UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1999
Commission File Number: 000-20739
EAGLE BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
37-1353957
(IRS Employer Identification No.)
301 Fairway Drive, Bloomington, IL 61701
(309) 663-6345
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
As of July 28, 1999, there were 1,063,239 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
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<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Condition (unaudited)
(amounts in thousands)
June 30, 1999 December 31, 1998
<S> <C> <C>
ASSETS
Cash and due from banks 956 1,084
Fed funds sold and overnight deposits 4,214 7,653
Investment securities 12,116 11,307
Mortgage backed securities 39,132 37,244
Federal Home Loan Bank stock 1,270 1,271
Loans, net 117,872 116,551
Premises and equipment 2,739 2,819
Other assets 2,375 2,172
------- -------
Total Assets 180,674 180,101
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 135,241 134,091
FHLB advances 25,000 25,000
Other liabilities 1,144 1,313
------- -------
Total Liabilities 161,385 160,404
------- -------
Capital stock 13 13
Paid in capital 12,531 12,456
Retained earnings 11,440 11,189
Treasury stock (4,074) (3,817)
Accumulated other comprehensive income (621) (144)
------- -------
Total Stockholders' Equity 19,289 19,697
------- -------
Total Liabilities and
Stockholders' Equity 180,674 180,101
======= =======
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Income (unaudited)
(amounts in thousands except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 2,327 2,328 4,659 4,709
Investment securities and other
interest earning assets 252 310 493 595
Mortgage-backed securities 560 408 1,092 786
Federal funds sold 28 58 80 107
----- ----- ----- -----
Total Interest Income 3,167 3,104 6,324 6,197
----- ----- ----- -----
Interest expense:
Deposits:
Passbook 125 141 249 280
MMDA and NOW 102 86 215 157
Certificates of deposit 1,377 1,515 2,794 3,034
Borrowings 319 310 635 638
----- ----- ----- -----
Total Interest Expense 1,923 2,052 3,893 4,109
----- ----- ----- -----
Net Interest Income Before
Provision For Loan Losses 1,244 1,052 2,431 2,088
Provision for loan losses 60 60 120 120
----- ----- ----- -----
Net Interest Income After
Provision For Loan Losses 1,184 992 2,311 1,968
Non-interest income:
Gains on loans sold 201 246 442 483
Other 116 87 218 169
----- ----- ----- -----
Total Non-Interest Income 317 333 660 652
Non-interest expense:
Salaries and employee benefits 748 567 1,378 1,135
Net occupancy expense 160 138 331 276
Federal deposit insurance premium 20 21 40 41
Data processing expense 82 73 167 140
Other 266 201 522 392
----- ----- ----- -----
Total Non-Interest Expense 1,276 1,000 2,438 1,984
Income Before Federal Income Tax 225 325 533 636
Federal income tax expense 102 123 210 233
----- ----- ----- -----
Net Income 123 202 323 403
===== ===== ===== =====
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period (369) (2) (476) 53
Less: reclassification adjustment
for (gains) losses included in
net income (1) (1) (1) 2
----- ----- ----- -----
Other comprehensive income (370) (3) (477) 55
----- ----- ----- -----
Comprehensive Income (247) 199 (154) 458
===== ===== ===== =====
Per Share Data:
Basic Earnings Per Share 0.12 0.19 0.32 0.37
Diluted Earnings Per Share 0.12 0.18 0.32 0.36
Dividends Per Share 0.10 0.00 0.20 0.00
See accompanying notes.
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<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Cash Flows (unaudited)
(amounts in thousands)
For the Six Months Ended June 30,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities
Net income 323 403
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan loss 120 120
Provision for depreciation 175 154
Amortization of premiums and discounts on
investment securities 86 (63)
(Gains) losses on securities sold, net (1) 4
Gains on loans sold, net (442) (483)
Compensation expense related to ESOP shares 115 110
Compensation expense related to MDRP shares 101 117
Proceeds from sale of loans
originated for sale 32,528 39,193
Loans originated for sale (31,315) (40,453)
Increase in accrued interest receivable (129) (45)
Increase (decrease) in accrued
interest payable 6 (4)
Decrease in other assets 44 30
Decrease in other liabilities (164) (287)
------ ------
Net cash provided by (used in)
operating activities 1,447 (1,204)
Cash Flows from Investing Activities
Investment securities
Purchases (8,024) (15,346)
Proceeds from sales and maturities 7,019 9,796
Mortgage-backed securities
Purchases (8,900) (8,864)
Proceeds from sales and maturities - 2,268
Principal collected 6,463 3,975
Purchase of FHLB stock - (12)
Principal collected on loans 32,916 34,900
Loans originated, net (35,063) (27,005)
Purchases of premises and equipment (95) (122)
Purchase of other real estate - (25)
------ ------
Net cash used in investing activities (5,684) (435)
------ ------
Cash Flows from Financing Activities
Increase in savings, demand and NOW accounts, net 2,564 1,741
Decrease in certificate accounts, net (1,423) (1,172)
Proceeds from FHLB advances - 9,000
Principal payments on FHLB advances - (7,000)
Dividends paid (214) -
Purchase of treasury stock (257) (14)
------ ------
Net cash provided by financing activities 670 2,555
------ ------
Increase in cash and cash equivalents (3,567) 916
Cash and cash equivalents at beginning of period 8,737 5,014
------ ------
Cash and cash equivalents at end of period 5,170 5,930
====== ======
See accompanying notes.
</TABLE>
Eagle BancGroup, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and therefore do not include all information and disclosures
required by generally accepted accounting principles for complete financial
statements. All adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the periods reported,
consisting only of normal recurring adjustments, have been included in the
accompanying consolidated financial statements. Operating results for the
six and three months ended June 30, 1999 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1999. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
2. Earnings Per Share and Dividends
Basic earnings per share is computed by dividing net income for the period by
the weighted average number of common shares outstanding of 999,153 and
1,096,075 for the six months ended June 30, 1999 and 1998, respectively, and
997,792 and 1,097,217 for the three months ended June 30, 1999 and 1998,
respectively. Diluted earnings per share is computed by dividing net income
for the period by the weighted average number of common shares and common share
equivalents outstanding of 1,021,829 and 1,115,488 for the six months ended
June 30, 1999 and 1998, respectively, and 1,029,020 and 1,123,054 for the three
months ended June 30, 1999 and 1998, respectively. Common share equivalents
assume exercise of stock instruments and use of proceeds to purchase treasury
stock at the average market price for the period.
The Company has paid dividends at the rate of $.10 per share in each of the
last three quarters. The agreement and Plan of Merger, dated June 30, 1999,
providing for the acquisition of the Company by First Busey Corporation does
not permit the Company to pay additional dividend on its common stock. A
copy of the Agreement and Plan of Merger is filed as an exhibit to this Form
10-Q.
Eagle BancGroup, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
GENERAL: Eagle BancGroup, Inc. (the "Company") had net income of $323,000, or
$.32 per share (basic), in the first six months of 1999 compared to $403,000,
or $.37 per share (basic) in the same period in 1998. In the three months
ended June 30, the Company had net income of $123,000, or $.12 per share, in
1999 compared to $202,000, or $.19 per share, in 1998. The decrease in
income in 1999 was primarily the result of additional employee benefits
expense of $75,000, net of the applicable income tax benefit, related to the
termination of the Company's pension plan in June 1999.
NET INTEREST INCOME: Net interest income increased to $2,431,000 in the first
six months of 1999 from $2,088,000 in the same period in 1998 and to $1,244,000
in the second quarter of 1999 from $1,052,000 in the same period in 1998. The
increase in net interest income was due to improvement in the interest rate
spread in 1999 compared to 1998. In the first six months, the interest rate
spread was 2.38% in 1999 compared to 1.92% in 1998 while in the second quarter,
the interest rate spread was 2.44% in 1999 compared to 1.92% in 1998. In 1999,
the Company has reduced the cost of funds while maintaining the earning asset
yield resulting in the increase in the interest rate spread and net interest
income.
Interest income was $6,324,000 in the first six months of 1999 compared to
$6,197,000 in the same period in 1998 and was $3,167,000 in the second quarter
of 1999 compared to $3,104,000 in the same period in 1998. Average earning
assets increased to $176,740,000 in the first half of 1999 from $171,945,000 in
the same period in 1998 and increased to $176,555,000 in the second quarter of
1999 from $172,239,000 in the same period in 1998 which resulted in the
increase in interest income in 1999. The composition of earning assets has
changed due to the volume of residential mortgage loans originated and sold
in 1998 and 1999. Many of the new originations were to refinance loans for
existing customers and the result was a decrease in residential mortgage
loans in the portfolio. In the first six months of 1999, average loans
decreased to $116,220,000 from $120,229,000 in the same period in 1998 while
average investments increased to $60,520,000 in the first half of 1999 from
$51,716,000 in the same period in 1998.
The earning asset yield was 7.21% in the first half of 1999 compared to 7.27%
in the first half of 1998 and was 7.19% in the second quarter of 1999 compared
to 7.23% in the same period in 1998. The Company has been able to maintain the
earning asset yield by offsetting much of the decrease in residential mortgage
loans with commercial and commercial real estate loans that generally earn
higher yields. The yield on average loans increased to 8.08% in the first half
of 1999 from 7.90% in the same period of 1998. Commercial and commercial real
estate loans comprised 24% of average loans in the first half of 1999 compared
to 9% in the first half of 1998. The yield on average investments declined to
5.55% in the first half of 1999 from 5.81% in the first half of 1998.
In the second quarter, average loans decreased to $116,052,000 in 1999 from
$118,059,00 in 1998 while average investments increased to $60,503,000 in 1999
from $54,180,000 in 1998. The yield on average loans increased to 8.04% in
second quarter of 1999 from 7.91% in the same period in 1998 as commercial and
commercial real estate loans comprised 25% of the average loans in 1999
compared to 10% in 1998. The yield on average investments decreased to 5.57%
in the second quarter of 1999 from 5.75% in the same period in 1998.
Interest expense declined to $3,893,000 in the six months ended June 30, 1999
from $4,109,000 in the same period in 1998 and to $1,923,000 in the second
quarter of 1999 from $2,052,000 in the same period in 1998. The decrease in
interest expense in 1999 was the result of decreases in the cost of funds even
though average interest bearing liabilities increased in 1999 from 1998. The
cost of funds decreased to 4.83% in the first half of 1999 from 5.34% in the
same period in 1998 and to 4.75% in the second quarter of 1999 from 5.31% in
the same period in 1998. The cost of funds decline was due to decreases in
rates paid on demand and savings balances in the fourth quarter of 1998, an
increase in demand deposits and a restructuring of the borrowings portfolio
in 1998.
Average interest bearing liabilities increased to $162,346,000 in the first
half of 1999 from $155,067,000 in the same period in 1998. Average deposits,
primarily demand deposits, increased from $131,774,000 in the first six months
of 1998 to $137,346,000 in the first six months of 1999. As a percentage of
average deposits, demand deposits increased to 14% in the first half of 1999
from 9% in the first half of 1998. The cost of average deposits decreased to
4.78% in the first half of 1999 from 5.31% in the first half of 1998. Average
borrowed funds were $25,000,000 at a cost of 5.12% in the first half of 1999
compared to $23,293,000 at a cost of 5.52% in the first half of 1998.
In the second quarter, average interest bearing liabilities increased to
$162,198,000 in 1999 from $154,995,000 in 1998. Average deposits increased to
$137,198,000 in the second quarter of 1999 from $132,028,000 in the same period
in 1998 with demand deposits comprising 14% of the total in 1999 and 10% in
1998. The cost of average deposits decreased to 4.69% in the second quarter of
1999 from 5.29% in the same period in 1998. Average borrowed funds increased
to $25,000,000 in the second quarter of 1999 from $22,967,000 in the same
period in 1998 at costs of 5.12% in 1999 and 5.41% in 1998.
The increase in the interest rate spread also resulted in an increase in the
net interest margin, defined as net interest income divided by average earning
assets. In the first half, the net interest margin increased to 2.77% in 1999
from 2.45% in 1998 and in the second quarter, the net interest margin increased
to 2.83% in 1999 from 2.45% in 1998.
Loans totaling $262,000 were contractually past due 90 days or more at June 30,
1999 and were classified as non-accrual. Interest income is recognized only
upon cash receipt, and no interest income is accrued on such loans. In the
first half of 1999, cash interest payments of $12,000 on these loans was
included in interest income. Additional interest income of $6,000 would have
accrued had the loans not been contractually past due 90 days or more.
PROVISION FOR LOAN LOSS: In the first six months of both 1999 and 1998, the
provision for loan loss was $120,000 and in the second quarter of both 1999 and
1998, the provision for loan loss was $60,000. The provision is determined as
the amount necessary to maintain the allowance for loan losses at a level
deemed adequate to absorb estimated future losses inherent in the loan
portfolio. Management evaluates the adequacy of the allowance for loan losses
quarterly. The allowance for loan losses was $1,043,000, or .88% of total
loans, at June 30, 1999 compared to $1,015,000, or .86% of total loans, at
December 31, 1998. In the first six months of 1999, loans totaling $102,000
were charged against the reserve and $11,000 was credited to the allowance due
to recoveries of loans previously charged off.
NON-INTEREST INCOME: In the first six months of 1999, non-interest income was
$660,000 compared to $652,000 in the same period in 1998. Gains on sales of
residential mortgage loans decreased to $442,000 in the first half of 1999 from
$483,000 in the same period in 1998 as proceeds from sales of residential
mortgage loans decreased to $32,528,000 in the first half of 1999 from
$39,193,000 in the same period in 1998. Other non-interest income increased to
$218,000 in the first half of 1999 from $169,000 in the same period in 1998 due
primarily to servicing fees on loans sold, other miscellaneous loan fees and
deposit account service charges.
Non-interest income decreased to $317,000 in the second quarter of 1999 from
$333,000 in the same period in 1998 as gains on residential mortgage loans
sales declined to $201,000 in 1999 from $246,000 in 1998. Proceeds from
residential mortgage loan sales declined from $19,502,000 in the second quarter
of 1998 to $14,674,000 in the same period in 1999. Partially offsetting the
decline in gains were increased servicing fees on loans sold, miscellaneous
loan fees and deposit account service charges as other non-interest income
increased to $116,000 in the second quarter of 1999 from $87,000 in the same
period in 1998.
NON-INTEREST EXPENSE: Non-interest expense increased to $2,438,000 in the
first half of 1999 from $1,984,000 in the same period in 1998 due in part to
the $112,000 additional employee benefits expense related to termination of the
Company's pension plan in June 1999. The pension plan was terminated in March
1998 but the final IRS determination letter was not received until May 1999.
