the fullest extent permitted by law. Grinnell is a member of
the Federal Home Loan Bank of Des Moines.
(c) The Company has heretofore delivered to First Federal
true and complete copies of the certificate of incorporation,
charter, organization certificate or other chartering instrument
and bylaws of the Company, Grinnell, and each Company Subsidiary
in effect on the date hereof. The minute books of the Company
and each Company Subsidiary contain accurate minutes of all
meetings and accurate consents in lieu of meetings of the board
of directors (and any committee thereof) and of the
stockholder(s) of the Company and each Company Subsidiary
recorded therein, and as of the Effective Time such minute books
will contain accurate minutes of all such meetings and such
consents in lieu of meetings respectively held or executed prior
thereto. These minute books accurately reflect all
7
transactions referred to in such minutes and consents in lieu of
meetings and disclose all material corporate actions of the
stockholder(s) and boards of directors of the Company and the
Company Subsidiaries and all committees thereof. Except as
reflected in such minute books, there are no minutes of meetings
or consents in lieu of meetings of the boards of directors (or
any committee thereof) or of the stockholder(s) of the Company
or any Company Subsidiary.
3.2. CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of 2,000,000 shares of Company Common Stock, par value
$.01 per share and 500,000 shares of preferred stock, par value
$.01 per share. As of the date of this Agreement, there were
issued and outstanding 988,242 shares of Company Common Stock
and no shares of preferred stock. On such date, there were
112,478 shares of Company Common Stock held by the Company as
treasury stock. All of such issued and outstanding shares of
Company Common Stock are validly issued, fully paid and
nonassessable and not issued in violation of any preemptive
rights. As of the date hereof, no shares of serial preferred
stock were issued and outstanding. Except pursuant to its stock
option plans, the Company does not have any arrangements or
commitments obligating it to issue or sell or otherwise dispose
of, or to purchase or redeem, shares of its capital stock or any
securities convertible into or having the right to purchase
shares of its capital stock. There are no agreements,
understandings or commitments relating to the right of the
Company to vote or to dispose of shares of the capital stock or
other ownership interests of any subsidiary of the Company.
(b) All of the outstanding shares of capital stock
or other ownership interests of each Company Subsidiary have
been duly authorized and validly issued, are fully paid and
nonassessable and are owned, directly or indirectly, by the
Company or Grinnell, as the case may be, free and clear
of any liens, encumbrances, charges, restrictions or rights of
third parties of any kind whatsoever. Grinnell does not have
any arrangements or commitments obligating it to issue or sell
or otherwise dispose of, or to purchase or redeem, shares of its
capital stock or any securities convertible into or having the
right to purchase shares of its capital stock. There are no
agreements, understandings or commitments relating to the right
or obligation of Xxxxxxxx to issue, to vote or to dispose of
shares of its capital stock or the share of capital stock of any
Company Subsidiary.
(c) Schedule 3.2(c) of the Company Disclosure
Schedule sets forth a complete and accurate list of all options
to purchase Company Common Stock that have been granted and
which remain unexercised, including the dates of grant, exercise
prices, dates of vesting, dates of termination and shares
subject to option for each grant.
(d) To the best of the Company's knowledge, no person
or group (as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than
as set forth at Schedule 3.2(d) of the Company Disclosure
Schedule, is the beneficial owner of more than 5% of the
outstanding Company Common Stock.
8
3.3. AUTHORIZATION.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and the Agreement of Merger
included as Exhibit A hereto and, subject to the consents and
approvals of federal and state regulatory authorities referred
to in Section 3.6 hereof and the approval of the stockholders of
the Company, to consummate the Company Merger and to carry out
its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Agreement of Merger included
as Exhibit A hereto and the consummation of the Reorganization
by the Company have been duly authorized by the board of
directors of the Company and, except for the approval of the
stockholders of the Company and the Company's adoption of an
amendment to the Xxxxxxxx charter to permit the acquisition of
more than 10% of the Xxxxxxxx common stock in connection
with the Bank Merger (the "Charter Amendment"), no other
corporate proceedings on the part of the Company are necessary
to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by the Company
and constitutes a valid and legally binding obligation of the
Company enforceable in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors'
rights generally, and except that the availability of equitable
remedies (including, without limitation, specific performance)
is within the discretion of the appropriate court.
(b) Promptly following formation of the to-be-formed
corporation referred to in Section 1.1(a) hereof, the Agreement
of Merger included as Exhibit A hereto will be duly and validly
executed by the Company and, upon such execution and delivery
and the execution and delivery thereof by the other parties
thereto, will constitute a valid and legally binding obligation
of the Company enforceable in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific
performance) is within the discretion of the appropriate court.
3.4. NO VIOLATION. Subject to the adoption and
effectiveness of the Charter Amendment, none of the execution
and delivery of this Agreement and the agreements included as
Exhibits A and B hereto by the Company and Xxxxxxxx, as
applicable, nor the consummation by the Company and Xxxxxxxx of
the transactions contemplated hereby and thereby and the Plan in
accordance with their respective terms, as applicable, nor
compliance by the Company or Xxxxxxxx with any of their
respective terms, as applicable, will (i) violate any provision
of the Company's or Grinnell's certificate of incorporation,
charter or other chartering instrument or bylaws, (ii) violate
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Company,
Xxxxxxxx, or any Company Subsidiary or any of their properties
or assets, or (iii) violate, conflict with, result in a breach
of any provisions of, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a
default), under, result in the termination or cancellation of,
accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other
encumbrance upon any of the respective properties or assets of
the Company, Xxxxxxxx, or any Company Subsidiary under the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company, Xxxxxxxx, or
9
any Company Subsidiary is a party, or by which they or any of
their respective properties or assets may be bound or affected,
except, with respect to clause (iii) above, such as individually
or in the aggregate will not have a material adverse effect on
the operations, assets, or financial condition of the Company
and the Company Subsidiaries taken as a whole and which will not
prevent or delay the consummation of the transactions
contemplated by this Agreement.
3.5. REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS.
(a) The Company and Xxxxxxxx have previously furnished First
Federal with true and complete copies of (a) all annual reports,
quarterly reports, proxy statements, financial statements, or
any other documents or material provided by the Company to its
stockholders since January 1, 1994, (b) all call reports and
other reports filed by Xxxxxxxx with the OTS since January 1,
1994, and (c) the audited financial statements of the Company
for the fiscal years ended June 30, 1995, 1996 and 1997. As of
their respective dates, such reports and statements did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim
financial statements of the Company, including any financial
statements included in such reports or otherwise delivered to
First Federal (collectively referred to herein as the "Company
Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes
thereto) and fairly present the financial position of the
Company or Xxxxxxxx, as the case may be, as of the dates thereof
and the results of their operations and changes in financial
position for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal year-end audit
adjustments, any other adjustments described therein, and the
absence of certain footnotes. Except as set forth in
Schedule 3.5 to the Company Disclosure Schedule, since June 30,
1997 neither the Company or Xxxxxxxx, or any Company Subsidiary,
has suffered a Material Adverse Effect (as that term is defined
in Section 12.7 hereof) and the Company is not aware of any
event or circumstance, or series of events and circumstances,
which is reasonably likely to result in a Material Adverse
Effect to the Company or Xxxxxxxx. The books and records of the
Company and Xxxxxxxx have been, and are being, maintained
in accordance with applicable legal and accounting requirements
and reflect only actual transactions. Except and to the extent
reflected, disclosed or provided for in the Company Financial
Statements, neither the Company, nor Xxxxxxxx nor any Company
Subsidiary had, as of the date of the Company Financial
Statements, any liabilities, whether absolute, accrued,
contingent or otherwise, material to the business, operations,
assets or financial condition of the Company.
(b) Xxxxxxxx has filed all reports, together with any
amendments required to be made with respect thereto, that were
required to be filed since January 1, 1994 to the date of this
Agreement with (i) the OTS; (ii) the FDIC; and (iii) any state
banking commission or other banking authority, and has
paid all fees and assessments due and payable in connection
therewith.
3.6. CONSENTS AND APPROVALS. Other than as set forth
in Schedule 3.6 to the Company Disclosure Schedule and other
than the receipt of approvals required by the HOLA, the Bank
Merger Act, the Thrift Regulations, and applicable federal
securities and state laws, and the approval of the holders of
Company Common Stock as described in Section 7.1 hereof, no
filing or registration
10
with, no notice to and no permit, authorization, consent or
approval of any third party or any public or governmental body
or authority is necessary for the consummation by the Company or
Xxxxxxxx of the transactions contemplated by this Agreement,
except where the failure to make such filing or obtain
such permit, authorization, consent or approval will not in the
aggregate have a Material Adverse Effect. The Company knows of
no reason (including those relating to fair lending laws or
other laws relating to discrimination, including, without
limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act, and anti-trust or consumer disclosure
laws and regulations) why the regulatory approvals should not be
obtained, and is aware of no reason to believe that such
approvals would include any term, condition or requirement
that, individually or in the aggregate, would have a Material
Adverse Effect on the results, business, operations, assets, or
financial condition of the Company.
3.7. ABSENCE OF CERTAIN CHANGES. Since June 30, 1997,
and except as otherwise permitted by this Agreement, neither the
Company, Xxxxxxxx or any Company Subsidiary has, except as set
forth in Schedule 3.7 to the Company Disclosure Schedule, (a)
issued or sold any corporate debt securities; (b) granted any
option for the purchase of its capital stock; (c) declared or
set aside or paid any dividend or other distribution in respect
of its capital stock; (d) incurred any material obligation or
liability (absolute or contingent), except obligations or
liabilities incurred in the ordinary course of business
consistent with past practices; (e) mortgaged, pledged or
subjected to lien or encumbrance (other than statutory liens for
taxes not yet delinquent and landlord liens) any of its material
assets or properties except pledges to secure government
deposits and in connection with repurchase or reverse
repurchase agreements; (f) discharged or satisfied any material
lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities
included in the Company's consolidated balance sheet as of June
30, 1997, and current liabilities incurred since the date
thereof in the ordinary course of business consistent with past
practices; (g) sold, exchanged or otherwise disposed of any of
its material capital assets other than in the ordinary course of
business consistent with past practices; (h) made any wage or
salary increase or entered into or modified any employment
contract with any officer or salaried employee or instituted any
employee welfare, bonus, stock option, profit sharing,
retirement or similar plan or arrangement, whether tax-qualified
or non tax-qualified; (i) suffered any damage, destruction or
loss, whether or not covered by insurance, materially and
adversely affecting its business, property or assets or waived
any rights of value that are material in the aggregate,
considering its business taken as a whole; (j) except in the
ordinary course of business consistent with past practices,
entered, or agreed to enter, into any agreement or arrangement
granting any preferential right to purchase any of its assets,
properties or rights or requiring the consent of any party to
the transfer and assignment of any such assets, properties or
rights; (k) entered into any material transaction outside the
ordinary course of its business consistent with past practices,
except as expressly contemplated by this Agreement; or (1)
except in the ordinary course of business consistent with past
practices or as reflected in the Company Financial Statements,
sold or otherwise disposed of any of its material investment
securities.
3.8. EMPLOYEE AND EMPLOYEE BENEFITS MATTERS. (a)
Schedule 3.8(a) to the Company Disclosure Schedule lists (i)
each pension, profit sharing, stock bonus, thrift, savings,
employee stock ownership or other plan, program or arrangement,
which constitutes an "employee
11
pension plan" within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
which is maintained by the Company, Xxxxxxxx or any Company
Subsidiary or to which the Company, Xxxxxxxx or any Company
Subsidiary contributes or is maintained for the benefit of any
current or former employee, officer, director, consultant or
agent; (ii) each plan, program or arrangement for the provision
of medical, surgical, or hospital care or benefits, benefits in
the event of sickness, accident, disability, death,
unemployment, severance, vacation, apprenticeship,
day care, scholarship, prepaid legal services or other benefits
which constitute an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA, which is maintained by the
Company, Xxxxxxxx or any Company Subsidiary or to which the
Company or any Company Subsidiary contributes for the benefit of
any current or former employee, officer, director, consultant or
agent; and (iii) every other retirement or deferred compensation
plan, bonus or incentive compensation plan or arrangement,
stock option plan, stock purchase plan, stock bonus plan or
stock grant plan, severance or vacation pay arrangement, or
other fringe benefit plan, program or arrangement through which
the Company, Xxxxxxxx or any Company Subsidiary provides
benefits for or on behalf of any current or former employee,
officer, director, consultant or agent. The plans, programs or
arrangements described in this Section 3.8 or listed in Schedule
3.8(a) of the Company Disclosure Schedule are hereinafter
referred to as the "Xxxxxxxx Benefit Plans." Xxxxxxxx has
delivered or made available to First Federal a true and
correct copy of (a) each Xxxxxxxx Benefit Plan, (b) the most
recent annual report (Form 5500) filed with the Internal Revenue
Service ("IRS") with respect to each Xxxxxxxx Benefit Plan, if
applicable, (c) each trust agreement and group annuity contract,
if any, relating to such Xxxxxxxx Benefit Plan, (d) the most
recent actuarial report or valuation relating to a Xxxxxxxx
Benefit Plan subject to Title IV of ERISA and (e) all rulings
and determination letters and any open requests for rulings or
letters that pertain to any Xxxxxxxx Benefit Plan.
