<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
HOMESIDE, INC.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: Common Stock
and Class C Non-Voting Common Stock
2) Aggregate number of securities to which transaction applies: 43,472,568
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
The filing fee is calculated on the sum of (i) 43,472,568 shares of Common Stock
(all classes) multiplied by $27.825 (per unit price), plus (ii) $18,005,350
(being the amount to be paid with respect to outstanding options)
4) Proposed maximum aggregate value of transaction: $1,227,629,555
5) Total fee paid: $245,526
[x] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
homeside logo HOMESIDE, INC.
7301 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
December 15, 1997
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of the Stockholders of HomeSide, Inc. (the "Company") to be held
at 10 a.m. (EST), on January 16, 1998, at the offices of the Company, 7301
Baymeadows Way, Jacksonville, Florida 32256.
At the Special Meeting, the Company's stockholders will be asked to adopt
an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which a
newly formed wholly-owned subsidiary of National Australia Bank Limited ("NAB")
is to be merged with and into the Company (the "Merger"). If the Merger is
consummated, the Company will become a direct or indirect wholly-owned
subsidiary of NAB, and each of the Company's stockholders will be entitled to
receive $27.825 in cash, without interest, for each share of the Company's
capital stock owned by such stockholder.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER, ON THE
TERMS AND CONDITIONS DESCRIBED IN THE ATTACHED PROXY STATEMENT, IS IN THE BEST
INTERESTS OF STOCKHOLDERS AND THEREFORE RECOMMENDS THAT YOU VOTE FOR THE
ADOPTION OF THE MERGER AGREEMENT.
Details concerning the proposed Merger and other important information
appear in the accompanying Proxy Statement which you are urged to read
carefully.
Pursuant to Delaware law, the Merger Agreement must be adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company. As indicated in attached Proxy Statement, the
holders of approximately 76% of the outstanding shares of Common Stock of the
Company have agreed to vote the shares owned by them for adoption of the Merger
Agreement.
Whether or not you plan to attend the Special Meeting, please sign, date
and mail your Proxy in the enclosed postage-paid envelope. If you attend the
Special Meeting, you may revoke the Proxy and vote in person. Proxies may also
be revoked by submitting a proxy having a later date or by giving written notice
of revocation to the Secretary of the Company at any time before the proxy is
exercised.
Very truly yours,
/s/ Joe K. Pickett
Joe K. Pickett
Chairman and Chief Executive Officer
<PAGE> 3
homeside logo HOMESIDE, INC.
7301 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 16, 1998
------------------------
To the Stockholders of HomeSide, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of HomeSide,
Inc. (the "Company"), a Delaware corporation, will be held at the offices of the
Company, 7301 Baymeadows Way, Jacksonville, Florida 32256, at 10 a.m. (EST) on
January 16, 1998, for the following purposes:
1. To adopt the Agreement and Plan of Merger (the "Merger Agreement")
dated as of October 25, 1997, by and between National Australia Bank
Limited ("NAB") and the Company, which Merger Agreement provides for the
merger of a Delaware corporation to be formed as a direct or indirect
wholly-owned subsidiary of NAB (the "Merger Subsidiary") with and into the
Company (the "Merger") pursuant to which each outstanding share of capital
stock of the Company will be converted into the right to receive $27.825 in
cash, without interest.
2. To transact any other business that may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on December 5, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting and at any adjournments or postponements
thereof. For ten days prior to the Special Meeting a list which sets forth
stockholders entitled to notice of and to vote at the Special Meeting shall be
open to the examination of any Company stockholder, for any purpose germane to
the Special Meeting, at the executive offices of the Company, 7301 Baymeadows
Way, Jacksonville, Florida 32256, during the Company's ordinary business hours.
If the Merger is consummated, stockholders of the Company who did not vote
in favor of adoption of the Merger Agreement and who otherwise comply with the
requirements of Section 262 of the Delaware General Corporation Law will have
certain appraisal rights under Delaware law. See "Description of Appraisal
Rights" in the accompanying Proxy Statement for a summary of the procedures
required to be followed to perfect appraisal rights.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. STOCKHOLDERS WHO
ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON. PROXIES
MAY ALSO BE REVOKED BY SUBMITTING A PROXY HAVING A LATER DATE OR BY GIVING
WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY AT ANY TIME BEFORE
THE PROXY IS EXERCISED.
By Order of the Board of Directors,
/s/ Robert J. Jacobs
Robert J. Jacobs
Secretary
Jacksonville, Florida
December 15, 1997
<PAGE> 4
homeside logo HOMESIDE, INC.
7301 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
PROXY STATEMENT
SPECIAL MEETING OF THE STOCKHOLDERS TO BE HELD ON JANUARY 16, 1998
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HomeSide, Inc. (the "Company" or
"HomeSide") for use at the Special Meeting of Stockholders of the Company to be
held on January 16, 1998, at the time and place set forth in the Notice of
Meeting, and at any adjournments or postponements thereof. The approximate date
on which this Proxy Statement and form of proxy are first being sent to
stockholders is December 15, 1997.
On October 25, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with National Australia Bank Limited ("NAB"),
which provides that a corporation to be formed as a direct or indirect
wholly-owned subsidiary of NAB (the "Merger Subsidiary") will be merged with and
into the Company (the "Merger"), with the Company continuing as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation"). At
the Special Meeting, Company stockholders will be asked to vote on the Merger.
Upon consummation of the Merger, all of the outstanding shares of Common Stock
(the "Common Stock") and Class C Non-Voting Common Stock (the "Class C Common
Stock") of the Company (other than shares as to which statutory appraisal rights
have been perfected) will be converted into the right to receive $27.825 per
share in cash, without interest (the "Merger Consideration"). The proposed
transaction is described in detail in this Proxy Statement, and the Merger
Agreement appears as Exhibit A hereto.
The Board of Directors of the Company has fixed the close of business on
December 5, 1997, as the record date for determination of stockholders entitled
to notice of and to vote at the Special Meeting. On that date the Company had
outstanding and entitled to vote 43,375,430 shares of Common Stock. Each
outstanding share entitles the record holder to one vote. The affirmative vote
of the holders of a majority of the shares of the Company's Common Stock
outstanding and entitled to vote on the record date for the Special Meeting is
required to adopt the Merger Agreement. The holders of approximately 76% of the
outstanding shares of Common Stock of the Company have agreed to vote the shares
owned by them for adoption of the Merger Agreement.
If the enclosed proxy is properly executed and returned, it will be voted
in the manner directed by the stockholder. If no instructions are specified,
proxies will be voted in favor of the adoption of the Merger Agreement. Proxies
may be revoked by the stockholder at any time prior to the voting thereof by
written notice of revocation given to the Secretary of the Company or by
submitting a proxy having a later date.
The cost of this solicitation will be borne by the Company. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telegraph and in
person, and may arrange for brokerage houses and their custodians, nominees and
fiduciaries to send proxies and proxy material to their principals at the
expense of the Company.
If the Merger is consummated, stockholders of the Company who did not vote
in favor of adoption of the Merger Agreement and who otherwise comply with the
requirements of Section 262 of the Delaware General Corporation Law will have
certain appraisal rights under Delaware law. See "Description of Statutory
Appraisal Rights" for a summary of the procedures required to be followed to
perfect statutory appraisal rights.
<PAGE> 5
The Company's principal executive offices are located at 7301 Baymeadows
Way, Jacksonville, Florida 32256. NAB is a commercial bank under Australian law,
a foreign bank within the meaning of the International Banking Act of 1978, as
amended, and a bank holding company registered as such with the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended whose principal
executive offices are located at 500 Bourke Street, Melbourne, Australia,
telephone number 011-613-9641-4927. The Merger Subsidiary will be formed as a
wholly-owned direct or indirect subsidiary of NAB.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Copies of such reports, proxy statements and
other information may be inspected and copied at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549; and at the public reference facilities of the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and Suite 1300, 7 World Trade Center, New York,
New York 10048. Copies of such material may be obtained, at prescribed rates,
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, material filed by the Company can be
inspected at the offices of the New York Stock Exchange, 25 Broad Street, New
York, New York, 10005, on which the Company's Common Stock is listed. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such site is http://www.sec.gov.
Statements contained herein or in any document incorporated herein by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and all such statements should
be read together with the copy of such contract or document either filed as an
exhibit to this Proxy Statement or incorporated herein by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission under the Exchange Act by
the Company are hereby incorporated by reference into this Proxy Statement: (a)
the Company's Annual Report on Form 10-K for the year ended February 28, 1997,
including the information incorporated by reference therein from the Company's
1997 Annual Report to Stockholders; (b) the Company's Quarterly Reports on Form
10-Q for the quarters ended May 31, 1997 and August 31, 1997; and (c) the
Company's Current Report on Form 8-K filed on October 31, 1997.
The information relating to the Company contained in this Proxy Statement
should be read together with the information in the documents incorporated by
reference.
All documents filed by the Company under Section 13(a), 13(c), 14, or 15(d)
of the Exchange Act after the date of this Proxy Statement and prior to the date
of the Special Meeting shall be deemed to be incorporated by reference in this
Proxy Statement, and to be a part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which is also incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Proxy
Statement.
THE PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (WITHOUT EXHIBITS,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THIS PROXY
STATEMENT) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM A COPY OF THE PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ROBERT J. JACOBS,
GENERAL COUNSEL AND SECRETARY, HOMESIDE, INC.,
ii
<PAGE> 6
7301 BAYMEADOWS WAY, JACKSONVILLE, FLORIDA 32256, TELEPHONE NUMBER (904)
281-3422. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JANUARY 8, 1998.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and, if given or made,
such information or representation should not be relied upon as having been
authorized by the Company.
iii
<PAGE> 7
HOMESIDE, INC.
PROXY STATEMENT
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION........................................................................ i
AVAILABLE INFORMATION............................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................... ii
SUMMARY............................................................................. 1
THE SPECIAL MEETING................................................................. 5
Matters to be Considered at the Special Meeting................................... 5
Vote Required..................................................................... 5
Voting of Proxies................................................................. 5
Revocability of Proxies........................................................... 5
Record Data; Quorum; Abstentions.................................................. 5
Statutory Appraisal Rights........................................................ 6
DESCRIPTION OF THE MERGER AGREEMENT AND THE MERGER.................................. 6
General........................................................................... 6
Reasons for the Merger; Position of Board of Directors............................ 6
Recommendation of the Board of Directors....................................... 6
Background..................................................................... 6
Factors Considered by the Board of Directors................................... 8
Opinions of the Company's Financial Advisors...................................... 9
Smith Barney Opinion........................................................... 9
Merrill Lynch Opinion.......................................................... 10
Financial Analyses............................................................. 11
Selected Company Analysis...................................................... 11
Selected Merger and Acquisition Transactions Analysis.......................... 12
Component Analysis............................................................. 12
Analysis of Net Present Value of Future Stock Price............................ 12
Discounted Dividend Stream Analysis............................................ 12
Premium Analysis............................................................... 13
Other Factors and Comparative Analyses......................................... 13
Miscellaneous.................................................................. 13
Interests of Certain Persons in the Merger........................................ 13
Employment Agreements with NAB and HomeSide Lending, Inc....................... 13
Confidentiality and Non-Competition Agreement with NAB and HLI................. 15
Acceleration of Options........................................................ 15
Indemnification of Officers and Directors...................................... 16
</TABLE>
iv
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Terms of the Merger Agreement............................................. 16
Consideration to be Paid in the Merger......................................... 16
Treatment of Stock Options..................................................... 16
Closing of Merger; Effective Time.............................................. 16
Conditions to the Merger....................................................... 16
Certificate of Incorporation................................................... 17
Representations and Warranties................................................. 17
Conduct of Business Pending the Merger......................................... 18
No Solicitation................................................................ 19
Employee Benefit Matters....................................................... 19
Termination.................................................................... 19
Shareholder Agreements............................................................ 21
DESCRIPTION OF STATUTORY APPRAISAL RIGHTS........................................... 22
Who May Exercise Statutory Appraisal Rights....................................... 22
Procedure for Exercising Statutory Appraisal Rights............................... 22
Determination of Fair Value; Venue for Filing Appraisal Petition.................. 24
Costs of Appraisal Action......................................................... 24
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER............................... 24
REGULATORY MATTERS.................................................................. 25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................... 27
BUSINESS AND OPERATIONS OF THE COMPANY.............................................. 28
CERTAIN INFORMATION CONCERNING NAB.................................................. 29
SELECTED CONSOLIDATED FINANCIAL INFORMATION......................................... 31
PRICE RANGE OF COMMON STOCK AND DIVIDENDS........................................... 32
INDEPENDENT PUBLIC ACCOUNTANTS...................................................... 32
OTHER MATTERS....................................................................... 32
FUTURE STOCKHOLDER PROPOSALS........................................................ 32
VOTING PROCEDURES................................................................... 33
EXHIBIT A: AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 25, 1997 BETWEEN NAB,
AND THE COMPANY
EXHIBIT B: SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
EXHIBIT C-1: OPINION OF SMITH BARNEY INC.
EXHIBIT C-2: OPINION OF MERRILL LYNCH, FENNER & SMITH INCORPORATED
</TABLE>
v
<PAGE> 9
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This summary is not intended to be complete and is
qualified in all respects by references to the detailed information appearing
elsewhere in this Proxy Statement, the appendices hereto and the documents
referred to and incorporated herein.
THE SPECIAL MEETING
The Special Meeting of stockholders of the Company will be held at 10 a.m.
(EST) on January 16, 1998 at the offices of the Company in Jacksonville,
Florida, to consider and vote upon adoption of the Merger Agreement pursuant to
which the Merger Subsidiary will be merged with and into the Company and the
Company will become a direct or indirect wholly-owned subsidiary of NAB. Only
stockholders of record on December 5, 1997, are entitled to receive notice of
and to vote at the Special Meeting.
CONSIDERATION TO BE RECEIVED BY COMPANY STOCKHOLDERS
If the Merger is consummated, each share of capital stock of the Company
outstanding at that time (other than shares as to which statutory appraisal
rights have been perfected) will be converted into the right to receive $27.825
in cash, without interest. See "Description of the Merger Agreement and the
Merger -- Certain Terms of the Merger Agreement -- Consideration to be Paid in
the Merger."
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company outstanding on the record date is required under Delaware
law for adoption of the Merger Agreement. Holders of approximately 76% of the
outstanding shares of Common Stock have agreed to vote all of such shares in
favor of adoption of the Merger Agreement. See "The Special Meeting -- Vote
Required."
EFFECTIVE TIME
If the Company's stockholders adopt the Merger Agreement, the Merger will
be consummated on such date as NAB selects, which shall be no later than seven
(7) business days after the last to occur of the satisfaction or waiver of each
of the conditions to consummation of the Merger, the expiration of all
applicable waiting periods in connection with approvals of governmental
authorities and the receipt of all approvals of governmental authorities, unless
another time is agreed to by the Company and NAB, by the filing of a properly
executed Certificate of Merger complying with applicable provisions of the
Delaware General Corporation Law with the Secretary of State of the State of
Delaware. The "Effective Time" shall be the date and time when the Merger
becomes effective, as set forth in the Certificate of Merger.
SURRENDER OF STOCK CERTIFICATES
Promptly after the consummation of the Merger, a Letter of Transmittal will
be mailed to all holders of Common Stock (other than holders exercising
statutory appraisal rights) for use in surrendering their stock certificates
formerly representing shares of Common Stock. Stock certificates should not be
surrendered until the Letter of Transmittal is received. See "Description of the
Merger Agreement and the Merger -- Certain Terms of the Merger
Agreement -- Consideration to be Paid in the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously (with two directors
absent) approved and adopted the Merger Agreement, has concluded that the Merger
is in the best interests of the Company's stockholders and recommends that the
stockholders adopt the Merger Agreement. The two absent directors have
subsequently expressed their concurrence with such actions of the Board. In
reaching its decision, the Board of Directors took into account a variety of
factors more fully described under "Description of the Merger Agreement and the
Merger -- Reasons for the Merger; Position of the Board of Directors." In making
this decision, the Board was also mindful of the expressed desire of BankBoston,
N.A., Siesta Holdings, Inc., Thomas H. Lee Equity Fund III, L.P., Thomas H. Lee
Foreign Fund III, L.P., and Madison Dearborn
<PAGE> 10
Capital Partners, L.P., who hold in the aggregate approximately 76% of the
outstanding shares of Common Stock, that the Board accept the NAB proposal
embodied in the Merger Agreement. See "Description of the Merger Agreement and
the Merger -- Reasons for the Merger; Position of the Board of Directors."
OPINIONS OF THE COMPANY'S FINANCIAL ADVISORS
Smith Barney Inc. ("Smith Barney") and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") have acted as financial advisors to the
Company in connection with the Merger and have each delivered to the Board of
Directors of the Company written opinions dated the date of this Proxy Statement
to the effect that, as of the date of such opinions and based upon and subject
to certain matters stated therein, the Merger Consideration was fair, from a
financial point of view, to the holders of Common Stock and Class C Common
Stock. The full text of the written opinions of Smith Barney and Merrill Lynch
dated the date of this Proxy Statement, which set forth the assumptions made,
matters considered and limitations on the review undertaken, are attached as
Exhibits C-1 and C-2, respectively, to this Proxy Statement and should be read
carefully in their entirety. THE OPINIONS OF SMITH BARNEY AND MERRILL LYNCH ARE
DIRECTED TO THE BOARD OF DIRECTORS OF THE COMPANY AND RELATE ONLY TO THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW, DO NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER OR RELATED TRANSACTIONS AND DO NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE SPECIAL MEETING. See "Description of the Merger Agreement and the
Merger -- Opinions of the Company's Financial Advisors."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company's Board, stockholders
should be aware that certain of the Company's directors and officers have
certain interests in the Merger that are in addition to their interests as
stockholders of the Company generally. Those interests relate to, among other
things, provisions in the Merger Agreement regarding indemnification and the
treatment of outstanding options with respect to Common Stock, and to new
employment agreements and confidentiality and noncompetition agreements. The
Board of Directors of the Company was aware of those interests and considered
those interests, among other matters, in recommending and approving the Merger
Agreement.
The Merger Agreement provides that for a period of six years after the
Effective Date of the Merger, NAB will indemnify and hold harmless each person
who was an officer, director, or employee of the Company at any time prior to
the Effective Time of the Merger (the "Indemnified Parties") against any costs,
expenses, judgments, fines, losses, claims, damages, or liabilities incurred in
connection with any claim, action, suit, proceeding, or investigation, whether
civil, criminal, administrative, or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at, or after the Effective Time, to the extent to which such
Indemnified Parties were entitled to indemnification under Delaware law and the
Company's Certificate of Incorporation and By-Laws in effect on the date of the
Merger Agreement.
NAB and the Company's indirect wholly-owned subsidiary, HomeSide Lending,
Inc. ("HLI"), have entered into employment agreements (the "Employment
Agreements") with Joe K. Pickett, the Company's Chairman and Chief Executive
Officer; Hugh R. Harris, the Company's President and Chief Operating Officer;
Kevin D. Race, the Company's Vice President, Treasurer and Chief Financial
Officer; Mark F. Johnson, the Company's Vice President, Loan Production; and
William Glasgow, Jr., the Company's Vice President, Loan Administration and six
other officers of the Company (the "Executives"). Each Employment Agreement
becomes effective only upon consummation of the Merger and provides for a
three-year term of employment commencing upon the consummation of the Merger.
Pursuant to the Employment Agreements, Messrs. Pickett, Harris, Race, Johnson
and Glasgow each (i) will receive an annual base salary of $450,000, $410,000,
$300,000, $230,000 and $230,000, respectively, (ii) will receive a guaranteed
annual bonus of $800,000, $800,000, $337,500, $362,500 and $362,500,
respectively, payable on each of the first and second anniversaries of the
Effective Time, (iii) will be eligible to participate in HLI's annual bonus
plan, (iv) will be eligible to participate in NAB's Executive Share Option Plan
and will receive an initial grant of 50,000, 45,000, 35,000, 30,000 and 30,000
options to purchase NAB ordinary shares, respectively, and (v) will be eligible
to participate in a long-term incentive plan (funded by NAB with a cash pool not
in excess of
2
<PAGE> 11
$15,000,000), the first award under such plan (the "Anniversary Award") to be
payable in a lump sum cash payment within 30 days following the third
anniversary of the Effective Time (the "Anniversary Date"), provided that such
Executive is employed by HLI on the Anniversary Date. The Employment Agreements
provide that NAB shall cause the entire long-term incentive plan cash pool to be
distributed to eligible Company executives. The Employment Agreements for the
six other officers of the Company provide for annual base salaries aggregating
$1,120,000 and guaranteed annual bonuses aggregating $712,500; and such officers
will receive in the aggregate initial grants of 150,000 options to purchase NAB
ordinary shares and will be eligible to participate in HLI's annual bonus plan
and in the long-term incentive plan referred to in clause (v) above. The
Employment Agreements also provide that each Executive will be (i) entitled to
participate in employee benefit plans as may be in effect for senior executives
of HLI from time to time, (ii) entitled to paid vacation in accordance with the
vacation policy applicable to HLI's senior executives, (iii) reimbursed by HLI
for reasonable business expenses and (iv) entitled to receive the same
perquisites that such Executive received immediately prior to the Effective
Time. The Employment Agreements further provide that each Executive will be
eligible to participate in a nonqualified deferred compensation plan to which
such Executive may elect to defer any amount of such Executive's cash
compensation. Each Employment Agreement provides that the Executive waives any
and all rights to benefits payable under any prior severance agreement to which
the Executive and HLI are parties and agrees that such severance agreement will
be void and of no further effect and will be superseded in its entirety by the
Employment Agreement.
NAB and HLI have also entered into confidentiality and noncompetition
agreements (the "Confidentiality and Noncompetition Agreements") with each
Executive, pursuant to which each Executive is entitled to receive a cash
payment in consideration for such Executive's agreement (i) not to disclose
confidential information of HLI or any of its affiliates, (ii) not to compete
with HLI or any of its affiliates and not to solicit certain persons for
employment and not to solicit or accept business from certain customers and
customer prospects of HLI and its affiliates, during the period during which the
Executive is employed by the Company pursuant to the Employment Agreement plus a
period equal to (x) 24 months thereafter in the event the Executive is
terminated for cause (as defined in the Employment Agreement) or voluntarily
terminates his Employment Agreement without Good Reason (as defined in the
Employment Agreement) or (y) in the event of any other termination not described
in (x) above, the shorter of the period equal to the remaining time left in the
current term of the Employment Agreement and the period the Executive receives
payments under the termination provisions of the Employment Agreement. The
Confidentiality and Noncompetition Agreements shall be of no force and effect if
the Merger is not consummated. The Confidentiality and Noncompetition Agreements
provide that the amount of cash payment payable to Messrs. Pickett, Harris,
Race, Johnson and Glasgow will be $1,500,000, $1,500,000, $1,000,000, $400,000
and $400,000, respectively. The Confidentiality and Noncompetition Agreements
entered into with the six other officers of the Company provide for cash
payments aggregating $1,520,000.
In addition, the Board of Directors of the Company, with the consent of
NAB, has authorized the acceleration, immediately prior to the consummation of
the Merger, of the vesting and exercisability of certain outstanding options to
purchase Common Stock of the Company under the Company's stock option plans. See
"Description of the Merger Agreement and the Merger -- Interests of Certain
Persons in the Merger."
CONDITIONS TO THE MERGER
The closing of the Merger is conditioned upon, among other things, the
absence of any injunction prohibiting consummation of the Merger, the receipt of
the requisite affirmative vote of the Company's stockholders to adopt the Merger
Agreement and the receipt by NAB and the Company of certain required regulatory
approvals. See "Description of the Merger Agreement and the Merger -- Certain
Terms of the Merger Agreement -- Conditions to the Merger."