Due to the length of time between the termination and the final IRS
determination, certain actuarial assumptions used in calculating the
participants termination benefits changed dramatically. A decrease in interest
rates used in the calculations was primarily responsible for the increase in
total benefits. The total termination benefits then exceeded plan assets
available to fund the benefits and an additional contribution was necessary to
fully fund the plan. Salaries and employee benefits expense increased to
$1,378,000 in the first half of 1999 from $1,135,000 in the same period in 1998
due primarily to the pension expense adjustment. In addition, salaries and
employee benefits expense of approximately $70,000 related to the new staff at
the branch opened in Lexington in December 1998 was incurred in the first half
of 1999. The remainder of the increase in salaries and employee benefits in
the first six months of 1999 from the same period in 1998 was due to normal
increases in employee costs.
Other non-interest expense increased to $522,000 in the first six months of
1999 from $392,000 in the same period in 1998 due primarily to corporate
professional fees, which increased $85,000 in 1999 over 1998. Office supplies
expense increased $22,000 in the first half of 1999 from the first half of 1998
due to the branch opening and the increase in demand deposit accounts. Postage
expense increased $15,000 in the first six months of 1999 from the same period
in 1998 due to the increased number of accounts and a special Y2K informational
mailing sent to all customers in 1999. Net occupancy expense increased to
$331,000 in the first half of 1999 from $276,000 in the same period in 1998 due
to the branch opening and depreciation and maintenance expense related to
recent hardware and software upgrades. Data processing expense increased to
$167,000 in the first six months of 1999 from $140,000 in the same period in
1998 due primarily to Y2K testing fees charged by the Company's primary data
provider and the increased number of accounts processed.
In the second quarter, non-interest expense increased to $1,276,000 in 1999
from $1,000,000 in 1998 due primarily to salaries and benefits expense, which
increased to $748,000 in 1999 from $567,000 in 1998. The increase in salaries
and employee benefits relates primarily to the $112,000 in additional pension
expense and also due to staff added at the new branch and normal increases in
employee costs in the second quarter of 1999 compared to the same period in
1998. Other non-interest expense increased to $266,000 in the second quarter
of 1999 from $201,000 in the second quarter of 1998 due primarily to corporate
professional fees, which increased $48,000 in 1999. Supplies and postage
expense also increased in the second quarter of 1999 compared to the same
period in 1998. Net occupancy expense increased to $160,000 in the second
quarter of 1999 from $138,000 in the second quarter of 1998 due to the branch
opening and increased depreciation and maintenance related to recent hardware
and software upgrades.
INCOME TAX EXPENSE: The provision for income taxes decreased to $210,000 in
the first six months of 1999 from $233,000 in the first six months of 1998 and
to $102,000 in the second quarter of 1999 from $123,000 in the second quarter
of 1998 due to the decrease in income before income tax in 1999 from 1998. The
effective tax rate increased to 39% in the first half of 1999 from 37% in the
first half of 1998 and to 45% in the second quarter of 1999 from 38% in the
second quarter of 1998.
FINANCIAL CONDITION
Total assets increased to $180,674,000 at June 30, 1999 from $180,101,000 at
December 31, 1998. Net loans increased to $117,872,000 and investment and
mortgage-backed securities increased to $51,248,000 at June 30, 1999 from
$116,551,000 and $48,551,000, respectively, at December 31, 1998. These
increases were funded by an increase in deposits to $135,241,000 at June 30,
1999 from $134,091,000 at December 31, 1998 and a decrease in cash and cash
equivalents to $5,170,000 at June 30, 1999 from $8,737,000 at December 31,
1998. The increase in loans is due to originations of commercial, commercial
real estate and direct consumer loans partially offset by decreased residential
mortgage loans. The increase in deposits, primarily demand accounts, relates
in part to the new branch opening.
Stockholders' equity decreased to $19,289,000, or 10.7% of total assets, at
June 30, 1999 from $19,697,000, or 10.9% of total assets, at December 31, 1998.
The decline relates to a decrease in accumulated other comprehensive income,
the purchase of additional shares for the treasury and the payment of dividends
partially offset by 1999 year to date net income. Book value per share
decreased to $18.07 per share at June 30, 1999 from $18.24 at December 31, 1998.
Savings institutions are required to maintain minimum capital levels measured
by the following ratios: Risk-based capital to risk weighted assets ratio of
8.00%; Core capital to tangible assets ratio of 3.00% and Tangible core capital
to adjusted tangible assets ratio of 1.50%. The Company's savings institution
subsidiary had ratios of 15.56%, 9.23% and 9.23%, respectively, as of June 30,
1999 compared to 15.56%, 9.25% and 9.25%, respectively, at December 31, 1998.
Savings institution are also required to maintain a minimum 4% liquidity ratio
measured as the ratio of cash, cash equivalents, short-term investments and
certain long-term investments to deposits and certain borrowed funds. At June
30, 1999, the Company's savings institution subsidiary had a liquidity ratio of
13.05% compared to 14.11% at December 31, 1998.
At June 30, 1999, funds committed for loan originations and loans in process
totaled $1,267,000 and unused lines of credit totaled $9,755,000. Cash and
cash equivalents, scheduled principal and interest payments on loans, mortgage-
backed and investment securities, new deposits and borrowed funds are sources
of fundsused to meet such commitments. Funds are primarily invested in
residential mortgage, commercial, commercial real estate and direct consumer
loans and mortgage-backed and investment securities. Funds are also used for
deposit interest payments, maturities and withdrawals.
YEAR 2000 READINESS DISCLOSURE
The Company formulated its initial Y2K compliance plan in September 1997 and
has expanded, revised and updated the plan continually since that time. The
Office of Thrift Supervision ("OTS"), the Company's primary regulator,
continues to monitor the compliance effort via copies of plan updates and with
on-site inspections, including one in the first quarter of 1999. Another
on-site inspection is scheduled for July 1999.
Specific Y2K compliance actions that occurred in the second quarter of 1999
include: continued follow-up contacts to monitor compliance of third-party
software vendors including installation of vendor certified compliant software
upgrades and testing of such systems as allowed and deemed necessary; continued
development of a comprehensive contingency plan; and contracting with the
Company's primary data provider for business continuity services and hotsite
availability if needed in January 2000.
Software compliance testing on the primary data provider was completed in the
first quarter of 1999 with no significant Y2K problems noted by the Company or
other users. Testing results from each user were shared with all other users
by the vendor. A second round of testing was available to all users following
review of the first round results, but the Company chose not to participate.
Results of the second round of testing were reviewed with no adverse results
noted.
The business continuity services contracted for include interactive loan and
deposit trial balance databases that can be utilized on the Company's hardware
(which has previously been certified as Y2K compliant). Daily updates, the
ability to enter debits and credits and ACH reporting are also included in the
service. The hotsite availability service reserves a daily time slot for the
Company to input transactions at a remote facility in the event communications
between the Company and the provider are interrupted.
Direct costs related to the Y2K compliance effort incurred in the second
quarter of 1999 include $2,000 paid to the primary data provider for the final
share of the software compliance testing fees. An additional $8,000 will be
paid to the provider in the third quarter for the business continuity and
hotsite availability services previously contracted for. The Company's third
party network consultant may provide additional services at a cost not expected
to exceed $25,000 and compliance testing on other third-party software
providers may be conducted at a cost not expected to exceed $10,000.
The Company has also incurred indirect costs related to the Y2K compliance
effort, primarily salaries and benefits for the employees involved with the
various testing procedures and with development of the contingency plan. The
Company estimates that approximately $10,000 of salary and benefit expense
could be allocated to the Y2K compliance effort for the second quarter of 1999.
This amount does not represent additional expense, rather a reallocation of
expense that would have been incurred even without the Y2K compliance effort.
A similar amount of salary and benefit expense could likely be allocated to the
Y2K compliance effort for the third quarter of 1999, but, as with previous
quarters,salary and benefit expense is not expected to increase solely due to
the Y2K compliance effort.
In addition to the direct and indirect costs noted, the Company has also
invested over $220,000 upgrading hardware since conversion to the current
primary data provider in August 1997. Included in this total is additional
hardware necessary to support new teller and platform software that the Company
migrated to from December 1998 through March 1999 as planned at the time of the
conversion. While these events have assisted in the Company's Y2K compliance
effort, the costs involved are not associated with Y2K compliance because the
data provider conversion was necessary due to contractual considerations.
The Y2K problem is extremely complex and potentially impacts any computer
process. The Company believes its Y2K compliance program will be effective.
However, since the Company relies on so many third parties for various
services, over which the Company has little or no control, no reasonable
assurance can be given that the Company will not suffer a Y2K-related service
interruption or incur potentially significant unanticipated expenditures that
could impact the financial performance of the Company.
This analysis may contain certain forward looking statements which are based on
management's current expectations regarding economic, legislative and
regulatory issues that may impact the Company's earnings in future periods.
Factors that could cause future results to vary materially from current
management expectations include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, real estate values or
competition, changes in accounting principles, policies or guidelines, changes
in legislation or regulation and other economic, competitive, governmental,
regulatory and technical factors affecting the Company's operations, pricing,
products and services.
Eagle BancGroup, Inc.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk faced by the Company arises primarily from interest rate risk
inherent in the Company's lending, investing, deposit-taking and borrowing
activities. The varying levels of sensitivity to changes in market interest
rates of the Company's interest-earning assets, primarily loans and
investments, and interest-bearing liabilities, primarily deposits and borrowed
funds, create market risk. Evaluation of market risk is an integral component
of the Company's interest rate risk management.
Interest rate risk arises from the impact of changes in interest rates on the
Company's assets and liabilities. Successful management of interest rate risk
reduces the impact of such changes on the Company's operations. Interest rate
risk is managed through the evaluation of the interest rate risk inherent in
certain assets and liabilities, and the determination of the appropriate risk
level given the Company's business plan, operating environment and capital and
liquidity requirements. Interest rate risk management guidelines are reviewed
and approved annually by the Board of Directors.
In December 1998, the OTS issued Thrift Bulletin #13a ("TB 13a") concerning
market risk and interest rate risk management guidelines, primarily through the
use of market value analysis. The Company has incorporated the market value
analysis approach to interest rate risk measurement in its interest rate risk
policy. In addition, interest rate risk is measured and evaluated by use of
gap analysis and income simulation analysis.
The market value analysis utilized is produced by the OTS net portfolio value
("NPV") model. Data provided by the Company's thrift subsidiary in various
regulatory reports is the primary basis for the NPV model, which generates
estimates of the amount of and changes in NPV over a range of interest rate
change scenarios. NPV is defined as the difference between incoming and
outgoing cash flows from assets, liabilities and certain off-balance sheet
contracts. The NPV ratio is the NPV in a scenario divided by the present value
of assets in the same scenario.
The guidelines established in the interest rate risk policy include maintaining
a minimum 7% NPV ratio under any interest rate shock scenario. At March 31,
1998, the NPV ratio ranged from 9.73% to 10.54% under interest rate shocks
ranging from +300 basis points to -300 basis points. The NPV analysis for June
30, 1999 has not been received from the OTS as of this date.
The OTS NPV model is the primary interest rate risk measurement but gap
analysis is also used. At June 30, 1999, the Company had a positive one year
cumulative gap of $14,910,000 compared to $15,120,000 at December 31, 1998. In
general, a positive gap is preferable in periods when interest rates are
expected to rise since more interest-earning assets will reprice at higher
rates than interest-bearing liabilities.
Gap analysis does have limitations arising from both assumptions utilized in
determining the repricing periods of certain assets and liabilities and the
uncertainty as to the probable response of assets and liabilities to changes in
interest rates. While gap analysis is useful in analyzing the inter-
relationship between the repricing of assets and liabilities, the interest
sensitivity of the assets and liabilities is not measured. Assumptions used to
determine the repricing frequency of demand and savings deposits, which have no
stated maturity date, are critical to the effectiveness of the gap calculation.
The OTS NPV model also has limitations due to the assumption that holdings of
interest sensitive assets and liabilities will remain constant in each interest
rate shock scenario. In addition, actual changes in market interest rates may
not result in the yield and cost changes assumed in the model. As such, the
NPV measurements on a specific date should be treated as an analysis of
interest rate risk exposure on that date and should not be use to forecast the
effect of changes in interest rates on the Company's results of operations.
The Company's interest rate risk strategies include emphasizing the origination
of short-term (under 5 years) commercial, commercial real estate and direct
consumer loans; selling all fixed-rate residential mortgage loans at
origination; classifying all investment securities as available for sale;
maintaining a portfolio of primarily adjustable-rate or short-term, fixed-rate
investment securities; utilizing medium-term (five to ten year) FHLB advances
as a funding alternative; and emphasizing lower rate, less interest sensitive
demand and savings deposits.
The Company's exposure to market risk is lessened by not holding or using any
derivative instruments to manage interest rate risk. In addition, the Company
does not maintain a portfolio of trading account securities. At June 30, 1999,
the Company did have $2,929,000 in residential mortgage loans held for sale.
All loans comprising that amount were previously sold to various secondary
market investors and were held for sale only due to the usual delay between the
loan closing date and the date funding is received from the investors. The
market risk exposure on these loans was not significant.
Eagle BancGroup, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
NONE
Item 2. Changes in Securities or Use of Proceeds.
NONE
Item 3. Defaults Upon Senior Securities.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held its annual meeting on April 21, 1999.
(b) The following directors were elected to a three-year term (expiring in
2002):
Robert P. Dole
Louis F. Ulbrich
Directors whose term in office continued after the meeting are as follows:
Gerald A. Bradley, William J. Hanfland (terms expire in 2000)
Donald L. Fernandes, Steven J. Wannemacher, David L. Wampler
(terms expire in 2001)
(c) The voting results of the director elections were as follows:
A total of 849,343 shares, representing 79.4% of total outstanding shares,
were present in person or by proxy at the meeting. Each director received
834,843 votes for election, representing 98.3% of votes cast, and 14,500 votes
to withhold election, representing 1.7% of votes cast. There were no
abstentions.
No other matters were submitted to a vote of shareholders.
(d) Not applicable
Item 5. Other Information.
NONE
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The following exhibits are included herein:
(2) - Agreement and Plan of Merger, dated as of June 30, 1999, by and
among First Busey Corporation, FBC Acquisition Corp. and Eagle BancGroup, Inc.
(27) - Financial Data Schedule
(b) Reports on Form 8-K:
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATE: July 30, 1999 Eagle BancGroup, Inc.
(registrant)
By: /s/ Donald L. Fernandes
-----------------------
DONALD L. FERNANDES
President and Chief Executive Officer
(Principal Financial Officer)
EXHIBIT INDEX
Exhibit Description Page
2 Agreement and Plan of Merger By and Among
First Busey Corporation, FBC Acquisition Corp.
And Eagle BancGroup, Inc.
Dated as of June 30, 1999 18
27 Financial Data Schedule
Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FIRST BUSEY CORPORATION,
FBC ACQUISITION CORP.
AND
EAGLE BANCGROUP, INC.