(b) All of the Xxxxxxxx Benefit Plans that are
subject to ERISA and the Internal Revenue Code (the "Code") are
in compliance with all applicable requirements of ERISA and the
Code and all other applicable federal and state laws, including,
without limitation, the reporting and disclosure requirements of
Part I of Title I of ERISA. Each of the Xxxxxxxx Benefit Plans
that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is
qualified under Section 401(a) of the Code satisfies the
applicable requirements of such provision and there exist no
circumstances that would adversely affect the qualified status
of any such plan under that section, except with respect to any
required retroactive amendment for which the remedial
amendment period has not yet expired. Except as set forth in
Schedule 3.8(b) to the Company Disclosure Schedule, there is no
pending or, to the best knowledge of Xxxxxxxx, threatened
litigation, claim, action, governmental proceeding or
investigation against or relating to any Xxxxxxxx Benefit Plan
which could give rise to any material liability, and there is no
reasonable basis for any material litigation, claims, actions or
proceedings against any such Xxxxxxxx Benefit Plan, and there
are not any facts that could give rise to any material liability
in the event of such litigation, claim, action, investigation,
or proceeding. No Xxxxxxxx Benefit Plan (or Xxxxxxxx Benefit
Plan fiduciary) has engaged in a non-exempt "Prohibited
Transaction" (as defined in Section 406 of ERISA and Section
4975(c) of the Code) since the date on which said sections
became applicable to such plan. There have been no acts or
omissions by the Company, Xxxxxxxx or any Company Subsidiary
that have given rise to any fines, penalties, taxes or related
charges under Sections 502(c), 502(i) or 4071 of ERISA or
Chapter 43
12
of the Code, or that may give rise to any material fines,
penalties, taxes or related damages under such laws for which
the Company, Xxxxxxxx or any Company Subsidiary may be liable.
No liability under Title IV of ERISA has been incurred by the
Company, Xxxxxxxx, any Company Subsidiary, any former
Affiliate (as such term is defined in Section 12.7 hereof) of
the Company, Xxxxxxxx or the Xxxxxxxx Benefit Plans since the
effective date of ERISA that has not been satisfied in full, and
no condition exists that presents a material risk of incurring a
liability under such Title, other than liability for premiums
due the Pension Benefit Guaranty Corporation ("PBGC"), which
payments have been made or will be made when due. With respect
to each of the Xxxxxxxx Benefit Plans which is subject to Title
IV of ERISA, the present value of accrued benefits under such
plan or Plans, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by
such plan's actuary with respect to such plan, did not, as of
its latest valuation date, exceed the then current value
of the assets of such plan allocable to such accrued benefits
and Xxxxxxxx is not aware of any facts or circumstances that
would materially change the funded status of any such ERISA
plan. None of the Xxxxxxxx Benefit Plans is a "multiemployer
pension plan" as such term is defined in section 3(37) of
ERISA. Except as listed on Schedule 3.8(b) to the Company
Disclosure Schedule, no employee of the Company, Xxxxxxxx or any
Company Subsidiary will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any
benefits under any Xxxxxxxx Benefit Plan as a result of the
transactions contemplated by this Agreement. Other than current
or contingent liabilities previously disclosed on Schedule
3.8(b) to the Company Disclosure Schedule, neither the Company,
Xxxxxxxx or any Company Subsidiary or any Xxxxxxxx Benefit Plan
will have any material current or contingent liability with
respect to any plan. All group health plans of the Company,
Xxxxxxxx and any Company Subsidiary, including any plans of
current and former Affiliates of the Company, Xxxxxxxx
or any Company Subsidiary that must be taken into account under
Section 4980B of the Code or Section 601 of ERISA or the
requirements of any similar state law regarding insurance
continuation, have been operated in material compliance with the
group health plan continuation coverage requirements of Section
4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable. All payments due from any Xxxxxxxx
Benefit Plan (or from the Company, Xxxxxxxx or any Company
Subsidiary with respect to any Xxxxxxxx Benefit Plan) have been
made, and all amounts properly accrued to date as liabilities of
the Company, Xxxxxxxx or any Company Subsidiary that have
not yet been paid have been properly recorded on the books of
the Company, Xxxxxxxx or any Company Subsidiary.
(c) No amounts payable under the Xxxxxxxx Benefit
Plans, or any employment, severance or termination agreement
between or among the Company, Xxxxxxxx, any Company
Subsidiary and any employee, officer or shareholder will fail to
be deductible for federal income tax purposes by virtue of
section 280G of the Code. No compensation payable by the
Company, Xxxxxxxx or any Company Subsidiary to any of their
employees under any existing contract, plan or other
employment arrangement (including by reason of the transactions
contemplated hereby) will be subject to disallowance under
section 162(m) of the Code.
(d) In the event of the withdrawal of Xxxxxxxx from
the Financial Institutions Retirement Plan adopted by Xxxxxxxx
(the "Retirement Plan") or in the event of the consolidation of
the interests of Xxxxxxxx and First Federal under the Retirement
Plan after the Effective Time, neither
13
Xxxxxxxx, the Company or First Federal will have a funding
obligation for benefits that have accrued up to the Effective
Time for the benefit of Xxxxxxxx employees.
(e) Except as set forth in Schedule 3.8(e) to the
Company Disclosure Schedule, from July 1, 1997 to the date
hereof, neither Xxxxxxxx nor the Company have made contributions
to the Xxxxxxxx employee stock ownership plan ("Xxxxxxxx ESOP")
for the plan year commencing July 1, 1997.
3.9. LITIGATION. Except as set forth in Schedule 3.9
to the Company Disclosure Schedule, no claims have been asserted
and no relief has been sought against the Company, Xxxxxxxx
or any Company Subsidiary in any pending litigation or
governmental proceedings or otherwise that would be reasonably
expected to result in damages or other relief which would have a
Material Adverse Effect on the Company and Xxxxxxxx, taken as a
whole. To the best knowledge of the Company and Xxxxxxxx, there
are no circumstances, conditions, events or arrangements,
contractual or otherwise, which may hereafter give rise to any
proceedings, claims, actions or government investigations
involving the Company, Xxxxxxxx or any Company Subsidiary that
would reasonably be expected to result in damages or other
relief that would have a Material Adverse Effect, nor, to the
knowledge of the Company and Xxxxxxxx, are any such proceedings,
claims, actions or government investigations threatened. Except
as set forth in Schedule 3.9 to the Company Disclosure Schedule,
neither the Company, Xxxxxxxx or any Company Subsidiary is a
party to any order, judgment or decree that would reasonably be
expected to have a Material Adverse Effect on the Company and
Xxxxxxxx, taken as a whole, and neither the Company, Xxxxxxxx or
any Company Subsidiary (a) is the subject of any cease
and desist order, or other formal or informal enforcement action
by any regulatory authority or (b) has made any commitment to or
entered into any agreement with any regulatory authority that
restricts or adversely affects its operations or financial
condition.
3.10. TAX MATTERS. The Company, Xxxxxxxx and the
Company Subsidiaries have timely filed (inclusive of applicable
extension periods) with the appropriate governmental agencies
all material federal, state and local income, employment,
franchise, excise, sales, use, real and personal property and
other tax returns and reports (including information returns and
reports) that are required to be filed, and neither the Company,
Xxxxxxxx or any Company Subsidiary is materially delinquent in
the payment of any taxes shown on such returns or reports or on
any assessments for any such taxes received by the Company,
Xxxxxxxx or any Company Subsidiary. There are included in the
Company Financial Statements adequate reserves for the payment
of all accrued but unpaid federal, state and local taxes of the
Company, Xxxxxxxx and each Company Subsidiary, including
interest and penalties, whether or not disputed for such fiscal
years as reflected therein and all fiscal years prior thereto.
Neither the Company, Xxxxxxxx or any Company Subsidiary has
executed or filed with the Internal Revenue Service ("IRS") or
any state tax authority any agreement extending the period for
assessment and collection of any federal or state tax, nor is
the Company, Xxxxxxxx or any Company Subsidiary a party to any
action or proceeding by any governmental authority for
assessment or collection of taxes, except tax liens or
levies against customers of any Company Subsidiary. There is no
outstanding material assessment or claim for collection of taxes
against the Company, Xxxxxxxx or any Company Subsidiary. Except
as set forth in Schedule 3.10 to the Company Disclosure
Schedule, the federal income tax returns of the Company,
Xxxxxxxx and each Company Subsidiary have been examined by the
IRS (or are closed to
14
examination due to the expiration of the applicable statute of
limitations) and no deficiencies were asserted as a result of
such examinations that have not been resolved and paid in full
or for which adequate reserves or accruals established in
accordance with generally accepted accounting principles
have been taken with respect thereto.
Neither the Company, Xxxxxxxx or any Company
Subsidiary has, during the past five (5) years, except as
disclosed in Schedule 3.10 to the Company Disclosure Schedule,
received any notice of deficiency, proposed deficiency or
assessment from the IRS or any other governmental agency, with
respect to any federal, state, county or local taxes. No
federal or state tax return of the Company, Xxxxxxxx or any
Company Subsidiary is currently the subject of any audit by the
IRS or any other governmental agency. During the past five (5)
years, no material deficiencies have been asserted in
connection with the federal and state income tax returns of each
of the Company, Xxxxxxxx and the Company Subsidiaries and the
Company has no reason to believe that any material deficiency
would be asserted relating thereto. Except as disclosed in
Schedule 3.10 to the Company Disclosure Schedule,
neither the Company, Xxxxxxxx or any Company Subsidiary is a
party to any agreement providing for allocation or sharing of
taxes. Neither the Company, Xxxxxxxx or any Company Subsidiary
has ever been a member of an "affiliated group of corporations"
(within the meaning of Section 1504(a) of the Code) filing
consolidated returns, other than the affiliated group of which
the Company is or was the common parent.
3.11. INFORMATION IN THE COMPANY PROXY STATEMENT.
The Company represents and warrants that the Company Proxy
Statement (as defined in Section 7.2 hereof) will not, either at
the time it is mailed to the stockholders of the Company in
connection with the Company Shareholders' Meeting (as defined in
Section 7.1 hereof) or at the time of the Company Shareholders'
Meeting, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
however, that none of the representations and warranties in this
Section 3.11 shall apply to statements in or omissions from the
Company Proxy Statement made in reliance upon and in conformity
with information about or furnished by Bancorp or First Federal
for use in the Company Proxy Statement.
3.12. ENVIRONMENTAL MATTERS. For purposes of this
Section 3.12, the following terms shall have the indicated
meaning:
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree,
injunction or agreement with any governmental entity relating to
(1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural
resource), and/or (2) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Materials of Environmental
Concern. The term Environmental Law includes without limitation
(1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Subsection 9601, et seq;
the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Subsection 6901, et seq; the Clean Air Act, as amended,
42
15
U.S.C. Subsection 7401, et seq; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Subsection 1251, et seq; the
Toxic Substances Control Act, as amended, 15 U.S.C. Subsection
9601, et seq; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. Subsection 11001, et seq; the Safe Drinking Water
Act, 42 U.S.C. Subsection 300f, et seq; and all comparable state
and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may
impose liability or obligations for injuries or damages due to,
or threatened as a result of, the presence of or exposure to any
Materials of Environmental Concern.