TERMINATION FEE
The Merger Agreement may be terminated at any time prior to the Effective
Time by the mutual consent of the Company and NAB and by either of them
individually under certain specified circumstances. In addition, the Merger
Agreement provides that the Company may terminate the Merger Agreement if,
without breaching certain non-solicitation provisions of the Merger Agreement,
the Company enters into a definitive
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agreement with a third party providing for an acquisition transaction on terms
determined in good faith by the Board of Directors of the Company to be more
favorable to the stockholders than the Merger and with respect to which the
Board of Directors has determined that to proceed with the Merger would violate
the fiduciary duty of the Board to the stockholders. In the event of such
termination, as well as upon the occurrence of certain other events specified in
the Merger Agreement, including in certain circumstances the acquisition by a
third party of securities representing 20% or more of the voting power of the
Company, the failure of a stockholder who is a signatory to the Shareholder
Agreement to vote in favor of the Merger and the consummation of certain
Acquisition Transactions (as defined in the Merger Agreement), the Company will
be required to pay NAB a termination fee of $44,000,000, plus out-of-pocket
expenses incurred by NAB in an amount not to exceed $10,000,000. See
"Description of the Merger Agreement and the Merger -- Certain Terms of the
Merger Agreement -- Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of the Merger Consideration for shares of Company Common Stock
will be a taxable transaction to the Company's stockholders for U.S. federal
income tax purposes. The Company's stockholders will generally recognize gain or
loss measured by the difference between the individual stockholder's adjusted
tax basis in their shares of Company Common Stock exchanged in the Merger and
the cash received as a result of the Merger. See "Certain Federal Income Tax
Consequences to the Merger."
EFFECTS OF THE MERGER
Upon consummation of the Merger, stockholders will be entitled to receive
$27.825 in cash, without interest, for each share of Common Stock owned by them.
Further, upon consummation of the Merger, the Company will become a direct or
indirect wholly-owned subsidiary of NAB, and former holders of the Company's
Common Stock will no longer possess any interest in, or rights as stockholders
of, the Company, other than the right to receive $27.825 per share. See
"Description of the Merger Agreement and the Merger -- General." Statutory
appraisal rights will be available to any stockholder who complies with the
provisions of Section 262 of the Delaware General Corporation Law regarding
statutory appraisal rights. See "Description of Statutory Appraisal Rights."
MARKET PRICES FOR COMMON STOCK
The Company's Common Stock is currently traded on the New York Stock
Exchange under the symbol HSL. On October 24, 1997, the last trading day before
the Company announced that it had entered into the Merger Agreement, the high
and low sales prices per share of the Company's Common Stock were $24 1/2 and
$24 1/8, respectively. On December 9, 1997, the closing sale price per share of
the Company's Common Stock was $27 7/16. See "Price Range of Common Stock and
Dividends."
STATUTORY APPRAISAL RIGHTS
Each holder of shares of Common Stock and Class C Common Stock who does not
vote in favor of the Merger Agreement and who complies with certain statutory
procedures set forth in Section 262 of the Delaware General corporation Law, a
copy of which is attached hereto as Exhibit B, will be entitled to receive the
"fair value" of such shares of Common Stock and Class C Common Stock, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by the
Delaware Court of Chancery. A VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT
WILL CONSTITUTE A WAIVER OF A STOCKHOLDER'S RIGHT TO DEMAND APPRAISAL OF SUCH
STOCKHOLDER'S SHARES OF COMMON STOCK AND CLASS C COMMON STOCK.
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting the Company's stockholders will be asked to consider
and vote upon a proposal to adopt the Merger Agreement.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY (WITH TWO DIRECTORS
ABSENT) APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
VOTE REQUIRED
Under applicable provisions of Delaware law and the Company's By-Laws, the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company outstanding on the record date is necessary to adopt the Merger
Agreement.
BankBoston, N.A., Siesta Holdings, Inc., Thomas H. Lee Equity Fund III,
L.P., Thomas H. Lee Foreign Fund III, L.P., and Madison Dearborn Capital
Partners, L.P., who hold in the aggregate approximately 76% of the outstanding
shares of Common Stock, have agreed to vote all of such shares in favor of
adoption of the Merger Agreement.
VOTING OF PROXIES
Shares of Common Stock represented at the Special Meeting by properly
executed proxies received at or prior to the Special Meeting will be voted in
the manner specified by the holders of such shares. Properly executed proxies
that do not contain instructions will be voted FOR adoption of the Merger
Agreement.
It is not expected that any matter other than those referred to herein will
be brought before the Special Meeting. However, if any other matters are
properly presented at the Special Meeting for consideration, the persons named
in the form of proxy enclosed herewith and acting thereunder will have
discretion to vote on such other matters as may be so presented at the Special
Meeting; provided, however, that such discretionary authority will only be
exercised to the extent possible under applicable federal and state securities
and corporation laws, and no proxy which is voted against the proposal to adopt
the Merger Agreement will be voted in favor of any such adjournment or
postponement.
REVOCABILITY OF PROXIES
The grant of a proxy does not preclude a stockholder from voting in person
or otherwise revoking a proxy. Attendance at the Special Meeting will not in and
of itself constitute revocation of a proxy. A stockholder may revoke a proxy by
voting in person at the Special Meeting, by submitting a proxy having a later
date, or by giving written notice of revocation to the Secretary of the Company
at any time before the proxy is exercised.
RECORD DATE; QUORUM; ABSTENTIONS
Holders of Common Stock of record at the close of business on December 5,
1997, will be entitled to receive notice of and to vote at the Special Meeting.
On December 5, 1997, the Company had outstanding and entitled to vote 43,375,430
shares of Common Stock. Each outstanding share entitles the record holder to one
vote. Shares representing a majority of the outstanding shares of Common Stock
must be represented in person or by proxy at the Special Meeting in order for a
quorum to be present at the Special Meeting. At the Special Meeting, abstentions
will be treated as shares that are present for purposes of determining the
existence of a quorum, and will in effect be considered a vote against the
Merger. Holders of Class C Common Stock are entitled to notice of the Special
Meeting but are not entitled to vote.
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STATUTORY APPRAISAL RIGHTS
A holder of Common Stock or Class C Common Stock who does not vote for the
Merger and who complies with statutory procedures is entitled to the rights and
remedies of a dissenting stockholder provided in Section 262 of the Delaware
General Corporation Law, a copy of which is attached hereto as Exhibit B. See
"Description of Statutory Appraisal Rights."
DESCRIPTION OF THE MERGER AGREEMENT AND THE MERGER
GENERAL
The Agreement and Plan of Merger dated as of October 25, 1997 between the
Company and NAB (the "Merger Agreement"), a copy of which is attached to this
Proxy Statement as Exhibit A, provides for the merger of a corporation to be
formed as a direct or indirect wholly-owned subsidiary of NAB (the "Merger
Subsidiary") with and into the Company. As a result, the separate corporate
existence of the Merger Subsidiary will terminate, the Company will be the
surviving corporation in the Merger and will be a direct or indirect
wholly-owned subsidiary of NAB. Pursuant to the Merger Agreement, at the
effective time of the Merger, each outstanding share of the Common Stock and
Class C Common Stock will be canceled and converted into the right to receive
$27.825 in cash, without interest, except for (i) shares of the Company's stock
held by stockholders who exercise statutory appraisal rights under Delaware law
or (ii) shares of the Company's stock held directly or indirectly by NAB (except
for shares held in a fiduciary or agency capacity or in satisfaction of a debt).
After the consummation of the Merger, a Letter of Transmittal containing
instructions with respect to the surrender of the Company's stock certificates
will be furnished to former Company stockholders for their use in submitting
stock certificates to the Exchange Agent. After the Effective Time of the Merger
there will be no further registry of transfers of the Shares on the books of the
transfer agent.
REASONS FOR THE MERGER; POSITION OF BOARD OF DIRECTORS
Recommendation of the Board of Directors. The Board of Directors of the
Company has unanimously (with two directors absent) approved the Merger
Agreement and the transactions contemplated thereby and directed that the Merger
Agreement be submitted to the stockholders for their adoption at the Special
Meeting to be held on January 16, 1998. The two absent directors subsequently
expressed their concurrence with such actions of the Board. The Board of
Directors believes that the Merger is fair and in the best interest of the
stockholders, and recommends the adoption of the Merger Agreement.
Background. In May and June, 1997 representatives of NAB visited HomeSide,
as well as several other companies in the United States, to gain a better
understanding of US mortgage servicing technology platforms. These meetings led
to discussions between HomeSide and NAB in both Jacksonville and Australia for
the purpose of exploring a number of strategic alternatives, including whether
HomeSide could provide services to NAB, whether HomeSide and NAB should enter
into a joint venture and whether NAB might contribute a portion of its mortgage
banking operation to HomeSide in exchange for an equity interest.
After extensive discussion regarding the foregoing alternatives, HomeSide
decided to consider the possible acquisition of HomeSide by NAB. NAB indicated
at the outset of these discussions that a condition to its entering into any
agreement to acquire the Company would be that the senior executive officers of
the Company enter into long-term employment contracts and arrangements with the
Company and NAB ensuring their continued and active involvement with the Company
and NAB. During August and September, NAB conducted extensive due diligence with
respect to HomeSide's activities.
At the regular meeting of the Board of Directors held on October 2, 1997,
the Board was informed that NAB had expressed possible interest in acquiring
HomeSide, but that the potential terms and timetable were unclear.
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On October 6, 1997, representatives of NAB met with David V. Harkins and
Thomas M. Hagerty of the Thomas H. Lee Company, both of whom are directors of
HomeSide, to convey orally their interest in acquiring HomeSide in a cash
purchase within a price range of $25 to $27 per share. NAB's interest in
acquiring HomeSide was further discussed on October 7, 1997 in a conference
telephone call in which Messrs. Harkins and Hagerty, Peter J. Manning of
BankBoston and a representative of Cohane Rafferty Securities, Inc., an advisor
to NAB, participated. Further meetings were held during that week between
Messrs. Harkins and Hagerty and representatives of NAB. As a result of these
meetings, Messrs Harkins, Hagerty, Pickett and Harris decided that NAB's
interest in acquiring HomeSide was worth pursuing in more detail. Throughout the
process, the HomeSide Board was kept apprised of the status of discussions.
Discussions continued during the week of October 13, 1997 between Messrs.
Harkins and Hagerty and representatives of NAB. No agreement was reached on any
of the principal terms of a possible transaction but Messrs. Harkins and Hagerty
reported that as a result of the discussion it appeared that it might be
possible to negotiate a transaction in a price range of $27.25 to $27.875. NAB
continued to pursue its due diligence investigation during the week of October
13, 1997.
On October 19, 1997, the Board of Directors met in a telephonic meeting to
hear a report on the status of the negotiations. At such meeting, the Board
authorized the engagement of Smith Barney and Merrill Lynch as financial
advisors to the Company and authorized the solicitation by Smith Barney of
selected third parties to determine whether such third parties might be
interested in acquiring the Company. At the meeting, the Board received the
advice of the Company's legal counsel concerning the legal issues associated
with the sale of publicly held companies. The Board authorized Messrs. Harkins
and Hagerty and members of management to continue negotiations with NAB with the
assistance of the Company's financial and legal advisors. The Board was advised
that NAB would continue to conduct due diligence during the following week and
that negotiations regarding the terms of the Merger Agreement would also be
pursued during that week.
On October 20, 1997, representatives of the Company and NAB met in
connection with NAB's due diligence investigation. On that date, NAB's counsel
provided the Company and its counsel with a preliminary draft of the Merger
Agreement for discussion purposes. No price was indicated in the draft
agreement.
Due diligence continued on October 21 through October 23, 1997. Counsel for
the Company had several discussions with counsel for NAB on October 21, 1997
concerning the terms and conditions presented in the preliminary draft of the
Merger Agreement. On October 22, 1997, counsel for the Company provided its
comments on the Merger Agreement. On October 23, 1997, counsel for NAB and
counsel for the Company met to negotiate the terms and conditions of the Merger
Agreement. HomeSide's counsel conveyed to counsel for NAB the Company's
unwillingness to consider a request by NAB that the transaction include an
option to acquire shares of common stock of the Company. During the week of
October 20, management with assistance of their counsel also negotiated
employment agreements and arrangements with NAB. Discussions concluded on
October 23 with no agreement having been reached on price or other material
terms. In addition, employment agreements and arrangements involving management
remained unresolved.
A meeting of the Board of Directors of the Company was held at noon on
October 24, 1997. The Company's Board was updated by Messrs. Harkins and
Hagerty, members of management and legal counsel on the status of negotiations.
In addition, Smith Barney reviewed with the Board the results of the inquiry
that had been made of certain other potentially interested parties, which
inquiry had elicited interest from two respondents, one of which subsequently
indicated that it would not be in a position to offer a price within the range
then being discussed with NAB. At such meeting, Smith Barney and Merrill Lynch
also reviewed with the Board the valuation methodologies to be utilized by Smith
Barney and Merrill Lynch in their financial analysis of the proposed Merger.
After discussion, management and the Company's counsel were instructed to
continue negotiations and Smith Barney was requested to continue discussions
with the one remaining party which had indicated interest in a transaction with
the Company.
Negotiations between the Company and NAB, and their respective counsel,
resumed on the afternoon of October 24, 1997 and continued until the execution
and delivery of the definitive Merger Agreement late in the evening on October
25, 1997. In addition to negotiating the terms and conditions of the Merger
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Agreement, representatives of the Company and NAB discussed merger consideration
and management discussed compensation issues with NAB.
A meeting of the Board of Directors of the Company was held telephonically
at 6:00 p.m. on October 25, 1997. The Board received a report on the status of
negotiations with NAB from members of management and legal counsel, which
informed the Board that all material issues had been resolved and that a
purchase price of $27.825 was expected to be offered by NAB. Smith Barney
reported to the Board that the one remaining party which previously had
indicated potential interest in the Company had informed Smith Barney that it
would not be in a position to pay a higher price than that being discussed with
NAB. The Board also received a report from management and legal counsel
describing in detail the final arrangements negotiated between management and
NAB. The Directors had a full discussion of the amounts to be received by
management in connection with the Merger, including the acceleration of certain
stock options, and also discussed in detail the ongoing employment agreements
and arrangements to be entered into between NAB and members of management which
the Board had been advised were a condition to NAB's doing the transaction. The
Directors were also advised that BankBoston, N.A., Siesta Holdings, Inc., Thomas
H. Lee Equity Fund III, L.P., Thomas H. Lee Foreign Fund III, L.P., and Madison
Dearborn Capital Partners, L.P., who hold in the aggregate approximately 76% of
the outstanding shares of Common Stock, desired that the Board accept the NAB
proposal embodied in the Merger Agreement. The Directors also reviewed in detail
the terms of the Shareholder Agreements being entered into between NAB and such
shareholders regarding their agreement to vote in favor of the Merger Agreement.
Smith Barney and Merrill Lynch each rendered oral opinions (which opinions were
subsequently confirmed by delivery of written opinions dated October 25, 1997
and the date of this Proxy Statement) to the effect that, as of the date of such
opinions and based upon and subject to certain matters stated therein, the
Merger Consideration was fair, from a financial point of view, to the holders of
Common Stock and Class C Common Stock. In addition, the directors present at the
meeting voted unanimously to approve the Merger Agreement and to recommend that
the shareholders of the Company vote in favor thereof. The two absent Directors
subsequently expressed their concurrence in the decision of the Board.
Thereafter, after final negotiations of merger consideration and terms
(resulting in a merger consideration of $27.825), the Merger Agreement was
executed by the Company and the Shareholder Agreements were executed by the
parties on October 25, 1997. Public announcement of the transaction was made at
approximately 9:00 a.m. October 27, 1997 in Australia and at approximately 6:00
p.m. October 26, 1997 in Jacksonville.
Factors Considered by the Board of Directors. In reaching its conclusion
that the transaction set forth in the Merger Agreement is fair and in the best
interests of the Company's stockholders, the Board of Directors considered
various factors, the material factors of which were the following:
(i) the terms and conditions of the Merger Agreement;
(ii) a review of the Company's results of operations for the fiscal
year ended February 28, 1997 and the six months ended August 31, 1997, as
well as anticipated results for the balance of the current fiscal year and
the Company's prospects if it were to remain independent;
(iii) the results of the inquiry of potentially interested third
parties;
(iv) the Company's competitive position and current trends in the
mortgage banking industry;
(v) the potential alternatives available to the Company with the
objective of maximizing stockholder value.
(vi) the financial presentations and opinions of Smith Barney and
Merrill Lynch dated October 25, 1997 (which opinions have been confirmed by
delivery of written opinions dated the date of this Proxy Statement) to the
effect that, as of the date of such opinions and based upon and subject to
certain matters stated therein, the Merger Consideration was fair, from a
financial point of view, to the holders of Common Stock and Class C Common
Stock. See "-- Opinions of Financial Advisors." Copies of the
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written opinions of Smith Barney and Merrill Lynch, dated the date of this
Proxy Statement, are attached hereto as Exhibits C-1 and C-2, respectively,
and should be read carefully in their entirety;
In its deliberations, the Board of Directors did not find it practical to,
and did not, quantify or otherwise assign relative weights to specific factors
considered, nor did the Board of Directors determine that any factor was more
important, less important or neutral as compared to any factors. Instead, the
Board of Directors, having considered a variety of factors, viewed its position
and recommendation as being based on the totality of all information presented
to and considered by it.
OPINIONS OF THE COMPANY'S FINANCIAL ADVISORS
Smith Barney Opinion. Smith Barney was retained by the Company to act as
its financial advisor in connection with the proposed Merger. In connection with
such engagement, HomeSide requested that Smith Barney evaluate the fairness,
from a financial point of view, to the holders of the Company's Common Stock and
Class C Common Stock of the consideration to be received by such holders in the
Merger. On October 25, 1997, at a special meeting of the Board of Directors of
HomeSide held to evaluate the proposed Merger, Smith Barney delivered to the
Board of Directors of HomeSide an oral opinion (which opinion was subsequently
confirmed by delivery of a written opinion dated October 25, 1997) to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the Merger Consideration was fair, from a financial
point of view, to the holders of Common Stock and Class C Common Stock. Smith
Barney has confirmed its opinion dated October 25, 1997 by delivery of a written
opinion dated the date of this Proxy Statement. In connection with its opinion
dated the date of this Proxy Statement, Smith Barney updated certain of the
analyses performed in connection with its earlier opinion and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of HomeSide concerning the business, operations and
prospects of HomeSide. Smith Barney examined certain publicly available business
and financial information relating to HomeSide as well as certain financial
forecasts and other information and data for HomeSide which were provided to or
otherwise discussed with Smith Barney by the management of HomeSide. Smith
Barney reviewed the financial terms of the Merger as set forth in the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volumes of Common Stock; the historical and projected
earnings and other operating data of HomeSide; and the capitalization and
financial condition of HomeSide. Smith Barney also considered, to the extent
publicly available, the financial terms of other transactions recently effected
which Smith Barney considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Smith Barney
considered relevant in evaluating those of HomeSide. In addition to the
foregoing, Smith Barney conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Smith Barney
deemed appropriate in arriving at its opinion. Smith Barney noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed, to Smith
Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Smith Barney, the management of HomeSide advised Smith Barney that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of HomeSide as to the future financial performance of HomeSide. Smith
Barney did not make and, except with respect to HomeSide's servicing portfolio,
was not provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of HomeSide nor did Smith Barney make any
physical inspection of the properties or assets of HomeSide. Smith Barney was
not requested to, and did not, participate in the negotiation or structuring of
the proposed Merger. In connection with its engagement, Smith Barney was
requested to approach on a selected basis, and held discussions with, certain
third parties to solicit
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indications of interest in the possible acquisition of HomeSide. Although Smith
Barney evaluated the Merger Consideration from a financial point of view, Smith
Barney was not asked to and did not recommend the specific consideration payable
in the Merger, which was determined through negotiation between HomeSide and
NAB. No other limitations were imposed by HomeSide on Smith Barney with respect
to the investigations made or procedures followed by Smith Barney in rendering
its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED THE DATE OF THIS
PROXY STATEMENT, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS EXHIBIT C-1 AND
SHOULD BE READ CAREFULLY IN ITS ENTIRETY. THE OPINION OF SMITH BARNEY IS
DIRECTED TO THE BOARD OF DIRECTORS OF HOMESIDE AND RELATES ONLY TO THE FAIRNESS
OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER OR RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS
PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SUCH OPINION.
Merrill Lynch Opinion. Merrill Lynch also was retained by HomeSide to act
as its financial advisor in connection with the proposed Merger. On October 25,
1997, at a special meeting of the Board of Directors of HomeSide held to
evaluate the proposed Merger, Merrill Lynch rendered its oral opinion (which
opinion was subsequently confirmed by delivery of a written opinion dated
October 25, 1997) to the effect that, as of such date and based upon and subject
to certain matters stated in such opinion, the Merger Consideration was fair,
from a financial point of view, to holders of Common Stock and Class C Common
Stock. Merrill Lynch has confirmed its opinion dated October 25, 1997 by
delivery of a written opinion dated the date of this Proxy Statement. In
connection with its opinion dated the date of this Proxy Statement, Merrill
Lynch updated certain of the analyses performed in connection with its earlier
opinion and reviewed the assumptions on which such analyses were based and the
factors considered in connection therewith.
A COPY OF THE OPINION OF MERRILL LYNCH DATED THE DATE OF THIS PROXY
STATEMENT (THE "MERRILL LYNCH OPINION"), WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY
MERRILL LYNCH, IS ATTACHED AS EXHIBIT C-2 TO THIS PROXY STATEMENT. THE MERRILL
LYNCH OPINION IS ADDRESSED TO THE HOMESIDE BOARD AND IS DIRECTED ONLY TO THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW, AND DOES
NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION OF HOMESIDE TO ENGAGE IN THE
MERGER OR CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER. THE SUMMARY OF THE MERRILL LYNCH
OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH OPINION BY REFERENCE TO THE FULL
TEXT OF THE MERRILL LYNCH OPINION WHICH IS ATTACHED AS EXHIBIT C-2.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things, (i) reviewed certain publicly available business and financial
information relating to NAB and HomeSide that Merrill Lynch deemed to be
relevant; (ii) reviewed certain information, including financial forecasts,
relating to the businesses, earnings, assets, liabilities and prospects of
HomeSide furnished to Merrill Lynch by senior management of HomeSide; (iii)
conducted discussions with members of senior management of HomeSide concerning
the matters described in clauses (i) and (ii) above; (iv) reviewed the market
prices and valuation multiples for the Common Stock and compared them with those
of certain publicly traded companies which Merrill Lynch deemed to be relevant;
(v) reviewed the financial condition and results of operations of HomeSide and
compared them with those of certain publicly traded companies which Merrill
Lynch deemed to be relevant; (vi) compared the proposed financial terms of the
Merger with the financial terms of certain other transactions which Merrill
Lynch deemed to be relevant; (vii) reviewed the Merger Agreement; and
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(viii) reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary under the circumstances,
including Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available, and Merrill Lynch did not assume responsibility for
independently verifying such information or undertake an independent evaluation
or appraisal of the assets or liabilities of HomeSide nor, except with respect
to HomeSide's servicing portfolio, was Merrill Lynch furnished with any such
evaluation or appraisal. In addition, Merrill Lynch did not assume any
obligation to conduct, nor did Merrill Lynch conduct, any physical inspection of
the properties or facilities of HomeSide. With respect to the financial forecast
information furnished to or discussed with Merrill Lynch by HomeSide, Merrill
Lynch assumed that such information was reasonably prepared and reflected the
best currently available estimates and judgments of the senior management of
HomeSide as to the expected future financial performance of HomeSide.