Dated as of June 30, 1999
TABLE OF CONTENTS
ARTICLE I THE MERGER 1
1.1 The Merger 1
1.2 Effective Time 1
1.3 Effects of the Merger 2
1.4 Effect on Capital Stock 2
1.5 Stock Options 3
1.6 The Closing 3
ARTICLE II EXCHANGE OF CERTIFICATES 3
2.1 Buyer to Make Merger Consideration Available 3
2.2 Exchange of Certificates 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EAGLE 5
3.1 Corporate Organization 5
3.2 Capitalization 6
3.3 Authority 7
3.4 Consents and Approvals 7
3.5 Reports 7
3.6 SEC Documents 8
3.7 Broker's Fees 8
3.8 Absence of Certain Changes or Events 9
3.9 Legal Proceedings 9
3.10 Taxes and Tax Returns 9
3.11 Employee Benefit Plans 10
3.12 Compliance with Applicable Law 12
3.13 Certain Contracts 12
3.14 Agreements with Regulatory Agencies 13
3.15 Other Activities of Eagle and its Eagle Subsidiaries 13
3.16 Investment Securities 14
3.17 Undisclosed Liabilities 14
3.18 Insurance 14
3.19 Allowance for Loan Loss 14
3.20 Title to Properties; Leases 14
3.21 Environmental Matters 15
3.22 Approval Delays 16
3.23 Vote Required 16
3.24 Powers of Attorney 16
3.25 Fairness Opinion 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND
ACQUISITION CORP. 16
4.1 Corporate Organization 16
4.2 Authority 17
4.3 Consents and Approvals 17
4.4 Financial Resources 17
4.5 Approval Delays 17
4.6 Vote Required 17
ARTICLE V ADDITIONAL AGREEMENTS 18
5.1 Conduct of Business 18
5.2 Negative Covenants 18
5.3 Access to Information and Due Diligence 20
5.4 Meeting of Shareholders of Eagle 21
5.5 Regulatory Filings 21
5.6 Reasonable Efforts 21
5.7 Business Relations and Publicity 22
5.8 No Conduct Inconsistent with this Agreement 22
5.9 Board of Directors' Notices, Minutes, Etc. 22
5.10 Untrue Representations and Warranties 23
5.11 Indemnification; Directors' and Officers' Insurance 23
5.12 Employee Benefit and Incentive Plans 23
5.13 Employment and Employment Security Agreements 26
5.14 Severance Program 26
5.15 COBRA 26
5.16 Pension Plan 26
5.17 Certain Consents 27
5.18 Title to Real Property 27
5.19 Environmental Surveys 27
5.20 List of Eagle Stockholders 28
ARTICLE VI CONDITIONS PRECEDENT 28
6.1 Conditions Precedent to Obligations of Buyer and
Acquisition Corp. 28
6.2 Conditions Precedent to Obligations of Eagle 31
ARTICLE VII TERMINATION, EXPENSES AND AMENDMENT 33
7.1 Termination 33
7.2 Effect of Termination 35
7.3 Termination Fee; Expenses 35
7.4 Amendment 35
7.5 Extension; Waiver 36
ARTICLE VIII GENERAL PROVISION 36
8.1 Non-survival of Representations, Warranties and Agreements 36
8.2 Notices 36
8.3 Interpretation 37
8.4 Counterparts 37
8.5 Entire Agreement 37
8.6 Governing Law 37
8.7 Severability 38
8.8 Publicity 38
8.9 Assignment; Third Party Beneficiaries 38
SCHEDULES
Schedule 3.1(b) Ownership of Voting Stock or Equity Securities by Eagle
Schedule 3.1(c) Ownership of Voting Stock or Equity Securities by Eagle
Subsidiaries
Schedule 3.2(a) Stock Options and MRP Awards
Schedule 3.5 Regulatory Report Exceptions
Schedule 3.7 Financial Advisor Contract
Schedule 3.8(a) Material Liabilities and Events
Schedule 3.9(a) Legal Proceedings, Claims etc.
Schedule 3.11(b) List of Eagle Plans
Schedule 3.11(c) Eagle Title IV or Multiemployer Plan
Schedule 3.13(a) Certain Contracts
Schedule 3.14 Agreements with Regulatory Agencies
Schedule 3.17 Undisclosed Liabilities
Schedule 3.18 Insurance
Schedule 3.21 Environmental Matters
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 30th day of June, 1999, by and among FIRST BUSEY CORPORATION, a
Nevada corporation ("Buyer"), FBC ACQUISITION CORP., a Delaware corporation and
wholly-owned subsidiary of Buyer ("Acquisition Corp."), and EAGLE BANCGROUP,
INC., a Delaware corporation ("Eagle").
WHEREAS, the respective Boards of Directors of the parties hereto deem it
advisable and in the best interests of the parties hereto and their respective
shareholders to consummate the Merger (as defined in Section 1.1), upon the
terms and subject to the conditions of this Agreement;
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and the
Merger;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto covenant and agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) and
subject to and upon the terms and conditions of this Agreement and the Delaware
General Corporation Law (" Delaware Law"), Acquisition Corp. shall merge with
and into Eagle, the separate corporate existence of Acquisition Corp. shall
cease, and Eagle shall continue as the surviving corporation (as such, the
"Surviving Corporation"), which shall be a wholly owned subsidiary of Buyer.
Pursuant to the Merger:
(a) the Certificate of Incorporation of Eagle, as in effect
immediately before the Effective Time, shall be, from and after the Effective
Time, the Certificate of Incorporation of the Surviving Corporation, until
thereafter amended as provided therein and under Delaware Law;
(b) the Bylaws of Eagle, as in effect immediately before the
Effective Time, shall be, from and after the Effective Time, the Bylaws of the
Surviving Corporation, until thereafter amended as provided therein and under
Delaware Law;
(c) the directors of Acquisition Corp. immediately before the
Effective Time shall be, from and after the Effective Time, the directors of
the Surviving Corporation to serve until his or her death, resignation or
removal or until his or her successor is duly elected and qualified; and
(d) the officers of Acquisition Corp. immediately before the
Effective Time shall be, from and after the Effective Time, the officers of the
Surviving Corporation to serve until his or her death, resignation or removal
or until his or her successor is duly elected and qualified.
1.2 Effective Time. As promptly as practicable on the Closing Date (as
hereinafter defined), the Parties shall cause the Merger to be consummated by
filing a Certificate of Merger (the " Certificate of Merger") with the Delaware
Secretary of State with respect to the Merger, in such form as required by, and
executed in accordance with, the relevant provisions of Delaware Law. The
Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State, or at such later date or time as may be set forth
in the Certificate of Merger (such time as the Merger becomes effective being
hereinafter referred to as the " Effective Time").
1.3 Effects of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
Eagle and Acquisition Corp. shall continue with, or vest in, as the case may
be, Eagle as the Surviving Corporation, and all debts, liabilities and duties
of Eagle and Acquisition Corp. shall continue to be, or become, as the case
may be, the debts, liabilities and duties of Eagle as the Surviving
Corporation. At the Effective Time, the Surviving Corporation shall be a
direct wholly owned subsidiary of Buyer.
1.4 Effect on Capital Stock .
(a) At the Effective Time, subject to Section 2.2 hereof, by
virtue of the Merger and without any action on the part of Eagle, or the holder
of any securities of Eagle, each share of common stock, $.01 par value per
share, of Eagle (the "Eagle Common Stock") issued and outstanding immediately
before the Effective Time (other than shares canceled pursuant to Section
1.4(b)), shall be converted into the right to receive an amount of cash equal
to $25.74 (the "Per Share Merger Consideration"). All of the shares of Eagle
Common Stock converted into the right to receive the Per Share Merger
Consideration pursuant to this Article I shall no longer be outstanding, shall
automatically be canceled and shall cease to exist as of the Effective Time,
and each certificate (each an "Eagle Common Stock Certificate") previously
representing any such shares of Eagle Common Stock shall thereafter represent
only the right to receive the cash consideration hereunder.
(b) At the Effective Time, each share of Eagle Common Stock (i)
held in the treasury of Eagle, (ii) held by any of Eagle's subsidiaries (other
than in a fiduciary capacity), (iii) available for plan share awards or subject
to existing unvested plan share awards under the Eagle Management Development
and Recognition Plan and Trust (the "Eagle MRP") and (iv) owned by Buyer,
Acquisition Corp. or any other subsidiary of Buyer (other than in a fiduciary
capacity), immediately before the Effective Time, shall be canceled and retired
and no Per Share Merger Consideration shall be paid with respect thereto. Any
share of Eagle Common Stock the holder of which has validly demanded and
perfected appraisal rights pursuant to Section 262 of the Delaware Law (the
"Dissenting Shares") shall not be converted into the right to receive the Per
Share Merger Consideration at or after the Effective Time, unless and until the
holder of such shares withdraws the demand for appraisal of their shares or
otherwise becomes ineligible to pursue appraisal rights under Section 262 of
the Delaware Law. If converted into the right to receive the Per Share Merger
Consideration or other amount of consideration in settlement of an appraisal
demand or by order of a court of competent jurisdiction, the Dissenting Shares
shall be canceled and shall cease to exist.
(c) At the Effective Time, the shares of common stock, par value
$.01 per share, of Acquisition Corp. issued and outstanding immediately before
the Effective Time, and all rights in respect thereof, shall, without any
action on the part of Buyer, forthwith cease to exist and be converted into an
aggregate of 100 validly issued, fully paid and nonassessable shares of common
stock of the Surviving Corporation, par value $.01 per share (the "Surviving
Corporation Common Stock"). Immediately after the Effective Time and upon
surrender by Buyer of the certificate representing the shares of the common
stock of Acquisition Corp., the Surviving Corporation shall deliver to Buyer an
appropriate certificate or certificates representing the shares of Surviving
Corporation Common Stock created by conversion of the common stock of
Acquisition Corp. owned by Buyer.
1.5 Stock Options. Buyer shall, as of the Effective Time, convert any
outstanding and unexercised stock option granted by Eagle for the purchase of
shares of Eagle Common Stock, but only if any such option is then exercisable
under the terms of the Eagle BancGroup, Inc. 1996 Stock Option and Incentive
Plan (the "Eagle Option Plan"), into cash in an amount equal to the excess of
the Per Share Merger Consideration over the exercise price of such option,
multiplied by the number of shares of Eagle Common Stock subject to such
option. Such cash, net of any amount that must be withheld for federal, state
or local tax purposes, shall be paid to the holder of such option on the
Closing Date, whereupon such option shall terminate.
1.6 The Closing . The consummation of the transactions contemplated by
this Agreement shall take place at a closing (the "Closing") to be held upon
the satisfaction or waiver of all of the conditions to the Merger set forth
herein, which Closing shall take place at 10:00 a.m., local time, at the
offices of Chapman and Cutler (or at such other place upon which the parties
may agree), on a date mutually agreeable to the parties hereto, but in no event
later than the last business day of the month in which all of the conditions to
the Merger set forth herein have been satisfied or waived, unless the parties
mutually agree to another date (hereinafter referred to as the "Closing Date").
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Buyer to Make Merger Consideration Available. At or before the
Effective Time, Buyer shall designate a paying agent reasonably satisfactory to
Eagle (the "Paying Agent") and shall irrevocably deposit, or shall cause to be
deposited, with the Paying Agent, for the benefit of the holders of Eagle
Common Stock Certificates, for payment in accordance with Article I hereof and
this Article II, an amount of cash sufficient for payment of the aggregate Per
Share Merger Consideration payable to the holders of Eagle Common Stock under
Section 1.4 of this Agreement (such cash being hereinafter referred to as the
"Conversion Fund").
2.2 Exchange of Certificates .
(a) Before the Effective Time, Buyer shall cause the Paying Agent
to mail to each holder of record of one or more Eagle Common Stock Certificates
a letter of transmittal and instructions for use in effecting the surrender of
the Eagle Common Stock Certificates in exchange for the Per Share Merger
Consideration into which the shares of Eagle Common Stock represented by such
Eagle Common Stock Certificate or Certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of an Eagle Common Stock
Certificate for payment and cancellation to the Paying Agent, together with
such properly completed letter of transmittal, duly executed, the holder of
such Eagle Common Stock Certificate shall be entitled to receive in exchange
therefore a check representing the cash payment for such holder's shares
pursuant to Section 1.4 of this Agreement, and the Eagle Common Stock
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on any cash payment payable to a holder of Eagle Common Stock
Certificates.
(b) If any check is to be issued in a name other than that in
which the Eagle Common Stock Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Eagle
Common Stock Certificate so surrendered shall be properly endorsed or
accompanied by an appropriate instrument of transfer and otherwise in proper
form for transfer.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of Eagle of the shares of Eagle Common Stock that were
issued and outstanding immediately before the Effective Time. If, after the
Effective Time, Eagle Common Stock Certificates are presented for transfer to
the Paying Agent, they shall be canceled and exchanged for the cash
consideration as provided in Section 1.4 hereof and this Article II.
(d) Any portion of the Conversion Fund that remains unclaimed by
the shareholders of Eagle for twelve (12) months after the Effective Time shall
be paid to the Surviving Corporation. Any shareholders of Eagle who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation for the cash consideration payable in respect of each
share of Eagle Common Stock such shareholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon. Notwithstanding
the foregoing, none of Buyer, Eagle, the Paying Agent or any other person shall
be liable to any former holder of shares of Eagle Common Stock, for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(e) In the event any Eagle Common Stock Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Eagle Common Stock Certificate to be lost, stolen or
destroyed and the posting by such person of a bond in such amount as the Paying
Agent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Eagle Common Stock Certificate, the
Paying Agent shall issue in exchange for such lost, stolen or destroyed Eagle
Common Stock Certificate the cash consideration payable in respect thereof
pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EAGLE
Eagle hereby represents and warrants to Buyer as follows.
3.1 Corporate Organization .
(a) Eagle is a corporation duly organized and validly existing
under the laws of the State of Delaware. Eagle has the 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 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 or qualified would not have a Material Adverse Effect (as
defined below) on Eagle. Eagle is duly registered as a savings and loan
holding company under the Home Owners' Loan Act ("HOLA"). True and complete
copies of the Certificate of Incorporation and Bylaws of Eagle, as in effect as
of the date of this Agreement, have previously been made available by Eagle to
Buyer. As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Eagle or Buyer, as the case may be, a material adverse effect
(i) on the business, assets, properties, results of operations, financial
condition, or (insofar as they can reasonably be foreseen) prospects of such
party and its subsidiaries, taken as a whole, or (ii) on the consummation of
the Merger. The word "subsidiary" when used with respect to any party means
any bank, corporation, partnership, limited liability company, or other
organization, whether incorporated or unincorporated, which is consolidated
with such party for financial reporting purposes. With respect to Eagle,
however, the word subsidiary shall not be deemed to include Eagle's interests
under the Joint Venture Agreement between Eagle and Lawrence F. Hundman or its
interests under the Joint Venture Agreement between Eagle and Jeff McElravy.
Eagle has provided Buyer with true and complete copies of these two Joint
Venture Agreements.
(b) As of the date of this Agreement, Eagle has, as its sole
direct or indirect subsidiaries, First Federal Savings and Loan Association of
Bloomington (the "Association"), a federally-chartered-capital-stock savings
and loan association and FFS Investment Services, Inc., an Illinois corporation
(together with the Association, the "Eagle Subsidiaries"). Except as set forth
in Schedule 3.1(b) of the disclosure schedules to this Agreement prepared and
delivered by Eagle (the "Eagle Disclosure Schedules"), Eagle does not own any
voting stock or equity securities of any bank, corporation, partnership,
limited liability company, or other organization, whether incorporated or
unincorporated, other than the Eagle Subsidiaries.