"Environmental Claim" means any written notice from any
governmental authority or third party alleging potential
liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on, or resulting
from the presence, or release into the environment, of any
Materials of Environmental Concern.
"Materials of Environmental Concern" means pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum
products and any other materials regulated under Environmental
Laws.
"Loan Portfolio Properties and Other Properties Owned"
means those properties owned, leased or operated by the Company,
Xxxxxxxx or any Company Subsidiary, including those properties
serving as collateral for any loans made and retained by
Xxxxxxxx or any Company Subsidiary or for which Xxxxxxxx or any
Company Subsidiary serves in a trust relationship for the loans
retained in portfolio.
(a) To the knowledge of the Company and Xxxxxxxx and
each Company Subsidiary, the Company, Xxxxxxxx and each Company
Subsidiary is in compliance with all Environmental Laws,
except for any violations of any Environmental Law which would
not, singly or in the aggregate, have a material adverse effect
on the operations, assets, or financial condition of the Company
and the Company Subsidiaries taken as a whole. Neither the
Company, Xxxxxxxx or any Company Subsidiary has received any
communication alleging that the Company, Xxxxxxxx or any Company
Subsidiary is not in such compliance and, to the knowledge of
the Company and Xxxxxxxx, there are no present circumstances
that would prevent or interfere with the continuation of such
compliance.
(b) To the knowledge of the Company and Xxxxxxxx and
each Company Subsidiary, neither the Company, Xxxxxxxx or any
Company Subsidiary has been or is in violation of or liable
under any Environmental Law, except any such violations or
liabilities that would not singly or in the aggregate have a
material adverse effect on the business, operations, assets or
financial condition of the Company and the Company Subsidiaries
taken as a whole.
(c) To the knowledge of the Company, Xxxxxxxx and
each Company Subsidiary, none of the Loan Portfolio Properties
and Other Properties Owned by them has been or is in violation
of or liable under any Environmental Law, except any such
violations or liabilities that singly or in the aggregate would
not have a material adverse effect on the business, operations,
assets or financial condition of the Company and the Company
Subsidiaries taken as a whole.
16
(d) To the knowledge of the Company, Xxxxxxxx and
each Company Subsidiary, there are no actions, suits, demands,
notices, claims, investigations or proceedings pending or
threatened relating to the liability of the Loan Portfolio
Properties and Other Properties Owned under any
Environmental Law, including without limitation any notices,
demand letters or requests for information from any federal or
state environmental agency relating to any such liabilities
under or violations of Environmental Law, except such which
would not have or result in a material adverse effect on the
business, operations, assets or financial condition of the
Company and the Company Subsidiaries taken as a whole.
(e) To the knowledge of the Company, Xxxxxxxx and
each Company Subsidiary, there are no past or present actions,
activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or
other claim or action or governmental investigation that could
result in the imposition of any liability arising under any
Environmental Law against the Company, Xxxxxxxx or any Company
Subsidiary or against any person or entity whose liability for
any Environmental Claim the Company, Xxxxxxxx or any Company
Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would
not have a material adverse effect on the operations, assets, or
financial condition of the Company and the Company Subsidiaries
taken as a whole.
(f) The Company has set forth on Schedule 3.12(f) any
environmental studies conducted by it, Xxxxxxxx or any Company
Subsidiary during the past five years with respect to any
properties owned by it as of the date hereof.
3.13. INSURANCE. Xxxxxxxx or the Company has
delivered to First Federal as part of Schedule 3.13 to the
Company Disclosure Schedule true, accurate and complete copies
of all insurance policies and fidelity bonds of the Company,
Xxxxxxxx and the Company Subsidiaries. Each such policy
is in full force and effect, with all premiums due thereon on or
prior to the Closing Date having been paid as and when due. The
Company, Xxxxxxxx and the Company Subsidiaries have not been
notified that their fidelity or insurance coverage will not be
renewed by their carrier(s) on substantially the same
terms as their existing coverage. All such policies (i) are
sufficient for compliance by the Company, Xxxxxxxx and each
Company Subsidiary with all requirements of law and all
agreements to which the Company, Xxxxxxxx or any Company
Subsidiary is a party, and (ii) will not, due to action or
inaction by the Company or Xxxxxxxx, terminate or lapse prior to
the Effective Time without similar policies being obtained that
would continue until the Effective Time.
3.14. COMPLIANCE WITH LAWS AND ORDERS. Except as
set forth in Schedule 3.14 to the Company Disclosure Schedule,
neither the Company, Xxxxxxxx or any Company Subsidiary has
received notice of any violation or alleged material violation
of, or, to the knowledge of the Company or Xxxxxxxx, is subject
to any liability (whether accrued, absolute, contingent, direct
or indirect) for past or continuing material violations of, any
law, statute or regulation. Neither the Company, Xxxxxxxx or
any Company Subsidiary is in default under, and no event has
occurred that, with the lapse of time or the giving of notice by
a third party or both, could result in a default under the terms
of any judgment, decree, order, writ, rule or regulation of any
governmental authority or court, whether federal, state or
17
local and whether at law or in equity, where the failure to be
in full compliance would reasonably be expected to result alone
or in the aggregate in damages, which would be reasonably likely
to have a Material Adverse Effect.
3.15. GOVERNMENTAL REGULATION. Each of the
Company, Xxxxxxxx and the Company Subsidiaries holds all
material licenses, certificates, permits, franchises and rights
from all appropriate federal, state and other public authorities
necessary for the conduct of its business; and, between the
date hereof and the Closing Date, the Company and Xxxxxxxx will,
and the Company will cause each Company Subsidiary to maintain
all such licenses, certificates, permits, franchises and rights
in effect. Except as set forth in Schedule 3.15 to the Company
Disclosure Schedule, neither the Company, Xxxxxxxx or any
Company Subsidiary is a party or subject to any agreements,
directives, orders or similar arrangements between or involving
the Company, Xxxxxxxx or any Company Subsidiary and any
federal savings institution regulatory authority.
3.16. CONTRACTS AND COMMITMENTS. Except as set
forth in Schedule 3.16 to the Company Disclosure Schedule,
neither the Company, Xxxxxxxx or any Company Subsidiary is a
party to or bound by any (a) material lease or license with
respect to any property, real or personal; (b) material contract
or commitment for capital expenditures; (c) material contract or
commitment for total expenses for the purchase of materials,
supplies or for the performance of services by third parties for
a period of more than 60 days from the date of this Agreement;
(d) material contract or option for the purchase or sale of any
real or personal property other than in the ordinary course of
business; (e) agreement, arrangement or understanding relating
to the employment, election, retention in office or severance of
any present or former director or officer of the Company,
Xxxxxxxx or any Company Subsidiary; or (f) interest-rate swaps,
caps, floors, and option agreements, or other similar interest
rate risk management agreements. To their knowledge, the
Company, Xxxxxxxx and the Company Subsidiaries have performed in
all material respects all obligations required to be performed
by them to date and are not in default under, and no event has
occurred which, with the lapse of time or action by a third
party or both, could result in a default resulting in material
damages or other material default under any outstanding
mortgage, lease, contract, commitment or agreement to which the
Company, Xxxxxxxx or any Company Subsidiary is a party or by
which the Company, Xxxxxxxx or any Company Subsidiary is bound
or under any provision of their respective charters or bylaws.
Each such outstanding material mortgage, lease, contract,
commitment or agreement is a valid and legally binding
obligation of the Company, Xxxxxxxx or the Company Subsidiary
subject to (x) all applicable bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors
rights generally or the rights of creditors of savings
institutions the accounts of which are insured by the FDIC, and
(y) the application of equitable principles if equitable
remedies are sought.
3.17. AGREEMENTS WITH DIRECTORS, OFFICERS AND
STOCKHOLDERS. Except as set forth in Schedule 3.17 to the
Company Disclosure Schedule, no director, executive officer, or
beneficial owner of five percent (5.0%) or more of the
outstanding capital stock of GFS or any associate of any
such person (hereinafter sometimes referred to as a "Company
Principal") (a) is or has during the period subsequent to June
30, 1997, been a party (other than as a depositor) to any
transaction with the Company or Xxxxxxxx, whether as a borrower
or otherwise, that (i) was made other than in the ordinary
18
course of business, (ii) was made on other than substantially
the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions with other
persons, or (iii) involves more than the normal risk of
collectability or presents other unfavorable features; or (b) is
a party to any material loan or loan commitment, whether written
or oral. Except as disclosed in Schedule 3.17 to the Company
Disclosure Schedule, no director, executive officer (or any
associate of such person) and, to the knowledge of the Company,
no beneficial owner of five percent (5.0%) or more of the
outstanding capital stock of GFS or any associate of such person
holds any position with or owns more than five percent (5.0%) of
the outstanding shares of any class of voting stock of any
depository organization, or holding company therefor, other than
the Company. For the purposes of this Section 3.17, the term
"depository organization" means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and
loan association, a homestead association, a cooperative bank,
an industrial bank, a credit union, or a depository holding
company.
3.18. ACCURACY OF INFORMATION. The statements
made by the Company and Xxxxxxxx in this Agreement and in any
other written documents executed and/or delivered by or on
behalf of the Company or Xxxxxxxx pursuant to the terms of this
Agreement are true and correct in all material respects. The
statements contained in such other documents specifically
referred to in this Agreement will be deemed to constitute
representations and warranties of the Company and Xxxxxxxx under
this Agreement to the same extent as if set forth herein in
full.
3.19 [RESERVED]
3.20 ALLOWANCES FOR LOSSES AND REAL ESTATE OWNED.
Each of the allowance for loan losses, and the reserve for
losses on Real Estate Owned reflected on the consolidated
balance sheets included in the Company's Financial Statements
referred to in Section 3.5 hereof is, or will be in the
case of subsequently delivered Company Financial Statements, as
the case may be, adequate in all material respects as of their
respective dates under the requirements of generally accepted
accounting principles to provide for reasonably anticipated
losses on outstanding loans net of recoveries and foreclosed
real estate, respectively.
3.21 TITLE TO ASSETS; LEASES
(a) Except for (i) liens and encumbrances
specifically disclosed in any of the Company Financial
Statements referred to in Section 3.5 hereof, (ii) landlords' or
statutory liens or other liens incurred in the ordinary course
of business and not securing indebtedness for borrowed
money and not yet delinquent, and (iii) liens and encumbrances
which are not material in amount and do not materially impair
the value of any property subject thereto or the use of such
property for the purposes for which it is presently used or
intended to be used, the Company, Xxxxxxxx and each Company
Subsidiary has good and marketable title, free and clear of all
security interests, encumbrances, trust agreements, liens or
other adverse claims, to all its assets and property, real and
personal, reflected in the Company Financial Statements referred
to in Section 3.5 hereof or acquired thereafter, which includes
all property and assets used by the Company, Xxxxxxxx and each
Company
19
Subsidiary that are material to the conduct of their respective
businesses, except for assets and property
disposed of in the ordinary course of business after June 30,
1997.
(b) The Company, Xxxxxxxx and each Company Subsidiary
as lessee has the right under valid and existing leases to
occupy, use, and possess all property leased by it in all
material respects as presently occupied, used, and possessed by
the Company, Xxxxxxxx or any Company Subsidiary and such leases
will not terminate or lapse prior to the Effective Time or be
affected in any material respect by consummation of the
transactions contemplated hereby. Schedule 3.21(b) contains
an accurate listing of each lease pursuant to which the Company,
Xxxxxxxx or any Company Subsidiary acts as lessor or lessee,
including the expiration date and the terms of any renewal
options which relate to the same, as well as a listing of each
material real property owned by the Company, Xxxxxxxx or any
Company Subsidiary and used in the conduct of its respective
business.
(c) All material real and personal property owned by
the Company, Xxxxxxxx or any Company Subsidiary or presently
used by any of them are in an adequate condition (ordinary wear
and tear excepted) and are in all material respects sufficient
to carry on the business of the Company, Xxxxxxxx and each
Company Subsidiary in the manner conducted currently by them.