The Merrill Lynch Opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of the Merrill Lynch
Opinion. Merrill Lynch assumed that in the course of obtaining the necessary
regulatory or other approvals (contractual or otherwise) for the Merger, no
restrictions, including amendment or modifications, would be imposed that would
have a material adverse effect on the Merger.
In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch was not authorized by HomeSide or the Board of Directors to solicit, nor
did Merrill Lynch solicit, third party indications of interest for the
acquisition of all or any part of HomeSide, nor was Merrill Lynch requested to,
and Merrill Lynch did not, participate in the negotiations or structuring of the
proposed Merger. Although Merrill Lynch evaluated the Merger Consideration from
a financial point of view, Merrill Lynch was not asked to and did not recommend
the specific consideration payable in the Merger, which was determined through
negotiation between HomeSide and NAB. No other limitations were imposed by
HomeSide or Merrill Lynch with respect to the investigations made or procedures
followed by Merrill Lynch in rendering the Merrill Lynch Opinion.
Financial Analyses. The following is a summary of the material analyses
performed by Smith Barney and Merrill Lynch in connection with their respective
opinions dated October 25, 1997:
In preparing their respective opinions, Smith Barney and Merrill Lynch each
performed a variety of financial and comparative analyses, including those
described below. The summary of such analyses does not purport to be a complete
description of the analyses underlying Smith Barney's opinion or the Merrill
Lynch Opinion. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, Smith Barney and Merrill Lynch
believe that their analyses must be considered as a whole and that selecting
portions of such analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinions. In their analyses, Smith Barney and
Merrill Lynch made numerous assumptions with respect to HomeSide, industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of HomeSide. The estimates
contained in such analyses and the valuation ranges resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Smith Barney's opinion, the Merrill Lynch Opinion and the analyses
performed by Smith Barney and Merrill Lynch were only one of many factors
considered by the Board of Directors of HomeSide in its evaluation of the Merger
and should not be viewed as determinative of the views of the Board of Directors
or management of HomeSide with respect to the Merger Consideration or the
proposed Merger.
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Selected Company Analysis. Using publicly available information, Smith
Barney and Merrill Lynch analyzed, among other things, the market values and
trading multiples of HomeSide and Countrywide Credit Industries, Inc., a
publicly traded company in the mortgage banking industry, the operations of
which Smith Barney and Merrill Lynch considered to be similar to those of
HomeSide (the "Selected Company"). Smith Barney and Merrill Lynch compared
market values as a multiple of estimated fiscal year 1998 and 1999 earnings and
as a multiple of adjusted tangible book value (equity market value, less
goodwill and capitalized servicing rights, plus the estimated value of the
servicing portfolio) as of September 30, 1997. Earnings per share ("EPS")
estimates for the Selected Company were based on estimates of selected
investment banking firms and EPS estimates of HomeSide were based on internal
estimates of the management of HomeSide. All multiples were based on closing
stock prices as of October 22, 1997. Applying multiples of estimated calendar
1998 and 1999 EPS and adjusted tangible book value as of September 30, 1997 for
the Selected Company of 12.9x, 11.5x and 2.1x, respectively, to corresponding
financial data for HomeSide resulted in an equity reference range for HomeSide
of approximately $23.11 to $27.56 (with a mean of $25.33) per fully diluted
share, as compared to the Merger Consideration of $27.825 per share.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney and Merrill Lynch analyzed, among other
things, the implied transaction value multiples paid in selected transactions in
the mortgage banking industry, consisting of (acquiror/target): Dime Bancorp,
Inc./North American Mortgage Company; FirstCity Financial Corp./Harbor Financial
Group, Inc.; Barnett Banks, Inc./BankPLUS Financial Corporation; Norwest
Corporation/Directors Mortgage Loan Corp.; BankAmerica Corporation/Arbor
National Holdings, Inc.; First Tennessee National Corporation/Carl I. Brown and
Co.; Fleet National Bank/Plaza Home Mortgage Corp.; Norwest
Corporation/Independence One Mortgage Corp.; Chase Manhattan Bank
Corporation/American Residential Holding Corp.; Chemical Banking
Corporation/Margaretten Financial Corp.; Boatmen's BancShares, Inc./National
Mortgage Co.; and BankAmerica Corporation/United Mortgage Holding Co.
(collectively, the "Selected Transactions"). Smith Barney and Merrill Lynch
compared transaction values as multiples of, among other things, adjusted
tangible book value. All multiples for the Selected Transactions were based on
information available at the time of announcement of the transaction. Applying a
range of multiples of adjusted tangible book value for the Selected Transactions
of 1.0x to 2.2x (with a mean of 1.4x) to corresponding financial data for
HomeSide resulted in an equity reference range for HomeSide of approximately
$13.28 to $28.72 (with a mean of $18.85) per fully diluted share, as compared to
the Merger Consideration of $27.825 per share.
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to HomeSide or the Merger. Accordingly, an analysis of the results of
the foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the Selected Companies, Selected Transactions or the
business segment, company or transaction to which they are being compared.
Component Analysis. Smith Barney and Merrill Lynch performed a component
analysis of HomeSide, which estimated the value for HomeSide's mortgage
origination operations, servicing portfolio and adjusted tangible book value,
based on internal estimates of the management of HomeSide. The financial data
utilized in such analysis was as of September 30, 1997. The value of HomeSide's
servicing portfolio was estimated based on current market values for servicing
rights with similar characteristics to HomeSide's servicing portfolio. The value
of HomeSide's origination operations were estimated based on a discounted cash
flow analysis and an analysis of the estimated premiums paid for origination
operations in other mortgage banking transactions. The adjusted tangible book
value of HomeSide was estimated by subtracting certain intangibles from the
common equity of HomeSide. This analysis resulted in an equity reference range
for HomeSide of approximately $16.38 to $21.14 (with a mean of $18.76) per fully
diluted share, as compared to the Merger Consideration of $27.825 per share.
Analysis of Net Present Value of Future Stock Price. Smith Barney and
Merrill Lynch analyzed the net present value of the future stock price of the
Common Stock based on internal estimates of the management of HomeSide for
fiscal years 1999 and 2000 and extrapolated thereafter using mean growth rate
estimates of selected research analysts. The range of estimated terminal values
for HomeSide was calculated by applying
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<PAGE> 21
terminal value multiples ranging from 12.0x to 16.0x (with particular focus on
terminal value multiples of 13.0x to 15.0x) to HomeSide's estimated fiscal year
2003 earnings. Terminal values were discounted to present value using discount
rates ranging from 15% to 19% (with particular focus on discount rates of 16% to
18%). Utilizing terminal value multiples of 13.0x to 15.0x and discount rates of
16% to 18%, this analysis resulted in an equity reference range for HomeSide of
approximately $19.15 to $24.07 (with a mean of $21.61) per fully diluted share,
as compared to the Merger Consideration of $27.825 per share.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, Merrill Lynch estimated the present value of HomeSide's dividendable
net income that HomeSide could produce on a stand-alone basis for fiscal years
ended 1999 through 2003. Merrill Lynch assumed that HomeSide would perform in
accordance with the earnings estimates of selected research analysts and that
HomeSide's tangible common equity to tangible asset ratio would be maintained at
a minimum 16.63% level. The estimated terminal values for HomeSide were
calculated by applying terminal value multiples ranging from 10.0x to 12.0x to
HomeSide's fiscal year 2004 estimated operating income (net income before
intangible amortization). The dividendable net income streams and terminal
values were then discounted to present value using discount rates ranging from
14.5% to 16.5%. This analysis indicated an equity reference range for HomeSide
of approximately $20.58 to $25.84 per share, as compared to the Merger
Consideration of $27.825 per share.
Premium Analysis. Smith Barney and Merrill Lynch analyzed the implied
premiums payable in the Merger as of one day, one week, one month and three
months prior to October 22, 1997 and since the initial public offering (the
"IPO") of HomeSide (January 30, 1997). The implied premiums payable in the
Merger based on the closing price of the Common Stock as of such periods were
approximately 11.3% (one day), 10.5% (one week), 8.3% (one month), 24.7% (three
months) and 85.5% (since the IPO), respectively.
Other Factors and Comparative Analyses. In rendering their respective
opinions, Smith Barney and Merrill Lynch considered certain other factors and
conducted certain other comparative analyses, including, among other things, a
review of (i) indications of interest received from third parties other than
NAB; (ii) HomeSide's historical and projected financial results; (iii) the
history of trading prices and volume for the Common Stock and the relationship
between movements in the Common Stock and movements in the common stock of the
Selected Company, movements in the S&P 500 Index and movements in the S&P Bank
Index; (iv) current trends in the mortgage banking industry; (v) selected
published research analysts' reports on HomeSide, including research analysts'
earnings estimates with respect to HomeSide; and (vi) a business and financial
profile of NAB.
Miscellaneous. Pursuant to the terms of Smith Barney's and Merrill Lynch's
engagement, HomeSide has agreed to pay each of Smith Barney and Merrill Lynch,
upon the consummation of the Merger, an aggregate financial advisory fee of $1.5
million for its services in connection with the Merger. HomeSide also has agreed
to reimburse Smith Barney and Merrill Lynch for travel and other reasonable
out-of-pocket expenses incurred by Smith Barney and Merrill Lynch in performing
their services, including the reasonable fees and expenses of legal counsel, and
to indemnify Smith Barney and Merrill Lynch and related persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of their engagements.
Smith Barney and Merrill Lynch have advised HomeSide that, in the ordinary
course of their respective businesses, Smith Barney, Merrill Lynch and their
respective affiliates may actively trade or hold the securities of HomeSide and
NAB and their respective affiliates for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities. Smith Barney has in the past provided investment banking
services to HomeSide, and Merrill Lynch has in the past provided investment
banking services to NAB and HomeSide, unrelated to the proposed Merger, for
which services Smith Barney and Merrill Lynch have received compensation. In
addition, Smith Barney and its affiliates (including Travelers Group Inc. and
its affiliates) may maintain relationships with HomeSide, NAB and their
respective affiliates.
Smith Barney and Merrill Lynch are internationally recognized investment
banking firms and were selected by HomeSide based on their experience, expertise
and familiarity with HomeSide and its business. Smith Barney and Merrill Lynch
regularly engage in the valuation of businesses and their securities in
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<PAGE> 22
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements, valuations for estate, corporate and other purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements with NAB and HomeSide Lending, Inc. NAB and HLI have
entered into employment agreements (the "Employment Agreements") with Joe K.
Pickett, the Company's Chairman and Chief Executive Officer; Hugh R. Harris, the
Company's President and Chief Operating Officer; Kevin D. Race, the Company's
Vice President, Treasurer and Chief Financial Officer; Mark F. Johnson, the
Company's Vice President, Loan Production; and William Glasgow, Jr., the
Company's Vice President, Loan Administration and six other officers of the
Company (the "Executives"). Each Employment Agreement will become effective upon
consummation of the Merger and provides for a three-year term of employment
commencing upon the consummation of the Merger. Pursuant to the Employment
Agreements, Mr. Pickett will serve as Chairman and Chief Executive Officer of
HLI. Mr. Harris will serve as President and Chief Operating Officer of HLI and
Mr. Race will serve as Executive Vice President and Chief Financial Officer of
HLI. The Employment Agreements for Messrs. Johnson and Glasgow provide that each
such Executive will serve as an Executive Vice President of HLI.
Pursuant to the Employment Agreements, Messrs. Pickett, Harris, Race,
Johnson and Glasgow each (i) will receive an annual base salary of $450,000,
$410,000, $300,000, $230,000 and $230,000 respectively, (ii) will receive a
guaranteed annual bonus of $800,000, $800,000, $337,500, $362,500 and $362,500,
respectively, payable on each of the first and second anniversaries of the
Effective Time, (iii) will be eligible to participate in HLI's annual bonus plan
("ABP"), (iv) will be eligible to participate in NAB's Executive Share Option
Plan and will receive an initial grant of 50,000, 45,000, 35,000, 30,000, and
30,000 options to purchase NAB ordinary shares, respectively, and (v) will be
eligible to participate in a long-term incentive plan (funded by NAB with a cash
pool not in excess of $15,000,000), the first award under such plan (the
"Anniversary Award") to be payable in a lump sum cash payment within 30 days
following the third anniversary of the Effective Time (the "Anniversary Date"),
provided that Executive is employed by HLI on the Anniversary Date. The
Employment Agreements provide that NAB shall cause the entire long-term
incentive plan cash pool to be distributed to eligible Company executives. The
Employment Agreements for the six other officers provide for annual base
salaries aggregating $1,120,000, and guaranteed annual bonuses aggregating
$712,500; and such officers will receive in the aggregate initial grants of
150,000 options to purchase NAB ordinary shares and will be eligible to
participate in HLI's annual bonus plan and in the long-term incentive plan
referred to in clause (v) above. The Employment Agreements also provide that
each Executive will be (i) entitled to participate in employee benefit plans as
may be in effect for senior executives of HLI from time to time, (ii) entitled
to paid vacation in accordance with the vacation policy applicable to HLI's
senior executives, (iii) reimbursed by HLI for reasonable business expenses and
(iv) entitled to receive the same perquisites that such Executive received
immediately prior to the Effective Time. The Employment Agreements further
provide that each Executive will be eligible to participate in a nonqualified
deferred compensation plan to which such Executive may elect to defer any amount
of such Executive's cash compensation.
The Employment Agreements may be terminated by the Executive for "good
reason" and by HLI for "cause," as such terms are defined in the Employment
Agreements, or by voluntary resignation of the Executive, upon ninety (90) days'
written notice provided the Executive waives any amounts payable under the
Employment Agreement and provided further that Executive's obligations under the
Confidentiality and Noncompetition Agreement (described below) to which
Executive is a party remain unaffected by such resignation. In the event that
HLI terminates the Executive's employment for any reason other than cause or
disability or the Executive terminates his employment for good reason, HLI is
obligated to (A) pay to the Executive his Anniversary Award pursuant to the
long-term incentive plan if he is terminated prior to the third anniversary of
the Merger and (B)(i) pay to the Executive for the twenty-four (24) month period
(the eighteen (18) month period, in the case of each Executive other than
Messrs. Pickett and Harris) following the Executive's termination (the
"Continuation Period"), an amount equal to his average monthly base salary for
the two year period (or portion thereof) immediately preceding the date of
termination, plus (ii) at the end
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<PAGE> 23
of the Continuation Period, an amount equal to two times (1.5 times, in the case
of each Executive other than Messrs. Pickett and Harris) the average of (x) the
Executive's target bonus under the ABP for the year in which termination occurs
and (y) the annual bonus under the ABP for the year immediately preceding the
year in which termination occurs, (iii) the pro rata portion of the guaranteed
annual bonus, if any, for the year of termination and (iv) the pro rata portion
of the Executive's ABP award for the year of termination, and (C) provide
Executive during the Continuation Period with continued coverage under HLI's
health, life and disability insurance plans, provided that Executive continues
to contribute the employee share of the cost applicable to such coverages. The
amounts under clauses (B)(i) and (ii) and the coverage under clause (C) in the
immediately preceding sentence will be payable or provided, as the case may be,
only so long as Executive complies with his obligations under the
Confidentiality and Noncompetition Agreement (described below) to which
Executive is a party.
In the event Executive's employment is terminated by reason of death or
disability, HLI shall pay Executive (or his designated beneficiary or estate, as
the case may be) the pro-rated portion of (i) the guaranteed annual bonus, if
any, for the year of termination of employment, (ii) any ABP award Executive
would have received for the year of termination of employment, and (iii) any
applicable award payable under the long-term incentive plan (which is the
Anniversary Award in the event of termination of employment on or before the
third anniversary of the Merger).
Each Employment Agreement provides that the Executive waives any and all
rights to benefits payable under any prior severance agreement to which the
Executive and HLI are parties and agrees that such severance agreement shall be
void and of no further effect and shall be superseded in its entirety by the
Employment Agreement.
Confidentiality and Non-Competition Agreements with NAB and HLI. Each
Executive has entered into a Confidentiality and Non-Competition Agreement (the
"Confidentiality and Noncompetition Agreements") with HLI and NAB under which
each Executive has agreed to hold in a fiduciary capacity for the benefit of HLI
all secret or confidential information, knowledge or data relating to HLI or any
of its affiliated companies and their respective businesses that was obtained
during the Executive's employment with the Company and not to divulge any such
information without the prior written consent of the Company, or as otherwise
required by law or legal process (provided that HLI has been given notice of and
opportunity to challenge or limit the scope of disclosure purportedly so
required). Each Confidentiality and Noncompetition Agreement also provides that
during the term of the Executive's employment and for the Applicable Period (as
defined below) thereafter, the Executive shall not, directly or indirectly, own,
manage, operate, control, be employed by, advise or in any manner participate or
engage in any mortgage origination, mortgage lending or mortgage servicing
business within the United States that competes directly or indirectly with any
business in which HLI or any of its affiliates is engaged at the time of the
Executive's termination or thereafter. Furthermore each Confidentiality and
Noncompetition Agreement provides that during the Applicable Period (as defined
below) the Executive will not directly or indirectly solicit for employment by
other than HLI any person who is at such time or was during specified periods
prior to the Executive's termination of employment employed by HLI or its
affiliates, or solicit or accept business from certain customers of HLI or its
affiliates or customer prospects of HLI or its affiliates. For purposes of the
Confidentiality and Noncompetition Agreements, the "Applicable Period" is the
period during which the Executive is employed by the Company pursuant to the
Employment Agreement plus a period equal to (i) 24 months thereafter in the
event the Executive is terminated for Cause (as defined in the Employment
Agreement) or voluntarily terminates his Employment Agreement without Good
Reason (as defined in the Employment Agreement) or (ii) in the event of any
other termination not described in clause (i) above, the shorter of the period
equal to the remaining time left in the current term of the Employment Agreement
and the period Executive receives payments under the termination provisions of
the Employment Agreement. The Confidentiality and Noncompetition Agreements will
only become effective upon the consummation of the Merger. In consideration of
entering into the Confidentiality and Noncompetition Agreement, Messrs. Pickett,
Harris, Race, Johnson and Glasgow will receive a one time cash payment in the
amount of $1,500,000, $1,500,000, $1,000,000, $400,000 and $400,000,
respectively, immediately following and conditioned upon, the consummation of
the Merger. The Confidenti-
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<PAGE> 24
ality and Noncompetition Agreements entered into by the six other officers
provide for cash payments aggregating $1,520,000.
Acceleration of Options. The Board of Directors of the Company, with the
consent of NAB, has authorized the acceleration of vesting and exercisability,
immediately prior to the consummation of the Merger, of certain outstanding
options to purchase Common Stock of the Company (each, an "Option") pursuant to
the Company's stock option plans. Pursuant to the Merger Agreement, immediately
prior to the Effective Time, each Option which is outstanding and exercisable
(and has not been exercised) will be terminated and each holder thereof will be
entitled to receive an amount in cash equal to (A) the product of (i) the excess
of (x) $27.825 over (y) the per share exercise price applicable to such Option
by (ii) the number of such shares of Company Stock subject to such accelerated
option, less (B) any amounts required to be withheld under applicable law. The
following sets forth for the executive officers and directors of the Company
listed, the amounts such individual is entitled to receive with respect to
accelerated Options pursuant to the Merger Agreement: Joe K.
Pickett -- $2,380,595; Hugh R. Harris -- $2,380,595; Kevin D.
Race -- $1,018,261; Mark F. Johnson -- $981,636; and William Glasgow,
Jr. -- $981,636. In addition, such individuals will receive the following
amounts with respect to previously vested options pursuant to the Merger
Agreement: Joe K. Pickett -- $851,533; Hugh R. Harris -- $851,533; Kevin D.
Race -- $340,645; Mark F. Johnson -- $340,645; and William Glasgow,
Jr. -- $340,645. Other officers and employees of the Company will receive, in
the aggregate, $7,553,317 with respect to Options pursuant to the Merger
Agreement, of which $5,644,174 represents amounts paid with respect to
accelerated options.
Indemnification of Officers and Directors. The Merger Agreement provides
that for a period of six years after the Effective Date of the Merger, NAB will
indemnify and hold harmless each person who was an officer, director, or
employee of the Company at any time prior to the Effective Time of the Merger
(the "Indemnified Parties") against any costs, expenses, judgments, fines,
losses, claims, damages, or liabilities incurred in connection with any claim,
action, suit, proceeding, or investigation, whether civil, criminal,
administrative, or investigative, arising out of matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at, or
after the Effective Time, to the extent to which such Indemnified Parties were
entitled under Delaware law and the Company's Certificate of Incorporation and
By-Laws in effect on the date of the Merger Agreement.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following summary description of the Merger Agreement should be read
with the full text of such agreement, a copy of which is attached as Exhibit A
to this Proxy Statement.
Consideration to be Paid in the Merger. At the Effective Time,
automatically and without any action on the part of any shareholder, each share
of capital stock of the Company issued and outstanding, other than shares held
by stockholders exercising statutory appraisal rights or shares held directly by
NAB (except shares held in a fiduciary or agency capacity or in satisfaction of
a debt previously contracted) shall be converted into the right to receive
$27.825 in cash, without interest (the "Merger Consideration"). In order to
receive the Merger Consideration each stockholder will be required to surrender
his or her stock certificate(s) to an exchange agent (the "Exchange Agent")
along with a duly executed letter of transmittal previously provided to such
stockholders by the Exchange Agent. The Exchange Agent will then pay the Merger
Consideration in cash for each share of Company Stock represented by such stock
certificates.
Treatment of Stock Options. Immediately prior to the Effective Time, each
stock option granted by the Company to directors, officers and employees of the
Company and its subsidiaries to purchase shares of Company Stock which is
outstanding and exercisable (and has not been exercised) shall be terminated and
each holder thereof shall be entitled to receive, an amount in cash equal to the
difference, if any, between $27.825 and the exercise price applicable to such
option multiplied by the number of shares of Company Stock subject to such
option, less any amounts required to be withheld under applicable law.
Closing of Merger; Effective Time. On such date as NAB selects, which
shall be within 7 business days after the last to occur of the expiration of all
applicable waiting periods in connection with approvals of governmental
authorities and the receipt of all approvals of government authorities and all
conditions to the
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<PAGE> 25
consummation of the Merger are satisfied or waived, or on such earlier or later
date as may be agreed in writing by the parties, a certificate of merger shall
be executed and the Merger shall become effective upon filing of such merger
certificate or on such date and at such time as is agreed to by the parties (the
"Effective Time").
Conditions to the Merger. The respective obligations of NAB, the Merger
Subsidiary and the Company to effect the Merger are subject to the satisfaction
or waiver of the following conditions: (i) approval by the requisite vote of the
shareholders of the Company in accordance with the Company's charter and
applicable law; (ii) NAB, Merger Subsidiary, the Company and each of their
respective subsidiaries shall have procured the approvals, authorizations,
consents or waivers with respect to the Merger Agreement and the transactions
contemplated thereby by the Reserve Bank of Australia, the U.S. Federal Reserve
Board, the relevant state mortgage banking licensing or supervisory authorities
(provided that, if such approvals cannot be obtained in time to permit the
consummation of the Merger at a time when it otherwise could occur, arrangements
reasonably acceptable to NAB that enable the Company to conduct its business
substantially in accordance with its recent past practices shall have been
entered into); Fannie Mae, Federal Home Loan Mortgage Corporation ("FHLMC"),
Government National Mortgage Association ("GNMA") and Department of Housing and
Urban Development ("HUD") and any other governmental authority or other person
necessary or appropriate for the consummation of the transactions contemplated
by the Merger Agreement; (iii) all other requirements prescribed by law which
are necessary to the consummation of the transactions contemplated by the Merger
Agreement shall have been satisfied; and (iv) no party to the Merger Agreement
shall be subject to any order, decree or injunction enjoining or prohibiting the
consummation of the Merger or any other transaction contemplated by the Merger
Agreement and no litigation or proceedings shall be pending against NAB, Company
or any of their subsidiaries brought by any governmental agencies seeking to
prevent consummation of the transactions contemplated in the Merger Agreement.