(c) Each Eagle Subsidiary (i) is duly organized and validly
existing as a business corporation or depository institution, as the case may
be, under the laws of its jurisdiction of organization, (ii) is duly qualified
to do business and in good standing in all jurisdictions (whether federal,
state, local or foreign) where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and in which the failure
to be so qualified would have a Material Adverse Effect on Eagle, and (iii) has
all requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted. Except as set forth in
Schedule 3.1(c) of the Eagle Disclosure Schedules, none of the Eagle
Subsidiaries owns any voting stock or equity securities of any bank,
corporation, partnership, limited liability company, or other organization,
whether incorporated or unincorporated.
3.2 Capitalization .
(a) The authorized capital stock of Eagle consists of 5,000,000
shares of Eagle Common Stock, $0.01 par value per share, of which, as of the
date hereof, 1,067,239 shares were issued and outstanding, and 100,000 shares
of Preferred Stock, $0.01 par value per share, of which, as of the date hereof,
none were issued and outstanding. As of the date hereof, 235,466 shares of
Eagle Common Stock were held in treasury. All of the issued and outstanding
shares of Eagle Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. Except for the
Eagle Option Plan and the Eagle MRP, Eagle does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, commitments,
agreements, preemptive or other rights of any character calling for the
purchase or issuance of any shares of Eagle Common Stock or any other equity
securities of Eagle or any securities representing the right to purchase or
otherwise receive any shares of the capital stock of Eagle, nor are there any
securities, debts, obligations or rights outstanding which are convertible
into or exchangeable for shares of the capital stock of Eagle. No shares of
Eagle Common Stock have been reserved for issuance, other than the shares of
Eagle Common Stock reserved for issuance under the Eagle Option Plan and the
Eagle MRP. Since December 31, 1998, Eagle has not issued any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock except upon exercise of stock options pursuant to the
Eagle Option Plan outstanding as of December 31, 1998 and upon the vesting of
awards under the Eagle MRP. Schedule 3.2(a) of the Eagle Disclosure Schedules
sets forth as of the date hereof (i) the number of outstanding stock options
for the purchase of Eagle Common Stock granted under the Eagle Option Plan by
optionee and the dates on which such options became or become exercisable and
(ii) the number of outstanding plan share awards for Eagle Common Stock under
the Eagle MRP for each participant in the Eagle MRP and the dates on which plan
shares were earned or will be earned under such awards.
(b) Eagle owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the Eagle Subsidiaries, free and
clear of any liens, pledges, charges, encumbrances and security interests
whatsoever ("Liens"). All of the shares of capital stock of each Eagle
Subsidiary are duly authorized and validly issued and are fully paid and
nonassessable. No Eagle Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock
or any other equity security of such Eagle Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Eagle Subsidiary.
3.3 Authority. Eagle has full corporate power and authority to execute
and deliver each of this Agreement and, subject to shareholder and regulatory
approvals, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Eagle. The Board of Directors of Eagle has directed that this
Agreement and the transactions contemplated hereby be submitted to Eagle's
shareholders for approval at a meeting of such shareholders and, except for the
adoption of this Agreement by the affirmative vote of the holders of a majority
of the outstanding shares of Eagle Common Stock, no other corporate proceedings
on the part of Eagle are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Eagle and (assuming due authorization, execution and
delivery by Buyer) constitutes a valid and binding obligation of Eagle,
enforceable against Eagle in accordance with its terms.
3.4 Consents and Approvals. No consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or
with any third party are necessary in connection with the execution and
delivery by Eagle of this Agreement and the consummation by Eagle of the Merger
and the other transactions contemplated hereby except for (a) the filing by
Buyer of an application with the Board of Governors of the Federal Reserve
System (the "FRB") and the approval of such application (the "Regulatory
Application"), (b) the filing with the Securities and Exchange Commission (the
"SEC") of a proxy statement in definitive form relating to the meeting of
Eagle's shareholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Statement"), (c) the filing of
the Certificate of Merger with the Delaware Secretary of State under Delaware
Law and (d) the approval of this Agreement by the requisite vote of the
shareholders of Eagle and by Buyer, as sole shareholder of Acquisition Corp.
3.5 Reports. Eagle and each of the Eagle Subsidiaries have timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
during the five years preceding the date hereof with (i) the Office of Thrift
Supervision (the "OTS"), (ii) the Federal Deposit Insurance Corporation, (iii)
any state regulatory authority, (iv) the SEC, and (v) any self-regulatory
organization with jurisdiction over any of the activities of Eagle or any of
the Eagle Subsidiaries (collectively "Regulatory Agencies"), and all other
reports and statements required to be filed by them during the five years
preceding the date hereof, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of
the United States, any state, or any Regulatory Agency, and have paid all fees
and assessments due and payable in connection therewith, except where the
failure to file such report, registration or statement or to pay such fees and
assessments, either individually or in the aggregate, will not have a Material
Adverse Effect on Eagle. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Eagle and the Eagle
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of Eagle, investigation into the business or operations of Eagle or
any of the Eagle Subsidiaries during the five years preceding the date hereof.
Except as set forth in Schedule 3.5 of the Eagle Disclosure Schedules, there
is no unresolved written violation, written criticism, or written exception by
any Regulatory Agency with respect to any report or statement relating to any
examinations of Eagle or any of the Eagle Subsidiaries, which is likely, either
individually or in the aggregate, to have a Material Adverse Effect on Eagle.
3.6 SEC Documents. Eagle has made available to Buyer a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Eagle with the SEC (other than reports filed pursuant
to Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") since the date Eagle has been required to file such
documents (as such documents have since the time of their filing been amended,
the "Eagle SEC Documents"), which are all the documents (other than preliminary
material and reports required pursuant to Section 13(d) or 13(g) of the
Exchange Act) that Eagle was required to file with the SEC since such date. As
of their respective dates of filing with the SEC, the Eagle SEC Documents,
including any Eagle SEC Documents filed after the date hereof until the
Closing, complied or will comply, as the case may be, in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Eagle SEC Documents, and
did not, or will not, as the case may be, 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 financial statements of Eagle
included and, to be included as the case may be, in the Eagle SEC Documents
complied and will comply, as the case may be, as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present in all material respects the consolidated financial position of
Eagle and the consolidated Eagle Subsidiaries as of the dates thereof and the
consolidated results of operations, changes in stockholders' equity and cash
flows of such companies for the periods then ended. All material agreements,
contracts and other documents required to be filed as exhibits to any of the
Eagle SEC Documents have been so filed or will be so filed prior to Closing.
3.7 Broker's Fees. Other than Eagle's arrangement with Trident
Securities, a division of McDonald Investments, Inc. ("Trident") to serve as a
financial advisor to Eagle in connection with the Merger and related
transactions contemplated by this Agreement, neither Eagle nor any Eagle
Subsidiary nor any of their respective officers or directors has employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory fees, broker's fees, commissions or finder's fees in connection with
the Merger or related transactions contemplated by this Agreement. Trident's
contract with Eagle is included as Schedule 3.7 of the Eagle Disclosure
Schedules.
3.8 Absence of Certain Changes or Events .
(a) Except as publicly disclosed in the Eagle SEC Documents (as
defined in Section 3.6) filed before the date hereof or as set forth in
Schedule 3.8(a) of the Eagle Disclosure Schedules, since December 31, 1998, (i)
Eagle and the Eagle Subsidiaries, taken as a whole, have not incurred any
material liability, except in the ordinary course of their respective
businesses, and (ii) no event has occurred which has had, individually or in
the aggregate, a Material Adverse Effect on Eagle or will have a Material
Adverse Effect on Eagle.
(b) Except as publicly disclosed in the Eagle SEC Documents filed
before the date hereof, since December 31, 1998, Eagle and the Eagle
Subsidiaries have conducted their respective businesses in all material
respects in the ordinary and usual course consistent with past practice and,
since the date of this Agreement, consistent with the restrictions set forth
in Section 5.2.
3.9 Legal Proceedings .
(a) Except as set forth in Schedule 3.9(a), of the Eagle
Disclosure Schedules to the best of Eagle's knowledge, there are no pending or
threatened, legal, administrative, arbitration or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Eagle or any of the Eagle Subsidiaries or challenging the validity or propriety
of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than regulatory restrictions that apply to similarly
situated savings and loan holding companies or savings associations) imposed
upon Eagle, any of the Eagle Subsidiaries or the assets of Eagle or any of the
Eagle Subsidiaries.
3.10 Taxes and Tax Returns .
(a) Each of Eagle and the Eagle Subsidiaries has duly filed all
federal, state, county, foreign and, to the best of Eagle's knowledge, local
information returns and tax returns required to be filed by it on or before the
date hereof (all such returns being accurate and complete in all material
respects) and has duly paid or made provisions for the payment of all Taxes (as
defined in Section 3.10(b)) and other governmental charges which have been
incurred or are due or claimed to be due from it by federal, state, county,
foreign or local taxing authorities on or before the date of this Agreement
(including, without limitation, if and to the extent applicable, those due in
respect of its properties, income, business, capital stock, deposits,
franchises, licenses, sales, use and payrolls) other than Taxes or other
charges which are not yet delinquent or are being contested in good faith and
have not been finally determined. There are no material disputes pending with
respect to, or claims asserted for, Taxes or assessments upon Eagle or any of
the Eagle Subsidiaries for which Eagle does not have adequate reserves, nor has
Eagle or any of the Eagle Subsidiaries given any currently effective waivers
extending the statutory period of limitation applicable to any federal, state,
county, foreign or local income tax return for any period. In addition, proper
and accurate amounts have been withheld by Eagle and each of the Eagle
Subsidiaries from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state, foreign and local laws, except where failure to do so would not, in the
aggregate, have a Material Adverse Effect on Eagle. There are no Tax liens
upon any property or assets of Eagle or any of the Eagle Subsidiaries except
liens for taxes not yet past due.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all
federal, state, county, local, and foreign income, excise, gross receipts,
gross income, ad valorem, profits, gains, property, capital, sales, transfer,
use, payroll, employment, severance, withholding, duties, intangibles,
franchise, backup withholding, and other taxes, charges, levies or like
assessments together with all penalties and additions to tax and interest
thereon.
3.11 Employee Benefit Plans.
(a) (i) Eagle Plan. The term "Eagle Plan" includes each bonus,
deferred compensation, pension, retirement, profit sharing, thrift savings,
employee stock ownership, stock bonus, stock purchase, restricted stock and
stock option plan, each employment or severance contract, each other material
employee benefit plan, any applicable "change in control" or similar provisions
in any plan, program, policy, contract or arrangement, and each other benefit
plan, contract, program, policy or arrangement, including but not limited to,
each employee benefit plan, as defined in Section 3(3) of ERISA (other than an
Eagle Multiemployer Plan and including any terminated Eagle Plans) that
currently or since January 1, 1993: (1) is or has been maintained for
directors or employees of Eagle or of any Eagle Control Group member or (2) to
which Eagle or any Eagle Control Group member made or was required to make
contributions.
(ii) Eagle Qualified Plan. The term "Eagle Qualified Plan"
means any Eagle Plan which is an employee pension benefit plan as defined in
Section 3(2) of ERISA and which is intended to meet the qualification
requirements of the Internal Revenue Code, as amended (the "Code"),
(iii) Eagle Title IV Plan. The term "Eagle Title IV Plan"
means any Eagle Qualified Plan that is a defined benefit plan (as defined in
Section 3(37) of ERISA) and is subject to Title IV of ERISA.
(iv) Eagle Multiemployer Plan. The term "Eagle Multiemployer
Plan" means any employee benefit plan that is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA and to which Eagle or any Eagle Control Group
member has or had any obligation to contribute.
(v) Eagle Control Group. The term "Eagle Control Group"
means a controlled group of corporations of which Eagle is a member within the
meaning of Section 414(b) of the Code, any group of corporations or entities
under common control with Eagle within the meaning of Section 414(c) of the
Code or any affiliated service group of which Eagle is a member within the
meaning of Section 414(m) of the Code.
(vi) ERISA. The term "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
(b) All Eagle Plans are set forth in Schedule 3.11(b) of the Eagle
Disclosure Schedules.
(c) (i) Each Eagle Plan has been administered in material
compliance with its terms and with all filing, reporting, disclosure and other
requirements of all applicable statutes (including but not limited to ERISA and
the Code), regulations or interpretations thereunder.
(ii) Except as set forth in Schedule 3.11(c) of the Eagle
Disclosure Schedules, neither Eagle nor any Eagle Control Group member
currently or at any time maintains or maintained, or contributes or contributed
to, or is required to contribute to, any Eagle Title IV Plan or any Eagle
Multiemployer Plan.
(iii) Neither Eagle nor any Eagle Control Group member, nor
any of their respective employees or directors, nor any fiduciary, has engaged
in any transaction, including the execution and delivery of this Agreement and
other agreements, instruments and documents for which execution and delivery by
Eagle is contemplated herein, in violation of Section 406(a) or (b) of ERISA or
any "prohibited transaction" (as defined in Section 4975(c)(1) of the Code) for
which no exemption exists under Section 408(b) of ERISA or Section 4975(d) of
the Code or for which no administrative exemption has been granted under
Section 408(a) of ERISA.
(iv) Each Eagle Qualified Plan is the subject of a favorable
Internal Revenue Service determination with respect to such qualification and
exemption.
(v) Except as set forth in Schedule 3.11(c), no matter is
pending relating to any Eagle Plan before any court or governmental agency.
(d) (i) Complete and correct copies of all current and prior
documents, including all amendments thereto, with respect to each Eagle Plan,
have been delivered to Buyer. These documents include, but are not limited to,
the following: Eagle Plan documents, trust agreements, insurance contracts,
annuity contracts, summary plan descriptions, filings with governmental
agencies, investment manager and investment adviser contracts, and actuarial
reports, audit reports, financial statements and annual reports (Form 5500) for
the most recent three plan years ending before the date of this Agreement.
(ii) All contributions payable to each Eagle Qualified Plan
for all benefits earned and other liabilities accrued through December 31,
1998, determined in accordance with the terms and conditions of such Eagle
Qualified Plan, ERISA and the Code, have been paid or otherwise provided for,
and to the extent unpaid are reflected in the consolidated balance sheet of
Eagle and Eagle Subsidiaries as of December 31, 1998.
3.12 Compliance with Applicable Law. Eagle and each of the Eagle
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to all, and have complied with and are not in default under any,
applicable laws, statutes, orders, rules, regulations, policies and/or
guidelines of any Governmental Entity relating to Eagle or any of the Eagle
Subsidiaries, except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not, individually or
in the aggregate, have a Material Adverse Effect on Eagle.