3.22. BUSINESS OF XXXXXXXX. Since June 30, 1997,
Xxxxxxxx has conducted its business in the ordinary course. For
purposes of the foregoing, Xxxxxxxx has not, since June 30,
1997, controlled expenses through the (i) elimination of
employee benefits; (ii) deferral of routine maintenance of real
property or leased premises; (iii) elimination of reserves where
the liability related to such reserve has remained; (iv)
reduction of capital improvements from previous levels; (v)
failure to depreciate capital assets in accordance with past
practice or to eliminate capital assets no longer used in
Grinnell's business; (vi) capitalization of loan production
expenses other than in accordance with SFAS No. 91,
or (vii) extraordinary reduction or deferral of ordinary or
necessary expenses.
3.23. TAX MATTERS. Neither the Company or any
Company Subsidiary has taken or agreed to take any action or has
any knowledge of any fact or circumstance that would (i) prevent
the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code, or
(ii) materially impede or delay receipt of any approval from any
regulatory authority or the consummation of the transactions
contemplated by this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL
First Federal hereby represents and warrants to the
Company and Xxxxxxxx as follows:
4.1. CORPORATE ORGANIZATION. First Federal is a stock
savings bank duly organized, validly existing and in good
standing under the laws of the United States. Bancorp is a
mutual holding company duly organized, validly existing and in
good standing under the laws of the United States.
20
All eligible accounts issued by First Federal are insured by the
FDIC to the maximum extent permitted under applicable law. Each
of First Federal and Bancorp has all requisite corporate power
and authority to own, operate and lease its properties as
presently owned, operated and leased and to engage in the
activities and business now being conducted by it.
4.2. AUTHORIZATION. The Board of Directors of First
Federal has approved this Agreement and the transactions
contemplated hereby and has authorized the execution, delivery
and performance by First Federal of this Agreement. No
corporate proceeding on the part of First Federal is necessary
to authorize this Agreement or to consummate the transactions
contemplated hereby, and First Federal has full corporate power
and authority to enter into this Agreement and to consummate
the transactions contemplated hereby subject to the consents and
approvals of federal and state regulatory authorities referred
to in Section 4.4 hereof. This Agreement has been duly and
validly executed and delivered by First Federal and constitutes
the valid and binding obligation of First Federal, enforceable
against it in accordance with its terms, subject to (a) all
applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally,
and (b) the application of equitable principles if equitable
remedies are sought.
4.3. NO VIOLATION. Neither the execution and delivery
of this Agreement or, subject to the receipt of the consents and
approvals contemplated by Section 4.4 hereof, the consummation
of the transactions contemplated herein will, (a) conflict with,
result in the breach of, constitute a violation of, constitute a
default under or accelerate the performance of the terms of any
government regulation, judgment, order or decree of any court or
other governmental agency to which First Federal or Bancorp
may be subject, or any contract, agreement or instrument to
which First Federal or Bancorp is a party or by which First
Federal or Bancorp are bound or committed, or the Charter or
Bylaws of First Federal or Bancorp, or any law, or any rule or
regulation of any governmental agency or authority, or (b)
constitute an event that with the lapse of time or action by a
third party could result in a default under any of the
foregoing, or (c) result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of First
Federal or Bancorp.
4.4. CONSENTS AND APPROVALS. Other than the receipt
of approvals required by the HOLA, the Thrift Regulations, and
the Bank Merger Act, no filing or registration with, no notice
to and no permit, authorization, consent or approval of any
public or governmental body or authority is necessary for the
consummation by First Federal of the transactions contemplated
by this Agreement. First Federal knows of no reason (including
those relating to fair lending laws or other laws relating
to discrimination, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act and the Home Mortgage Disclosure Act, and
anti-trust or consumer disclosure laws and regulations) why the
regulatory approvals should not be obtained in a reasonably
timely manner.
4.5. INFORMATION SUPPLIED FOR INCLUSION IN THE COMPANY
PROXY STATEMENT. Any information regarding First Federal,
Bancorp or any subsidiary of First Federal supplied by First
Federal or Bancorp to the Company specifically for inclusion in
the Company Proxy Statement (as defined in Section 7.2 hereof)
will not contain any untrue statement of a material fact or omit
to state
21
a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading.
4.6. CASH PAYMENT. First Federal has sufficient funds
to pay the cash payment required under Sections 2.3 and 2.4,
hereof and such payment will not cause it to fail to meet any
regulatory capital requirements to which it is subject.
4.7. ACCURACY OF INFORMATION. The statements made by
First Federal and with respect to Bancorp in this Agreement and
in any other written documents executed and/or delivered by
or on behalf of Bancorp and First Federal pursuant to the terms
of this Agreement are true and correct in all material respects.
The statements contained in such other documents specifically
referred to in this Agreement will be deemed to constitute
representations and warranties of First Federal under this
Agreement to the same extent as if set forth herein in full.
4.8. REGULATORY APPROVALS AND NO ADVERSE CHANGE.
First Federal is aware of no reason that it cannot obtain any of
the approvals of regulatory authorities necessary to consummate
the Merger and First Federal has received no advice or
information from any regulatory authority indicating that such
approvals will be denied or are doubtful. There has not been
any adverse change in the business or financial condition,
operations, properties or capitalization of First Federal since
the end of its most recently completed fiscal year that is
reasonably likely to have a material adverse effect upon
its ability to consummate the transactions contemplated by this
Agreement and as of the date of this Agreement, no event,
occurrence or development of any nature is existing or, to the
knowledge of First Federal, threatened, which would reasonably
be expected to have such an effect on First Federal's ability to
consummate such transactions.
ARTICLE V.
COVENANTS OF FIRST FEDERAL
First Federal hereby agree that from the date of this
Agreement until the Effective Time:
5.1. AFFIRMATIVE COVENANTS. As soon as reasonably
practicable, First Federal shall furnish Xxxxxxxx with copies of
all of First Federal's periodic reports on Forms 10-K, 10-Q and
8-K, all proxy statements and all call reports filed with the
OTS, or provided to the stockholders of First Federal,
subsequent to the date hereof.
5.2. NEGATIVE COVENANTS. Except as specifically
contemplated by this Agreement, First Federal shall not do, or
agree or commit to do, without the prior written consent of
Xxxxxxxx any of the following:
22
(a) take action which would or is reasonably likely
to (i) adversely affect the ability of either First Federal or
the Company and Xxxxxxxx to obtain any necessary approvals of
governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect First Federal's
ability to perform its covenants and agreements under this
Agreement; or (iii) result in any of the conditions to the
Reorganization set forth in Articles IX and X not being
satisfied; or
(b) agree in writing or otherwise to do any of the
foregoing.
5.3. BREACHES. First Federal 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 breach had such
event occurred or been known prior to the date hereof) 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.
5.4. FILING OF APPLICATIONS. First Federal shall use
its best efforts promptly to and, in any event, no later than 90
days after the date hereof shall, prepare, submit, publish and
file (a) an application to the OTS pursuant to 12 C.F.R. Part
574; and (b) any other applications, notices or statements
required to be filed in connection with the transactions
contemplated hereby.
5.5. SUPPLEMENT TO FIRST FEDERAL DISCLOSURE SCHEDULE.
First Federal will promptly supplement or amend the First
Federal Disclosure Schedule with respect to any matter hereafter
arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described
in the First Federal Disclosure Schedule. No supplement or
amendment to the First Federal Disclosure Schedule will have any
effect for the purpose of determining satisfaction of the
condition set forth in Section 9.1 hereof as to the accuracy of
representations made as of the date of this Agreement.
5.6. EXPENSES. First Federal hereby agrees that if
this Agreement or the transactions contemplated hereby are
terminated pursuant to Sections 11.1 (c)(iii) or 11.1 (c)(iv) as
a result of a willful breach by First Federal, First Federal
shall promptly (and in any event within ten (10) business
days after such termination) pay all reasonable Expenses of
Xxxxxxxx in an amount not to exceed $300,000. For purposes of
this Section 5.6, the "Expenses of Xxxxxxxx" shall include all
reasonable out-of-pocket expenses of Xxxxxxxx (including all
fees and expenses of counsel, accountants, financial advisors,
experts and consultants to Xxxxxxxx and its Affiliates) incurred
by it or on its behalf in connection with the consummation of
the transactions contemplated by this Agreement.
ARTICLE VI.
COVENANTS OF THE COMPANY AND XXXXXXXX
The Company and Xxxxxxxx hereby agree that from the
date of this Agreement until the Effective Time:
23
6.1. AFFIRMATIVE COVENANTS. Unless the prior written
consent of First Federal shall have been obtained (which shall
not be unreasonably withheld) and except as otherwise
contemplated herein, the Company and Xxxxxxxx will:
(a) operate their business in the ordinary course in
accordance with past business practices;
(b) use their best efforts to (i) preserve intact
their business organization and assets, maintain their rights
and franchises, retain the services of their officers and key
employees (except that they shall have the right to terminate
the employment of any officer or key employee in accordance
with established employment procedures) and (ii) maintain their
relationships with customers:
(c) maintain their corporate existence in good
standing and file all required Xxxxxxxx Reports (as defined in
such Section 12.7(c) hereof);
(d) use their best efforts to maintain and keep their
properties in as good repair and condition as at present, except
for ordinary wear and tear;
(e) use their best efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of
coverage to that now maintained by them and, in the event that
Xxxxxxxx is unable to keep such insurance and bonds in full
force and effect, to provide prompt notice of such failure to
First Federal;
(f) perform all obligations required to be performed
by them under all material contracts, leases, and documents
relating to or materially affecting their assets, properties,
and business;
(g) use their best efforts to comply with and perform
in all material respects all obligations and duties imposed upon
them by all applicable laws and regulations; and
(h) as soon as reasonably practicable, furnish First
Federal copies of all of Grinnell's reports and documents
provided to Company stockholders or filed with the OTS
subsequent to the date hereof.
6.2. NEGATIVE COVENANTS. Except as specifically
contemplated by this Agreement, from the date hereof until the
Effective Time, neither the Company nor Xxxxxxxx shall, or shall
any Company Subsidiary be permitted to, without the prior
written consent of First Federal (which shall not be
unreasonably withheld), do any of the following:
(a) incur any material liabilities or material
obligations, whether directly or by way of guaranty, including
any obligation for borrowed money whether or not evidenced by a
note, bond, debenture or similar instrument or enter into or
extend any material agreement or lease, except in the
ordinary course of business consistent with past business
practices or in connection with the transactions contemplated
and permitted by this Agreement;
24
(b) (i) Except as set forth on Schedule 6.2(b) of the
Company Disclosure Schedule, grant any bonus or increase in
compensation to its directors or grant any bonus or any increase
in compensation to its officers and employees, (ii) effect any
change in retirement benefits to any class of employees or
officers (unless any such change shall be required by applicable
law) that would increase its retirement benefit liabilities,
(iii) adopt, enter into, amend or modify any Xxxxxxxx Benefit
Plan except as required by law, (iv) enter into or amend any
employment, severance or similar agreements or arrangements with
any directors or officers (exclusive of renewals in the ordinary
course of business), (v) make any additional awards under any
Xxxxxxxx stock bonus plan or Xxxxxxxx stock option plan, or (vi)
make any additional contributions to the Xxxxxxxx ESOP;
(c) declare or pay any dividend on, or make any other
distribution in respect of, its outstanding shares of capital
stock, except for regular, quarterly cash dividends, paid on
normal dividend payment dates, in an amount no greater than the
dividend rate as of the date hereof.