In addition, the obligations of NAB and the Merger Subsidiary are subject
to the satisfaction (or waiver) of the following conditions: (i) each of the
representations and warranties of the Company contained in the Merger Agreement
shall (subject to a specified standard of materiality) have been true and
correct on the date of the Merger Agreement and shall be true and correct on the
Effective Date and the Company shall have performed, in all material respects,
each of its covenants and agreements contained in the Merger Agreement; (ii) NAB
shall have received a certificate signed by the Chief Executive Officer and the
Chief Financial Officer of the Company dated the Effective Date to the foregoing
effect; (iii) immediately prior to the Effective Time, all rights (including all
options) relating to the capital stock of the Company shall have been duly
terminated and shall thereafter be of no force and effect whatsoever; and (iv)
no statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of the Merger or any other transaction contemplated by the Merger Agreement.
In addition, the obligation of the Company to effect the Merger shall be
subject to the satisfaction or waiver prior to the Effective Time of the
following additional conditions: (i) each of the representations, warranties and
covenants of NAB and the Merger Subsidiary contained in the Merger Agreement
shall (subject to a specified standard of materiality) have been true and
correct on the date of the Merger Agreement and shall be true and correct on the
Effective Date as if made on such date in NAB and the Merger Subsidiary shall
have performed, in all material respects, each of its covenants and agreements
contained in the Merger Agreement; (ii) the Company shall have received
certificates signed by the Chief Financial Officer and the Chief Executive
Officer of NAB, dated the Effective Date, to the foregoing effect; and (iii) no
statute, rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the Merger
or any other transaction contemplated by the Merger Agreement.
Certificate of Incorporation. As provided in the Merger Agreement, the
Certificate of Incorporation and By-Laws of the Company each as in effect
immediately prior to the Effective Time will be the Certificate of Incorporation
and the By-Laws of the surviving corporation.
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<PAGE> 26
Representations and Warranties. The Merger Agreement contains various
representations and warranties. These include representations and warranties by
the Company with respect to the truth of the recitals in the Merger Agreement,
capital stock of the Company, due organization, authority to conduct its
business, subsidiaries, shareholder approval, no violations, securities filings,
absence of undisclosed liabilities and certain changes or events, taxes, absence
of claims, absence of regulatory actions, agreements, labor matters, employee
benefits, properties, knowledge as to conditions, compliance with laws, fees,
environmental matters, names and trademarks, mortgage banking licenses and
qualifications, title to loans, compliance of loans, loan files, loan servicing
agreements, no recourse of servicing rights against the servicer, escrow
accounts, advances, single family loans, ARM adjustments, pools, securitization
transactions, mortgage insurance, taxes and insurance, title insurance,
condemnation, servicing portfolio tape, inapplicability of anti-takeover
provisions, material interests of certain persons, insurance, risk management,
registration obligations, books and records, corporate documents,
indemnification, fair lending, no omission of material fact, and conduct of
business. NAB has made certain representations with respect to the truth of its
recitals, corporate organization and qualification, corporate authority, no
violations, access to funds, knowledge as to conditions, and truth of proxy
statement information.
Conduct of Business Pending the Merger. During the period between the date
of the Merger Agreement and the Effective Time, the Company and each of its
subsidiaries is obligated to (i) conduct its business in the usual, regular and
ordinary course of business consistent with past practice, (ii) use its
reasonable best efforts to maintain and preserve intact its business
organization, good will, properties, franchises, leases, employees and
advantageous business relationships and retain the services of its current
officers and key employees, (iii) take no action which would adversely affect or
delay the ability of the Company, NAB, the Merger Subsidiary or any subsidiary
thereof to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated by the Merger
Agreement or to perform its covenants and agreements on a timely basis under the
Merger Agreement, and (iv) take no action that is reasonably likely to have a
Material Adverse Effect on the Company.
As used in the Merger Agreement, the term "Material Adverse Effect" means
any condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the condition (financial or other), properties,
assets, business or results of operations of any person or its subsidiaries,
taken as a whole, or (B) the ability of such person to perform its obligations
under and to consummate the transactions contemplated by the Merger Agreement.
Any change in the condition (financial or otherwise), properties, assets,
business or results of operations arising by virtue of a change in interest
rates or other event affecting the mortgage banking industry in general is not
deemed to cause a Material Adverse Effect.
The Company has agreed that, during the period from the date of the Merger
Agreement to the Effective Time, subject to certain exceptions, limitations and
qualifications set forth in the Merger Agreement, neither the Company nor its
subsidiaries shall, without the prior written consent of NAB: (i) make any loan
or advance or incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other person; (ii) adjust, split, combine or reclassify any capital
stock; make, declare, set aside money for or pay any dividend or make any other
distribution on or redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or grant any stock appreciation rights or
grant, sell or issue any right, warrant or option to acquire, or securities
evidencing a right to convert into, exchange for or acquire any shares of its
capital stock; or issue any additional shares of capital stock; (iii) sell,
transfer, lease, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person, or cancel, release or assign any
indebtedness of any such person; (iv) make or commit to make or incur any
obligation or liability in connection with any capital expenditures; (v)
terminate, establish, adopt, enter into, make any new or accelerate the vesting
or payment of any existing grants or awards under, amend or otherwise modify,
any compensation and benefit plans or increase the salary, wage, bonus or other
compensation of any officers or other key employees; (vi) make any investment
either by contributions to capital, property transfers or purchase of any
property or assets of any person; (vii) sell, transfer, mortgage, lease,
encumber or otherwise dispose of or discontinue any material portion of its
assets, business or properties; sell, assign or otherwise transfer any rights to
service loans; or sell, transfer, lease or encumber any loan;
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(viii) acquire any assets or enter into any contract, agreement or commitment or
arrangement with respect thereto or acquire any servicing right in a bulk
transaction; (ix) enter into, terminate, waive, release or assign any contract
or agreement, or make any change in any of its leases, agreements or contracts;
(x) settle certain claims, actions or proceedings involving liability,
restrictions on operations or the creation of precedent; (xi) waive or release
any material right or collateral or cancel or compromise any extension of credit
or other debt or claim; (xii) make, renegotiate, renew, increase, extend or
purchase any loan or lease (credit equivalent), advance, credit enhancement or
other extension of credit or make any commitment or guarantee in respect of any
of the foregoing; (xiii) change its fiscal year or its method of accounting in
effect on August 31, 1997; (xiv) enter into any new lines of business or cease
to conduct any lines of business that it conducted on the date of the Merger
Agreement or conduct any business activity outside the ordinary course of
business and not consistent with past practice; (xv) amend its certificate of
incorporation, by-laws or similar organizational documents; (xvi) implement or
adopt any material change in its interest rate risk management and hedging
policies or procedures, fail to follow its existing policies or procedures with
respect to managing its exposure to interest rate risk, fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure to
interest rate risk against loans held in the Company's pipeline, or materially
alter its methods or policies of underwriting, pricing, originating,
warehousing, selling and servicing or buying or selling rights to service loans;
(xvii) amend or revise or fail to comply in any material respect with any of its
other material policies, procedures and guidelines; or (xviii) agree to or make
any commitment to take any of the actions prohibited by the foregoing clauses of
the Merger Agreement.
No Solicitation. Neither the Company nor its subsidiaries nor any of the
respective officers and directors of the Company or its subsidiaries shall, and
the Company shall direct and use its reasonable best efforts to cause its
employees, agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal or offer
with respect to a merger, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company or
any of its subsidiaries, or, except to the extent the Board of Directors of the
Company determines in good faith, based on the advice of independent counsel,
that its fiduciary obligations require such action and prior to the receipt of
the required Company shareholder approval, engage in any negotiations concerning
or provide any confidential information or data to, or have any discussions with
any person relating to an acquisition proposal or otherwise knowingly facilitate
any effort to implement an acquisition proposal. The Company will notify NAB
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company and will continue to
inform NAB of the status of such inquiries, proposals, requests, negotiations
and discussions.
Employee Benefit Matters. During the period commencing on the Effective
Time and ending on the first anniversary thereof, to the extent permitted by
law, NAB has agreed to provide or cause the Company to provide employees of the
Company who remain as employees of the Company as of the Effective Time
("Covered Employees") with employee benefit plans, programs and arrangements
which in the aggregate are substantially comparable to those currently provided
by the Company and its subsidiaries (other than stock option or other plans
involving the potential issuance of securities of the Company). For purposes of
employee benefit plans, programs and arrangements provided to Covered Employees
maintained or contributed to by NAB or any of its subsidiaries, NAB will, and
will cause its subsidiaries to, treat service of each Covered Employee with the
Company and its subsidiaries (to the same extent such service is recognized
under analogous plans, programs and arrangements of the Company and its
subsidiaries) as service rendered to NAB and its subsidiaries, solely for the
purpose of eligibility to participate and vesting thereunder. NAB will honor,
and will cause the Company to honor, pursuant to their terms (as they may be
amended or superseded from time to time, for example, as provided by the
Employment Agreements), all employee severance plans and employment, change of
control or severance agreements of the Company or its subsidiaries that are
specifically identified to NAB. Neither NAB nor the Company will be prohibited
from amending or terminating any compensation and benefit plan of the Company
(or its subsidiaries) or NAB (or its subsidiaries) or any other contracts,
arrangements, commitments or understandings, in accordance with their terms and
applicable law.
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Termination. The Merger Agreement may be terminated, and the Merger
abandoned prior to the Effective Date, (i) by the mutual consent of NAB and the
Company; (ii) by NAB or the Company by written notice to the other in the event
of a material breach by, in the case of a termination by the Company, NAB or in
the case of a termination by NAB, the Company, of any representation, warranty,
covenant or agreement contained in the Merger Agreement which is not cured or
curable within 30 days of notice of any such breach; (iii) by NAB or the
Company, by written notice to the other if (a) any approval, consent or waiver
of a governmental authority required to permit consummation of the transactions
contemplated by the Merger Agreement shall have been denied or (b) any
governmental authority of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by the Merger Agreement; (iv) by NAB or the Company,
by written notice to the other party in the event that the Merger is not
consummated by June 30, 1998, unless the failure to so consummate by such time
is due to the breach of any representation, warranty or covenant contained in
the Merger Agreement by the party seeking to terminate; (v) by NAB, by written
notice to the Company if (a) the Company takes, causes to be taken or allows to
be taken any action that is prohibited by the non-solicitation provisions
described above or (b) the Board of Directors of the Company fails to make or
withdraws, rescinds or materially modifies its recommendation to the
shareholders that the Merger Agreement be approved by the shareholders at the
Special Meeting; or (vi) by the Company by written notice to NAB prior to the
approval by the shareholders of the Company of the Merger Agreement, if without
breaching the non-solicitation provisions described above, the Company shall
contemporaneously enter into a definitive agreement with a third party providing
for an Acquisition Transaction (as defined below) on terms determined in good
faith by the Board of Directors of the Company after consulting with and
considering the advice of the Company's independent counsel and financial
advisors to be more favorable to the stockholders of the Company than the Merger
and with respect to which the Board of Directors has determined after such
consultation and consideration that to proceed with the Merger would violate the
fiduciary duties of the Board of Directors to the Company's shareholders;
provided, however, that the right to terminate the Merger Agreement pursuant to
this termination provision shall not be available unless the Company pays to NAB
simultaneously with such termination a fee in the amount of $22,000,000 and an
amount in cash equal to the amount of all out-of-pocket expenses not exceeding
$10,000,000 incurred by NAB related to the transactions contemplated by the
Merger Agreement and NAB's plans to acquire the Company. Such amounts shall be
credited against any amounts which may be payable upon the occurrence of a "Fee
Trigger Event" as described below.
As used in the Merger Agreement the term "Acquisition Transaction" means
(i) a merger or consolidation, or any similar transaction involving the Company
or any subsidiary of the Company (a "Company Subsidiary") or group of Company
Subsidiaries that is, or would on an aggregate basis, constitute a significant
subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the SEC)
(other than mergers, consolidations, or similar transactions involving solely
the Company and/or one or more wholly owned subsidiaries of the Company provided
that any such transaction is not entered into in violation of the terms of the
Merger Agreement), (ii) a purchase, lease or other acquisition of all or
substantially all of the assets or deposits of the Company or any Company
Subsidiary or group of Company Subsidiaries that is, or would on aggregate basis
constitute, a significant subsidiary (other than in the case of subsidiaries of
HLI sales of mortgage loans, servicing rights and related assets in the ordinary
course of business consistent with past practice), or (iii) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 50% or more of the voting power of the
Company or any Company subsidiary or group of Company Subsidiaries that is, or
would on an aggregate basis constitute, a significant subsidiary.
The Merger Agreement provides that, upon the occurrence of a "Fee Trigger
Event" the Company shall pay to NAB a cash fee in the amount of $44,000,000 plus
all out-of-pocket expenses not exceeding $10,000,000 incurred by NAB related to
the transactions contemplated by the Merger Agreement and NAB's plans to acquire
the Company. The term "Fee Trigger Event" includes (i) the acquisition by any
person other than NAB or its subsidiaries of beneficial ownership of securities
representing 20% or more of the voting power of the Company; (ii) the
consummation of an Acquisition Transaction, except that the percentage referred
to in clause (iii) of the definition of "Acquisition Transaction" referred to
above shall be 20% for purposes of determining a Fee Trigger Event; or (iii) the
failure of BankBoston, N.A., Siesta Holdings, Inc., Thomas H.
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Lee Equity Fund III, L.P., Thomas H. Lee Foreign Fund III, L.P. and Madison
Dearborn Capital Partners, L.P. to vote its shares of Common Stock in favor of
the Merger. NAB's right to receive such fee shall be discontinued in the event
that any of the following occurs prior to a Fee Trigger Event: (i) the Effective
Time; (ii) termination of the Merger Agreement in accordance with its
provisions, if such termination occurs prior to the occurrence of a Preliminary
Fee Trigger Event (other than (x) a termination by NAB because of a knowing,
intentional or grossly negligent breach by the Company, (y) a termination by NAB
because of breach by the Company of the non-solicitation provisions of the
Merger Agreement or the failure to make, or the withdrawal, rescission or
material modification by the Board of Directors of the Company of its
recommendation that stockholders should vote in favor of the Merger, or (z)
termination by the Company under the terms described above which require it to
pay the $22,000,000 termination fee described above); or (iii) 18 months after
termination of the Merger Agreement if such termination follows or occurs at the
same time as a Preliminary Fee Trigger Event or is a Listed Termination as
defined in Section 6.3(a)(ii) of the Merger Agreement.
The term "Preliminary Fee Trigger Event" means any of the following events
(with the percentage described in subsection (iii) of the definition of
"Acquisition Transaction" above being deemed to be 10%): (i) the Company or any
Company subsidiary, without obtaining NAB's prior written consent shall have
entered into an agreement to engage in an Acquisition Transaction or the Board
of Directors of the Company shall have recommended that the Company approve an
Acquisition Transaction other than the Merger; (ii) any person other than NAB or
any NAB subsidiaries shall have acquired beneficial ownership or the right to
acquire beneficial ownership of securities representing 10% or more of the
outstanding voting power of the Company; (iii) the stockholders of the Company
shall have voted and failed to approve the Merger Agreement and the Merger at
the special meeting or if the special meeting shall not have been held in
violation of the Merger Agreement, if it shall have been publicly announced that
a third party has made or intends to make a proposal to engage in an Acquisition
Transaction; (iv) the Board of Directors of the Company shall have withdrawn or
modified in any manner adverse to NAB, its recommendation that the stockholders
of the Company approve the transactions contemplated by the Merger Agreement or
the Company shall have authorized, recommended or proposed an agreement to
engage in an Acquisition Transaction other than with NAB; (v) any person other
than NAB shall have made a proposal to the Company to engage in an Acquisition
Transaction and such proposal shall have become public; (vi) any person other
than NAB or any NAB subsidiary shall have filed with the SEC a Registration
Statement or tender offer materials with respect to a potential exchange or
tender offer that would constitute an Acquisition Transaction; (vii) the Company
shall have willfully breached any covenant or obligation obtained in the Merger
Agreement in anticipation of engaging in an Acquisition Transaction; and
following such breach NAB would be entitled to terminate the Merger Agreement;
or (viii) any person other than NAB or any NAB subsidiary shall have filed an
application or notice with the Federal Reserve Board or other federal or state
bank regulatory or antitrust authority, which application or notice has been
accepted for processing, for approval or clearance to engage in an Acquisition
Transaction.
NAB shall not be entitled to a termination fee or an expense reimbursement
fee if the Merger Agreement is terminated (i) by mutual consent, (ii) in the
event of certain breaches of the representations, warranties, covenants or
agreements contained in the Merger Agreement, (iii) in the event any approval,
consent or waiver of a governmental authority required to permit consummation of
the Merger shall have been denied, or any governmental authority shall have
issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the Merger, (iv) if the Merger is not consummated by June 30,
1998, unless the failure to so consummate by such time is due to the breach of
any representation, warranty or covenant contained in the Merger Agreement by
the Company if it is seeking to terminate or by NAB or its merger subsidiary if
NAB is seeking to terminate; provided that prior to any such termination, the
Company (i) has made and shall not have withdrawn, rescinded or materially
modified its recommendation to shareholders to vote favorably on the Merger,
(ii) is not in breach of its obligations under the provision of the Merger
Agreement which prohibits the Company from soliciting an Acquisition Proposal
from a third party or the provision which requires the Company to convene a
meeting of its stockholders for the purpose of approving the Merger Agreement,
and (iii) shall not have acted willfully or knowingly so as to adversely affect
the favorable approval of the Merger Agreement by the stockholders of the
Company.
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SHAREHOLDER AGREEMENTS
Each of BankBoston, N.A., Siesta Holdings, Inc., Thomas H. Lee Equity Fund
III, L.P., Thomas H. Lee Foreign Fund III, L.P., and Madison Dearborn Capital
Partners, L.P., who hold in the aggregate approximately 76% of the outstanding
shares of Common Stock of the Company, have entered into shareholder agreements
(the "Shareholder Agreements") under which they have irrevocably and
unconditionally agreed to vote all of their shares of Common Stock of the
Company in favor of the Merger at any meeting of the Company's stockholders
called to vote upon the Merger. Each such stockholder has further agreed that it
will not vote its shares of Common Stock of the Company in favor of any other
Acquisition Proposal (as defined below). The Shareholder Agreements provide that
each such stockholder will not (a) directly or indirectly sell, transfer,
pledge, assign or otherwise dispose of, or enter into any contract, option,
commitment or other arrangement or understanding with respect to the sale,
transfer, pledge, assignment or other disposition of, any of their shares of
Common Stock of the Company, unless such stockholder receives (i) an irrevocable
proxy to vote such shares with respect to the Merger Agreement and the Merger,
and such stockholder will vote such proxy as provided in the Shareholder
Agreement and (ii) an agreement identical in all material respects to such
Shareholder Agreement executed by the buyer of such shares; and (b) take any
action or omit to take any action which would prohibit, prevent or preclude such
stockholder from performing its obligations under the Shareholder Agreement.
Each such stockholder has agreed to take all reasonable actions and make
reasonable efforts to consummate the Merger and effect the other transactions
contemplated by the Merger Agreement.
Each such stockholder has also agreed that neither it nor any of the
subsidiaries, nor any of the respective officers and directors of the
stockholder or its subsidiaries shall, and it shall direct and use its
reasonable best efforts to cause its employees, agents and representatives
(including without limitation any investment, banker, attorney or accountant
retained by it or any of its subsidiaries) not to initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer (including without limitation any proposal or offer to stockholders of
the Company) with respect to a merger, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company or any of its subsidiaries (any such proposal or offer being an
"Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or having any discussions with, any person
relating to an Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal or make any
Acquisition Proposal.
The Shareholder Agreements provide that the stockholders are entering into
such agreements in their capacity as stockholders of the Company and that
nothing therein shall be deemed to restrict in any respect the ability of the
directors of the Company (including directors who are employees of the
stockholders and affiliates of the stockholders) to exercise their fiduciary
duties in accordance with the terms of the Merger Agreement.
DESCRIPTION OF STATUTORY APPRAISAL RIGHTS
If the Merger is consummated, dissenting stockholders of the Company will
be entitled to have the fair value of their shares of the Common Stock and Class
C Common Stock at the Effective Time determined and paid to them by complying
with the provisions of Section 262 of Delaware General Corporation Law. The
following is a summary description of the provisions of Section 262. This
summary is complete in all material respects, but should be read with the full
text of Section 262, a copy of which is attached hereto as Exhibit B. Any
stockholder intending to exercise statutory appraisal rights is urged to review
Exhibit B carefully and to consult with legal counsel so as to assure strict
compliance with its provisions.
A VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE A
WAIVER OF A STOCKHOLDER'S RIGHT TO DEMAND APPRAISAL OF SUCH STOCKHOLDER'S SHARES
OF COMMON STOCK AND CLASS C COMMON STOCK.
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WHO MAY EXERCISE STATUTORY APPRAISAL RIGHTS
Under Section 262, stockholders who follow the procedures set forth therein
will be entitled to have their shares of Common Stock and Class C Common Stock
appraised by the Delaware Court of Chancery and to receive payment in cash of
the "fair value" of such shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. Stockholders considering seeking
appraisal should be aware that the fair value of their shares of Common Stock
and Class C Common Stock as determined under Section 262 could be more than,
less than or equal to the consideration to be received by stockholders in the
Merger.
PROCEDURE FOR EXERCISING STATUTORY APPRAISAL RIGHTS
Where a proposed merger for which statutory appraisal rights are available
is submitted for approval at a meeting of stockholders, Section 262 requires
that the company, not less than 20 days prior to such meeting, notify each of
its stockholders who was such on the record date for such meeting with respect
to the shares for which statutory appraisal rights are available, that statutory
appraisal rights are so available, and must include in such notice a copy of
Section 262. This Proxy Statement constitutes such notice to the holders of the
Common Stock and Class C Common Stock and the provisions of Section 262 are
attached to this Proxy Statement as Exhibit B. Any Company stockholder who
wishes to exercise statutory appraisal rights with respect to all or a portion
of the shares of Common Stock and Class C Common Stock held by such stockholder
or who wishes to preserve the right to do so should review the following
discussion and Exhibit B carefully, as the failure to timely and properly comply
with the procedures specified will result in the loss of statutory appraisal
rights under Delaware law.
A holder of Company Common Stock or Class C Common Stock wishing to
exercise statutory appraisal rights must (i) deliver to the Company prior to the
vote on the Merger Agreement at the Special Meeting a written demand for
appraisal of such holder's Common Stock or Class C Common Stock and (ii) not
vote in favor of adoption of the Merger Agreement. A holder of Common Stock or
Class C Common Stock wishing to exercise such rights must be the record holder
of such shares on the date the written demand is made and must continue to hold
such shares of record through the Effective Time. Accordingly, a holder of the
Company's Common Stock or Class C Common Stock who is a record holder on the
date that the demand is made but who subsequently transfers such shares prior to
the Effective Time will lose such holder's right to appraisal with respect to
the shares transferred.