3.13 Certain Contracts.
(a) Except as set forth in Schedule 3.13(a) of the Eagle
Disclosure Schedules or as an exhibit to the Eagle SEC Documents, neither Eagle
nor any of the Eagle Subsidiaries is a party to or bound by:
(i) any contract, arrangement, commitment or understanding
(whether written or oral) with respect to the employment or compensation of any
directors, officers or employees;
(ii) any contract, arrangement, commitment or understanding
(whether written or oral) which, upon the consummation of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence of
any additional acts or events) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due from Eagle, Buyer, the Surviving Corporation, or any
of their respective Subsidiaries to any officer, director or employee thereof
or to the trustee under any "rabbi trust" or similar arrangement;
(iii) any contract, arrangement, commitment or understanding
(whether written or oral), including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased or be required to be paid, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(iv) any agreement of indemnification or guaranty not entered
into in the ordinary course of business, including any indemnification
agreements between Eagle or any of the Eagle Subsidiaries and any of its
officers or directors;
(v) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business; or
(vi) any material agreement relating to the sale or purchase
of any business or business assets providing for payment of any deferred or
contingent consideration by Eagle or providing for indemnification by Eagle.
Each contract, arrangement, commitment or understanding of the type
described in this Section 3.13(a), is referred to herein as an "Eagle
Contract," and neither Eagle nor any of the Eagle Subsidiaries knows of, or has
received notice of, any violation of any Eagle Contract by any of the other
parties thereto, which, individually or in the aggregate, would have a Material
Adverse Effect on Eagle.
(b) (i) Each Eagle Contract is valid and binding on Eagle or the
applicable Eagle Subsidiary, as the case may be, and is in full force and
effect, (ii) Eagle and each of the Eagle Subsidiaries has performed all
obligations required to be performed by it to date under each Eagle Contract to
which it is a party, except where such noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect on Eagle, and (iii) no
event or condition exists which constitutes or, after notice or lapse of time
or both, would constitute, a default on the part of Eagle or any of the Eagle
Subsidiaries under any such Eagle Contract, except where any such default,
individually or in the aggregate, would not have a Material Adverse Effect on
Eagle.
3.14 Agreements with Regulatory Agencies. Except as set forth in
Schedule 3.14 of the Eagle Disclosure Schedules, neither Eagle nor any of the
Eagle Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been during
the three years preceding the date hereof, a recipient of any supervisory
letter from, or during the three years preceding the date hereof, has adopted
any board resolutions at the request of any Regulatory Agency or other
Governmental Entity that currently restricts the conduct of its business or
that relates to its capital adequacy, compliance with laws, its credit
policies, its management or its business (each, whether or not set forth in the
Eagle Disclosure Schedules, an "Eagle Regulatory Agreement"), nor has Eagle or
any of the Eagle Subsidiaries been advised during the three years preceding the
date hereof by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any such Eagle Regulatory Agreement.
3.15 Other Activities of Eagle and its Eagle Subsidiaries. Neither Eagle
nor any of the Eagle Subsidiaries that is either a savings association, a
savings association operating subsidiary or a savings association service
corporation directly or indirectly engages in any activity prohibited by the
OTS. Without limiting the generality of the foregoing, no equity investment of
Eagle or any Eagle Subsidiary that is neither a savings association, a savings
association operating subsidiary nor a savings association service corporation
is prohibited by the OTS.
3.16 Investment Securities. Each of Eagle and the Eagle Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to secure
obligations of Eagle or any of the Eagle Subsidiaries. Such securities are
valued on the books of Eagle and the Eagle Subsidiaries in accordance with GAAP.
3.17 Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the consolidated statement of financial
condition of Eagle included in the Eagle Form 10-K for fiscal year ended
December 31, 1998, liabilities disclosed in Schedule 3.17 of the Eagle
Disclosure Schedules, and liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1998, neither Eagle
nor any of the Eagle Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due) that, either alone or when combined with all similar
liabilities, has had, or could reasonably be expected to have, a Material
Adverse Effect on Eagle.
3.18 Insurance. Schedule 3.18 of the Eagle Disclosure Schedules
describes all policies of insurance in which Eagle or any of the Eagle
Subsidiaries is named as an insured party or which otherwise relate to or cover
any assets or properties of Eagle or any of the Eagle Subsidiaries. Each of
such policies is in full force and effect, and the coverage provided under such
policies complies with the requirements of any contracts binding on Eagle or
any of the Eagle Subsidiaries relating to such assets or properties. Except as
set forth in Schedule 3.18 of the Eagle Disclosure Schedules, neither Eagle
nor any of the Eagle Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of Eagle or any of
the Eagle Subsidiaries.
3.19 Allowance for Loan Loss. The allowance for loan losses set forth in
the December 31, 1998 financial statements of Eagle is adequate in all material
respects under the requirements of GAAP to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding
(including accrued interest receivable) as of December 31, 1998. The aggregate
loan balances of the Association at such date in excess of such allowance are,
to the best knowledge and belief of Eagle, collectible in accordance with their
terms.
3.20 Title to Properties; Leases. (a) Eagle, or each of the Eagle
Subsidiaries, as applicable, is the owner of good and marketable title to all
real properties and is the owner of good title to all other property and
assets, tangible and intangible, that it claims or otherwise purports to own to
the extent it claims or otherwise purports to own them (including, without
limitation, all of its assets reflected in its financial statements for the
fiscal year ended December 31, 1998 or that it purports to have acquired since
December 31, 1998), free and clear of any Liens, except for (the following
collectively referred to as "Permitted Exceptions") (i) pledges and liens given
to secure deposits and other banking liabilities arising in the ordinary course
of business, (ii) liens for current taxes not yet due and payable, (iii) all
easements, covenants, conditions, assignments, defects, restrictions,
exceptions, reservations and other encumbrances, whether recorded or
unrecorded, which do not materially interfere with the use or operation of the
property as the same is being currently used and operated, or render title to
any material portion of the property unmarketable, (iv) all leases, subleases
and any memoranda thereof and any non-disturbance agreements with tenants,
subtenants or other occupants of any property or (v) any liens, encumbrances,
objections or other matters which are caused or created by or on behalf of
Buyer or the Surviving Corporation.
(b) Each lease under which Eagle or any of the Eagle Subsidiaries
is the lessee of any real or personal property will be, upon consummation of
the Merger, in full force and effect, and Eagle or each of the Eagle
Subsidiaries has been in peaceable possession of the property covered thereby
since the commencement of the original term of such lease. With respect to the
facility leased by Eagle located at 302 West Main Street, Lexington, Illinois,
(i) no right of approval or consent on the part of the lessor under such lease
exists or will exist with respect to the Merger, (ii) no waiver, indulgence or
postponement of Eagle or the Eagle Subsidiaries' obligations under such lease
has been granted by the lessor thereunder, or of such lessor's obligations by
Eagle or the Eagle Subsidiaries and (iii) neither Eagle nor the Eagle
Subsidiaries nor, to the knowledge of Eagle, the lessor under such lease has
violated, in any material respect, any of the terms or conditions of such
lease, and all of the material covenants to be performed by Eagle or the Eagle
Subsidiaries and the lessor as of the date hereof have been fully performed in
all material respects.
3.21 Environmental Matters. Neither Eagle nor any of the Eagle
Subsidiaries has received notice of any material violation of any applicable
environmental law, regulation, ordinance, order or requirement relating to its
operations or properties; to Eagle's knowledge no such violation exists; and to
Eagle's knowledge all properties and buildings and other structures occupied,
owned, leased or used by Eagle or the Eagle Subsidiaries, or in which Eagle or
any of the Eagle Subsidiaries has an interest (whether acquired by foreclosure
or otherwise), comply, in all material respects, with all applicable
environmental laws, regulations, ordinances, orders and requirement, except
where any noncompliance would not have a Material Adverse Effect on Eagle.
Except as set forth in Schedule 3.21 of the Eagle Disclosure Schedules, to
Eagle's knowledge, all properties occupied, owned leased or used by Eagle or
the Eagle Subsidiaries, or in which Eagle or the Eagle Subsidiaries has an
interest (whether by foreclosure or otherwise, including all improvements
thereon: (i) are free from contamination; (ii) have not been subject to a
release, discharge or emission, or imminent threat of release, discharge or
emission, of any hazardous substance, gas or liquid, as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act or the rules and
regulations promulgated or published thereunder, or any other substance, gas or
liquid, which is prohibited, controlled or regulated thereunder, or which is
regulated under any law or regulation dealing with protection or public health
or safety, or the environment except as would be expected in the ordinary
course of business (collectively, "Hazardous Substances"); and (iii) have not
appeared or have not proposed to appear on the United State Environmental
Protection Agency's National Priority List or any similar state list. There
have been no past, and to Eagle's knowledge there are no pending or threatened,
claims, complaints, notices, or requests for information received by Eagle or
the Eagle Subsidiaries with respect to any alleged violation of any
Environmental Law, or potential liability under any Environmental Law. The
term "Environmental Law" means all applicable statutes, laws, regulations,
orders, judgments, decrees or principles of common law, and any permits,
licenses, authorization, relating to pollution, protection of the environment,
public health or safety, employee health or safety, or the emission, discharge,
release or threatened release of Hazardous Substances into the environment or
otherwise relating to the presence, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances.
3.22 Approval Delays. Eagle knows of no reason why any of the regulatory
approvals referenced in Section 6.1(c) and Section 6.2(c) should be denied or
unduly delayed.
3.23 Vote Required. The approval by the holders of a majority of the
votes entitled to be cast by all holders of Eagle Common Stock of this
Agreement and the Merger is the only vote of the holders of any class or
series of the capital stock of Eagle required for any of the transactions
contemplated by this Agreement.
3.24 Powers of Attorney. No power of attorney or similar authorization
given by Eagle not in the ordinary course of business is currently outstanding.
3.25 Fairness Opinion. Eagle has received a written opinion from
Trident, dated as of a date within five business days of the date hereof, to
the effect that as of such date, the Per Share Merger Consideration is fair to
Eagle from a financial point of view. Eagle has delivered to Buyer a copy of
such opinion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION CORP.
Each of Buyer and Acquisition Corp. jointly and severally represent and
warrant to Eagle as follows.
4.1 Corporate Organization. Each of Buyer and Acquisition Corp. is a
corporation duly organized and validly existing under the laws of the States of
Nevada and Delaware, respectively. Each of Buyer and Acquisition Corp. has the
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. Buyer is duly
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended ("BHCA"). True and complete copies of the Certificate of
Incorporation and Bylaws of each of Buyer and Acquisition Corp., as in effect
as of the date of this Agreement, have previously been made available by each
of Buyer and Acquisition Corp. to Eagle. Buyer owns directly all of the
issued and outstanding shares of capital stock of Acquisition Corp.
4.2 Authority. Each of Buyer and Acquisition Corp. has full corporate
power and authority to execute and deliver this Agreement subject to
shareholder and regulatory approvals, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of each of Buyer and Acquisition Corp, and
Buyer, as the owner of all of the outstanding shares of capital stock of
Acquisition Corp. has caused this Agreement and the Merger to be approved in
accordance with Delaware Law. Except for the adoption of this Agreement and
the transactions contemplated hereby by Buyer, as sole shareholder of
Acquisition Corp., no other corporate proceedings on the part of Buyer or
Acquisition Corp. are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Buyer and Acquisition Corp. and, assuming due
authorization, execution and delivery by Eagle, constitutes a valid and binding
obligation of each of Buyer and Acquisition Corp., enforceable against each of
Buyer and Acquisition Corp. in accordance with its terms.
4.3 Consents and Approvals. No consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary in connection with the execution and delivery by each of Buyer and
Acquisition Corp. of this Agreement and the consummation by Acquisition Corp.
of the Merger and the other transactions contemplated hereby except for (a) the
filing by Buyer and Acquisition Corp. of the Regulatory Application and the
approval of the Regulatory Application, (b) the filing with the SEC of the
Proxy Statement in definitive form relating to the meeting of Eagle's
shareholders to be held in connection with this Agreement and the transactions
contemplated hereby, (c) the filing of the Certificate of Merger with the
Delaware Secretary of State under Delaware Law and (d) the approval of this
Agreement by the requisite vote of the shareholders of Acquisition Corp. and
Eagle.
4.4 Financial Resources. Buyer has the financial wherewithal, whether
by using its internal funds, external financing, or both, to perform its
obligations under this Agreement. Buyer and its subsidiaries are, and will be
following the Merger, in compliance with all applicable capital, debt and
financial and non-financial criteria of state and federal banking agencies
having jurisdiction over them.
4.5 Approval Delays. Buyer knows of no reason why any of the regulatory
approvals referred to in Section 6.1(c) and Section 6.2(c) should be denied or
unduly delayed.
4.6 Vote Required. The approval by Buyer, as sole stockholder of
Acquisition Corp., of this Agreement and the Merger is the only vote of the
holders of any class or series of the capital stock of Buyer or Acquisition
Corp. required for any of the transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business. Between the date hereof and the Closing Date,
the parties shall conduct their respective businesses and shall cause their
subsidiaries to conduct their businesses in the usual and ordinary course
consistent in all material respects with prudent banking practices.