(d) (i) redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock, or any options, warrants, conversion or other rights to
acquire any shares of its capital stock or any such securities
or obligations; (ii) merge with or into any other corporation,
savings institution or bank, permit any other corporation,
savings institution or bank to merge into it or consolidate with
any other corporation or bank, or effect any reorganization or
recapitalization; (iii) purchase or otherwise acquire any
assets, or shares of any class of stock, of any corporation,
savings institution, bank or other business; (iv) liquidate,
sell, dispose of, or encumber any assets or acquire any assets,
other than in the ordinary course of its business consistent
with past practices; or (v) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(e) except pursuant to the exercise of outstanding
stock options, issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or
sale of, any shares of its capital stock of any class (including
shares held in treasury), any debt instrument having a right
to vote or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting debt or
convertible securities;
(f) initiate, solicit or encourage, or take any other
action to facilitate, any inquiries or the making of any
proposal which constitutes a Superior Proposal (as defined in
Section 7.1 hereof), take any action in furtherance of such
inquiries or to obtain a Superior Proposal, or negotiate with
any person in, or agree to or endorse any Superior Proposal, or
authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, accountant or other
representative retained by it or any Company Subsidiary to take
any such action, except with respect to negotiations regarding,
and the endorsement of a Superior Proposal, as legally required
by the fiduciary duties of the Company's Board of Directors
under applicable law and as advised by counsel to the Company's
Board of Directors, and the Company shall promptly notify First
Federal orally and in writing of all of the relevant details
relating to all inquiries and proposals which it may receive
relating to any of such matters;
25
(g) propose or adopt any amendments to its charter or
by-laws, except such amendments as may be required to consummate
the transactions contemplated by this Agreement;
(h) enter into an agreement in principle with respect
to any acquisition of a material amount of assets or securities
or any release or relinquishment of any material contract rights
not in the ordinary course of business;
(i) except in its fiduciary capacity, purchase any
shares of capital stock of First Federal;
(j) [RESERVED]
(k) subject to the provisions of Section 7.1 hereof
(and provisions of this Agreement related thereto) regarding a
Superior Proposal, willfully take action which would or is
reasonably likely to (i) adversely affect the ability of either
of First Federal, the Company or Xxxxxxxx to obtain any
necessary approvals of governmental authorities required for the
transactions contemplated hereby; (ii) adversely affect
Grinnell's or the Company's ability to perform its covenants and
agreements under this Agreement; or (iii) result in any of the
conditions to the Reorganization set forth in Articles VIII and
X not being satisfied;
(l) change in any material respect the lending,
investment, deposit, asset and liability management and other
material policies concerning the business of Xxxxxxxx or the
Company, unless required by law or regulation or, with respect
to lending or depository activities;
(m) file any applications or make any contract with
respect to branching by Xxxxxxxx (whether de novo or by
purchase, sale or relocation);
(n) form any new subsidiary or cause or permit a
material change in the activities presently conducted by any
Company Subsidiary or make additional material investments in
subsidiaries or enter into or invest in any partnership, joint
venture or other business enterprise;
(o) purchase any debt securities or derivative
securities including CMO or REMIC products;
(p) purchase any equity securities other than Federal
Home Loan Bank Stock;
(q) discharge or satisfy any lien or encumbrance or
pay any material obligation or liability (absolute or
contingent) other than at scheduled maturity or in the ordinary
course of business;
(r) sell or otherwise dispose of any loan,
mortgage-backed security or investment security except in the
ordinary course of business consistent with past practices and
policies;
26
(s) modify or restructure the terms of any loan
except in the ordinary course of business consistent with
prudent banking practices and policies;
(t) make any capital expenditures in excess of
$10,000 individually or $25,000 in the aggregate, other than
pursuant to binding commitments existing on the date hereof and
other than expenditures necessary to maintain existing assets in
good repair;
(u) change its method of accounting in effect prior
to the Effective Time, except as required by changes in laws or
regulations or generally accepted accounting principles
concurred in by its and the Company's independent certified
public accountants, or change any of its methods of reporting
income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax returns
for the Company's last full taxable year, except as required
by changes in laws or regulations;
(v) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or
entity; or
(w) except for loans secured by commercial real
estate or multifamily real estate and originated as part of the
Bache Funding, Inc. program, for which the net amount retained
by Xxxxxxxx shall be limited to $500,000, make, renew, increase,
extend or purchase any loan secured by commercial real estate or
multifamily real estate, any land acquisition or development
loan, any commercial business loan, or any residential loan in
an amount in excess of $200,000, except to the extent that
Xxxxxxxx is contractually obligated to do so as of the date
hereof;
(x) fail to keep in full force and effect its
insurance and bonds as now carried;
(y) fail to notify First Federal promptly of its
receipt of any letter, notice or other communication, whether
written or oral, from any regulatory authority advising that it
is contemplating issuing, requiring or requesting any agreement,
memoranda, understanding or similar undertaking, or order,
directive, or extraordinary supervisory letter;
(z ) agree in writing or otherwise to do any of the
foregoing.
6.3. REPORT TO FIRST FEDERAL. The Company and
Xxxxxxxx will use its best efforts to keep First Federal fully
informed concerning all developments of which it becomes aware
that may have a material effect upon the business, any
properties or condition (either financial or otherwise) of
the Company (other than developments affecting financial
institutions generally).
6.4. BREACHES. The Company and Xxxxxxxx shall, in the
event they become 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 breach had such event occurred or been known
prior to the date hereof) of any of their representations or
agreements contained or referred to herein,
27
give prompt written notice thereof to First Federal and use
their best efforts to prevent or promptly remedy the same.
6.5. SUPPLEMENT TO DISCLOSURE SCHEDULE. The Company
will promptly supplement or amend the Company Disclosure
Schedule with respect to any matter hereafter arising that, if
existing or occurring at the date of this Agreement, would have
been required to be set forth or described in the Company
Disclosure Schedule. No supplement or amendment to the Company
Disclosure Schedule will have any effect for the purpose of
determining satisfaction of the condition set forth in Section
8.2hereof as to the accuracy of representations made as of the
date of this Agreement.
6.6. CONSENTS AND APPROVALS. The Company and Xxxxxxxx
shall use their best efforts to assist First Federal in
obtaining the consents and approvals referenced in Section 8.5
hereof.
6.7. EXPENSES. Xxxxxxxx hereby agrees that if this
Agreement or the transactions contemplated hereby are terminated
pursuant to Sections 11.1 (b)(iii) or 11.1 (b)(iv) as a result
of a willful breach by Xxxxxxxx or the Company, Xxxxxxxx shall
promptly (and in any event within ten (10) business days after
such termination) pay all reasonable Expenses of First Federal
in an amount not to exceed $300,000. For purposes of this
Section 6.7, the "Expenses of First Federal" shall include all
reasonable out-of-pocket expenses of First Federal (including
all fees and expenses of counsel, accountants, financial
advisors, experts and consultants to First Federal and its
Affiliates) incurred by it or on its behalf in connection with
the consummation of the transactions contemplated by this
Agreement.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.1. COMPANY SHAREHOLDERS' MEETING. The Company
shall, as soon as is reasonably practicable, call and hold a
meeting of its stockholders (the "Company Shareholders'
Meeting") to submit for stockholder approval this Agreement.
Subject to receipt of a fairness opinion from Professional Bank
Services updated as of a date within five days of mailing of the
Company Proxy Statement, the Board of Directors of the Company
will recommend that holders of Company Common Stock vote in
favor of and approve this Agreement at the Company Shareholders'
Meeting; provided, however, that nothing contained in this
Section 7.1 shall prohibit the Board of Directors of the Company
from failing to recommend approval of the transactions
contemplated hereby, if necessary to comply with its fiduciary
duties as determined in consultation with legal counsel in the
context of a Superior Proposal (as hereinafter defined). For
purposes of this Agreement, "Superior Proposal" means a bona
fide proposal to acquire the entire equity interest in the
Company or Xxxxxxxx or substantially all of the assets of the
Company or Xxxxxxxx, which is expressly conditioned upon the
termination of this Agreement and is made by a third party on
terms which a majority of the disinterested members of the Board
of Directors of the Company determines pursuant to the exercise
of its fiduciary duty after consultation with legal counsel, to
be more favorable (from a financial point
28
of view) to the holders of Company Common Stock than the
Reorganization and for which financing is either then committed
or not a condition precedent to the consummation thereof.
7.2. PROXY STATEMENT FOR COMPANY SHAREHOLDERS'
MEETING. For the purposes of holding the Company Shareholders'
Meeting, the Company shall prepare a proxy statement satisfying
all requirements under applicable securities laws (said proxy
statement, together with any and all amendments or supplements
thereto, being herein referred to as the "Company Proxy
Statement"). First Federal shall review and comment on the
Company Proxy Statement prior to its distribution to the
Company's stockholders.
7.3. COOPERATION; REGULATORY APPROVALS. The parties
shall cooperate, and shall cause each of their affiliates and
subsidiaries to cooperate, in the preparation and submission by
them, as promptly as reasonably practicable, of such
applications, petitions, and other documents and materials as
any of them may reasonably deem necessary or desirable to the
OTS, the FDIC, the Department of Justice, other regulatory
authorities, and any other persons for the purpose of obtaining
any approvals or consents necessary to consummate the
transactions contemplated by this Agreement. Each party will
have the right to review and comment on such applications,
petitions and other documents and materials and shall furnish to
the other copies thereof promptly after filing or submission
thereof. At the date hereof, none of the parties is aware of
any reason that the regulatory approvals required to be obtained
by it would not be obtained. The obligation to take action as
provided in this Section 7.3 shall not be construed as including
an obligation to accept any terms of or conditions to a consent,
authorization, order or approval of, or any exemption by, any
party that are unduly burdensome as reasonably determined by the
Boards of Directors of First Federal or Xxxxxxxx. In the event
of a restraining order or injunction which prevents the Closing
by reason of the operation of Section 10.2 hereof, each of the
parties hereto shall use its respective best efforts to cause
such order or injunction to be lifted and the Closing to be
consummated as soon as reasonably practicable.
7.4. REPORTS. Prior to the Effective Time, the
Company and Xxxxxxxx shall prepare and file as and when required
all Xxxxxxxx Reports. Xxxxxxxx shall prepare such Xxxxxxxx
Reports so that (a) they comply in all material respects with
all of the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they are
filed and do not 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 light
of the circumstances under which they were made, not misleading,
and (b) with respect to any Xxxxxxxx Reports containing Company
Financial Statements, the financial information (i) is prepared
in accordance with generally accepted accounting principles
and practices as utilized in the Company Financial Statements
applied on a consistent basis, (ii) presents fairly the
consolidated financial condition of Xxxxxxxx at the dates, and
the consolidated results of operations and cash flows for the
periods, stated therein and (iii) in the case of interim fiscal
periods, reflects all adjustments, consisting only of normal
recurring items, subject to year-end audit adjustments. All
Xxxxxxxx Reports shall be provided to First Federal promptly
following the filing of such reports with the respective
regulatory authority.
29
7.5. BROKERS OR FINDERS. Except as set forth on
Schedule 7.5, each of First Federal, the Company and Xxxxxxxx
represents that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this
Agreement.
7.6. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement, each of
the parties hereto agrees to use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the
appropriate vote of the stockholders of the Company described in
Section 7.1 hereof, including cooperating fully with the other
party. 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 First Federal with full title to all
properties, assets, rights, approvals, immunities and
franchises of the Company, Xxxxxxxx or the Company Subsidiaries,
the proper officers and directors of each party to this
Agreement shall take all such necessary action.
7.7. RELEASE OF INFORMATION. The Company, Xxxxxxxx
and First Federal agree that prior to making any public
announcement with respect to the transactions contemplated by
this Agreement, each party will consult with the other and will
use its best efforts either to agree upon the text of the
proposed joint announcement to be made by both parties or to
obtain the other's approval (which approval shall not be
unreasonably withheld) of the text of an announcement to be made
solely on behalf of such party. In the event that the parties
do not ultimately agree on the text of any proposed public
announcement, no such disclosure shall be made unless the party
seeking to make an announcement is advised by counsel that its
failure to do so would be reasonably likely to constitute
a violation of law.
7.8. DIRECTORS AND ADVISORY DIRECTORS. At the
Effective Time, First Federal shall appoint Xxxxxx X. Xxxxx and
one additional individual to the First Federal Board of
Directors and to the Bancorp Board of Directors. Each of the
members of the Board of Directors of Xxxxxxxx as of the
date of this Agreement (other than the directors referred to in
the preceding sentence) shall be entitled to serve on an
Advisory Board to the Board of Directors of First Federal, for a
period of one year following the Effective Time, subject to
reappointment at the sole discretion of First Federal and such
Advisory Board members shall meet monthly during the first year
following the Effective Time. Thereafter, to the extent such
Advisory Board is continued, such Advisory Board members will
meet as frequently as requested by the Board of Directors of
First Federal, but no less frequently than quarterly. Such
Advisory Board members shall receive an annual fee of at least
$2,000 plus $200 per meeting attended; provided, however, with
respect to Xxxxxxxx Director XxXxx Xxxxxxxx, the compensation
this Advisory Board member shall be as set forth in that certain
Employment Agreement of even date herewith between Xx. Xxxxxxxx
and First Federal.