A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on the stock
certificate. If the shares of Common Stock or Class C Common Stock in question
are held in a fiduciary or representative capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the shares are owned of record by more than one person as in a joint
tenancy or a tenancy in common, the demand should be executed by or on behalf of
all joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owner or owners. A
record holder such as a broker who holds shares of Common Stock or Class C
Common Stock as nominee for several beneficial owners may exercise statutory
appraisal rights with respect to the shares of Common Stock or Class C Common
Stock held by one or more beneficial owners without exercising such rights with
respect to other beneficial owners; in such case, the written demand should set
forth the number of shares of Common Stock and Class C Common Stock as to which
appraisal is sought and, where no number of shares is expressly mentioned, the
demand will be presumed to cover all shares of Common Stock and Class C Common
Stock held in the name of the record owner. Stockholders who hold the Company's
Common Stock or Class C Common Stock in brokerage accounts or other nominee form
and who wish to assert statutory appraisal rights are urged to consult with
their brokers to determine the appropriate procedures to be followed in making a
demand for appraisal by such a nominee.
All written demands for appraisal should be sent or delivered to the
Company at 7301 Baymeadows Way, Jacksonville, Florida 32256, Attention: Robert
J. Jacobs, Secretary.
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Any holder of the Company's Common Stock or Class C Common Stock who has
duly demanded an appraisal in compliance with Section 262 will not, from and
after the Effective Time, be entitled to vote the Common Stock or Class C Common
Stock subject to the demand for any purpose or be entitled to the payment of
dividends or other distributions on the Common Stock (except for dividends or
distributions payable to holders of record of the Common Stock or Class C Common
Stock as of a record date prior to the Effective Time). After the Effective
Time, no Common Stock or Class C Common Stock will be outstanding.
Within 10 days after the Effective Time the Surviving Corporation will be
required to notify each stockholder who has complied with the provisions of
Section 262 and who has not voted in favor of adoption of the Merger Agreement
of the date that the Merger became effective. Within 120 days after the
Effective Time, any stockholder who has complied with the requirements for
exercise of statutory appraisal rights will be entitled, upon written request,
to receive from the Surviving Corporation a statement setting forth the
aggregate number of shares of Common Stock not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such Common Stock. Such statements must be
mailed within 10 days after a written request therefor has been received by the
Surviving Corporation or within 10 days after the expiration of the period for
delivery of demands, whichever is later.
DETERMINATION OF FAIR VALUE; VENUE FOR FILING APPRAISAL PETITION
Within 120 days after the Effective Time, but not thereafter, the Surviving
Corporation or any stockholder who has complied with the statutory requirements
described above may file a petition in the Delaware Chancery Court demanding a
determination of the fair value of the Common Stock and Class C Common Stock and
a copy thereof shall be served upon the Surviving Corporation. The Surviving
Corporation is under no obligation to and does not currently intend to file a
petition with respect to the appraisal of the fair value of the Common Stock and
Class C Common Stock. Accordingly, it will be the obligation of the stockholders
to initiate all necessary action to perfect statutory appraisal rights with
respect to their shares of Common Stock within the time periods prescribed by
Section 262.
If a petition for appraisal is timely filed, stockholders entitled to
statutory appraisal rights may receive notice of the time and place of a hearing
on the petition. After such hearing, the Delaware Court of Chancery will
determine the stockholders entitled to statutory appraisal rights and the "fair
value" of their shares of the Common Stock and Class C Common Stock, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, to be paid thereon. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in determining fair value in
an appraisal proceeding. The Delaware Supreme Court has further stated that in
making a determination of fair value in an appraisal proceeding the Court must
consider market value, asset value, dividends, earnings prospects, the nature of
the enterprise and any other facts which could be ascertained as of the date of
the merger which throw any light on the future prospects of the merged
corporation. In Weinberger v. UOP, INC., the Delaware Supreme Court held that
the "elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered" in determining fair value.
COSTS OF APPRAISAL ACTION
The costs of an appraisal action may be determined by the Court of Chancery
and taxed upon the parties as it deems equitable. The Chancery Court may also
order that all or a portion of the expenses incurred by any stockholder in
connection with appraisal, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts utilized in the appraisal proceeding,
be charged pro rata against the value of all of the shares of Common Stock and
Class C Common Stock entitled to appraisal.
If any stockholder who properly demands appraisal of his or her Common
Stock or Class C Common Stock under Section 262 fails to perfect, or effectively
withdraws or loses his or her right to appraisal, as provided in the Delaware
General Corporation Law, such stockholder's shares will be converted into the
right to receive the consideration specified in the Merger Agreement. A
stockholder will fail to perfect statutory
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appraisal rights, or effectively lose or withdraw his or her right to appraisal
if, among other things, no petition for appraisal is filed within 120 days after
the Effective Time or if the stockholder delivers to the Company or the
Surviving Corporation a written withdrawal of his or her demand for appraisal
and acceptance of the Merger. Any such attempt to withdraw an appraisal demand
more than 60 days after the Effective Time will require the written approval of
the Surviving Corporation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
This summary sets forth material anticipated U.S. federal income tax
consequences to stockholders of their disposition of capital stock pursuant to
the Merger. The summary is based on the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect as of the date hereof. Such laws or interpretations may differ at the
Effective Time, and relevant facts may also differ. The summary does not address
any foreign, state or local tax consequences, nor does it address estate or gift
tax considerations. The effectiveness of the Merger is not conditioned upon the
receipt of any ruling from the Internal Revenue Service or any opinion of
counsel as to tax matters.
This summary is for general information only. The tax treatment of each
stockholder will depend in part upon his or her particular situation. Special
tax consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, pension funds, mutual funds,
broker-dealers, persons who are not citizens or residents of the United States
or who are foreign corporations, foreign partnerships or foreign estates or
trusts, stockholders who own or owned actually or constructively (under certain
attribution rules contained in the Code) 5% or more of the outstanding capital
stock of the Company who acquired their capital stock through the exercise of an
employee stock option or otherwise as compensation, and persons who receive
payments in respect of options to acquire capital stock. All stockholders should
consult with their own tax advisors as to the particular tax consequences of the
consummation of the Merger to them, including the applicability and effect of
any state, local and foreign tax laws.
A Company stockholder will generally recognize gain or loss equal to the
difference between the adjusted tax basis of the shares of capital stock of the
Company exchanged in the Merger and the amount of cash received as a result of
the Merger. Such gain or loss will be capital gain or loss if the shares of
capital stock of the Company are capital assets in the hands of the exchanging
stockholder, and will be long-term capital gain or loss if the holding period
for the shares of capital stock of the Company is more than 12 months as of the
Effective Time. For an individual stockholder, long-term capital gain is
generally subject to a maximum Federal income tax rate of 28% in respect of
property held for more than one year and to a maximum Federal income tax rate of
20% in respect of property held in excess of 18 months.
REGULATORY MATTERS
BANK REGULATORY APPROVALS
Federal Reserve Board. Pursuant to the Bank Holding Company Act of 1956,
as amended (the "BHCA") the Merger is subject to prior approval by the U.S.
Federal Reserve Board under Section 4(c)(8) of the BHCA. Under the BHCA, the
Federal Reserve Board is required, in approving a transaction such as the
Merger, to take into consideration whether the Merger can reasonably be expected
to produce benefits to the public (such as greater convenience, increased
competition, and gains in efficiency) that outweigh possible adverse effects
(such as undue concentration of resources, decreased or unfair competition,
conflicts of interest, and unsound banking practices). Such consideration will
include an evaluation of the financial and managerial resources of NAB,
including its subsidiaries and the Company, the effect of the Merger on those
resources, and the management expertise, internal control and risk-management
systems, and capital of the Company.
State Regulatory Authorities. The Company is subject to the jurisdiction
of various state mortgage banking licensing and supervisory authorities
(together, the "State Agencies"), and must provide notices to and/or receive
certain approvals from the State Agencies prior to the consummation of the
Merger. There can
25
<PAGE> 34
be no assurance as to when the requisite State Agency approvals might be
received although the Company anticipates receipt of all State Agency approvals
within sixty days after filing each such approval request. The Company must also
provide certain notices to Fannie Mae, FHLMC, GNMA, HUD and VA. The Company must
satisfy the foregoing requirements as a condition to the Merger; provided,
however, that if the Company cannot satisfy any such requirement in time to
permit the consummation of the Merger at a time when it otherwise could occur,
the Company shall enter into arrangements reasonably acceptable to NAB that
enable the Company to conduct its business substantially in accordance with its
recent past practices and thereby permit the consummation of the Merger.
Reserve Bank of Australia. Supervision and regulation of the Australian
banking system is the responsibility of the Reserve Bank of Australia (the
Reserve Bank) as empowered by the Banking Act 1959, as amended (the Banking
Act).
Currently, Prudential Statement G1 ("PSG1") issued by the Reserve Bank,
entitled "Banks Associations with Non-Banks," sets out the broad criteria for
diversification by banks through equity involvements or investments in
subsidiaries. Paragraph 2 of PSG1 provides that a potential equity association
should normally be in the field of finance and where it involves more than a
nominal ownership interest (the threshold being defined as 10 percent of equity)
should be referred to the Reserve Bank for comment before the bank enters into a
firm commitment. Through consensual agreement between the Reserve Bank and
Australian licensed banks, the Reserve Bank's affirmation is required prior to a
firm commitment by a bank to any major equity association, including the Merger.
In assessing a potential equity association, the Reserve Bank requires
assurances from the acquiring bank's board that the acquired entity's assets are
fairly valued on the basis of an appropriate due diligence examination; the bank
will have the management resources, systems and controls in place to manage
effectively the business of the acquired entity; and the Reserve Bank will be
regularly and fully informed of developments affecting the strategy, control and
financial condition of the acquired entity.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION
NAB and the Company have filed or will promptly file applications with all
applicable regulatory agencies and have taken or will take other appropriate
action with respect to any requisite approvals or other action of any
governmental entity.
The Merger Agreement provides that the obligation of each of NAB and the
Company to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approval of the Federal Reserve
Board; provided however that no such approval shall be deemed to have been
received if it shall include any condition or requirement that, individually or
in the aggregate, (i) would result in a Material Adverse Effect on NAB, Michigan
National Corporation or the Company, (ii) would require NAB, the Company or
their respective subsidiaries to dispose of any asset which is material to NAB
or the Company, (iii) materially restricts or curtails the current business
operations or activities of NAB, Michigan National Corporation or the Company,
(iv) would require NAB, Michigan National Corporation or the Company to raise an
amount of capital, the issuance and sale of which, in the absence of the Merger
and the other transactions contemplated by the Merger Agreement would in NAB's
judgment be materially burdensome in light of NAB's capital raising policies or
(v) would reduce the benefits of the transactions contemplated by the Merger
Agreement to NAB or Michigan National Corporation in so significant a manner
that NAB, in its reasonable judgment, would not have entered into the Merger had
such condition or requirement been known at the date the Merger Agreement was
entered into. There can be no assurance that any governmental agency will
approve or take any other required action with respect to the Merger, and, if
approvals are received or action is taken, there can be no assurance as to the
date of such approvals or action, that such approvals or action will not be
conditioned upon matters that would cause the parties to abandon the Merger or
that no action will be brought challenging such approvals or action, or if such
challenge is made, the result thereof.
NAB and the Company are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as described
above. Should any other approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the parties
to abandon the Merger.
26
<PAGE> 35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of the Company's voting securities as of December 5, 1997,
by (i) all stockholders of the Company who own more than 5% of any class of such
voting securities; (ii) each director who is a stockholder; (iii) certain
executive officers; and (iv) all directors and executive officers as a group, as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENTAGE OF VOTING
NAME OF BENEFICIAL OWNER COMMON STOCK STOCK OUTSTANDING
- ------------------------------------------------------------ ------------ --------------------
<S> <C> <C>
BankBoston, N.A............................................. 11,461,400 26.42%
100 Federal Street
Boston, MA
Siesta Holdings, Inc. ...................................... 11,461,400 26.42%
3800 Howard Hughes Parkway
Suite 1560
Las Vegas, NV
THL(1)...................................................... 8,596,050 19.82%
75 State Street
Boston, MA
Madison Dearborn Capital Partners, L.P. .................... 2,865,350 6.60%
Three First National Plaza
Chicago, IL
Thomas Hagerty.............................................. 25,194(2)*
David V. Harkins............................................ 39,661(3)*
Joe K. Pickett.............................................. 126,797(4)*
Hugh R. Harris.............................................. 121,435(4)*
Kevin D. Race............................................... 48,586(5)*
William Glasgow, Jr. ....................................... 63,955(5)*
Mark F. Johnson............................................. 68,051(5)*
All Directors and Executive Officers as a group (18
persons).................................................. 593,568(6) 1.36%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Thomas H. Lee Equity Fund III, L.P. and certain affiliates of Thomas H. Lee
Company are herein collectively referred to as "THL."
(2) Does not include 8,570,856 shares owned by THL, as to which Mr. Hagerty
disclaims beneficial ownership.
(3) Does not include 8,556,389 shares owned by THL, as to which Mr. Harkins
disclaims beneficial ownership.
(4) Includes 48,573 shares currently exercisable under the Company stock option
plan.
(5) Includes 19,431 shares currently exercisable under the Company stock option
plan.
(6) Does not include the shares held by THL, Madison Dearborn Capital Partners,
L.P., BankBoston, N.A., and Siesta Holdings, Inc., with which certain
directors are affiliated; includes 202,073 shares currently exercisable
under the Company stock option plan.
27
<PAGE> 36
BUSINESS AND OPERATIONS OF THE COMPANY
The Company was formed on December 11, 1995 by an investor group consisting
of Thomas H. Lee Company and its affiliates and Madison Dearborn Partners, L.P.,
and on March 15, 1996 acquired certain assets and liabilities of HLI, the
mortgage banking business owned by BankBoston, N.A. ("BankBoston"). On May 31,
1996, the Company acquired certain of the mortgage banking operations of Barnett
Banks, Inc. ("Barnett"). The Company's executive offices are located at 7301
Baymeadows Way, Jacksonville, Florida 32256, telephone number (904) 281-3000.
The Company, together with its subsidiaries (collectively "HomeSide"), is
one of the largest full-service residential mortgage banking companies in the
United States. HomeSide's strategy emphasizes variable cost mortgage origination
and low cost servicing. HomeSide's mortgage loan production volume, excluding
bulk purchases, was $20.9 billion for the period March 16, 1996 to February 28,
1997, and $10.5 billion for the six months ending August 31, 1997 and its
servicing portfolio was $96.6 billion at August 31, 1997. HomeSide ranks as the
5th largest originator and 7th largest servicer in the United States for
calendar 1996 based on data published by National Mortgage News.
HomeSide's business strategy is to increase the volume of its loan
originations and the size of its servicing portfolio while continuing to improve
operating efficiencies. In originating mortgages, HomeSide focuses on variable
cost channels of production, including correspondent, broker, consumer direct,
affinity, and co-issue sources. HomeSide pursues strategic relationships such as
its existing agreements to acquire residential mortgage loans from BankBoston
and Barnett production sources, which, for the period May 31, 1996 through
February 28, 1997, represented 18.8% of HomeSide's loan production. Management
believes that these variable cost channels of production deliver consistent
origination opportunities for HomeSide without the fixed cost investment
associated with traditional retail mortgage branch networks. HomeSide believes
that its ongoing investment in technology will further enhance and expand
existing processing capabilities and improve its efficiency. Based on
independent surveys of direct cost per loan and loans serviced per employee,
management believes that HomeSide has been one of the industry's most efficient
mortgage servicers. The Company's average cost per employee is not higher than
the average cost per employee of its competitors.
HomeSide's business activities consist primarily of:
- Mortgage production: origination and purchase of residential single
family mortgage loans through multiple channels including correspondents,
strategic partners (BankBoston and Barnett), mortgage brokers, co-issue
partners, direct consumer telemarketing and affinity programs;
- Servicing: administration, collection and remittance of monthly mortgage
principal and interest payments, collection and payment of property taxes
and insurance premiums and management of certain loan default activities;
- Secondary marketing: sale of residential single family mortgage loans as
pools underlying mortgage-backed securities guaranteed or issued by
governmental or quasi-governmental agencies or as whole loans or private
securities to investors; and
- Risk management: management of a program designed primarily to protect
the economic performance of the servicing portfolio that could otherwise
be adversely affected by loan prepayments due to declines in interest
rates.
HomeSide participates in several origination channels, with a focus on
wholesale originations. Since the acquisition of HLI, wholesale channels
(correspondent, co-issue and broker) have represented more than 95% of
HomeSide's total production. Excluding the volumes purchased from BankBoston and
Barnett, no single source within the correspondent or broker channels accounted
for more than 2% of total production during the period March 16, 1996 to
February 28, 1997. HomeSide's other origination channels include telemarketing,
affinity programs and retail branches. HomeSide also purchases servicing rights
in bulk from time to time. This multi-channel production base provides access to
and flexibility among production channels in a wide variety of market and
economic conditions.
28
<PAGE> 37
HomeSide derives its revenues predominantly from its servicing operations.
Loan servicing includes collecting payments of principal and interest from
borrowers, remitting aggregate loan payments to investors, accounting for
principal and interest payments, holding escrow funds for payment of mortgage
related expenses such as taxes and insurance, making advances to cover
delinquent payments, inspecting the mortgaged premises as required, contacting
delinquent mortgagors, supervising foreclosures and property dispositions in the
event of unremedied defaults, and other miscellaneous duties related to loan
administration. HomeSide collects servicing fees from monthly mortgage payments.
These fees generally range from 0.25% to 0.50% of the declining principal
balances of the loans per annum. HomeSide's weighted average servicing fee,
including ancillary income, was 0.431% for the period from March 16, 1996 to
February 28, 1997 and 0.436% for the three months ended August 31, 1997.
HomeSide also maintains certain subservicing relationships whereby servicing is
performed by another servicer under an agreement with HomeSide, which remains
contractually responsible for servicing the loans. Subservicing relationships
are often entered into as part of a bulk servicing acquisition where the selling
institution continues to perform servicing until the loans are transferred to
the purchasing institution.
HomeSide customarily sells all loans that it originates while retaining the
servicing rights to such loans. HomeSide aggregates mortgage loans into pools
and sells these pools, as well as individual mortgage loans, to investors
principally at prices established under forward sales commitments. HomeSide's
FHA and VA loans are generally pooled and sold in the form of GNMA mortgage
backed securities ("MBS"). Conforming conventional mortgage loans are generally
pooled and exchanged under the purchase and guarantee programs sponsored by
Fannie Mae and FHLMC for Fannie Mae MBS or FHLMC participation certificates,
respectively. HomeSide pays certain guarantee fees to the agencies in connection
with these programs and then sells the GNMA, Fannie Mae and FHLMC securities to
securities dealers. A limited number of mortgage loans (i.e., non-conforming
loans) are sold to private investors. In the period March 16, 1996 to February
28, 1997, approximately 78% of the mortgage loans originated by HomeSide were
sold to GNMA (38%), Fannie Mae (27%) or FHLMC (13%).
CERTAIN INFORMATION CONCERNING NAB
NAB, together with its subsidiaries (the "Group"), is Australia's largest
bank in terms of assets with total assets of A $202.0 billion at September 30,
1997 and is among the world's 40 largest banks in terms of shareholders' equity.
NAB ranked in terms of market capitalization as one of the two largest
Australian companies listed on the Australian Stock Exchange Limited (the "ASX")
with a market capitalization of A$27.6 billion at November 20, 1997. For its
fiscal year ended September 30, 1997, the Group recorded an operating profit
after income tax of A$2,223 million, the Group's fifth consecutive year of
record profits.
NAB was established in Melbourne, Australia in 1858 as The National Bank of
Australasia. The Group has expanded its banking activities in Australia and
overseas principally through a combination of organic growth and acquisitions.
Over the past decade, the Group has diversified the geographic range of its
activities by acquiring regional banks in the United Kingdom, the Republic of
Ireland ("Ireland"), New Zealand and the United States. The Group is continuing
to develop the banking and financial service activities of each bank within its
regional market. In addition to the Group's extensive range of retail and
wholesale banking services, it also offers a range of financial services,
including life and other insurance, retail and wholesale funds management and
custodian and trustee services. The Group also has branches or representative
offices in the major business capitals in the Asia region. As a result, assets
outside Australia accounted for approximately 47% of the Group's total assets as
at September 30, 1997. Management believes that the Group's international spread
of activities reduces its dependence on any single economy by ensuring a
diversified income stream. Growth in other financial services is consistent with
the Group's focus on expanding its non-interest income streams.
The Group's business operations in Australia are conducted principally
through NAB, which offers a full range of banking and financial services across
all Australian states and major territories. Services include retail financial
services, such as residential mortgage lending, credit card operations and
personal loans; business financial services, including loans, trade finance,
leasing finance, payment services, cash flow lending, invoice
29
<PAGE> 38
discounting, fleet management services, equity finance and rural lending;
wholesale financial services, including corporate banking activities, project
and structured finance, capital markets facilities, treasury services including
foreign exchange transactions and custody and related services for domestic and
offshore institutions; and, financial management services, including personal
financial planning, life and disability insurance, superannuation (pension) and
a range of managed investment funds. The Australian operations of NAB, when
viewed on a stand alone basis, would constitute the largest bank in Australia in
terms of assets.
The Group's business operations in New Zealand are conducted through the
Bank of New Zealand ("BNZ") which is the second largest financial institution in
New Zealand in terms of assets. BNZ, which was established in 1861, was acquired
by the Group in 1992. It offers a full range of banking services and selected
financial services to personal, business, rural and corporate customers.
In the United Kingdom, the Group has acquired Clydesdale Bank PLC
("Clydesdale Bank"), Yorkshire Bank PLC ("Yorkshire Bank") and Northern Bank
Limited ("Northern Bank"). Clydesdale Bank, which was established in 1838 and
was acquired by the Group in 1987, is the third largest bank in Scotland in
terms of assets. It has a substantial base in consumer and business banking in
Scotland. Yorkshire Bank, which was established in northern England in 1859, was
acquired by the Group in 1990. Yorkshire Bank, which is strongly represented in
northern England and the Midlands region, has a substantial presence in consumer
banking and has established a significant business banking capability. In
Northern Ireland, the Group operates Northern Bank, which was acquired in 1987.
Northern Bank is the largest bank in Northern Ireland in terms of assets and
offers a full banking service to personal, business and rural customers and a
growing range of financial services.
The Group's business operations in Ireland are conducted through National
Irish Bank Limited ("National Irish Bank"), which was acquired by the Group in
1987. National Irish Bank provides banking and selected financial services to
individuals, rural enterprises and businesses in Ireland and is seeking to
expand in the business banking market.
In 1995, the Group established a significant presence in the United States
with the acquisition of Michigan National Corporation ("MNC") whose principal
subsidiary, Michigan National Bank ("MNB") is currently the fifth largest bank
in Michigan and the 58th largest bank in the United States, in each case, in
terms of total assets. It offers a range of commercial and consumer banking
services.
The Group also has an established presence in Asia. From its regional
headquarters in Hong Kong, the Group operates a branch in Tokyo and six branches
and four representative offices in Asia's major business capitals providing
trade finance and treasury services. The Group's presence in the region is being
expanded through the enhancement of wholesale banking capabilities and selected
consumer banking activities. In addition, the Group has commenced providing a
limited range of personal financial services through the provision of mortgages.
The Group's business operations also include National Australia Financial
Management Limited which offers financial services products in Australia such as
life insurance, superannuation (pension), rollovers and investment funds.