5.2 Negative Covenants. Between the date hereof and the Closing Date,
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld:
(a) except upon the exercise of existing options under the Eagle
Option Plan or the vesting of existing awards under the Eagle MRP or the
repurchase by Eagle of up to 4,000 shares of Eagle Common Stock from the First
Federal Savings and Loan Association Employees Pension Plan ("Pension Plan") at
a per share price not to exceed the Per Share Merger Consideration, Eagle
shall, and shall cause the Association to, make no changes in their respective
charters or bylaws or in the number of their issued and outstanding shares;
(b) Eagle shall, and shall cause the Association to, not increase
the compensation of their directors, officers or employees, provided, however,
that the compensation of officers and employees of Eagle and the Association
may be increased in a manner consistent with prior practice of Eagle and the
Association;
(c) Eagle shall, and shall cause the Association to, make no loan
for $500,000 or more, except for loans currently committed to be made pursuant
to written commitment letters, and Eagle shall, and shall cause the Association
to, make no other loans, or renewals or restructuring of loans regardless of
amount except in the ordinary course of business and consistent in all material
respects with prudent banking practices and applicable rules and regulations of
regulatory authorities with respect to amount, terms, security and quality of
the borrower's credit;
(d) Eagle shall not declare or pay any stock dividend, cash
dividend or other distribution without the prior written consent of Buyer,
provided, however, that until the Closing Date, Eagle may declare and pay its
fiscal 1999 second quarter cash dividend to its shareholders in an amount not
to exceed $ .10 per share of Common Stock, and the Association may pay cash
dividends to Eagle in the aggregate amount necessary for Eagle to pay its
fiscal 1999 second quarter cash dividend;
(e) Eagle shall, and shall cause the Association to, use their
best efforts to maintain their present insurance coverage in respect to their
respective properties and businesses;
(f) Eagle shall, and shall cause the Association to, make no
significant changes, outside the ordinary course of business, in the general
nature of the business conducted by Eagle and the Association, including but
not limited to the investment or use of their assets, the liabilities they
incur, or the facilities they operate;
(g) Eagle shall, and shall cause the Association to, not enter
into any employment, consulting or other similar agreements that are not
terminable on 30 days' notice or less without penalty or obligation;
(h) Eagle shall, and shall cause the Association to, not take any
action that would result in a termination, partial termination, curtailment,
discontinuance or merger into another plan or trust of any Eagle Plan, except
as contemplated by this Agreement or as disclosed in the Eagle Disclosure
Schedules;
(i) Eagle shall, and shall cause the Association to, timely file
all required tax returns with all applicable taxing authorities and shall not
make any application for or consent to any extension of time for filing any tax
return or any extension of the period of limitations applicable thereto;
(j) except as already reflected in the financial statements
referred to in Section 3.6 hereof, Eagle shall, and shall cause the Association
to, not make any expenditure for fixed assets in excess of $25,000 for any
single item, or $50,000 in the aggregate, or enter into any lease of fixed
assets, if the monthly rental payment under such lease exceeds $5,000;
(k) Eagle shall, and shall cause the Association to, not incur any
liabilities or obligations, make any commitments or disbursements, acquire or
dispose of any property or asset, dispose of real estate owned, make any
contract or agreement, or engage in any transaction, except in the ordinary
course consistent in all material respects with prudent banking practices;
(l) Eagle shall, and shall cause the Association to, not do or
fail to do anything that will cause a breach of, or default under, any
contract, agreement, commitment, obligation, appointment, plan, trust or other
arrangement to which Eagle or the Association is a party or by which either
Eagle or the Association is otherwise bound where such breach would have a
Material Adverse Effect on Eagle;
(m) Eagle shall, and shall cause the Association to, make no
changes of a material nature in their accounting procedures, methods, policies
or practices or the manner in which they conduct their businesses and maintain
their records;
(n) Eagle shall cause the Association not to accept any brokered
deposits;
(o) Eagle shall not grant any new stock options under the Eagle
Option Plan or any new plan share awards under the Eagle MRP;
(p) Eagle shall, and shall cause the Association to, substantially
comply with all material laws applicable to the conduct of its business;
(q) Eagle shall, and shall cause the Association to, use its best
efforts to preserve its business organization in tact, to keep available the
services of its present officers and employees and to preserve the goodwill of
its customers and others having business relations with it;
(r) Eagle shall, and shall cause the Association to, not make any
borrowings, except in the ordinary course of business (indebtedness, other than
deposits in customary amounts accepted by the Association in the ordinary
course of its business, maturing more than one year after its creation is not
for the purpose of this Agreement considered as being in the "ordinary course");
(s) Eagle shall, and shall cause the Association to, not purchase
or invest in securities or obligations, or accept deposits (except for deposits
at rates consistent with those being paid generally by other financial
institutions in markets in which the Association has branch offices) having a
maturity of more than three years from the date of purchase or acceptance;
(t) Eagle shall, and shall cause the Association to, not extend
credit or make advances, or grant any extension of any outstanding loan,
advance or other credit, to any customer of the Association who is listed on
the Association's problem or watch list or who has any outstanding loan,
advance or other credit from the Association which is in default, has been
placed on nonaccrual status or has been internally classified as among "other
loans specifically mentioned," or as "substandard," "doubtful" or "loss;" and
(u) Eagle shall, and shall cause the Eagle Subsidiaries to, not
nominate or appoint any new directors or executive officers of Eagle or the
Eagle Subsidiaries, as the case may be.
5.3 Access to Information and Due Diligence.
(a) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, Eagle shall, and shall cause the Eagle
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of Buyer, access, during normal business hours during the
period before the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, Eagle shall, and shall cause
the Eagle Subsidiaries to, make available to Buyer (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws or
federal banking laws, and (ii) all other information concerning its business,
properties and personnel as Buyer may reasonably request. Neither Eagle nor
the Eagle Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would (A) violate or prejudice the
rights of Eagle's customers or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into before the
date of this Agreement, or (B) impair any attorney-client privilege of the
disclosing party. The parties hereto shall make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) Buyer shall hold all information furnished by or on behalf of
Eagle or the Eagle Subsidiaries or their representatives pursuant to Section
5.3(a) in confidence and shall return all documents containing any information
concerning the properties, business and assets of such parties that may have
been obtained in the course of negotiations or examination of the affairs of
Eagle either before or after the execution of this Agreement (other than such
information as shall be in the public domain or otherwise ascertainable from
public sources) and shall destroy any information, analyses or the like derived
from such confidential information. Buyer shall use such information solely
for the purpose of conducting business, legal and financial reviews of the
Eagle and for such other purposes as may be related to this Agreement.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein. Without limitation of the foregoing, each party shall
promptly notify the other party of any information obtained by such party
during the course of any due diligence conducted by such party or its
representatives in accordance with this Section 5.3 which is materially
inconsistent with any representation or warranty made by the other party under
this Agreement; provided, however, that either party's failure to provide such
notice to the other party shall not, in turn, be deemed to constitute a
material breach of such party's obligations under this Agreement.
5.4 Meeting of Shareholders of Eagle. As soon as practicable after the
date of this Agreement, Eagle shall call and convene a meeting of its
shareholders for the purpose of voting upon this Agreement and the transactions
herein contemplated in accordance with Eagle's Certificate of Incorporation,
its bylaws and Delaware Law (the "Shareholders Meeting"). Eagle shall, through
its Board of Directors, consistent with the Board's fiduciary duties, recommend
to its shareholders approval of this Agreement and the Merger. As soon as
practicable after the date of this Agreement, Eagle shall prepare and mail to
the holders of Eagle Common Stock appropriate proxy materials (the "Proxy
Materials"), including a notice of the meeting, the Proxy Statement and a form
of proxy that comply with applicable laws and regulations. Buyer shall furnish
to Eagle all information concerning Buyer and Acquisition Corp. required for
inclusion in the Proxy Materials, and all such information shall be true and
correct in all material respects without omission of any material fact required
to be stated to make the information stated therein not misleading. In the
Proxy Materials, Eagle shall present this Agreement and the transactions
contemplated hereby for approval by the holders of the Eagle Common Stock at
the Shareholders Meeting.
5.5 Regulatory Filings. Buyer, as soon as is reasonably practical, but
in no event later than the 60th day following the date of this Agreement, shall
take all appropriate actions necessary to obtain the regulatory approvals
referred to in Section 6.1(c) hereof, and Eagle will cooperate fully in the
process of obtaining all such approvals. As soon as practicable after the date
of this Agreement, Buyer shall make all appropriate initial filings necessary
to obtain the regulatory approvals referred to in Section 6.1(c) hereof. Buyer
shall provide Eagle with draft copies of all regulatory applications
sufficiently in advance of the proposed filing date to allow Eagle time to
review and comment on such draft copies. In addition, Buyer shall provide
Eagle with copies of all applications filed and all approvals when received.
5.6 Reasonable Efforts. The parties to this Agreement agree to use
their reasonable efforts in good faith to satisfy the various conditions to
Closing and to consummate the Merger as soon as practicable. None of the
parties hereto shall intentionally take or intentionally permit to be taken any
action that would be in breach of the terms or provisions of this Agreement or
that would cause any of the representations and warranties contained herein to
be or to become untrue.
5.7 Business Relations and Publicity. Eagle shall use reasonable
efforts to preserve its reputation and relationship with suppliers, clients,
depositors, customers, employees and others having business relations with it.
No press release or other communication in connection with or relating to this
Agreement or the transactions contemplated hereby (other than communications
with appropriate regulatory authorities) shall be issued or made except as
mutually agreed upon, provided that either party hereto, after consultation
with the other party, may make such disclosures concerning the transactions
provided for herein as the disclosing party believes are required by law.
5.8 No Conduct Inconsistent with this Agreement.
(a) Eagle agrees that it shall not, during the term of this
Agreement, (i) solicit, encourage or authorize any individual, corporation or
other entity to solicit from any third party any inquires or proposals relating
to the disposition of its business or assets, or the acquisition of its capital
stock, or the merger of it or any of the Eagle Subsidiaries with any
corporation or other entity other than as provided by this Agreement except
pursuant to a written direction from a regulatory authority; or (ii) negotiate
with or entertain any proposals from any other person for any such transaction
wherein the business, assets or capital stock of it or the Eagle Subsidiaries
would be acquired, directly or indirectly, by any party other than as provided
by this Agreement, except pursuant to a written direction from any regulatory
authority or upon the receipt of an unsolicited offer from a third party where
the Board of Directors of Eagle reasonably believes, upon the opinion of
counsel, that its fiduciary duties require it to enter into discussions with
such party. Eagle shall promptly notify Buyer of all of the relevant details
relating to all inquiries and proposals that it may receive relating to any
proposed disposition of its business or assets, or the acquisition of its
capital stock, or the merger of it or the Eagle Subsidiaries with any
corporation or other entity other than as provided by this Agreement and shall
keep Buyer informed of the status and details of any such inquiry or proposal.
(b) Nothing contained in Section 5.8(a) hereof shall prohibit
Eagle from disclosing to its shareholders a position contemplated by Rule 14e-
2(a) under the Exchange Act with respect to a tender offer for Eagle's common
stock.
5.9 Board of Directors' Notices, Minutes, Etc. Eagle shall give
reasonable notice to Buyer of all meetings of the Board of Directors and Board
committees of Eagle and the Association, and if known, the agenda for or
business to be discussed at such meeting. Eagle shall transmit to Buyer,
promptly, copies of all notices, minutes, consents and other materials that
Eagle or the Association provides to their directors to the extent permissible
under law, other than materials relating to any proposed acquisition of Eagle
or the Association. Buyer agrees to hold in confidence and trust and to act
in a fiduciary manner with respect to such information.
5.10 Untrue Representations and Warranties. During the term of this
Agreement, if a party hereto becomes aware of any facts or of the occurrence or
impending occurrence of any event that would cause one or more of such party's
representations and warranties contained in this Agreement to be or to become
untrue as of the Closing Date, then such party shall immediately give detailed
written notice thereof to the other party.
5.11 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Buyer shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Eagle or the Eagle Subsidiaries pursuant to any indemnification agreements
between Eagle and its directors and officers existing prior to the date hereof.
Furthermore, for a period of five years following the Effective Time, Buyer
agrees to indemnify and hold harmless those directors and officers of Eagle
entitled to indemnification under, and to the fullest extent permitted by, the
Certificate of Incorporation of Eagle as it existed immediately prior to the
Effective Time and as if the Certificate of Incorporation were still in effect
without amendment during such five year period; provided, however, that all
rights to indemnification in respect of any claim asserted or made within such
period shall continue until the final disposition of such claim.
(b) Notwithstanding Section 5.2 hereof, Eagle may purchase a
policy of directors' and officers' liability insurance, to be effective for a
period not to exceed three years from the Effective Time, covering those
persons who are currently directors and officers of Eagle and who are covered
by Eagle's directors' and officers' liability insurance policy but only to the
extent and on terms comparable to those applicable to Eagle's current policy;
provided, however, that in no event shall Eagle expend in excess of 110% of
the annual premium currently paid by Eagle for such coverage for each such
year of coverage.
5.12 Employee Benefit and Incentive Plans.
(a) At the Effective Time, except as otherwise provided in this
paragraph, each employee of Eagle and the Eagle Subsidiaries shall immediately
become eligible to participate in all employee welfare benefit plans and other
fringe benefit programs offered or maintained by Buyer and its subsidiaries on
the same terms and conditions that Buyer and its subsidiaries may make
available to their officers and employees, including, without limitation, any
health, life, long-term disability, severance, vacation or paid time off
programs ("Buyer's Welfare Plans"). The period of employment and compensation
of each employee of Eagle and the Eagle Subsidiaries before the Effective Time
shall be counted for all purposes under Buyer's Welfare Plans, including,
without limitation, for purposes of service credit, eligibility and vesting.
Any expenses incurred by an employee of Eagle or the Eagle Subsidiaries under
Eagle's or the Association's employee welfare benefit plans (such as
deductibles or co-payments), shall be counted for all purposes under Buyer's
Welfare Plans. Buyer shall waive any pre-existing condition exclusions for
conditions existing on the Closing Date, and actively-at-work requirements for
periods ending on the Closing Date contained in Buyer's Welfare Benefit Plans
as they apply to Eagle's employees and former employees and their dependents.
(b) At the Effective Time, the First Federal Savings and Loan
Association of Bloomington Employee Stock Ownership Plan (the "ESOP") shall be
terminated on such terms and conditions as Eagle shall determine, and the loan
between Eagle and the ESOP shall be repaid in full from the cash consideration
received for unallocated shares of Eagle Common Stock held by the ESOP upon the
conversion pursuant to the Merger of such shares of Eagle Common Stock held by
the ESOP. Any remaining cash consideration received for such unallocated
shares after such repayment shall be allocated to the ESOP accounts of those
employees of Eagle and the Eagle Subsidiaries who are ESOP participants and
beneficiaries (the "ESOP Participants") in accordance with the terms of the
ESOP as amended with respect to such termination and as in effect on the
Effective Time. All ESOP Participants shall fully vest and have a
nonforfeitable interest in their accounts under the ESOP (including allocations
of the consideration received on the unallocated shares) determined as of the
Effective Time. As soon as practicable after the receipt of a favorable
determination letter from the Internal Revenue Service ("IRS") as to the tax
qualified status of the ESOP upon its termination under Section 401(a) and
4975(e) of the Code (the "Final Determination Letter"), distributions of the
benefits under the ESOP shall be made to the ESOP Participants. From and after
the date of this Agreement, in anticipation of such termination and
distribution, Eagle shall cause the Association and its representatives before
the Effective Time, and Buyer and its representatives after the Effective Time,
shall use their best efforts to apply for and to obtain such favorable Final
Determination Letter from the IRS. If the Association and its representatives,
before the Effective Time, and Buyer and its representatives after the
Effective Time, reasonably determine that the ESOP cannot obtain a favorable
Final Determination Letter, or that the amounts held therein cannot be so
applied, allocated or distributed without causing the ESOP to lose its tax
qualified status, Eagle, or the Association at the direction of Eagle, before
the Effective Time and Buyer after the Effective Time, shall take such action
as they may reasonably determine with respect to the distribution of benefits
to the ESOP Participants, provided that the assets of the ESOP shall be held or
paid for the benefit of the ESOP Participants and provided further that in no
event shall any portion of the amounts held in the ESOP revert, directly or
indirectly, to Eagle or any affiliate thereof, or to Buyer or any affiliate
thereof. If Eagle or Association employees otherwise become eligible to
participate in an employee stock ownership plan maintained by Buyer or any
affiliate thereof ("Buyer ESOP"), each Eagle or Eagle Subsidiary employee's
period of employment with Eagle or the Eagle Subsidiaries before the Effective
Time shall be counted for all purposes under Buyer ESOP, including without
limitation, for purposes of eligibility and vesting.