7.9. ACCESS TO PROPERTIES AND RECORDS;
CONFIDENTIALITY. (a) Each of the Company, Xxxxxxxx and each
Company Subsidiary shall permit First Federal and its
representatives, including financial advisors, reasonable access
to its properties, and shall disclose and make available to them
all
30
books, papers and records relating to the assets, stock
ownership, properties, operations, obligations and liabilities
of the Company, Xxxxxxxx and each Company Subsidiary, including,
but not limited to, all books of account (including the general
ledger), tax records, minute books of meetings of boards of
directors (and any committees thereof) (except portions thereof
relating to this Agreement, the Reorganization and matters
relating thereto, including competing transactions) and
stockholders, organizational documents, bylaws, material
contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files (other than attorney
work product or materials protected by any attorney-client
privilege), plans affecting employees, and any other business
activities or prospects in which the Company or Xxxxxxxx may
have a reasonable interest. The Company and Xxxxxxxx and each
Company Subsidiary shall make their respective officers,
employees and agents and authorized representatives (including
counsel and independent public accountants) available to confer
with First Federal and its representatives. The Company and
Xxxxxxxx shall permit a representative of First Federal to
attend meetings of their Board of Directors, including, without
limitation, the loan committee or asset/liability committee
meetings.
(b) All information furnished previously in
connection with the transactions contemplated by this Agreement
or pursuant hereto shall be treated as the sole property of the
party furnishing the information until consummation of the
transactions contemplated hereby and, if such transactions shall
not occur, the party receiving the information shall, upon
request, return to the party which furnished such information
all documents or other materials containing, reflecting or
referring to such information, shall use its best efforts to
keep confidential all such information, and shall not
directly or indirectly use such information for any competitive
or other commercial purposes. The obligation to keep such
information confidential shall continue for one year from the
date the proposed transactions are abandoned but shall not apply
to (i) any information which (x) the party receiving the
information can establish by convincing evidence was already in
its possession prior to the disclosure thereof by the party
furnishing the information; (y) was then generally known to the
public; or (z) became known to the public through no fault of
the party receiving the information; or (ii) disclosures
pursuant to a legal requirement or in accordance with an order
of a court of competent jurisdiction, provided that the party
which is the subject of any such legal requirement or order
shall use its best efforts to give the other party at least ten
business days prior notice thereof.
7.10. CERTAIN POLICIES. At the request of First
Federal, the Company shall, prior to the Effective Time, (i)
establish and take such reserves and accruals as First Federal
shall reasonably request to conform, on a mutually satisfactory
basis, the Company's loan, real estate, accrual and reserve
policies to First Federal's policies and (ii) establish and take
such accruals, reserves and charges in order to implement such
policies in respect of severance costs, write-off or write-down
of various assets and other appropriate accounting adjustments,
and to recognize for financial accounting purposes such expenses
incurred in connection with the Reorganization, provided,
however, that Xxxxxxxx shall not be obligated to take any such
action pursuant to this Section 7.10 unless and until (x) First
Federal specifies its request in a writing delivered to the
Company, and acknowledges that all conditions to the
obligations of First Federal to consummate the Reorganization
set forth in Articles VIII and X have been waived (if available)
or satisfied and (y) the Company and Xxxxxxxx acknowledge that
the conditions to its obligation to consummate the
Reorganization set forth in Articles IX and X have been
31
waived (if available) or satisfied. The Company and Xxxxxxxx
shall not be required to take any such action that is not
consistent with generally accepted accounting principles or any
requirement applicable to either of them by any bank regulatory
agency. The representations, warranties and covenants of the
Company and Xxxxxxxx contained in this Agreement shall not be
deemed to be untrue or breached in any respect for any purpose
as a consequence of any action undertaken on account of this
Section 7.10and shall not constitute grounds for termination of
this Agreement by First Federal.
7.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT
ARRANGEMENTS.
(a) First Federal intends to offer continued
employment to employees of Xxxxxxxx as of the Effective Time at
the base salary levels in effect at the Effective Time, subject
to the provisions in this Section 7.11 and provided that this
Agreement shall not, except as otherwise provided herein,
provide any contractual right to such employees of such
employment. Employees of Xxxxxxxx who continue employment with
First Federal on or after the Effective Time (all such persons
are referred to herein as "Continuing Employees") shall be
eligible to participate in such employee benefit plans as may be
in effect generally for employees of First Federal from time to
time (the "First Federal Plans"), if such Continuing Employee
shall be eligible or selected for participation therein. Except
as specifically set forth in this Section 7.11, Continuing
Employees shall be entitled to participate on the same basis as
similarly situated employees of First Federal, except that
Continuing Employees shall be entitled to full credit for each
year of prior service (in which 1,000 hours of service are
performed) with Xxxxxxxx for purposes of determining eligibility
for participation and vesting, but not for benefit accruals, in
the First Federal Plans, subject to applicable break in service
rules. Notwithstanding anything in this Section 7.11(a) to the
contrary, participation by Continuing Employees in employee
benefit plans of First Federal with respect to which eligibility
and participation is at the discretion of the employer, such as
non-qualified deferred compensation plans, stock option plans,
stock bonus plans, restricted stock plans, and other such
similar plans, (but not including employee benefit plans
generally available to all full-time employees of First Federal)
shall be discretionary with First Federal.
(b) In connection with the execution of this
Agreement, GFS and Xxxxxxxx shall amend the Xxxxxxxx ESOP loan
documents to cause the loan to be repaid on an annual rather
than a quarterly basis. Such annual payment shall be due and
payable at the end of the Xxxxxxxx ESOP plan year. In
connection with the execution of this Agreement, and pursuant to
amendments made by Xxxxxxxx to the Xxxxxxxx ESOP, the Xxxxxxxx
ESOP shall automatically terminate, effective at the Effective
Time. Following the termination of the Xxxxxxxx ESOP, the
outstanding balance of the Xxxxxxxx ESOP loan shall be repaid
from the cash proceeds in the Xxxxxxxx ESOP suspense account and
the remainder shall be allocated to participants of the plan, in
accordance with ERISA, the rules and regulations promulgated
thereunder, the Code, and the rules, regulations promulgated
thereunder, and any precedential rulings issued by the Internal
Revenue Service ("IRS"). In connection with the termination of
the Xxxxxxxx ESOP, Xxxxxxxx shall promptly apply to the IRS for
a favorable determination letter on the tax-qualified status of
the ESOP on termination and on any amendments made to the
Xxxxxxxx ESOP in connection with its termination or otherwise,
if said amendments have not previously received a favorable
determination letter from the IRS with respect to their
qualification under Code Section 401(a). Any and all
distributions from the ESOP after its termination shall be made
32
consistent with the aforementioned determination letter issued
by the IRS relating to such termination and amendments. As of
the Effective Time, the administrative authority over the
Xxxxxxxx ESOP, which shall include the authority to appoint and
remove trustees of the Xxxxxxxx ESOP, shall be exercised by
a committee consisting of Xxxxxx X. Xxxxx and another individual
to be selected by Xxxxxxxx prior to the Effective Time.
(c) At or prior to the Effective Time, Xxxxxxxx shall
take all actions necessary to terminate the non-qualified
deferred compensation plan for the benefit of its Chairman of
the Board of Directors, and all benefits under this plan shall
be paid out in a lump sum to such participant; or alternatively,
on or before the Closing Date, Xxxxxxxx in its sole discretion
may establish an irrevocable grantor trust or trusts and deposit
therein guaranteed investment contracts in amounts sufficient to
provide the monthly benefits specified in accordance with the
plan for such participant. To the extent that a lump sum
payment is not made as of the Closing Date, First Federal shall
assume the payment of the liabilities of such plan thereafter.
The amount of the obligation of such plan that was accrued
for as of September 30, 1997, and the amount necessary to
complete the funding of such plan is set forth in Disclosure
Schedule 7.11(c).
(d) With respect to Continuing Employees and
dependents covered under the Iowa Bankers' Group Health Plan
maintained by Xxxxxxxx, which plan is concurrently maintained by
First Federal, there shall be no waiting period or preexisting
condition exclusions applicable to such persons, amounts
previously paid by such persons towards satisfaction of the
required deductible will count towards satisfaction of the
deductible under the plan maintained by First Federal and the
benefits previously received by such persons will count toward
the maximum benefit coverages provided by First Federal.
(e) As of the date hereof, Xxxxxxxx has entered into
employment agreements with each of the individual employees
listed in Schedule 7.11 (e) to the Company Disclosure Schedule.
Each of such employees who have agreed as of the date hereof to
continue employment with First Federal (the "Continuing
Executives") have been identified on Schedule 7.11(e) to the
Company Disclosure Schedule. Each of the Continuing Executives
shall enter into an employment agreement with First Federal in
the form set forth on Exhibit D, with such employment agreements
to take effect upon the Effective Time. The employment
agreements to which the Continuing Executives are party as of
the date hereof will terminate as of the Effective Time.
(f) Following the Effective Time, First Federal shall
honor in accordance with their terms the employment, severance
and other compensation contracts set forth on Schedule
7.11(f)between the Company, any of the Company Subsidiaries, and
any current or former director, officer or employee thereof, and
all provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under the Company
employee benefit plans.
(g) The Company shall, by amendment or resolution, as
appropriate, ensure that all awards under the Company's
Recognition and Retention Plan shall accelerate, become vested
and be paid out to the award recipient immediately prior to the
Effective Time.
33
(h) At the Effective Time, the separate interests of
Xxxxxxxx and Siouxland in the Retirement Plan shall be combined.
Future benefit accruals shall be made in accordance with the
adoption agreement that relates to the Retirement Plan adopted
by Siouxland. Any benefits accrued by participants in the
Retirement Plan adopted by Xxxxxxxx attributable to service
before the Effective Time shall not be reduced. Xxxxxxxx may
amend the Xxxxxxxx Retirement Plan in any manner permitted
under the Code and Treasury Regulations to assure that a portion
of the dollar amount of excess funding in such plan as of June
30, 1997 (the "Determination Date"), determined in accordance
with the formula set forth below, inures solely to the benefit
of individuals who have become participants in such plan
prior to the Effective Time. In providing for such amendment,
it is the intent of the parties hereto that the amount of excess
funding remaining in the Xxxxxxxx Retirement Plan at the
Effective Time is proportionally equivalent to the amount of
excess funding in the Siouxland Retirement Plan, relative
to the number of participants in each plan. For these
purposes, said portion shall be determined as follows: the
excess funding under the Siouxland Retirement Plan at the
Determination Date shall be divided by the number of active
participants in the Siouxland Retirement Plan on said date, and
this quotient shall be multiplied by the number of active
participants in the Xxxxxxxx Retirement Plan on the
Determination Date. This product shall be subtracted from the
excess funding dollar amount in the Xxxxxxxx Retirement Plan on
the Determination Date. The remainder is the amount that
Xxxxxxxx shall be entitled to use to increase its benefit
formula for the period from July 1, 1997 through the date of
closing, to the extent permitted under the Code and Treasury
Regulations.
(i) As soon as practicable after the date hereof,
Xxxxxxxx shall amend its tax-qualified 401(k) Plan ("Xxxxxxxx
401(k) Plan"), effective for the current Plan Year, to provide
for the return of elective deferrals if annual additions to the
tax-qualified defined contribution plans of Xxxxxxxx have
been made in excess of the amounts permitted under Section 415
of the Code. At the time of such amendment, Xxxxxxxx will
further amend the Xxxxxxxx 401(k) Plan to disallow further
elective deferrals to the Xxxxxxxx 401(k) Plan.