Investment activities in Australia are conducted through National Australia
Asset Management Limited. On October 1, 1997, the Group acquired County NatWest
Australia Investment Management Limited, an investment management company.
30
<PAGE> 39
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected quarterly and annual consolidated financial and operating
information of the Company as set forth below should be read in conjunction
with, and is qualified in its entirety by reference to, the consolidated
financial statements and the notes thereto incorporated by reference in this
Proxy Statement. The consolidated operating results for the period March 16,
1996 to May 31, 1996, each of the three months ended August 31, 1996, November
30, 1996, and February 28, 1997, the period March 16, 1996 to August 31, 1996,
and the six months ended August 31, 1997 are unaudited, but, in the opinion of
management, contain all material adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation; such results of
operations are not necessarily indicative of results to be expected for the full
year. The consolidated operating results for the period March 16, 1996 to
February 28, 1997, and the consolidated balance sheet data at February 28, 1997,
are derived from, and are qualified by reference to, the audited consolidated
financial statements incorporated by reference in this Proxy Statement and
should be read in conjunction with those financial statements and notes thereto.
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE FOR THE PERIOD FROM FOR THE FOR THE
PERIOD FROM THREE MONTHS THREE MONTHS THREE MONTHS MARCH 16, 1996 PERIOD FROM SIX MONTHS
(DOLLAR AMOUNTS IN MARCH 16, 1996 ENDED ENDED ENDED TO FEBRUARY MARCH 16, 1996 ENDED
THOUSANDS, EXCEPT TO MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, 28, TO AUGUST 31 AUGUST 31,
PER SHARE DATA) 1996 1996 1996 1997 1997 1996 1997
-------------- ------------ ------------ ------------ -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Statement of
Income Data:
Revenues:
Mortgage servicing fees... $ 41,485 $ 83,349 $ 91,636 $ 95,871 $ 312,341 $ 124,834 $ 203,469
Amortization of mortgage
servicing rights........ (16,442) (40,464) (48,831) (50,090) (155,827) (56,906) (102,741)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net servicing revenue... 25,043 42,885 42,805 45,781 156,514 67,928 100,728
Interest income........... 12,719 22,270 25,241 21,277 81,507 34,989 45,884
Interest expense.......... (14,962) (23,920) (22,321) (26,497) (87,700) (38,882) (45,954)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest revenue.... (2,243) (1,650) 2,920 (5,220) (6,193) (3,893) (70)
Net mortgage origination
revenue................. 10,810 16,273 16,521 22,469 66,073 27,083 38,510
Other income.............. 107 355 79 141 682 462 1,036
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues.......... 33,717 57,863 62,325 63,171 217,076 91,580 140,204
Expenses:
Salaries and employee
benefits................ 11,480 21,177 20,650 19,669 72,976 32,657 39,282
Occupancy and equipment... 1,846 3,084 3,337 3,503 11,770 4,930 7,627
Servicing losses on
investor-owned loans and
foreclosure-related
expenses................ 3,938 4,058 4,957 4,981 17,934 7,996 10,509
Other expenses............ 5,345 12,523 11,711 12,135 41,714 17,868 20,046
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses.......... 22,609 40,842 40,655 40,288 144,394 63,451 77,464
Income before income taxes
and extraordinary loss on
early extinguishment of
debt...................... 11,108 17,021 21,670 22,883 72,682 28,129 62,740
Income tax expenses........ 4,554 6,954 9,015 8,750 29,273 11,508 24,469
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before extraordinary
loss on early
extinguishment of debt.... 6,554 10,067 12,655 14,133 43,409
Extraordinary loss one
early extinguishment of
debt, net of tax.......... -- -- -- 6,440 6,440
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income................. $ 6,554 $ 10,067 $ 12,655 $ 7,693 $ 36,969 $ 16,621 $ 38,271
=========== =========== =========== =========== =========== =========== ===========
Per Share Data:
Income per share before
extraordinary loss........ $ 0.34 $ 0.29 $ 0.36 $ 0.37 $ 1.33 $ 0.61 $ 0.87
Net income per share....... $ 0.34 $ 0.29 $ 0.36 $ 0.20 $ 1.13 $ 0.61 $ 0.87
Book Value................. 11.78 10.71 12.66
Weighted average shares
outstanding............... 19,246,902 34,973,790 34,996,360 38,279,486 32,687,780 27,110,346 44,050,325
=========== =========== =========== =========== =========== =========== ===========
Selected Balance Sheet Data
at End of Period:
Mortgage loans held for
sale...................... $ 974,484 $ 1,290,841 $ 1,101,229 $ 805,274 $ 805,274 $ 1,290,841 $1,029,620
Mortgage servicing
rights.................... 1,235,708 1,428,117 1,339,819 1,614,307 1,614,307 1,428,117 1,822,433
Total assets............... 2,666,771 2,934,938 2,858,711 2,752,182 2,752,182 2,934,938 3,564,859
Warehouse credit
facility.................. 954,994 1,245,591 1,074,583 835,396 835,396 1,245,591 1,002,284
Long-term debt............. 1,168,059 1,064,067 1,157,508 1,134,235 1,134,235 1,064,067 1,721,870
Total liabilities.......... 2,301,817 2,559,817 2,470,785 2,239,886 2,239,886 2,559,817 3,014,272
Total stockholders'
equity.................... 364,954 375,121 387,926 512,296 512,296 375,121 550,587
=========== =========== =========== =========== =========== =========== ===========
Selected Operating Data:
Volume of loan
production................ $ 3,780,236 $ 5,492,199 $ 5,540,875 $ 6,064,225 $ 20,877,535 $ 9,272 $ 10,541
Loan servicing portfolio
(at period end)........... 78,391,496 85,835,155 88,706,478 90,192,247 90,192,247 85,835 96,554
Loan servicing portfolio
(average during the
period)................... 44,718,020(a) 82,247,794 87,537,188 90,540,220 75,692,214(b) 63,483(c) 93,389
Weighted average interest
rate of the servicing
portfolio (at period
end)...................... 7.86% 7.92% 7.91% 7.92% 7.92% 7.92% 7.89%
Weighted average servicing
fee of the servicing
portfolio including
ancillary income (at
period end)............... 0.445% 0.405% 0.419% 0.424% 0.431% 0.429% 0.436%
</TABLE>
- ---------------
(a) Period information is for March 1, 1996 through May 31, 1996.
(b) Period information is for March 1, 1996 through February 28, 1997.
(c) Period information is for March 1, 1996 through August 31, 1996.
31
<PAGE> 40
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol HSL. The following table sets forth on a quarterly basis the range of
high and low sales prices per share for the Common Stock as reported by the New
York Stock Exchange. The Company's initial public offering occurred on January
30, 1997.
<TABLE>
<CAPTION>
HIGH LOW
--- ---
<S> <C> <C>
1997:
January 30-February 28, 1997................................. 19 161/8
1998:
First Quarter ended May 31, 1997............................. 187/8 131/2
Second Quarter ended August 31, 1997......................... 235/8 173/4
Third Quarter ended November 30, 1997........................ 271/16 221/2
Fourth Quarter through December 9, 1997...................... 277/16 27 /16
</TABLE>
On October 24, 1997, the trading date prior to the public announcement of
the execution of the Merger Agreement, the high and low sales prices per share
of the Common Stock were 24 1/2 and 24 1/8, respectively. On December 9, 1997,
the closing sale price per share of Common Stock was 27 7/16.
On December 5, 1997 the Company's Common Stock was held by approximately 98
holders of record. The Company has never paid cash dividends on its Common Stock
and has no intention to do so in the foreseeable future.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been engaged as independent public accountants to
audit the financial statements of the Company and its subsidiaries for the
current fiscal year.
A representative of Arthur Andersen LLP is expected to be present at the
Special Meeting and will be given the opportunity to make a statement. The
representative will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
As of the date of the Proxy Statement, management is unaware of any matters
to come before the Special Meeting other than as set forth in the Notice. If
other matters are properly presented at the Special Meeting for consideration,
the persons named in the form of proxy enclosed herewith and acting thereunder
will have discretion to vote on such matters to be presented at the Special
Meeting.
FUTURE STOCKHOLDER PROPOSALS
If the Merger is not consummated, the Company will hold an Annual Meeting
of Stockholders with respect to its fiscal year ending February 28, 1998, at
such time in 1998 as the Board considers appropriate, and will solicit proxies
for that meeting. In the event that the Merger is not consummated, any
stockholder who wishes to submit a proposal for inclusion in the Company's proxy
materials with respect to such meeting must do so so that such proposal is
received at the Company's Jacksonville, Florida office no later than January 21,
1998. To be eligible for inclusion in the 1997 proxy materials, such proposal
must conform to the requirements set forth in Regulation 14A promulgated under
the Exchange Act. Any such proposals should be directed to the Secretary of the
Company at 7301 Baymeadows Way, Jacksonville, Florida 32256, Attention:
Secretary.
32
<PAGE> 41
VOTING PROCEDURES
The affirmative vote of holders of a majority of all of the outstanding
shares of the Common Stock of the Company entitled to vote on the Merger is
required to adopt the Merger Agreement.
You are urged to sign and return your Proxy promptly in order to make
certain that your shares are voted at the Special Meeting. For your convenience,
a postage paid return envelope is enclosed herewith.
By Order of the Board of Directors,
/s/ Robert J. Jacobs
Robert J. Jacobs
Secretary
33
<PAGE> 42
Exhibit A
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 25, 1997
BY AND BETWEEN
NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004044937
AND
HOMESIDE, INC.
================================================================================
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
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RECITALS ................................................................ 1
ARTICLE I. THE MERGERS.................................................. 3
SECTION 1.1. FORMATION OF MERGER SUB; STRUCTURE OF THE MERGER...... 3
SECTION 1.2. EFFECT ON OUTSTANDING SHARES.......................... 3
SECTION 1.3. EXCHANGE PROCEDURES................................... 4
SECTION 1.4. DISSENTER'S RIGHTS.................................... 5
SECTION 1.5. ALTERNATIVE STRUCTURE................................. 6
SECTION 1.6. OPTIONS............................................... 6
ARTICLE II. CONDUCT PENDING THE MERGER................................... 7
SECTION 2.1. CONDUCT OF THE COMPANY'S BUSINESS PRIOR
TO THE EFFECTIVE TIME...................................... 7
SECTION 2.2. FORBEARANCE BY THE COMPANY............................ 7
SECTION 2.3. COOPERATION........................................... 11
ARTICLE III. REPRESENTATIONS AND WARRANTIES............................. 11
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 11
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT.............. 34
SECTION 3.3. STANDARD.............................................. 36
ARTICLE IV. COVENANTS.................................................... 36
SECTION 4.1. NO SOLICITATION....................................... 36
SECTION 4.2. CERTAIN POLICIES OF THE COMPANY....................... 37
SECTION 4.3. EMPLOYEE BENEFIT MATTERS.............................. 38
SECTION 4.4. ACCESS AND INFORMATION................................ 38
SECTION 4.5. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS............ 39
SECTION 4.6. ANTITAKEOVER STATUTES................................. 39
SECTION 4.7. ADDITIONAL AGREEMENTS................................. 39
SECTION 4.8. PUBLICITY............................................. 40
SECTION 4.9. SHAREHOLDER MEETING................................... 40
SECTION 4.10. NOTIFICATION OF CERTAIN MATTERS...................... 41
SECTION 4.11. TAX MATTERS.......................................... 41
SECTION 4.12. CERTAIN INFORMATION.................................. 42
</TABLE>
<PAGE> 44
<TABLE>
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<S> <C>
SECTION 4.13. REGULATORY COMMUNICATIONS............................ 42
SECTION 4.14. INDEMNIFICATION...................................... 42
SECTION 4.15. HEDGING AND INTEREST RATE POLICIES;
CORRESPONDENT LENDING AGREEMENT............................ 43
ARTICLE V. CONDITIONS TO CONSUMMATION................................... 43
SECTION 5.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS................ 43
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF PARENT AND
MERGER SUB................................................. 44
SECTION 5.3. CONDITIONS TO THE OBLIGATION OF THE COMPANY........... 45
ARTICLE VI. TERMINATION................................................. 46
SECTION 6.1. TERMINATION........................................... 46
SECTION 6.2. EFFECT OF TERMINATION................................. 47
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME.......................... 50
SECTION 7.1. EFFECTIVE DATE AND EFFECTIVE TIME..................... 50
ARTICLE VIII. OTHER MATTERS............................................. 51
SECTION 8.1. CERTAIN DEFINITIONS; INTERPRETATION................... 51
SECTION 8.2. SURVIVAL.............................................. 51
SECTION 8.3. WAIVER................................................ 51
SECTION 8.4. COUNTERPARTS.......................................... 52
SECTION 8.5. GOVERNING LAW......................................... 52
SECTION 8.6. WAIVER OF JURY TRIAL.................................. 52
SECTION 8.7. EXPENSES.............................................. 52
SECTION 8.8. NOTICES............................................... 52
SECTION 8.9. ENTIRE AGREEMENT; ETC................................. 53
SECTION 8.10. ASSIGNMENT........................................... 53
ANNEX 1 -- Form of Shareholder Agreement
</TABLE>
<PAGE> 45
AGREEMENT AND PLAN OF MERGER, dated as of October 25, 1997 (this
"Plan"), by and between National Australia Bank Limited A.C.N. 004044937
("Parent") and HomeSide, Inc. (the "Company").
RECITALS:
A. Parent. Parent is a commercial bank under Australian law, a foreign
bank within the meaning of the International Banking Act of 1978, as amended,
and a bank holding company registered as such with the Federal Reserve System
(the "Federal Reserve Board") under the Bank Holding Company Act of 1956, as
amended (the "BHC Act").
B. The Company. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, with its
principal executive offices located in Jacksonville, Florida. As of the date
hereof, the Company has 119,610,000 authorized shares of common stock, par value
$0.01 per share ("Common Stock"), of which no more than 43,375,430 shares were
outstanding as of the date hereof, 97,138 authorized shares of Class B
Non-Voting Common Stock ("B Stock"), par value $0.01 per share, none of which
were outstanding as of the date hereof, and 195,000 authorized shares of Class C
Non-Voting Common Stock ("C Stock"), par value $1.00 per share, of which no more
than 97,138 shares were outstanding as of the date hereof (the Common Stock, B
Stock and C Stock together, the "Company Stock"). The Company has no other
shares of capital stock or other voting securities authorized and no bonds,
debentures, notes or other indebtedness with general voting rights or
convertible into or exchangeable for securities with such voting rights.
C. Rights, Etc. Except as set forth in the Company's Disclosure Letter
neither the Company nor any of its subsidiaries has any shares of its capital
stock or other voting securities reserved for issuance, any outstanding option,
call or commitment relating to shares of its capital stock or other voting
securities or any outstanding securities, obligations or agreements convertible
into or exchangeable for, or giving any person any right (including,
<PAGE> 46
without limitation, preemptive rights) to subscribe for or acquire from it, any
shares of its capital stock or other voting securities (collectively, "Rights"),
except pursuant to the 1996 Stock Option Plan and the 1996 Time Accelerated
Restricted Stock Option Plan (together, the "Stock Plans").
D. Shareholder Agreements. As a condition and inducement to Parent's
willingness to enter into this Plan, The First National Bank of Boston, Siesta
Holdings, Inc., Thomas H. Lee Equity Fund III, L.P., Thomas H. Lee Foreign Fund
III, L.P. and Madison Dearborn Capital Partners, L.P. (collectively, the
"Significant Shareholders"), stockholders of the Company who are entitled to
cast votes in favor of the approval and adoption of this Plan sufficient to
constitute at least 71% of the shares entitled to vote thereon, have each
entered into a Shareholder Agreement in the form of Annex 1 attached hereto
evidencing, among other things, their instructions to the Board of Directors of
the Company (the "Company Board") and their unconditional and irrevocable
agreement to vote in favor of, and otherwise support, this Plan.
E. Employment Agreements. Simultaneously with the execution and
delivery of this Plan, Parent and the Company have entered into employment
agreements (the "Employee Agreements") with each of the following officers of
the Company providing for their employment by the Company after the consummation
of the Merger: Joe K. Pickett, Hugh R. Harris, Kevin D. Race, William Glasgow,
Jr., Robert J. Jacobs, Mark F. Johnson, Daniel T. Scheuble, W. Blake Wilson,
John Deptula, Preston James and Tommy Adkins.
F. Board Approvals. The respective Boards of Directors of Parent and
the Company have duly approved this Plan and have duly authorized its execution
and delivery. Prior to the approval of this Plan by the Company Board, each of
the Significant Shareholders has, after consultation with the Company as to the
process (and the results thereof) the Company has undertaken regarding a
possible sale of the Company and the nature of the Parent's proposal, advised
the Company Board that it desires that the Company and the Company Board accept
the Parent's proposal embodied in this Plan,
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<PAGE> 47
terminate any further activities with third parties regarding a sale of the
Company and immediately approve and adopt this Plan and authorize the execution
and delivery thereof.
In consideration of their respective representations, warranties,
promises and obligations hereunder, the parties hereto adopt and make this Plan
and prescribe the terms and conditions hereof and the manner and basis of
carrying it into effect, which shall be as follows:
ARTICLE I. THE MERGER
SECTION 1.1. Formation of Merger Sub; Structure of the Merger. As soon
as practicable after the date hereof, Parent shall cause to be formed a direct
or indirect wholly owned corporate subsidiary (the "Merger Sub") under the
Delaware General Corporation Law (the "State Corporation Law") and cause the
Merger Sub to take all corporate action necessary to cause the Merger (as
defined below) to occur as provided for herein. On the Effective Date (as
defined in Section 7.1), Merger Sub will merge (the "Merger") with and into the
Company, with the Company being the surviving corporation (the "Surviving
Corporation"), pursuant to the provisions of, and with the effect provided in
the State Corporation Law. The separate corporate existence of Merger Sub shall
thereupon cease. The Surviving Corporation shall continue to be governed by the
State Corporation Law and its separate corporate existence with all of its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. At the Effective Time (as defined in Section 7.1), the
certificate of incorporation and by-laws of the Surviving Corporation shall be
the certificate of incorporation and by-laws of the Company immediately prior to
the Effective Time. The Merger shall have the effects set forth in Section 259
of the State Corporation Law.
SECTION 1.2. Effect on Outstanding Shares. (a) At the Effective Time,
automatically and without any action on the part of any holder thereof, each
share of Company Stock issued and outstanding at the Effective Time (other than
shares which are (i) held by stockholders ("Dissenting
- 3 -
<PAGE> 48
Stockholders") exercising appraisal rights pursuant to Section 262 of the State
Corporation Law or (ii) shares held directly or indirectly by Parent, except for
shares held in a fiduciary or agency capacity or in satisfaction of a debt
previously contracted) shall be converted into the right to receive $27.825 in
cash, without interest (the "Merger Consideration"). At the Effective Time, each
share of Company Stock held directly or indirectly by Parent, other than shares
held in a fiduciary or agency capacity or in satisfaction of a debt previously
contracted, and shares held by the Company, shall be canceled and retired and
shall cease to exist, and no exchange or payment shall be made with respect
thereto.
(b) At the Effective Time, the shares of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock of the
Surviving Corporation and shall thereafter constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation.
SECTION 1.3. Exchange Procedures. (a) At and after the Effective Time,
each certificate theretofore representing shares of Company Stock (each, a
"Certificate") shall represent only the right to receive the Merger
Consideration in cash without interest or the right, if any, to receive payment
from the Surviving Corporation as determined in accordance with Section 262 of
the State Corporation Law.
(b) As of the Effective Time, Parent shall deposit, or shall cause to
be deposited, with First National Bank of Chicago or such other bank or trust
company as Parent shall elect (which shall be reasonably acceptable to the
Company) (the "Exchange Agent"), for the benefit of the holders of shares of
Company Stock, for exchange in accordance with this Section 1.3, the Merger
Consideration to be paid pursuant to Section 1.2 and deposited pursuant to this
Section 1.3 in exchange for outstanding shares of Company Stock.
(c) As soon as practicable after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record of a Certificate or
Certificates the following:
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<PAGE> 49
(i) a letter of transmittal specifying that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent, which shall be in a form and contain any
other customary provisions as Parent may reasonably determine; and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon the proper surrender of a Certificate to the
Exchange Agent, together with a properly completed and duly executed letter of
transmittal and evidence that any applicable stock transfer taxes have been
paid, the holder of such Certificate shall be entitled to receive in exchange
therefor a check representing the Merger Consideration which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions hereof, and the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the Merger Consideration. In
the event of a transfer of ownership of any shares of Company Stock not
registered in the transfer records of the Company, a check for the Merger
Consideration may be issued to the transferee if the Certificate representing
such Company Stock is presented to the Exchange Agent, accompanied by documents
sufficient, in the reasonable discretion of Parent and the Exchange Agent, (i)
to evidence and effect such transfer and (ii) to evidence that all applicable
stock transfer taxes have been paid.
(d) From and after the Effective Time, there shall be no registration
of transfers on the stock transfer records of the Company of any shares of
Company Stock that were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to Parent or the Surviving
Corporation for any reason, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Plan in accordance
with the procedures set forth in this Section 1.3.
(e) Any portion of the aggregate Merger Consideration that remains
unclaimed by the shareholders of the Company for six months after the Effective
Time and the proceeds of any investments thereof shall be repaid by the Exchange
Agent to Parent. Any shareholder of the Company who has not theretofore
complied with this Section 1.3 shall thereafter be
- 5 -
<PAGE> 50
entitled to look only to Parent for payment of the Merger Consideration
deliverable in respect of each share of Company Stock held by such shareholder
without any interest thereon. If outstanding certificates for shares of Company
Stock are not surrendered or the payment for them is not claimed prior to the
date on which such payments would otherwise escheat to or become the property of
any governmental unit or agency, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of Parent (and to the extent not in its possession shall be paid over
to Parent), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of Parent, Merger
Sub, the Surviving Corporation, the Exchange Agent or any other person shall be
liable to any former holder of Company Stock for any amount delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate a check for the Merger
Consideration deliverable in exchange therefor.
SECTION 1.4. Dissenter's Rights. If any Dissenting Stockholder shall be
entitled to be paid for his or her shares as provided in Section 262 of the
State Corporation Law, the Company shall give Parent notice thereof and Parent
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. Neither the Company nor the Surviving Corporation
shall, except with the prior written consent of Parent, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. If any Dissenting Stockholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the shares held by such
Dissenting Stockholder shall thereupon be
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<PAGE> 51
treated as though such shares had been converted into the Merger Consideration
pursuant to Section 1.3.
SECTION 1.5. Alternative Structure. Notwithstanding anything in this
Plan to the contrary, Parent may specify that, before or after the Merger, any
of its direct or indirect subsidiaries and the Company and any of its direct or
indirect subsidiaries shall enter into transactions other than those described
in Article I hereof in order to effect the purposes of this Plan, and Parent and
the Company shall take all action necessary and appropriate to effect, or cause
to be effected, such transactions; provided, however, that no such specification
shall materially and adversely affect the timing of the consummation of the
transactions contemplated herein or the tax effect of the Merger to the holders
of Company Stock, and provided, further that all such specifications shall be
reasonably acceptable to the Company.