(c) (i) Immediately prior to the Effective Time, Eagle shall
cause the Association's Profit Sharing 401(k) Plan (the "401(k) Plan") to be
terminated, and in connection therewith to fully vest the accounts held by the
401(k) Plan participants on the date of such termination. All 401(k) Plan
participants who are not employed by the Buyer immediately following the
Effective Time shall have the distribution options available to participants
who terminate employment or otherwise separate from service. As soon as
practicable after receipt of a favorable determination letter from the IRS as
to the tax-qualified status of the 401(k) Plan under Section 401(a) and 501(a)
of the Code upon its termination (the "401(k) Determination Letter"), the
remaining account balances held under the 401(k) Plan shall be directly
transferred into the First Busey Corporation Profit Sharing Plan for which
Buyer has received a favorable determination letter from the IRS as to its
tax-qualified status under Sections 401(a) and 501(a) of the Code (the "Buyer
Plan"). Eagle and its representatives prior to the Effective Time and Buyer
and its representatives after the Effective Time shall use their best efforts
to apply and obtain such 401(k) Final Determination Letter from the IRS. In
the event that Eagle and its representatives prior to the Effective Time and
Buyer and its representatives after the Effective Time reasonably determine
that the 401(k) Plan cannot obtain a favorable 401(k) Final Determination
Letter, or that the amounts held therein cannot be transferred to the Buyer
Plan without causing the 401(k) Plan to lose its tax-qualified status, Eagle
and its representatives prior to the Effective Time and Buyer after the
Effective Time shall take such actions as they may reasonably determine, with
respect to the distribution of benefits to the 401(k) Plan participants,
provided that the assets of the 401(k) Plan shall be held or paid only for the
benefit of such 401(k) Plan participants; and provided further that in no event
shall any portion of the amounts held in the 401(k) Plan revert, directly or
indirectly, to Eagle or any affiliate thereof, or to Buyer or any affiliate
thereof.
(ii) If employees of Eagle or any Eagle Subsidiary become
eligible to participate in the Buyer Plan: (A) all such employees who are or
were 401(k) Plan participants shall become participants in the Buyer Plan on
the date the Buyer Plan is made available; and (B) each such employee's period
of employment with Eagle or the Eagle Subsidiary before the Closing Date shall
be counted for all purposes under the Buyer Plan, including, without
limitation, for purposes of eligibility and vesting.
(d) Treatment of Plan Share Awards under the Eagle MRP. All
shares of Eagle Common Stock subject to plan share awards under the Eagle MRP
that have vested as of the Effective Time shall be treated as issued and
outstanding shares of Eagle Common Stock for purposes of Section 1.4. Prior to
the Effective Time and in recognition that the Buyer has expressly agreed not
to assume the Eagle MRP, the Board of Directors of Eagle shall terminate the
Eagle MRP, shall direct the trustees of the Eagle MRP to return to Eagle or the
Association all shares of Eagle Common Stock subject to plan share awards but
not yet earned by a recipient thereof to whom they were allocated and any
shares of Eagle Common Stock subject to plan share awards that have not been
allocated, all of which shares shall be canceled pursuant to Section
1.4(b)(iii) at the Effective Time.
(e) Treatment of Stock Options under the Eagle Option Plan. Prior
to the Effective Time and in recognition that the Buyer has expressly agreed
not to assume the Eagle Option Plan, the Board of Directors of Eagle shall
terminate the Eagle Option Plan and cancel any and all outstanding stock
options that have not vested in the recipient as of the Effective Time.
5.13 Employment and Employment Security Agreements. Buyer agrees to
honor the provisions of the present employment and employment security
agreements between each of Donald L. Fernandes, David R. Wampler, Donald L.
Lambert, James E. Lyons, Larry C. McClellan and Gary L. Richardson on one hand
and Eagle and/or the Association on the other hand, including those that relate
to a termination of employment following a change-in-control of Eagle.
5.14 Severance Program. Buyer Agrees to honor the Severance Program of
Eagle, as amended and restated as of the date hereof, a copy of which has been
previously provided to Buyer.
5.15 COBRA. Until the Effective Time, Eagle shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of the Code
and Section 601 through 609 of ERISA ("COBRA") with respect to each qualified
beneficiary (as defined in COBRA) of Eagle who incurs a qualifying event (as
defined in COBRA) before the Effective Time. Buyer shall be liable for (i) all
obligations for continued health coverage under COBRA with respect to each
Eagle qualified beneficiary (as defined in COBRA) who incurs a qualifying event
(as defined in COBRA) from and after the Effective Time, and (ii) for continued
health coverage under COBRA from and after the Effective Time for each Eagle
qualified beneficiary who incurs a qualifying event before the Effective Time.
5.16 Pension Plan. The Pension Plan has been terminated effective March
31, 1998 and appropriate filings have been made with respect to such
termination with the Pension Benefit Guaranty Corporation ("PBGC") and the IRS.
The appropriate noncompliance period under Section 4041(b)(3)(C) of ERISA has
expired without receipt of a notice of noncompliance from the PBGC with respect
to the termination of the Pension Plan. An application has been filed with the
IRS for a final determination letter ("Pension Plan Final Determination
Letter") with respect to the termination of the Pension Plan. From and after
the date of this Agreement, Buyer, Eagle and their respective representatives
before the Effective Time, and Buyer and its representatives after the
Effective Time, shall use their best efforts to obtain such Pension Plan Final
Determination Letter from the IRS. If such Pension Plan Final Determination
Letter is received from the IRS before the Effective Time, Buyer, Eagle and
their respective representatives shall use their best efforts to complete full
and final distribution of the assets of the Pension Plan to participants
thereunder. If either such Pension Plan Final Determination Letter is not
obtained before the Effective Time, or if the assets of the Pension Plan are
not fully and finally distributed to participants before the Effective Time,
Buyer and its representatives shall use their best efforts to obtain such
Pension Plan Final Determination Letter from the IRS, and/or to complete such
distribution of the assets of the Pension Plan, as soon as practicable after
the Effective Time. All participants in the Pension Plan as of the Effective
Time shall be fully vested in their accrued benefits thereunder and all assets
of the Pension Plan shall be applied only to provide benefits to participants
in the Pension Plan as of the Effective Time. In no event shall any portion of
the assets of the Pension Plan revert directly or indirectly to Eagle or any
affiliate thereof, or to Buyer or any affiliate thereof.
5.17 Certain Consents. In the event of a request by Eagle for written
consent from Buyer for purposes of Sections 5.2 and 6.1 hereof, Buyer shall use
reasonable efforts to respond to such request promptly; Eagle shall be entitled
to rely, for purposes of any of such sections, on a verbal consent given on
behalf of Buyer by Douglas C. Mills, its Chairman of the Board and Chief
Executive Officer, or Barbara J. Kuhl, its Executive Vice President.
5.18 Title to Real Property.
(a) Within 45 days after the date hereof, Eagle, at its expense,
will furnish to Buyer the following documents with respect to the real property
owned by Eagle located at (i) 301 Fairway Drive, Bloomington, Illinois, (ii)
1111 South Veterans Parkway, Bloomington, Illinois and (iii) 207 South East
Street, LeRoy, Illinois (the "Owned Real Property"):
(i) An ALTA owner's title insurance commitment, in the
minimum amount of $10,000 with respect to each parcel of Owned Real Property,
and showing Eagle or the Eagle Subsidiaries as the owner of such Owned Real
Property, subject only to Permitted Exceptions; and
(ii) An ALTA Class A survey, including Table 3 requirements
1-12, of each parcel of Owned Real Property, certified to the title insurance
company issuing the title insurance commitment with respect to such parcel
referred to in clause (i) directly above, Eagle and Buyer, and disclosing no
survey matters affecting such parcel other than Permitted Exceptions.
(b) Buyer shall have ten days after the delivery of the title
commitments and surveys to examine the title commitments and surveys and notify
Eagle in writing of any defects noted therein that are not Permitted Exceptions
("Title Defects"). If Buyer fails to notify Eagle of any Title Defects, title
to the Owned Real Property shall be deemed accepted. If Buyer timely notifies
Eagle of any Title Defects within such ten day period, Eagle shall have five
days after receipt of Buyer's notification to advise Buyer that: (i) Eagle
will remove any Title Defects on or before the Closing Date; or (ii) Eagle will
not cause the Title Defects to be removed. If Eagle advises Buyer that it will
not cause the exceptions to be removed, Buyer will have five days after Eagle's
notification to elect, as its sole remedy, to: (i) proceed with the
transaction and accept such Title Defects; or (ii) terminate this Agreement by
written notice to Eagle. If Buyer does not give Eagle notice of its election
within such period, Buyer will be deemed to have elected to proceed with this
transaction.
5.19 Environmental Surveys. Within 45 days after the date hereof, Eagle,
at its expense, will furnish to Buyer, with respect to each parcel of Owned
Real Property, a written environmental audit prepared by an engineering firm or
other qualified expert satisfactory to Buyer, and prepared in accordance with
the ASTM standard for Phase I environmental site assessments exclusive of the
title search (as such search is being done independent of the environmental
audit), and designed to meet the requirements of any applicable state law
relating to an innocent owner defense to liability for releases of Hazardous
Substances (the "Phase I Audits"). Buyer may request with ten days following
receipt of any Phase I Audit that recommends additional investigation, that
such recommendations be performed ("Phase II Work"). Costs associated with
Phase II Work shall be paid by Eagle up to $15,000 and thereafter paid by
Buyer. Within ten days of receiving the results of any Phase II Work that
confirms the presence of a significant environmental concern that may
reasonably have a Material Adverse Effect on Eagle, Buyer and Eagle will agree
to negotiate a mutually agreeable resolution. If a mutually agreeable
resolution cannot be reached after ten days, Eagle and Buyer shall have the
right to terminate this Agreement by providing written notice of the same.
5.20 List of Eagle Stockholders. At the Effective Time, Eagle shall
deliver to Buyer a list of holders of record of the outstanding Eagle Common
Stock as of the most recent reasonably practicable date, and the accuracy of
such list shall be certified by an authorized officer of Eagle.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of Buyer and Acquisition Corp.
Unless the conditions are waived by Buyer or Acquisition Corp., all obligations
of Buyer and Acquisition Corp. under this Agreement are subject to the
fulfillment, before or at the Closing, of each of the following conditions:
(a) Representations and Warranties; Performance of Agreements.
The representations and warranties of Eagle contained in Article III of this
Agreement, or in any documents, certificates, schedules or exhibits delivered
by, or on behalf, of Eagle to Buyer pursuant to this Agreement shall be true
and correct as of this date and shall be true and correct as of the Closing
Date as though made on and as of the Closing Date, except where the failure of
such representations and warranties to be so true and correct would not have,
individually or in the aggregate, a Material Adverse Effect on Eagle. Eagle
shall have performed all agreements herein required to be performed by it on or
before the Closing Date.
(b) Closing Certificate. Buyer shall have received a certificate
signed by the Chief Executive Officer of Eagle, dated as of the Closing Date,
certifying in such detail as Buyer may reasonably request, as to the
fulfillment of the conditions to the obligations of Buyer as set forth in this
Agreement and required to be fulfilled by Eagle on or before the Closing Date.
(c) Regulatory and Other Approvals. Buyer shall have obtained the
approval of all appropriate regulatory entities (including, without limitation,
the approval of the FRB) of the transactions contemplated by this Agreement,
all required regulatory waiting periods shall have expired, and there shall
have been no motion for rehearing or appeal from such approval or commencement
of any suit or action seeking to enjoin the transaction provided for herein or
to obtain substantial damages in respect of them.
(d) Approval of Merger and Delivery of this Agreement. This
Agreement and the transactions contemplated herein shall have been approved by
the Board of Directors and the shareholders of Eagle in accordance with
applicable law and the Certificate of Incorporation and Bylaws of Eagle, and
the proper officers of Eagle shall have executed and delivered to Buyer copies
of this Agreement and the Certificate of Merger, in form suitable for filing
with the Delaware Secretary of State, and shall have executed and delivered all
such other certificates, statements or other instruments as may be necessary or
appropriate to effect such filings.
(e) No Litigation with Respect to Transactions. No suit or other
legal proceeding shall have been instituted or threatened seeking to enjoin the
consummation of the transactions contemplated hereby, which reasonably could be
expected to result in the issuance of a court order enjoining such transactions;
(f) Deferred Compensation Agreement. The Association shall have
terminated all of its obligations under the Deferred Compensation Agreement
entered into between Donald L. Fernandes and the Association dated December 15,
1986, as amended on September 22, 1992 (the "Compensation Agreement");
provided, however, that neither Eagle nor the Association shall prepay any
future payment required under the Compensation Agreement. Donald L. Fernandes
shall receive ownership, effective as of the termination of the Compensation
Agreement, of the Massachusetts Mutual Policy, number 7-238-768, pursuant to
Section 3(c) of the Compensation Agreement.
(g) Opinion of Counsel. Buyer shall have received an opinion of
Schiff Hardin & Waite, counsel for Eagle, dated as of the Closing Date, and in
form and substance satisfactory to Buyer and its counsel as follows:
(i) Eagle is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted as described in Eagle's 1998 Form
10-K. Eagle is duly authorized to transact business under the laws of the
State of Delaware and each state in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify would not have a Material Adverse
Effect. Eagle is a registered savings and loan holding company under the Home
Owners' Loan Act.
(ii) The Association is validly existing as a savings
association under the laws of the United States of America and has full
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted as described in Eagle's 1998 Form
10-K. The Association is duly authorized to transact business under the laws
of each state in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary, except where the failure
to so qualify would not have a Material Adverse Effect.
(iii) To the best of our knowledge, there are no actions,
suits or proceedings pending or threatened against Eagle or the Eagle
Subsidiaries at law or in equity, before any federal, state, foreign, local or
other governmental department, court, commission, board, bureau, agency or
instrumentality which, in our opinion, based upon such knowledge, if the relief
sought in the pleadings in such actions, suits, and proceedings were granted or
if the threatened claims were accrued in full, are likely to have a Material
Adverse Effect on Eagle.
(iv) The execution and delivery of the Agreement, compliance
with the provisions thereof, and consummation of the transactions contemplated
therein (a) shall not constitute a violation by Eagle or the Eagle Subsidiaries
of any provision of law or (b) do not conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute a default under,
Eagle's or the Eagle Subsidiaries' corporate charter or bylaws.
(v) Eagle has full corporate power and authority to enter
into and perform the Agreement. The Agreement has been duly authorized,
executed and delivered by Eagle and is a legal and binding obligation of Eagle
enforceable against Eagle in accordance with its terms.
(vi) No consent of any party or Governmental Entity is
required for the execution, delivery and performance by Eagle of the Agreement
and the transactions contemplated thereby that have not been received or
obtained as of the date hereof, except where the failure to obtain such consent
will not have or be reasonably likely to have a Material Adverse Effect on
Eagle.
(vii) There are 5,000,000 authorized shares of Common Stock,
$.01 par value, of Eagle and 100,000 authorized shares of Preferred Stock, $.01
par value, of Eagle. Eagle has no other authorized or outstanding stock of any
class, series, designation or description. The issuance and the sale of the
1,302,705 shares of Eagle Common Stock on June 29, 1996 in connection with the
mutual-to-stock conversion of the Association and the simultaneous formation of
Eagle as the savings and loan holding company for the Association were duly and
validly authorized by all necessary corporate action on the part of Eagle and
were validly issued, fully paid and nonassessable.