7.12. COMPANY STOCK OPTIONS.
(a) At the Effective Time, all Company stock options
that are then outstanding and exercisable in accordance with
their terms (all of which are listed on Schedule 3.2(c) of the
Company Disclosure Schedule) shall be exchanged for First
Federal stock options. It is intended that the foregoing
exchange shall be undertaken in a manner that will not
constitute a "modification" (as defined in the Code) as to any
Company stock option that is an "incentive stock option" (as
defined in the Code); the number of First Federal stock options
to be exchanged for each Company stock option (the "Exchange
Ratio") as well as the exercise price (the "Exercise Price") for
each such First Federal stock option to be so exchanged shall be
fixed so as to preserve the First Federal stock options to be so
exchanged as "incentive stock options" (as defined in the Code),
and the parties hereby agree to develop a mutually acceptable
formula in conformity with applicable law and regulations for
determining the Exchange Ratio. The Exercise Price and the
Exchange Ratio as fixed in the preceding sentence shall
be applied to all Company stock options, whether such options
are incentive stock options or non-incentive stock options. The
Exchange Ratio and the Exercise Price shall be adjusted as
appropriate to reflect any stock split, stock dividend,
recapitalization, exchange of shares or other similar
34
transaction involving either Company Common Stock or First
Federal common stock if such event occurs prior to the Effective
Time.
(b) The shares of First Federal common stock covered
by the stock options to be issued by First Federal pursuant to
Section 7.12 (a) hereof shall be covered by an effective
registration statement filed on with the OTS, which shall be
filed by First Federal as soon as practicable after the
Closing Date and shall be duly authorized, validly issued and in
compliance with all applicable federal and state securities
laws, fully paid and nonassessable and not subject to or in
violation of any preemptive rights. First Federal shall also
take any action reasonably required to be taken under any
applicable state blue sky or securities laws in connection with
the issuance of such shares.
(c) The Company and First Federal acknowledge that
the exchange contemplated by Section 7.12 (a) and (b) hereof is
subject to OTS approval. First Federal will make all reasonable
efforts from and after the date hereof through the Effective
Date to secure all necessary regulatory approvals to effect the
exchange contemplated; however, the parties hereto acknowledge
and agree that efforts to obtain OTS approval of the exchange
shall not hinder, delay or impede the Reorganization
contemplated by this Agreement. The parties hereto further
acknowledge and agree that under no circumstances will First
Federal (i) be obliged to grant subscription rights for its
common stock; (ii) be obliged to issue shares of its common
stock to Bancorp; or (iii) be obliged to form a "mid-tier" stock
holding company or repurchase shares of its common stock for the
purpose of facilitating or effecting the exchange contemplated
by Section 7.12(a) and (b) hereof. If, in the reasonable
judgement of First Federal, OTS approval of the exchange will
not be forthcoming, or will hinder, delay or impede the
Reorganization, the exchange contemplated by Section 7.12 (a)
and (b) hereof will be canceled. In lieu of such exchange, the
Company will issue stock appreciation rights on First Federal
common stock for each Company stock option outstanding at the
Effective Time so that the recipients of such stock
appreciation rights obtain equivalent value for their Company
stock options.
(d) If, in the reasonable judgment of First Federal,
the issuance of stock appreciation rights contemplated by
Section 7.12(c) hereof will impede, delay or hinder the
consummation of the transactions contemplated hereby because of
regulatory questions, the Company will, immediately prior
to the Effective Date, pay cash to the holders of Company stock
options that are then outstanding and exercisable in accordance
with their terms so that such holders obtain equivalent value
for such stock options.
7.13. D&O INDEMNIFICATION AND INSURANCE. For a
period of four (4) years following the Effective Time, First
Federal shall indemnify the employees, agents, directors or
officers of the Company and Grinnell to the extent they are
indemnified under the Company's Certificate of Incorporation and
Bylaws in the form in effect at the date of this Agreement or
arising by operation of law. First Federal shall use its best
efforts to cause the directors and officers listed in Schedule
7.13 of the Company Disclosure Schedule to be covered under
individual directors' and officers' liability insurance
policies, which coverage is available in the form of tail
coverage under the Company's existing directors' and officers'
liability policy for the duration of any applicable statute of
limitations, provided the cost of such coverage shall not exceed
$7,500.
35
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF FIRST FEDERAL
The obligations of First Federal under this Agreement
to cause the transactions contemplated herein to be consummated
shall be subject to the satisfaction or written waiver by First
Federal of the following conditions:
8.1. NO MATERIAL ADVERSE CHANGE. Except as disclosed
in Schedule 3.5 to the Company Disclosure Schedule and except
for general changes in generally accepted accounting principles,
changes in economic, financial or market conditions, changes in
market interest rates, payments due under any employment
agreements or benefit plans and the transactions contemplated
hereby, costs and expenses relating to this Agreement (including
those resulting from actions or inactions pursuant to the
covenants of the Company and Grinnell under this Agreement) and
the transactions contemplated hereby, there shall not have been
any material adverse change in the financial condition, results
of operations or business of the Company, Grinnell, and the
Company's Subsidiaries, taken as a whole, from June 30, 1997 to
the Closing Date.
8.2. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties by the Company and Grinnell
contained in this Agreement shall be true and correct in all
material respects (or where any statement in a representation or
warranty expressly contains a standard of materiality, such
statement shall be true and correct in all respects taking into
consideration the standard of materiality contained therein) at,
or as of, the date of this Agreement and (except to the extent
such representation speaks as of an earlier date) and as of any
date subsequent, until and including the Closing Date (except as
otherwise contemplated or permitted by this Agreement) as though
such representations and warranties were made on and as of said
date. Any information provided by the Company and Grinnell
pursuant to Section 6.5 hereof as a supplement to the Company
Disclosure Schedule shall be true and correct in all material
respects as of the date such information is supplied to First
Federal.
8.3. PERFORMANCE AND COMPLIANCE. The Company and
Grinnell shall have performed or complied in all material
respects with all covenants and agreements required by this
Agreement to be performed and satisfied by it on or prior to the
Closing Date.
8.4. NO PROCEEDING OR LITIGATION. On the Closing
Date, no suit, action or proceeding shall be pending or overtly
threatened, and no liability or claim shall have been asserted
against the Company, Grinnell or any Company Subsidiary
involving any of the assets, properties, business or operations
of the Company, Grinnell or any Company Subsidiary that would
reasonably be expected to have a Material Adverse Effect.
8.5. CONSENTS UNDER AGREEMENTS. First Federal shall
have received the consent or approval of each person or entity
whose consent or approval shall be required in order to permit
36
consummation of the Reorganization under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement
or instrument to which the Company, Grinnell or any Company
Subsidiary is a party or to which its respective property is
subject, except those for which failure to obtain such
consents and approvals would not, individually or in the
aggregate, have a Material Adverse Effect on First Federal,
whether prior to (if applicable) or following the consummation
of the transactions contemplated hereby.
8.6. NO AMENDMENTS TO RESOLUTIONS. Neither the Board
of Directors of the Company or Grinnell nor any committee
thereof shall have amended, modified, rescinded or repealed
the resolutions adopted by such Board of Directors with respect
to this Agreement or shall have adopted any other resolutions in
connection with this Agreement and the transactions contemplated
hereby which are inconsistent with such resolutions, except
resolutions adopted consistent with the express rights of
Grinnell under this Agreement.
8.7. CERTIFICATE OF GRINNELL OFFICERS. The Company
shall have furnished First Federal a certificate, signed by its
Chief Executive Officer and its Chief Financial Officer, dated
the Closing Date, to the effect, based on his knowledge, that
the conditions described in Sections 8.1 through 8.6, and
Section 8.8, of this Agreement have been fully satisfied.
8.8. CORPORATE PROCEEDINGS. All action required to be
taken by, or on the part of the Company and Grinnell to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
by this Agreement shall have been duly and validly taken by the
Company and Grinnell.
8.9. LEGAL OPINION. First Federal shall have received
an opinion, dated the Closing Date, from legal counsel to
Grinnell, in the form specified on Exhibit E.
8.10.CLOSING BOOK VALUE. Immediately prior to the
Closing, the total stockholders' equity account determined in
accordance with generally accepted accounting principles on a
basis consistent with the Company Financial Statements, of the
Company shall not be less than $10.4 million, as reasonably
determined by First Federal's independent public accountant, in
consultation with the Company's independent public accountant;
provided, however, that for purposes of calculating total
stockholders' equity, the Company's expense associated with the
issuance of stock appreciation rights (as contemplated by
Section 7.12(c) hereof), and with the severance payments due
under the employment agreement between Grinnell and Xxxxxxx X.
Xxxxxx dated as of January 19, 1996, will not be counted.
37
ARTICLE IX.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND GRINNELL
The obligations of the Company and Grinnell under this
Agreement to cause the transactions contemplated herein to be
consummated shall be subject to the satisfaction or written
wavier by the Company or Grinnell of the following conditions:
9.1. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of First Federal contained in
this Agreement shall be true and correct in all material
respects (or where any statement in a representation or warranty
expressly contains a standard of materiality, such statement
shall be true and correct in all respects taking into
consideration the standard of materiality contained therein) at,
or as of, the date of this Agreement and (except to the extent
such representation speaks as of an earlier date) and as of any
date subsequent, until and including the Closing Date (except
as otherwise contemplated or permitted by this Agreement) as
though such representations were made on and as of said date.
Any information provided by First Federal pursuant to Section
5.5 hereof as a supplement to the First Federal Disclosure
Schedule shall be true and correct in all material respects
as of the date such information is supplied to the Company or
Grinnell.
9.2. PERFORMANCE AND COMPLIANCE. First Federal shall
have performed or complied in all material respects with all
covenants and agreements required by this Agreement to be
performed and satisfied by it on or prior to the Closing Date.
9.3 CORPORATE PROCEEDINGS. All action required to be
taken by, or on the part of Bancorp and First Federal to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
by this Agreement shall have been duly and validly taken by
Bancorp and First Federal.
9.4. CERTIFICATE OF FIRST FEDERAL OFFICERS. First
Federal shall have furnished to Grinnell a certificate, signed
by its Chief Executive Officer and its Chief Financial Officer
and dated the Closing Date, to the effect, based on their best
knowledge, that the conditions described in Sections 9.1, 9.2
and 9.3 of this Agreement have been satisfied.
9.5. LEGAL OPINION. Grinnell shall have received an
opinion, dated as of the Closing Date, from Xxxx Xxxxxx Xxxxxx
Xxxxxxxx & Xxxxxx, P.C., counsel for First Federal, in the form
specified on Exhibit F.
9.6. OPINION OF FINANCIAL ADVISOR. The Company shall
have received on or before the date on which the Company Proxy
Statement or other similar document is to be mailed to holders
of Company Common Stock the written opinion of its investment or
financial advisor to the effect that the merger consideration
payable to the Company's stockholders pursuant to the
Reorganization is fair from a financial point of view to the
stockholders of the Company.
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ARTICLE X.
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
In addition to the provisions of Articles VIII and IX
hereof, the obligations of First Federal, the Company and
Grinnell to cause the transactions contemplated herein to be
consummated, shall be subject to the satisfaction or written
waiver by both First Federal and the Company of the following
conditions:
10.1. GOVERNMENTAL APPROVALS. The parties hereto
shall have received all necessary approvals of the transactions
contemplated by this Agreement from governmental agencies and
authorities, including, without limitation, those of the OTS and
the FDIC, and each of such approvals shall remain in full force
and effect and all statutory waiting periods in connection
therewith shall have expired at the Closing Date and such
approvals and the transactions contemplated thereby shall not
have been contested by any federal or state governmental
authority nor by any other third party by formal proceeding.
Provided, however, that no approval or consent referred to in
this Section 10.1 shall be deemed to have been received by First
Federal if it shall include any non-standard term, condition or
requirement that, individually or in the aggregate (i) would
have a Material Adverse Effect on the business, results of
operations, assets, or financial condition of First Federal on a
consolidated basis, or (ii) would reduce the economic or
business benefits of the transactions contemplated by this
Agreement to First Federal in so significant a manner that First
Federal, in its reasonable judgment, would not have entered into
this Agreement.
10.2. NO INJUNCTIONS OR RESTRAINTS. No suit,
action or proceeding shall be pending or overtly threatened
before any court or other governmental agency by the federal or
any state government in which it is sought to restrain or
prohibit the consummation of the Reorganization and no temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of
the Reorganization shall be in effect.
10.3. STOCKHOLDER APPROVAL. This Agreement shall
have been duly approved by the requisite affirmative vote of the
stockholders of the Company as contemplated by Section 7.1
hereof.