SECTION 1.6. Options. Immediately prior to the Effective Time, each
stock option granted by the Company to directors, officers and employees of the
Company and its subsidiaries to purchase shares of Company Stock (each, an
"Option") which is outstanding and exercisable (and has not been exercised)
immediately prior to the Effective Time shall be terminated and each holder
thereof shall be entitled to receive, in lieu of each share of Company Stock
that at such time would otherwise have been issuable upon the exercise thereof
and without payment of any exercise price therefor, an amount in cash equal to
(A) the product of (i) the excess of (x) the per share amount of the Merger
Consideration (i.e. $27.825) over (y) the per share exercise price applicable to
such Option by (ii) the number of such shares of Company Stock subject to such
Option, less (B) any amounts required to be withheld under applicable law (the
"Option Consideration"). The Company shall take or cause to be taken any and all
action necessary in the reasonable judgment of the Parent under such Options to
provide for such termination of all Options, including using its reasonable best
efforts to obtain any necessary consents from holders. As soon as practicable
after the Effective Time, the Surviving Corporation will make the payments
required to be made to holders of Options under this Section 1.6. The
cancellation of an Option in exchange for
- 7 -
<PAGE> 52
the Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Option, and all consents received
from Option holders shall so provide. All Stock Plans and Options shall
terminate as of the Effective Time and the provisions in any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any subsidiary thereof, shall be
canceled as of the Effective Time, and the Company shall take all action
necessary, including using its reasonable best efforts to obtain applicable
consents from optionees, to terminate all such plans and to ensure that
following the Effective Time no participant in any Stock Plan or other plans,
programs or arrangements shall have any right thereunder to acquire equity
securities of the Parent, the Company, the Surviving Corporation or any
subsidiary thereof.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1. Conduct of the Company's Business Prior to the Effective
Time. Except as expressly provided in this Plan, during the period from the date
of this Plan to the Effective Time, the Company shall, and shall cause each of
its subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course of business consistent with past practice, (ii) use its reasonable best
efforts to maintain and preserve intact its business organization, goodwill,
properties, franchises, leases, employees and advantageous business
relationships and retain the services of its current officers and key employees,
(iii) take no action which would adversely affect or delay the ability of the
Company, Parent, Merger Sub or any subsidiary thereof to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Plan and (iv) take no action that is reasonably likely
to have a Material Adverse Effect (as defined in Section 8.1 hereof) on the
Company.
SECTION 2.2. Forbearance by the Company. During the period from the
date of this Plan to the Effective Time, the
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<PAGE> 53
Company shall not, and shall not permit any of its subsidiaries, without the
prior written consent of Parent, to:
(a) except as previously disclosed in the Company's Disclosure Letter
or in the ordinary course of business consistent with past practice, make
any loan or advance or incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other person;
(b) adjust, split, combine or reclassify any capital stock; directly or
indirectly make, declare, set aside money for or pay any dividend or make
any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock, or grant any stock appreciation rights or grant, sell or issue to
any individual, corporation or other person any right, warrant or option
to acquire, or securities evidencing a right to convert into, exchange for
or acquire, any shares of its capital stock; or issue any additional shares
of capital stock except pursuant to the exercise of Options outstanding as
of the date hereof and on the terms in effect on the date hereof as set
forth in the Company's Disclosure Letter;
(c) except as set forth in the Company's Disclosure Letter or in the
ordinary course of business consistent with past practice and pursuant to
policies currently in effect, sell, transfer, lease, mortgage, encumber or
otherwise dispose of any of its properties, leases or assets to any person,
or cancel, release or assign any indebtedness of any such person, except
pursuant to contracts or agreements in force as of the date of this Plan;
(d) except as previously disclosed in the Company's Disclosure Letter,
make or commit to make, or incur any obligation or liability in connection
with, any capital expenditures other than capital expenditures made in the
ordinary course of business consistent with past practice in amounts not
exceeding in the aggregate $1,200,000 in any thirty (30) day period;
- 9 -
<PAGE> 54
(e) except as previously disclosed in the Company's Disclosure Letter,
terminate, establish, adopt, enter into, make any new, or accelerate the
vesting or payment of any existing, grants or awards under, amend or
otherwise modify, any Compensation and Benefit Plans (as defined below), or
increase the salary, wage, bonus or other compensation of any officers or
other key employees, except increases occurring in the ordinary course of
business consistent with past practice (but not in excess of 6% in any
12-month period) or any amendment required by applicable law (provided that
the Company shall use reasonable efforts to cause any such amendment to
provide the least increase in cost permitted under such applicable law);
(f) other than in the ordinary course of business consistent with past
practice, make any investment either by contributions to capital, property
transfers, or purchase of any property or assets of any person, provided
that the Company shall make no acquisition of business operations without
Parent's prior written consent;
(g) except as previously disclosed in the Company's Disclosure Letter,
(i) sell, transfer, mortgage, lease, encumber or otherwise dispose of or
discontinue any material portion of its assets, business or properties,
(ii) sell, assign or otherwise transfer any rights to service loans, other
than servicing rights in respect of first mortgage loans held by the
Company or one of its subsidiaries (a) on a retail basis or (b) on a
wholesale basis where such wholesale loans are jumbo loans, adjustable rate
mortgage loans, or other wholesale mortgage loans registered with private
investors, in each case where such sales are in a manner consistent with
past practice, or (iii) except in the ordinary course of business and in a
manner consistent with past practice, sell, transfer, lease or encumber any
Loan;
(h) except as previously disclosed in the Company's Disclosure Letter
or in the ordinary course of business consistent with past practice, (i)
acquire any assets or enter into any contract, agreement, commitment or
arrangement with respect thereto or (ii) acquire any servicing right in a
"bulk" transaction;
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<PAGE> 55
(i) enter into, terminate, waive, release or assign any contract or
agreement, or make any change in any of its leases, agreements or
contracts, other than in the ordinary course of business consistent with
past practice;
(j) settle any claim, action or proceeding involving (i) any liability
or obligation, fixed or contingent, of the Company or any of its
subsidiaries for money damages in excess of $500,000, (ii) any material
restrictions upon the operations of the Company or any of its subsidiaries
or (iii) the creation of any precedent for claims, actions or proceedings
that are reasonably likely to be material to the Surviving Corporation and
its subsidiaries;
(k) except in the ordinary course of business and in amounts less than
$500,000, waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim;
(l) except as set forth in the Company's Disclosure Letter, make,
renegotiate, renew, increase, extend or purchase any loan, lease (credit
equivalent), advance, credit enhancement or other extension of credit, or
make any commitment or guarantee in respect of any of the foregoing (a
"Loan"), except (i) in the ordinary course of business consistent with past
practice and (ii) loans or advances as to which the Company has a legally
binding obligation to make such loan or advance as of the date hereof and
which has been disclosed by the Company in writing to Parent prior to the
execution of this Plan; provided, however, that the Company may take (or
permit any subsidiary of the Company to take) any such action if, within
five business days after the Company requests in writing (which request
shall include information and analyses sufficient for Parent to assess the
proposed action) that Parent consent to the taking of such action, Parent
has approved such request in writing or has not responded in writing to
such request;
(m) except as otherwise contemplated by this Plan, change its fiscal
year or its method of accounting in effect at August 31, 1997, except as
required by changes in regulatory accounting practices or generally
accepted
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<PAGE> 56
accounting principles as concurred in by the Company's independent
auditors;
(n) except as previously disclosed in the Company's Disclosure Letter,
enter into any new lines of business, or cease to conduct any lines of
business that it conducts on the date hereof, or conduct any business
activity outside the ordinary course of business and not consistent with
past practice;
(o) amend its certificate of incorporation, by-laws or similar
organizational documents;
(p) except (w) as previously disclosed in the Company's Disclosure
Letter, (x) as required by applicable law or regulation to comply with
modifications of rules, regulations or requirements imposed by means of the
United States Department of Housing and Urban Development ("HUD"), the
Federal Housing Administration ("FHA"), the VA, the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC"), the Government National Mortgage Association ("GNMA") or any
state agency with authority to regulate the business of the Company,
determine the investment or servicing requirements with regard to loans
originated, purchased or serviced by the Company, or otherwise participate
in or promote mortgage lending, as applicable (each of the above, an
"Agency"), (y) (after prior consultation with Parent) for changes required
by the Company's or any of its subsidiaries' traditional conduits for the
sale of non-conventional loans, and (z) as agreed by the Parent after
consultation as contemplated by Section 4.15 hereof, (i) implement or adopt
any material change in its interest rate risk management and hedging (which
term includes buying futures and forward commitments from financial
institutions) policies or procedures, (ii) fail to follow its existing
policies or procedures with respect to managing its exposure to interest
rate risk, (iii) fail to use commercially reasonable means to avoid any
material increase in its aggregate exposure to interest rate risk against
loans held in the Company's pipeline, or (iv) materially alter its methods
or policies
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<PAGE> 57
of underwriting, pricing, originating, warehousing, selling and servicing,
or buying or selling rights to service loans;
(q) amend or revise or fail to comply in any material respect with any
of its other material policies, procedures and guidelines; or
(r) agree to, or make any commitment to, take any of the actions
prohibited by this Section 2.2.
SECTION 2.3. Cooperation. The Company shall, and the Company shall
cause each of its subsidiaries to, cooperate with the Parent and Merger Sub in
completing the transactions contemplated hereby and shall not take, cause to be
taken or agree or make any commitment to take any action: (i) that could cause
or could reasonably be expected to cause any of the representations or
warranties of it that are set forth in Article III hereof not to be true and
correct or (ii) that is inconsistent with or prohibited by Section 2.1 or
Section 2.2.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. The Company
represents and warrants to Parent that, except as set forth in a letter (the
"Disclosure Letter") of the Company delivered to Parent prior to the execution
of this Plan (and making specific reference to the Section of this Plan for
which an exception is taken):
(a) Recitals True. The facts set forth in the Recitals to this Plan
with respect to the Company are true and correct.
(b) Capital Stock. All outstanding shares of capital stock of the
Company and its subsidiaries have been duly authorized and validly issued,
fully paid and non-assessable and are not subject to any preemptive rights.
(c) Due Organization. Each subsidiary of the Company is a corporation
duly incorporated, validly existing and in
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<PAGE> 58
good standing under the laws of the state of its incorporation or
organization.
(d) Authority. Each of the Company and its subsidiaries has the power
and authority, and is duly qualified and in good standing in all
jurisdictions where such qualification is required, to carry on its
business as it is now being conducted and to own all its properties and
assets, and it has all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease and operate its properties
and assets and to carry on its business as it is now being conducted.
(e) Subsidiaries; Significant Investments. The only subsidiaries of the
Company are set forth in the Disclosure Letter. All of the shares of
capital stock of each subsidiary of the Company are owned directly and of
record by the Company or a wholly-owned subsidiary of the Company, in each
such case fully paid and non-assessable and free and clear of all liens,
claims, encumbrances and restrictions on transfer ("Liens") and there are
no Rights with respect to any such capital stock. Neither the Company nor
any of its subsidiaries maintains a liquidation or similar type of account.
None of the Company or any of such subsidiaries owns any equity securities,
any security convertible or exchangeable into an equity security or any
rights to acquire any equity security except those of its subsidiaries as
listed in the Disclosure Letter.
(f) Shareholder Approval. (i) This Plan and the transactions
contemplated herein have been duly authorized by all necessary corporate
action of the Company except for the approval of the shareholders referred
to in clause (ii) below. In addition, the Board of Directors of the Company
has received the opinion of each of Smith Barney Inc. and Merrill, Lynch,
Pierce, Fenner & Smith, Incorporated ("Merrill Lynch") to the effect that
as of the date of this Plan the Merger Consideration is fair to the holders
of Company Stock from a financial point of view and will provide a true and
complete copy of such opinion to Parent. Subject to receipt of the required
approvals, consents or waivers of governmental authorities referred to in
Section
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<PAGE> 59
5.1(b), this Plan is a valid and binding agreement of the Company
enforceable against it in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(ii) The affirmative vote of a majority of the outstanding shares
of the Company's Common Stock entitled to vote on this Plan is the only
shareholder vote required for approval of the Plan and consummation of the
Merger and the other transactions contemplated hereby.
(g) No Violations. The execution, delivery and performance of this Plan
by the Company do not, and the consummation of the transactions
contemplated hereby by the Company and each of its subsidiaries will not,
(i) conflict with or constitute a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, obligation, indenture or
instrument of the Company or any subsidiary of the Company or to which the
Company or any of its subsidiaries (or any of their respective properties)
is subject, or enable any person to enjoin the Merger or the other
transactions contemplated hereby, (ii) conflict with or constitute a breach
or violation of, or a default under, the certificate of incorporation or
by-laws or similar organizational documents of the Company or any
subsidiary of the Company or (iii) conflict with or constitute a breach or
violation of, or a default under (or an event which with due notice or
lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, give rise to a
right to terminate or accelerate, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon, or the loss of
material benefits of, any of the properties or assets of the Company or any
subsidiary of the Company under, any of the terms, conditions or provisions
of any note, bond, loan, mortgage, indenture, deed of trust, loan agreement
or other agreement, instrument or obligation to which the Company or any
subsidiary of the Company is a party, or to which any of their respective
properties or
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<PAGE> 60
assets may be bound or affected; and the consummation of the transactions
contemplated hereby will not require any approval, filing, consent or
waiver under any such law, ordinance, statute, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or instrument,
other than (i) the required approvals, authorizations, consents and
waivers of governmental authorities referred to in Section 5.1(b) and (ii)
such approvals, filings, consents or waivers as are required under the
federal securities laws in connection with the transactions contemplated by
this Plan.
(h) Reports. (i) As of their respective dates, neither the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1997, nor
any other document filed by the Company subsequent to February 28, 1997
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Securities Exchange Act"), each in the form
(including exhibits) filed with the Securities and Exchange Commission (the
"SEC") (collectively, the "Reports"), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading and the Reports complied in all material respects with the
requirements of the Securities Exchange Act. Each of the consolidated
balance sheets contained or incorporated by reference in the Reports
(including in each case any related notes and schedules) fairly presented
in all material respects the financial position of the entity or entities
to which it relates as of its date and each of the consolidated statements
of income, consolidated statements of shareholders' equity and consolidated
statement of cash flows, contained or incorporated by reference in the
Reports (including in each case any related notes and schedules), fairly
presented in all material respects the results of operations, stockholders'
equity and cash flows, as the case may be, of the entity or entities to
which it relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit
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<PAGE> 61
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted therein.
(ii) The Company and each of its subsidiaries have each timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since March 15, 1996 with (i) the SEC, (ii) the Federal
Reserve Board, (iii) the Office of the Comptroller of the Currency, (iv)
any state regulatory authority (each, a "State Regulator") (such entities
collectively, the "Regulatory Agencies"), and (v) the National Association
of Securities Dealers, Inc. and any other self-regulatory organization (an
"SRO"), and all other material reports and statements required to be filed
by them since March 15, 1996, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations
of the United States, any State Regulator or any SRO, and have paid all
fees and assessments due and payable in connection therewith; all such
reports and filings comply in all material respects with applicable
requirements and do not contain any untrue or misleading statement of
material fact or omit to make any statement of material fact required to be
stated or necessary to make the statements therein not misleading.
(i) Absence of Undisclosed Liabilities and Certain Changes or Events.
Since August 31, 1997, the Company and its subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice and have not incurred any material liability, except in the
ordinary course of their business consistent with past practice. Since
February 28, 1997, there has not been any change in the condition
(financial or other), properties, business or results of operations of the
Company or its subsidiaries which, individually or in the aggregate, has
had, or is reasonably likely to have, a Material Adverse Effect on the
Company.
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<PAGE> 62
(j) Taxes. (i) (a) All Tax Returns that are required to be filed by
or with respect to the Company and its subsidiaries have been duly filed,
(b) all Taxes shown to be due on the Tax Returns referred to in clause (a)
have been paid in full, (c) no issues that have been raised by the relevant
taxing authority in connection with the examination of any of the Tax
Returns referred to in clause (a) are currently pending, and (d) no waivers
of statutes of limitation have been given by or requested with respect to
any Taxes of the Company or its subsidiaries.
(ii) No tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transfer contemplated by this Plan.
(iii) For purposes of this Plan, the following terms shall have the
indicated meanings:
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates
and information returns) required to be filed with respect to any Tax.
"Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") means all federal, state, local or foreign taxes,
including, without limitation, income, gross receipts, windfall
profits, gains, excise, severance, property, production, sales, use,
transfer, license, franchise, employment, withholding, environmental,
customs duty, capital stock, stamp, payroll, unemployment, disability,
production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions.
(k) Absence of Claims. As of the date hereof, no litigation,
proceeding or controversy before any court, arbitrator or governmental
agency is pending, and there is no pending claim, action or proceeding
against the Company or any of its subsidiaries, and, to the best of the
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<PAGE> 63
Company's knowledge after reasonable inquiry, no such litigation,
proceeding, controversy, claim or action has been threatened or is
contemplated. As of the Effective Time, no litigation, proceeding or
controversy before any court or governmental agency is pending, and there
is no pending claim, action or proceeding against the Company or any of its
subsidiaries, which is reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Company or to hinder or delay
consummation of the transactions contemplated hereby and, to the best of
the Company's knowledge after reasonable inquiry, no such litigation,
proceeding, controversy, claim or action has been threatened or is
contemplated.
(l) Absence of Regulatory Actions. Neither the Company nor any of
its subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of, federal or
state governmental authorities charged with the supervision or regulation
of banks and their holding companies or mortgage banking ("Government
Regulators") nor has it been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking.
(m) Agreements. (i) Except as disclosed in the Reports, as of the
date of this Plan, neither the Company nor any of its subsidiaries is a
party or subject to, or has amended or waived any rights under, any of the
following (whether written or oral, express or implied):
(a) any agreement, arrangement or commitment not made in the
ordinary course of business consistent with past practice that is material
to the Company and its
subsidiaries taken as a whole, or any contract, agreement or
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<PAGE> 64
understanding relating to the sale or disposition by the Company or any of
its subsidiaries of any significant assets or businesses of the Company or
any of its subsidiaries;
(b) any material agreement, indenture, credit agreement or other
instrument relating to the borrowing of money by the Company or any of its
subsidiaries or the guarantee by the Company or any such subsidiary of any
such obligation;
(c) any contract containing covenants which limit the ability of
the Company or any of its subsidiaries to compete in any line of business
or with any person or which involve any restriction of the geographical
area in which, or method by which, the Company and its subsidiaries may
carry on their respective businesses (other than as may be required by law
or applicable governmental authorities); or
(d) any other contract or agreement that would be required to be
disclosed as an exhibit to the Company's annual report on Form 10-K and
which has not been so disclosed.
(ii) Neither the Company nor any of its subsidiaries is in
default under or in violation of any provision of any note, bond,
indenture, mortgage, deed of trust, lease, insurance policy, loan agreement
or other agreement or instrument, whether oral or written, to which it is a
party or by which it is bound or to which any of its respective properties
or assets is subject; and no event has occurred which would give rise to a
default with the passage of time.
(n) Labor Matters. Neither the Company or any of its subsidiaries
is a party to, or is bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its subsidiaries the subject of
any proceeding asserting that it has committed an unfair labor practice or
seeking to compel it or any such subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor is there any
strike, work stoppage, other labor dispute or organizational effort or
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<PAGE> 65
any labor-related arbitration, law suit or administrative proceeding
involving the Company or any of its subsidiaries pending or threatened.
(o) Employee Benefits. (i) The Disclosure Letter contains a
complete and accurate list of all existing bonus, deferred compensation,
incentive, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock
option, severance, welfare and fringe benefit plans, employment or
severance agreements of the Company or its subsidiaries and all similar
practices, policies and arrangements of the Company or its subsidiaries in
which any employee or former employee (the "Employees"), consultant or
former consultant (the "Consultants") or director or former director (the
"Directors") of the Company or any of its subsidiaries participates or to
which any such Employees, Consultants or Directors are a party (the
"Compensation and Benefit Plans"). Neither the Company nor any of its
subsidiaries has any commitment to create any additional material
Compensation and Benefit Plan or to modify or change any existing Plan in a
material respect.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the Code and all
filings, disclosures and notices required by ERISA or the Code (including
notices under Section 4980B of the Code) have been timely made. Each
Compensation and Benefit Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter (including a determination that the related
trust under such Compensation and Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the Internal Revenue Service for "TRA" (as
defined in Rev. Proc. 93-39), or will file for such a determination letter
prior to the expiration of the remedial amendment period for such
Compensation and Benefit Plan, and the Company is not aware
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<PAGE> 66
of any circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the best
knowledge of the Company, threatened legal action, suit or claim relating
to the Compensation and Benefit Plan. Neither the Company nor any of its
subsidiaries has engaged in a transaction with respect to any Compensation
and Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would reasonably be expected to subject the
Company or any of its subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.
(iii) No material liability (other than for payment of premiums
to the Pension Benefit Guaranty Corporation (the "PBGC") which have been
made or will be made on a timely basis) under Title IV of ERISA has been or
is expected to be incurred by the Company or any of its subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any single-employer plan of any entity (an
"ERISA Affiliate") which is considered one employer with the Company under
Section 4001(b) of ERISA or Section 414(b) or (c) of the Code (an "ERISA
Affiliate Plan"). The Company and its subsidiaries have not incurred and do
not expect to incur any withdrawal liability with respect to a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA) under
Title IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate) or any material liability in connection with the reorganization
or termination of any multiemployer plan. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Compensation and Benefit Plan or by any ERISA Affiliate Plan within
the 12-month period ending on the date hereof, and no such notice will be
required to be filed with respect thereto as a result of the transactions
contemplated by this Plan. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and, to the Company's
knowledge, no condition exists that presents a
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<PAGE> 67
material risk that such proceedings will be instituted. Under each Pension
Plan and ERISA Affiliate Plan, as of the last day of the most recent plan
year ended prior to the date of this Plan, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the most recent actuarial valuation of such
Pension Plan or ERISA Affiliate Plan), did not exceed the then current
value of the assets of such Pension Plan or ERISA Affiliate Plan, and to
the knowledge of the Company, there has been no change in the financial
condition of such Pension Plan or ERISA Affiliate Plan since the last day
of the most recent plan year which reasonably could be expected to change
such conclusion.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan have been timely
made or have been reflected on the Company's financial statements. Neither
any Pension Plan nor any ERISA Affiliate Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and all required payments to the PBGC with
respect to each Pension Plan or ERISA Affiliate Plan have been made on or
before their due dates. Neither the Company nor any of its subsidiaries has
provided, or is required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code.
(v) Except as described in the Disclosure Letter, neither the
Company nor any of its subsidiaries has any obligations to provide retiree
health and life insurance benefits or other death benefits under any
Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code. To the knowledge of the Company, there has been no oral
communication to Employees by the Company that would reasonably be expected
to promise or guarantee on behalf of the Company such Employees retiree
health or life benefits on a permanent basis, and each such Compensation
and Benefit Plan may be amended or terminated without incurring any
material liability thereunder.
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<PAGE> 68
(vi) With respect to each Compensation and Benefit Plan, the
Company has provided or made available to Parent, if applicable, true and
complete copies of existing: (A) Compensation and Benefit Plan documents
and amendments thereto; (B) trust instruments and insurance contracts; (C)
most recent Forms 5500 filed with the IRS; (D) most recent actuarial report
and financial statement; (E) most recent summary plan description; (F) most
recent forms filed with the PBGC (other than for premium payments); (G)
most recent determination letter issued by the IRS; (H) any Form 5310 or
Form 5330 filed with the IRS; and (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(vii) The Company and its subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees. All Compensation
and Benefit Plans covering foreign Employees comply in all respects with
applicable local law. The Company and its subsidiaries have no material
unfunded liabilities with respect to any Compensation and Benefit Plan
which covers foreign Employees.