In rendering its opinion, such counsel may rely as to matters of
fact upon such certificates of the officers of Eagle or the Association or
governmental officials as such counsel deems appropriate.
(h) No Adverse Changes. Between the date of this Agreement and
the Closing Date, the business of Eagle and the Association, taken as a whole,
shall have been conducted in the ordinary course consistent in all respects
with prudent banking practices, and there shall not have occurred any material
adverse change or any condition, event, circumstance, fact or occurrence (other
than general economic or competitive conditions) that may reasonably be
expected to result in a material adverse change in the business, properties,
financial condition, loan portfolio, operations or prospects of Eagle or the
Association, taken as a whole.
(i) Consents. Eagle and the Association shall have obtained all
such written consents, permissions and approvals as required under any
agreements, contracts, appointments, indentures, plans, trusts or other
arrangements with third parties required to effect the transactions
contemplated by this Agreement.
(j) Other Documents. Buyer shall have received at the Closing all
such other documents, certificates or instruments as it may have reasonably
requested evidencing compliance by Eagle with the terms of this Agreement.
6.2 Conditions Precedent to Obligations of Eagle. Unless the conditions
are waived by Eagle, all obligations of Eagle under this Agreement are subject
to the fulfillment, before or at the Closing, of each of the following
conditions:
(a) Representations and Warranties; Performance of Agreements.
The representations and warranties of Buyer and Acquisition Corp. contained in
Article IV of this Agreement, or in any documents, certificates or exhibits
delivered by them, or on their behalf to Eagle pursuant to this Agreement shall
be true and correct as of this date and shall be true and correct as of the
Closing Date as though made on and as of the Closing Date, except where the
failure of such representations and warranties to be so true and correct would
not have, individually or in the aggregate, a Material Adverse Effect on
Buyer. Buyer and Acquisition Corp. shall have performed all agreements herein
required to be performed by them on or before the Closing Date.
(b) Closing Certificate. Eagle shall have received a certificate
signed by the Chairman of the Board and Chief Executive Officer of Buyer, dated
as of the Closing Date, certifying in such detail as Eagle may reasonably
request, as to the fulfillment of the conditions to the obligations of Eagle as
set forth in this Agreement and required to be fulfilled by Buyer or
Acquisition Corp. on or before the Closing.
(c) Regulatory and Other Approvals. Buyer shall have obtained the
approval of all appropriate regulatory entities (including, without limitation,
the approval of the FRB) of the transactions contemplated by this Agreement;
all required regulatory waiting periods shall have expired, and there shall
have been no motion for rehearing or appeal from such approval or commencement
of any suit or action seeking to enjoin the transaction provided for herein or
to obtain substantial damages in respect of them.
(d) Approval of Merger and Delivery of this Agreement. This
Agreement and the transactions contemplated herein shall have been approved by
the Board of Directors of Buyer and Acquisition Corp., and Buyer, as the sole
shareholder of Acquisition Corp., in accordance with applicable law and the
Certificate of Incorporation and Bylaws of Acquisition Corp., and the proper
officers of Buyer and Acquisition Corp. shall have executed and delivered to
Eagle copies of this Agreement and the Certificate of Merger, in form suitable
for filing with the Delaware Secretary of State, and shall have executed and
delivered all such other certificates, statements or other instruments as may
be necessary or appropriate to effect such filings.
(e) No Litigation with Respect to Transactions. No suit or other
legal proceeding shall have been instituted or threatened seeking to enjoin the
consummation of the transactions contemplated hereby, which reasonably could be
expected to result in the issuance of a court order enjoining such transactions.
(f) Opinion of Counsel. Buyer shall have received an opinion of
Chapman and Cutler, counsel for Buyer, dated as of the Closing Date, and in
form and substance satisfactory to Eagle and its counsel as follows.
(i) Buyer is a corporation validly existing and in good
standing under the laws of the State of Nevada and has the corporate power to
own all of its properties and assets and to carry on its business as it is now
being conducted. Acquisition Corp. is a corporation duly organized and validly
existing under the laws of the State of Delaware and has the corporate power to
own all of its properties and assets and to carry on its business as it is now
being conducted. Buyer is a registered bank holding company under the BHCA.
(ii) Buyer and Acquisition Corp. have full corporate power
and authority to execute and deliver the Agreement and to consummate the
transactions contemplated hereby. The execution and delivery and performance
of the Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Buyer and
Acquisition Corp., and, in the case of the Agreement, by Buyer as the sole
shareholder of Acquisition Corp., these being the only corporate authorizations
required under the Certificate of Incorporation and Bylaws of Buyer and
Acquisition Corp. and Delaware Law. The Agreement has been duly and validly
executed and delivered by Buyer and Acquisition Corp. and constitute the valid
and binding obligation of Buyer and Acquisition Corp. enforceable against Buyer
and Acquisition Corp. in accordance with its terms.
(iii) the execution, delivery and performance by Buyer and
Acquisition Corp. of the Agreement do not violate the Certificate of
Incorporation or Bylaws of Buyer or Acquisition Corp.
(iv) no consents or approvals of, or filings or registrations
with, any Governmental Entity are necessary in connection with the execution
and delivery by Buyer or Acquisition Corp. of the Agreement and the
consummation by Buyer and Acquisition Corp. of the Merger and the other
transactions contemplated hereby, that have not been received or obtained as of
the date hereof, except where the failure to obtain such consent or approval or
to make such filing or registration will not have or be reasonably likely to
have a Material Adverse Effect on Buyer or Eagle.
(v) no consent, approval, authorization, order, registration
or qualification of or with any court or Governmental Entity are necessary for
the consummation by Buyer or Acquisition Corp. of the transactions contemplated
by this Agreement, except such as have been obtained.
In rendering its opinion, such counsel may rely as to matters of
fact upon such certificates of the officers of Buyer or governmental officials
as such counsel deems appropriate.
(g) Fairness Opinion. Eagle shall have received from Trident, a
fairness opinion dated as of the date of the Proxy Statement and in form and
substance reasonably satisfactory to Eagle, to the effect that the
consideration to be received in the Merger by the shareholders of Eagle is
fair, from a financial point of view, to the shareholders of Eagle.
(h) Other Documents. Eagle shall have received at the Closing all
such other documents, certificates or instruments as it may have reasonably
requested evidencing compliance by Buyer and Acquisition Corp. with the terms
of this Agreement.
ARTICLE VII
TERMINATION, EXPENSES AND AMENDMENT
7.1 Termination. This Agreement may be terminated before the Effective
Time:
(a) at any time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of Eagle, by
written agreement between Buyer and Eagle, if the Board of Directors of each so
determines;
(b) at any time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of Eagle, by either
the Board of Directors of Eagle or the Board of Directors of Buyer and
Acquisition Corp. if (i) any Governmental Entity that must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable or (ii) any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of Eagle or the Board of
Directors of Buyer and Acquisition Corp. if the Merger shall not have been
consummated on or before February 29, 2000, unless the failure of the Closing
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(d) by Buyer or Eagle if any approval of the shareholders of Eagle
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment or postponement thereof;
(e) by Eagle, upon two (2) days' prior notice to Buyer, if, as a
result of an unsolicited tender offer by a party other than Buyer or its
affiliates or any written offer or proposal with respect to a merger, share
exchange, sale of a material portion of its assets or other business
combination (each, a "Business Combination Proposal") by a party other than
Buyer or its affiliates, the Board of Directors of Eagle determines in good
faith that its fiduciary obligations under applicable law require that such
Business Combination Proposal be accepted; provided, however, that:
(i) the Board of Directors of Eagle shall have been advised
in an opinion of outside counsel that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in the
proper exercise of its applicable fiduciary duties, and notwithstanding all
concessions that may be offered by Buyer in negotiations entered into pursuant
to clause (ii) below, such fiduciary duties would require the directors to
reconsider such commitment as a result of such tender offer or other written
offer or proposal; and
(ii) before delivering the two (2) days' prior notice to
Buyer to effect a termination under this paragraph (e), Eagle shall, and shall
cause its financial and legal advisors to, negotiate with Buyer for three (3)
calendar days to make such adjustments in the terms and conditions of this
Agreement as would enable Eagle to proceed with the transactions contemplated
herein on such adjusted terms;
(f) by Eagle, by written notice to Buyer, if:
(i) there exists any material breach or breaches of the
representations and warranties of Buyer made herein, and such breaches shall
not have been remedied within thirty (30) days after receipt by Buyer of notice
in writing from Eagle, specifying the nature of such breaches and requesting
that they be remedied; or
(ii) Buyer shall have failed to perform and comply with, in
all material respects, its agreements and covenants hereunder and such failure
to perform or comply shall not have been remedied within thirty (30) days after
receipt by Buyer of notice in writing from Eagle, specifying the nature of such
failure and requesting that it be remedied; or
(g) by Buyer, by written notice to Eagle, if:
(i) there exists any material breach or breaches of the
representations and warranties of Eagle made herein, and such breaches shall
not have been remedied within thirty (30) days after receipt by Eagle of notice
in writing from Buyer, specifying the nature of such breaches and requesting
that they be remedied; or
(ii) Eagle shall have failed to perform and comply with, in
all material respects, its agreements and covenants hereunder and such failure
to perform or comply shall not have been remedied within thirty (30) days after
receipt by Eagle of notice in writing from Buyer, specifying the nature of such
failure and requesting that it be remedied; or
(iii) the Board of Directors of Eagle or any committee
thereof:
(A) shall withdraw or modify in any manner adverse to Buyer
its approval or recommendation of this Agreement or the Merger,
(B) shall fail to reaffirm such approval or recommendation
upon Buyer's request,
(C) shall approve or recommend any Business Combination
Proposal involving Eagle other than the Merger involving Eagle, in each case,
by or involving a party other than Buyer or any of its affiliates or
(D) shall resolve to take any of the actions specified in
clause (A), (B) or (C).
7.2 Effect of Termination. Subject to Section 7.3, in the event of
termination of this Agreement by Eagle or Buyer pursuant to Section 7.1 there
shall be no liability on the part of either Eagle or Buyer or their respective
officers or directors hereunder, except that Section 5.3(b), Section 5.18,
Section 7.2 and Section 7.3 shall survive the termination.
7.3 Termination Fee; Expenses.
(a) Termination Fee. If this Agreement is terminated at such time
that this Agreement is terminable pursuant to one (but not both) of (A) Section
7.1(f)(i) or (ii), or (B) Section 7.1(g)(i) or (ii), then the breaching party
shall promptly (but no later than three (3) business days after receipt of
notice from the non-breaching party) pay to the non-breaching party in cash an
amount equal to all documented out-of-pocket expenses and fees incurred by the
non-breaching party (including, without limitation, fees and expenses payable
to all legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Merger or the
transactions contemplated by this Agreement) not in excess of $250,000;
provided, however, that, if this Agreement is terminated by a party as a result
of a willful breach by the other party, the non-breaching party may pursue any
remedies available to it at law or in equity and shall, in addition to its
documented out-of-pocket expenses and fees (which shall be paid as specified
above and shall not be limited to $250,000), be entitled to recover such
additional amounts as such non-breaching party may be entitled to receive at
law or in equity.
(b) Alternative Termination Fee. If this Agreement is terminated
at such time that this Agreement is terminable pursuant to Section 7.1(e), then
Eagle shall pay to Buyer, in immediately available funds at the time of the
termination of this Agreement, $750,000.
(c) Expenses. The parties agree that the agreements contained in
this Section 7.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If one party
fails to promptly pay to any other party any fee due hereunder, the defaulting
party shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate as published in the Wall Street
Journal (Midwest Edition) from the date such fee was required to be paid.
7.4 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Merger by the shareholders of
Eagle; provided, however, that after any approval of the transactions
contemplated by this Agreement by the shareholders of Eagle, there may not be,
without further approval of such shareholders, any amendment of this Agreement
that changes the amount or the form of the consideration to be delivered to the
holders of Eagle Common Stock hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time before the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions contained herein; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the shareholders of Eagle, there may not be, without further
approval of such shareholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of Eagle Common Stock hereunder
other than as contemplated by this Agreement. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE VIII
GENERAL PROVISION
8.1 Non-survival 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, which shall terminate
in accordance with its terms) shall survive the Effective Time, except for
those covenants and agreements contained herein which by their terms apply in
whole or in part after the Effective Time. Without by implication limiting the
foregoing, none of the directors or officers of the parties hereto shall have
any liability for any of the representations, warranties, covenants and
agreements contained herein.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Buyer addressed to:
First Busey Corporation
102 E. Main, Suite 102
Urbana, Illinois 61801
Attention: Douglas C. Mills, Chairman of the Board and
Chief Executive Officer
Telephone: (217) 365-4512
Facsimile: (217) 365-4592
with a copy to:
Mark J. Kneedy, Esq.
Chapman and Cutler
111 West Monroe
Chicago, Illinois 60603
Telephone: (312) 845-3000
Facsimile: (312) 701-2361
If to Eagle, addressed to:
Eagle BancGroup, Inc.
301 Fairway Drive
Bloomington, Illinois 61701
Attention: Donald L. Fernandes, President and Chief Executive
Officer
Telephone: (309) 663-6345
Facsimile: (309) 663-8763
with a copy to:
Christopher J. Zinski, Esq.
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Telephone: (312) 258-5548
Facsimile: (312 ) 258-5600
8.3 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a section of or
exhibit or schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require
Eagle, the Eagle Subsidiaries, Buyer or Buyer Subsidiaries or affiliates to
take any action that would violate any applicable law, rule or regulation.
8.4 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
8.5 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter hereof.
8.6 Governing Law. This Agreement and the exhibits attached hereto
shall be governed and construed in accordance with the laws of the State of
Illinois, without regard to any applicable conflicts of law.
8.7 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If, however, any
provision of this Agreement is declared invalid or unenforceable by a court of
competent jurisdiction, then the parties hereto shall in good faith amend this
Agreement to include an alternative provision that accomplishes a similar
result.
8.8 Publicity. Except as otherwise required by applicable law or the
rules of The Nasdaq Stock Market or any other applicable securities exchange,
neither Eagle nor Buyer shall, nor shall Eagle or Buyer permit the Eagle
Subsidiaries or any subsidiary of Buyer, respectively, to issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
8.9 Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations of the parties under this Agreement
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in this Section 8.9 and
in Section 5.11, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Buyer, Acquisition Corp. and Eagle have executed this
Agreement as of the day and year hereinabove first written.
FIRST BUSEY CORPORATION
By: /s/ Douglas C. Mills
Name: Douglas C. Mills
Title: Chairman of the Board and
Chief Executive Officer
FBC ACQUISITION CORP.
By: /s/ Douglas C. Mills
Name: Douglas C. Mills
Title: President
EAGLE BANCGROUP, INC.
By: /s/ Donald L. Fernandes
Name: Donald L. Fernandes
Title: President and Chief Executive
Officer
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