10.4 CORPORATE PROCEEDINGS. The obligations of
the parties to this Agreement required to be performed at or
prior to the Closing Date shall have been duly performed and
complied with in all material respects. All action required to
be taken by, or on the part of, the parties to this Agreement to
authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by the parties
hereto.
39
ARTICLE XI.
TERMINATION
11.1. REASONS FOR TERMINATION. This Agreement may
be terminated and the Reorganization abandoned at any time
before the Closing Date, whether before or after the approval
or adoption of this Agreement by the stockholders of the
Company:
(a) By mutual written consent of the Board of
Directors of First Federal and the Board of Directors of the
Company;
(b) By written notice from First Federal to the
Company if:
(i) any condition set forth in Article VIII of
this Agreement shall have become impossible to substantially
satisfy at any time or has not been substantially satisfied or
waived in writing; or
(ii) any condition set forth in Article X of this
Agreement shall have become impossible to substantially satisfy
at any time or has not been substantially satisfied or waived in
writing, provided, however, First Federal shall not have the
right to terminate this Agreement pursuant to this Section
11.1(b)(ii) if any condition imposed by Section 10.1 hereof was
not met due to the failure of First Federal to perform or
observe the covenants and agreements set forth in this
Agreement; or
(iii) any warranty or representation as set
forth in Article III hereof made by the Company or Grinnell
shall be discovered to be or to have become untrue or incorrect
in any material respect, or where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall be discovered to be or to have
become untrue or incorrect in any respect taking into
consideration the standard of materiality contained therein, in
either case where any such breach has not been cured within
thirty (30) days following receipt by the Company or Grinnell
of notice of such discovery; or
(iv) The Company or Grinnell shall have breached
one or more provisions of this Agreement in any material respect
considering all such breaches in the aggregate, where such
breach has not been cured within thirty (30) days following
receipt by the Company or Grinnell of notice of such breach; or
(c) By written notice from the Company to First
Federal, if
(i) any condition set forth in Article IX of
this Agreement shall have become impossible to substantially
satisfy at any time or has not been substantially satisfied or
waived in writing; or
40
(ii) any condition set forth in Article X of this
Agreement shall have become impossible to substantially satisfy
at any time or has not been substantially satisfied or waived in
writing; provided, however, the Company shall not have the right
to terminate this Agreement pursuant to this Section 11.1(c)(ii)
if any condition imposed by Section 10.1 hereof was not met due
to the failure of the Company or Grinnell to perform or observe
the covenants and agreements set forth in this Agreement; or
(iii) any warranty or representation as set
forth in Article IV hereof made by First Federal shall be
discovered to be or to have become untrue or incorrect in any
material respect, or where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be discovered to be or to have become untrue or
incorrect in any respect taking into consideration the standard
of materiality contained therein, in either case where any such
breach has not been cured within thirty (30) days following
receipt by First Federal of notice of such discovery; or
(iv) First Federal shall have breached one or
more provisions of this Agreement in any material respect
considering all such breaches in the aggregate, where such
breach has not been cured within thirty (30) days following
receipt by First Federal of notice of such breach.
(d) By the Board of Directors of the Company if all
of the following conditions are met: (i) a person (including a
company or any other entity) makes a Superior Proposal; (ii)
within seven (7) business days after First Federal receives
written notice from the Company of such Superior Proposal, First
Federal does not increase the consideration to be paid to the
holders of Company Common Stock in the Reorganization so that it
is at least as favorable to the holders of Company Common Stock
as the Superior Proposal (such increase in the consideration to
be paid by First Federal, an "First Federal Superior Proposal");
(iii) the Board of Directors of the Company, to the extent
permitted by Section 7.1 hereof, shall have failed to recommend
to stockholders, or shall have withdrawn or shall have modified
in a manner adverse to First Federal its recommendation of, this
Agreement or the Reorganization in order to permit Grinnell to
enter into a definitive written agreement providing for the
transactions contemplated by such Superior Proposal; and (iv)
the Company or the person or entity making the Superior Proposal
shall have paid to First Federal the Fee (as defined in
Section 12.2(b) hereof), to the extent such Fee is payable
pursuant to Section 12.2(b) hereof, and the expenses of First
Federal (including, but not limited to, the fees and expenses of
attorneys) incurred in connection with negotiating this
Agreement and effectuating the consummation of the transactions
contemplated hereby.
(e) By the Board of Directors of First Federal if the
Board of Directors of the Company shall not recommend, or shall
withdraw or modify in a manner adverse to First Federal, its
recommendation to the holders of Company Common Stock to approve
this Agreement.
(f) By the Board of Directors of First Federal or the
Company at any time after the Company Shareholders' Meeting as
contemplated in Section 7.1 if the stockholders of the Company
have not approved this Agreement by the requisite affirmative
vote.
41
(g) By the Board of Directors of First Federal or the
Company if the Reorganization has not been consummated on or
before June 30, 1998.
11.2. EFFECT OF TERMINATION. In the event of
termination of this Agreement by either the Company or First
Federal as provided in Section 11.1 hereof, this Agreement shall
forthwith become void, and there shall be no liability or
obligation on the part of First Federal or the Company or their
respective officers or directors except with respect to Sections
6.7, 7.9, 11.1(d) and 12.2 hereof.
ARTICLE XII.
MISCELLANEOUS
12.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. None of the representations, warranties,
covenants and agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective
Time, except for the covenants and agreements which by their
terms are contemplated to be performed after the Effective Time.
12.2. EXPENSES AND TERMINATION FEE. (a) Except
as otherwise provided herein, all expenses incurred by First
Federal and the Company in connection with or related to the
authorization, preparation and execution of this Agreement, the
solicitation of stockholder approvals and all other matters
related to the closing of the transactions contemplated thereby,
including, without limitation of the generality of the
foregoing, all fees and expenses of agents, financial advisors,
representatives, counsel and accountants employed by either such
party or its Affiliates, shall be borne solely and entirely by
the party that has incurred the same.
(b) Grinnell also hereby agrees to pay First Federal,
and First Federal shall be entitled to payment of, a fee (the
"Fee") of $900,000, upon the occurrence of any of the following
events on or before the earlier of the date this Agreement is
terminated or June 30, 1998:
(i) if the Board of Directors of the Company
recommends a Superior Proposal and thereafter (A) the Company
Shareholders' Meeting shall not have been held or shall have
been postponed, delayed or enjoined prior to termination of this
Agreement or (B) the Company's shareholders do not approve this
Agreement;
(ii) if the Board of Directors of the Company
withdraws or modifies its recommendation of approval of this
Agreement, and thereafter (A) the Company Shareholders' Meeting
shall not have been held or shall have been postponed, delayed
or enjoined prior to termination of this Agreement or (B) the
Company's shareholders do not approve this Agreement;
(iii) if the Company's shareholders do not approve
this Agreement after a Superior Proposal is made and within
twelve (12) months thereafter the Company enters into a
definitive agreement to be merged into or acquired by another
entity (provided, however, that Grinnell shall pay
42
all Expenses of First Federal, as defined in Section 6.7.
hereof, in an amount not to exceed $300,000, within five
business days following rejection of this Agreement by Company
shareholders);
(iv) if the Company or Grinnell enters into an
agreement to be acquired by any other party; or
(v) if the Company both (1) fails to receive the
opinion of its financial advisor that the Merger is fair to the
Company's shareholders from a financial point of view, and such
failure occurs after a Superior Proposal is made, and (2) the
Reorganization is not consummated.
With the exception of the payment under subparagraph
(iii) above, which shall be paid within five business days
following the Company's execution of a definitive agreement of
merger or acquisition (except that the Expenses of First Federal
shall be paid as provided in (iii) above), such payment shall be
made to First Federal in immediately available funds within five
business days after the occurrence of an event set forth above.
12.3. WAIVERS; AMENDMENTS. At any time prior to
the Closing Date, either First Federal, by action taken by its
Board of Directors, or any committee or officers thereunto
authorized, or the Company or Grinnell, by action taken by its
Board of Directors, or any committee or officers thereunto
authorized, may waive the performance of any of the obligations
of the other or waive compliance by the other with any of the
covenants or conditions contained in this Agreement or agree
to the amendment or modification of this Agreement by an
agreement in writing executed in the same manner as this
Agreement; provided, however, that after the favorable vote by
the stockholders of the Company pursuant to Section 7.1 of this
Agreement any such action shall be taken only if, in the
opinion of the Company's Board of Directors, such waiver,
amendment or modification will not have a material adverse
effect on the benefits intended under this Agreement for the
shareholders of the Company and will not require resolicitation
of any proxies from such shareholders.
12.4. ASSIGNMENT; PARTIES IN INTEREST. This
Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their respective successors and
assigns, but shall not be assigned by the parties hereto, by
operation of law or otherwise, without the prior written consent
of the other parties. Except with respect to the payment of
benefits pursuant to Section 7.12 and the obligation of First
Federal contained in Section 7.8, nothing in this Agreement,
express or implied, is intended to confer upon any third party
any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
12.5. ENTIRE AGREEMENT. This Agreement supersedes
any other agreement, whether written or oral, that may have been
made or entered into by the Company, Grinnell or First Federal
or by any officer or officers of such parties relating to the
acquisition of the business or the capital stock of the Company
or Grinnell by First Federal, except for the Confidentiality
Agreement dated September __, 1997, which shall remain in full
force and affect. This Agreement and such Confidentiality
Agreement constitute the entire agreement by the respective
parties, and there are no agreements or commitments except as
set forth herein and therein.
43
12.6. CAPTIONS AND COUNTERPARTS. The captions in
this Agreement are for convenience only and shall not be
considered a part of or affect the construction or
interpretation of any provision of this Agreement. This
Agreement may be executed in several counterparts, each of which
shall constitute one and the same instrument.
12.7. CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "Affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, another person;
(b) "Material Adverse Effect" shall mean a material
adverse effect on the operations, assets, or financial condition
of the parties to this Agreement other than the effects of any
such change attributable to or resulting from any change in law,
regulation or generally accepted accounting principles or
regulatory accounting principles and other than the effects of
any change attributable to or resulting from changes in economic
conditions applicable to depository institutions generally or in
general levels of interest rates.
(c) "Grinnell Reports" shall mean all reports,
registrations and statements, together with any amendments
required to be made with respect thereto, that were and are
required by applicable law to be filed with the OTS, the FDIC,
and any other applicable state securities or bank regulatory
authorities by either Grinnell or the Company; and
(d) "to the knowledge of First Federal" or "to the
best knowledge of First Federal" shall mean the actual knowledge
of any member of the Board of Directors or of any senior officer
of First Federal.
(e) "to the knowledge of the Company or Grinnell" or
"to the best knowledge of the Company or Grinnell" shall mean
the actual knowledge of any member of the Board of Directors or
of any senior officer of the Company or Grinnell.
12.8. ENFORCEMENT OF THIS AGREEMENT. The parties
hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto will
be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
12.9. GOVERNING LAW. This Agreement shall be
construed and interpreted in accordance with the laws of the
State of Iowa, except to the effect that Federal Law applies,
without regard to the conflicts of laws rules.
44
12.10. NOTICES. All notices given hereunder shall be
in writing and shall be hand delivered, sent by facsimile
transmission or sent by a nationally recognized overnight
delivery service, addressed as follows:
(a) If to First Federal to:
First Federal Savings Bank of Siouxland
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, President
and Chief Executive Officer
With A Copy To:
Xxxx Xxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
(b) If to Grinnell to:
GFS Bancorp, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, President and
Chief Executive Officer
with a copy to:
Housley Kantarian & Xxxxxxxxx, P.C.
Suite 700
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Any notice provided hereunder shall be effective upon
receipt thereof.
45
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first above
written.
ATTEST: FIRST FEDERAL SAVINGS BANK OF SIOUXLAND
By: By: ________________________________
Xxxxx X. Xxxxxxxx, President
ATTEST: XXXXXXXX FEDERAL SAVINGS BANK
By: By: ________________________________
Xxxxxx X. Xxxxx, President
ATTEST: GFS BANCORP, INC.
By: By: ________________________________
Xxxxxx X. Xxxxx
46