(viii) Except as described in the Disclosure Letter, the
consummation of the transactions contemplated by this Plan would not,
directly or indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective Time)
reasonably be expected to (A) entitle any Employee, Consultant or Director
to any payment (including severance pay or similar compensation), (B)
result in the vesting or acceleration of any benefits under any
Compensation and Benefit Plan or (C) result in any material increase in
benefits under any Compensation and Benefit Plan.
(ix) Except as described in the Disclosure Letter, neither the
Company nor any of its subsidiaries maintains any Compensation and Benefit
Plans the payments under which would not be reasonably expected to be
deductible as a result of the limitations under Section 162(m) of the Code
and the regulations issued thereunder.
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<PAGE> 69
(x) Except as described in the Disclosure Letter, as a
result, directly or indirectly, of the transactions contemplated by this
Plan (including, without limitation, as a result of any termination of
employment prior to or following the Effective Time) none of Parent, Merger
Sub, the Company or the Surviving Corporation, or any of their respective
subsidiaries, are reasonably expected to be obligated to make a payment
with respect to any Compensation and Benefit Plans or other arrangement in
existence on or before the Effective Time to an individual who is a
"disqualified individual", that would be characterized as an "excess
parachute payment" (as such terms are defined in Section 280G(b)(1) of the
Code).
(p) Properties. Except as disclosed in the Reports filed prior to
the date hereof, the Company and its subsidiaries (i) have good, clear and
marketable title to all the properties and assets which are material to the
Company's business on a consolidated basis and are reflected in the latest
audited statement of condition included in the Reports as being owned by
the Company and its subsidiaries or acquired after the date thereof (except
properties sold or otherwise disposed of since the date thereof), free and
clear of all Liens except (A) statutory Liens securing payments not yet
due, (B) Liens on assets of subsidiaries of the Company incurred in the
ordinary course of their business and (C) such imperfections or
irregularities of title or Liens as do not affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties, in either case in such a
manner as to have a Material Adverse Effect on the Company, and (ii) are
collectively the lessee of all leasehold estates which are material to the
Company's business on a consolidated basis and are reflected in the latest
audited financial statements included in the Reports or acquired after the
date thereof (except for leases that have expired by their terms or as to
which the Company has agreed to terminate or convey since the date thereof)
and is in possession of the properties purported to be leased thereunder,
and each such lease is valid without default thereunder by the lessee or,
to the Company's knowledge, the lessor, other than defaults that would not
have a Material
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<PAGE> 70
Adverse Effect on the Company. Each of the Company and each of its
subsidiaries enjoys peaceful and undisturbed possession of all such leases.
Substantially all the Company's and its subsidiaries' owned buildings,
structures and equipment have been well maintained and are in good and
serviceable condition, normal wear and tear excepted.
(q) Knowledge as to Conditions. As of the date hereof, the Company
knows of no reason why the approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b) should not be obtained without
the imposition of any condition of the type referred to in the provisos
thereto.
(r) Compliance with Laws. Since March 15, 1996, the Company and
each of its subsidiaries have complied in all material respects with all
applicable laws. The Company and each of its subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made
all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect, and, to the best knowledge of the Company, no
suspension or cancellation of any of them is threatened.
(s) Fees. Other than financial advisory services performed for the
Company by Smith Barney, Inc. and Merrill Lynch in an amount and pursuant
to an agreement both previously disclosed to Parent, neither the Company
nor any of its subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder, investment
banker or financial adviser or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no
broker, finder, investment banker or financial adviser has acted directly
or indirectly for the Company or any subsidiary of the Company, in
connection with the Plan or the transactions contemplated hereby.
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<PAGE> 71
(t) Environmental Matters. (i) Except as previously disclosed in the
Company's Disclosure Letter: (A) the Company and each of its subsidiaries
have complied in all material respects with applicable Environmental Laws;
(B) to the best of the Company's knowledge no property (including buildings
and any other structures) currently or formerly owned or operated by the
Company or any of its subsidiaries, has been contaminated with, or has had
any release of, any Hazardous Substance in violation of any applicable
Environmental Law; (C) to the best of their knowledge, neither the Company
nor any of its subsidiaries has been ruled the owner or operator under any
Environmental Law of any property in which it has currently or formerly
held a Lien; (D) to the best of their knowledge, neither the Company nor
any of its subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any other third-party property; (E) neither
the Company nor any of its subsidiaries has received any written notice,
demand letter, claim or request for information alleging any violation of,
or liability under, any Environmental Law; (F) to the best of its
knowledge, neither the Company nor any of its subsidiaries is subject to
any order, decree, injunction or other agreement with any Governmental
Authority relating to any Environmental Law; (G) the Company is not aware
of any circumstances or conditions involving the Company or any of its
subsidiaries, any currently or formerly owned or operated property, or any
Lien held by the Company or any of its subsidiaries that have resulted in
any claims, liability or investigations or resulted in any restrictions on
the ownership, use or transfer of any property pursuant to any
Environmental Laws; and (H) the Company has delivered to Parent copies of
all environmental reports, studies, sampling data, correspondence, filings
and other environmental information in its possession and relating to the
Company, any of its subsidiaries, any currently or formerly owned or
operated property.
(ii) The following definitions apply for purposes of this
Section 3.1(t): (A) "Environmental Laws" means any federal, state or local
law, regulation, order, decree, permit, authorization, common law or agency
requirement with force of law relating to (1) the protection or restoration
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<PAGE> 72
of the environment, health or safety (in each case relating to the
environment) or natural resources or (2) the handling, use, presence,
disposal, release or threatened release of any Hazardous Substance; (B)
"Hazardous Substance" means any substance in any concentration that is (1)
listed, classified or regulated pursuant to any Environmental Law, (2) any
petroleum product or by-product, asbestos-containing material, lead-
containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon or (3) any other substance which is or may be the
subject of regulatory action by any Governmental Authority pursuant to any
Environmental Laws; and (C) "Governmental Authority" means any court,
administrative agency or commission or other federal, state or local
governmental authority or instrumentality.
(u) Names and Trademarks. The Company has trademarks registered
with the United States Patent and Trademark Office for the trademarks set
forth in the Disclosure Letter. The Company has received no challenge to
the Company's use of any such trademark and is not aware of any adverse
claim with respect thereto.
(v) Mortgage Banking Business. (i) Licenses and Qualifications. The
Company (or any subsidiary of it that services or originates Loans, as the
case may be) (A) is an approved (1) HUD mortgagee and servicer for
FHA-insured loans, (2) lender and servicer for VA-insured loans, (3)
seller/servicer of one-to-four-family first and second mortgages for FNMA
and FHLMC, and (4) GNMA issuer and servicer of GNMA-guaranteed
mortgage-backed securities, (B) has all other certifications,
authorizations, licenses, permits and other approvals necessary to conduct
its current business, (C) is in good standing under all applicable federal,
state and local laws and regulations thereunder as a lender and servicer
and (D) is in good standing with all authorities and servicers for the
state bond programs in which it participates. As of the date hereof, there
is no pending or, to the Company's and its subsidiaries' knowledge,
threatened cancellation or reduction of any loan purchase commitment or
other loan sale contract to which the Company or any of its subsidiaries is
a party, and the
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obligations of the Company and each of its subsidiaries under each such
contract are being performed by the Company or such subsidiary, as the case
may be, in accordance with its terms. The Company has no reason to believe
that the underwriting waivers from FNMA and FHLMC, under current agreements
with the Company, will be restricted or rescinded, or that the guarantee
fees payable to FNMA and FHLMC will be increased as a result of the
Company's or its subsidiaries' credit performance, or that the Company or
its subsidiaries will suffer a forced reduction of the master commitment
amount relating to FNMA or FHLMC purchases or swaps of loans, nor has any
such restriction, rescission, increase or reduction occurred at any time
since March 15, 1996.
(ii) Title to Loans. All loans held for the Company's or any of its
subsidiaries' account, whether or not for future sale or delivery to an
investor (the "Warehouse Loans"), are owned by the Company or such
subsidiary free and clear of any Lien, other than Liens in favor of the
Company's or such subsidiary's lender banks pursuant to warehouse lines of
credit and forward sale commitments or similar agreements to sell any such
loans to investors in the ordinary course, and all Warehouse Loans meet all
requirements for sale to the intended investors. Each mortgage or deed of
trust securing a Warehouse Loan has been duly recorded or submitted for
recordation in due course in the appropriate filing office in the name of
the Company or one of its subsidiaries as mortgagee. Neither the Company
nor any of its subsidiaries has released any security for any Warehouse
Loan, except upon receipt of reasonable consideration for such release (as
documented in the applicable Loan file), or accepted prepayment of any such
Warehouse Loan which has not been promptly applied to such Warehouse Loan.
(iii) Compliance. Each Warehouse Loan and each loan which is being
serviced by the Company or one of its subsidiaries for the account of
others (the "Serviced Loans", and together with the Warehouse Loans, the
"Loans") was underwritten and originated, and the loan documents and loan
files maintained by the Company or its subsidiaries
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with respect thereto are being maintained by the Company or such
subsidiaries, in compliance with all applicable laws and regulations and,
if applicable, the requirements of the "Investor" (which term means (x)
FHLMC, FNMA, GNMA, or any other person, as the case may be, that owns any
of the Loans or any portion of a Pool of Loans or holds beneficial title to
the Loans or any portion of a Pool of Loans, but shall not mean the holder
of mortgage-backed securities or mortgage pass-through securities except to
the extent that the consent of such holder may be required in order for the
Company or any of its subsidiaries to continue to have servicing rights
with respect to the Loans related thereto and (y) any person who owns
servicing rights for loans serviced or master serviced by the Company or
any of its subsidiaries pursuant to a Loan Servicing Agreement) acquiring
such Loan (or, if there is no such Investor, in accordance with the
Company's or such subsidiary's underwriting standards then in effect) and
the requirements of each person who insures or guarantees all or any
portion of the risk of loss upon borrower default on any of the Loans,
including, without limitation, the FHA, the VA and any private mortgage
insurer, and providers of life, hazard, flood, disability, title or other
insurance with respect to any of the Loans or the collateral therefor
(each, an "Insurer"), if any, in effect and applicable at the time such
insurance was obtained. The Company and its subsidiaries have not done or
failed to do, or caused to be done or omitted to be done, any act, the
effect of which would operate to invalidate or materially impair (i) any
approvals of any Agency or the FHA to insure, (ii) any VA guarantee or
commitment of the VA to guarantee, (iii) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (iv) any title
insurance policy, (v) any hazard insurance policy, (vi) any flood insurance
policy, (vii) any fidelity bond, direct surety bond, errors and omissions
or other insurance policy required by any Agency, Investor or Insurer,
(viii) any surety or guaranty agreement, (ix) any guaranty issued by GNMA,
FNMA or FHLMC to the Company or any of its subsidiaries respecting mortgage
backed securities issued by the Company or any of its subsidiaries and
other like guarantees or (x) the rights of the Company or any of its
subsidiaries under any Loan
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Servicing Agreement or loan purchase commitment. No Agency, Investor or
Insurer has (i) claimed that the Company or any of its subsidiaries have
violated or have not complied on a recurring basis with the applicable
underwriting standards with respect to Loans sold by the Company or any of
its subsidiaries to an Investor or (ii) imposed restrictions on the
activities (including commitment authority) of the Company or any of its
subsidiaries.
(iv) Loan Files. The loan documents relating to a Loan maintained in
the loan files of the Company and its subsidiaries were in compliance with
all applicable laws and regulations at the time of the origination,
assumption or modification of such Loan, as the case may be. The loan files
maintained by the Company and its subsidiaries contain originals (or, where
necessitated by the terms of the applicable mortgage servicing agreements,
contain true, correct and complete copies) of the documents relating to
each Loan and the information contained in such loan files with respect to
each such Loan is true, complete and accurate and in compliance with all
applicable laws and regulations. Except as set forth in the loan documents
relating to a Loan maintained in the loan files of the Company or its
subsidiaries, the terms of the note, bond, deed of trust and mortgage for
each such Loan have not been impaired, waived, altered or modified in any
respect from the date of their origination except by a written instrument
which written instrument has been recorded, or submitted for recordation in
due course, if recordation is necessary to protect the interests of the
owner thereof. The substance of any such waiver, alteration or modification
has been communicated to and approved by (A) the relevant Investor and
Insurer (if any), to the extent required by the relevant Investor and
Insurer requirements, and (B) the title Insurer, to the extent required by
the relevant policies, and the terms of any such waiver, alteration or
modification are reflected in the loan documents. Except as set forth in
the loan documents maintained in the loan files by the Company or its
subsidiaries, no mortgagor has been released from such mortgagor's
obligations with respect to the applicable Loan.
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(v) Loan Servicing Agreements. All of the contracts pursuant to
which the Company or any of its subsidiaries has the right and/or
obligation to service loans (each, a "Loan Servicing Agreement") are (A)
valid and binding obligations of the Company or such subsidiary, and to the
knowledge of the Company and such subsidiary, of all the other parties
thereto, (B) in full force and effect, (C) enforceable in accordance with
their terms (except where enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and by general equity principles) and (D) owned by the
Company or such subsidiary free and clear of any Lien, except pursuant to
the loan and security agreements previously disclosed in the Company's
Disclosure Letter. There is no default by the Company or any of its
subsidiaries or claim of default against the Company or any of its
subsidiaries by any party under any such Loan Servicing Agreement, and,
except for the consummation of the transactions contemplated by this Plan,
no event has occurred which with the passage of time or the giving of
notice or both would constitute a default by any party under any such Loan
Servicing Agreement or would result in any such mortgage servicing
agreement being terminable by any party thereto. There is no pending or, to
the knowledge of the Company, threatened cancellation of any Loan Servicing
Agreement and the obligations of the Company or any of its subsidiaries
under each Loan Servicing Agreement are being performed by the Company or
such subsidiary in accordance with the terms of such Agreement and
applicable rules or regulations. The Company and its subsidiaries are not
subservicers with respect to any of the Serviced Loans.
(vi) No Recourse. None of the Company's or any of its subsidiaries'
servicing rights are subject to recourse against the servicer, and none of
the Company or any of its subsidiaries is subject to recourse in connection
with any Loans sold by it, in each case for losses on liquidation of a
loan, borrower defaults or repurchase obligations upon the occurrence of
non-payment or other events, other than events entitling Investors to
request a repurchase of a loan because of alleged breaches of customary
representations and warranties relating to the origination or servicing
thereof.
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(vii) Escrow Account. Unless otherwise prohibited by law or an
executed escrow waiver, the Company or its subsidiaries collect all escrows
related to the Loans, and all escrow accounts have been maintained by the
Company, its subsidiaries and, to the Company's and its subsidiaries'
knowledge, all prior servicers in accordance with the related loan
documents, all applicable laws, rules, regulations, and requirements of
Investors, Insurers and governmental authorities, and in accordance with
the applicable Loan Servicing Agreements. The Company or its subsidiaries
has credited to the account of borrowers all interest required to be paid
on any escrow account in accordance with applicable law and the terms of
such agreements and loan documents. All escrow, custodial, and suspense
accounts related to the Loans are held in the Company's (or subsidiary's)
name or the investor's name by the Company.
(viii) Advances. There are no servicing or other contracts to which the
Company or any of its subsidiaries is a party which obligates any of them
to make servicing advances for principal and interest payments with respect
to defaulted or delinquent Loans other than in a manner as provided in
standard and customary agreements with FNMA, FHLMC or GNMA. To the extent
made, any such advances are valid and subsisting amounts owing to the
Company or its subsidiary, as the case may be, subject to the terms of the
applicable Loan Servicing Agreement.
(ix) Single Family Loans. All of the Loans are secured by single
family (i.e., one to four family) residential real property or, to the
extent that a Loan is secured by property other than a single family
residential property, such Loan is not a Warehouse Loan and has not been
sold to any person where either the Company or any of its subsidiaries has
any recourse obligation.
(x) ARM Adjustments. With respect to each Loan for which the
interest rate is not fixed for the entire term of the loan, the Company or
its subsidiaries, as the case may be, has, since the date it commenced
servicing such loan and, to the Company's and its subsidiaries' knowledge,
all
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prior servicers have (A) properly and accurately entered into its system
all data required to service the loan in accordance with the related loan
documents and all regulations, (B) properly and accurately adjusted the
monthly payment on each payment adjustment date, (C) properly and
accurately calculated the amortization of principal and interest on each
payment adjustment date, in each case in compliance with all applicable
laws, rules and regulations and the related loan documents, and (D)
executed and delivered any and all necessary notices required under, and in
a form that complies with, all applicable laws, rules and regulations and
the terms of the related loan documents regarding the interest rate and
payment adjustments.
(xi) Pools. Each Loan included in a pool of Loans originated,
acquired or serviced by the Company or any of its subsidiaries (a "Pool")
meets all eligibility requirements (including, without limitation, all
applicable requirements for obtaining mortgage insurance certificates and
loan guaranty certificates) for inclusion in such Pool. All of such Pools
have been finally certified or, if required, recertified in accordance with
all applicable laws, rules and regulations, except where the time for
certification or recertification has not expired. No Pools have been
improperly certified. The loan file for each Loan included in a certified
Pool contains all documents and instruments necessary for the final
certification or recertification of such Pool. No Loan has been bought out
of a Pool without all required prior written approvals of the applicable
Investors. Neither the execution, delivery or performance of this Plan by
the Company nor the consummation by the Company of the transactions
contemplated hereby will require any Pool to be recertified. The aggregate
unpaid principal balance outstanding of the Loans in each Pool equals or
exceeds the amount owing to the applicable Investors.
(xii) Securitization Transactions.
(A) The Company and each of its subsidiaries, as servicer under
the applicable Loan Servicing Agreement, (the "Securitization
Servicer") of each outstanding
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transaction under which the Company or any of its subsidiaries have
sold or pledged Loans in a securitization, whether sold under the
Securities Act or otherwise (a "Securitization Transaction"), has
complied in all material respects with all contracts, including the
Loan Servicing Agreements, and all conditions to be performed or
satisfied by it with respect to all agreements and arrangements
pursuant to which such person is bound under such Securitization
Transaction (collectively, "Securitization Instruments").
(B) No Securitization Servicer or, to the Company's knowledge,
no trustee or issuer with respect to any Securitization has taken any
action which would reasonably be expected to adversely affect the
characterization or tax treatment for federal, state or local income or
franchise tax purposes of the issuer or any securities issued in a
Securitization Transaction, and all required federal, state and local
tax and information returns relating to any Securitization Transaction
have been properly filed.
(C) Each representation and warranty made by the Company or any
of its subsidiaries in each "Purchase Agreement," "Pooling and
Servicing Agreement," "Placement Agency Agreement," "Servicer's
Indemnification Agreement" and any other Securitization Instrument to
which any of them was a party in any Securitization Transaction was
true and correct in all material respects whenever made or reaffirmed
by any of them and the Company and each of its subsidiaries have each
fully performed and carried out each covenant and agreement made by any
of them in any such Securitization Instrument.
(D) No rating agency has downgraded, or given the Company or
any of its subsidiaries any indication that it is considering a
downgrading of any securities issued in any Securitization Transaction,
or of its rating of any Securitization Servicer.
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(xiii) Mortgage Insurance. Each Loan which is indicated in the related
loan documents to have FHA insurance is insured under the National Housing
Act or qualifies for such insurance. Each Loan which is indicated in the
related loan documents to be guaranteed by the VA is guaranteed under the
provisions of Chapter 37 of Title 38 of the United States Code to the
extent required by the applicable Investor or qualifies for such guarantee.
As to each FHA insurance certificate, each VA guarantee certificate, and
each Loan which is indicated in the related loan file to be insured by
private mortgage insurance, the Company has complied with applicable
provisions of the insurance or guarantee contract and applicable laws and
regulations, the insurance or guarantee is in full force and effect with
respect to each such Loan, and to the knowledge of the Company, there does
not exist any event or condition which, but for the passage of time or the
giving of notice or both, can result in a revocation of any such insurance
or guarantee or constitute adequate grounds for the applicable Insurer to
refuse to provide insurance or guarantee payments thereunder.
(xiv) Taxes and Insurance. Each Loan has been covered by a policy of
hazard insurance and flood insurance, to the extent required by the Loan
Servicing Agreements relating thereto or any laws, rules, regulations or
Investor or Insurer requirements applicable to such Loan, all in a form
usual and customary in the industry and which is in full force and effect,
and all amounts due and payable under each policy have been, or will be,
paid prior to the date such payments are due, or with respect to
non-escrowed loans, promptly upon the Company becoming aware that such
amounts have not been paid; and all taxes, assessments, ground rents or
other applicable charges or fees due and payable as to each Loan have been,
or will be, paid prior to the date such payments are due, or with respect
to non-escrowed loans, promptly upon the Company becoming aware that such
amounts have not been paid. Any and all claims under such insurance
policies have been submitted and processed in accordance with the
applicable Investor's and Insurer's requirements. Such insurance policies
name the Company (or a subsidiary of it) and its successors and assigns as
mortgagee.
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(xv) Title Insurance. To the extent required by the applicable
Investor, each Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance or opinion of
title acceptable to the relevant Investor, and each such title insurance
policy is issued by an Insurer acceptable to the applicable Investor and
qualified to do business in the jurisdiction where the collateral securing
such Loan is located, and insures the originator and its successors and
assigns as to the first priority lien of the mortgage in the original
principal amount of the Loan (or, in the case of a second mortgage, the
second priority lien). The applicable Investor, as assignee of the
originator's rights, is an insured of such lender's title insurance policy,
and such lender's policy is in full force and effect. Neither the Company
nor, to the Company's knowledge, any prior servicer has performed any act
or omission which would impair the coverage of such lender's policy.
(xvi) Condemnation. The Company and each of its subsidiaries has no
notice of and has no knowledge of any proceeding pending or threatened for
the partial or total condemnation of any of the collateral securing any of
the Loans, and the Company and each of its subsidiaries has no notice or
knowledge that all or any part of such collateral has been or will be
condemned.
(xvii) Tape. The Company has previously delivered to the Parent a tape
(magnetic media) on which certain information regarding the servicing
portfolio of the Company and its subsidiaries as of September 30, 1997 is
recorded. Such tape completely and accurately contains the list of serviced
loans as of such date. The loan characteristics recorded on such tape have
been previously disclosed, and the information contained on such tape is
complete and accurate.
(w) Antitakeover Provisions Inapplicable. The Company has taken all
actions required to exempt itself as well as this Plan and the Merger and
any amendment or revision thereto, and the transactions contemplated hereby
from any state antitakeover laws, including without limitation,
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Section 203 of the State Corporation Law. Neither Section 203 of the State
Corporation Law nor any other State antitakeover laws apply to the Company
or to the transactions contemplated under this Plan.
(x) Material Interests of Certain Persons. Except as disclosed in
the Company's Proxy Statement for its 1997 Annual Meeting of Shareholders,
no officer or director of the Company, or any "associate" (as such term is
defined in Rule 12b-2 under the Securities Exchange Act) of any such
officer or director, has any material interest in any material contract or
property (real or personal), tangible or intangible, used in or pertaining
to the business of the Company or any of its subsidiaries.
(y) Insurance. The Company and its subsidiaries are presently
insured, and since March 15, 1996, have been insured, for reasonable
amounts with financially sound and reputable insurance companies, against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by the Company and its subsidiaries are in
full force and effect, the Company and its subsidiaries are not in default
thereunder and all material claims thereunder have been filed in due and
timely fashion. Since March 15, 1996, no claim by the Company or any of its
subsidiaries on or in respect of an insurance policy or bond has been
declined or refused by the relevant insurer or insurers. In the best
judgment of the Company's management, such insurance coverage is adequate
and will be available in the future under terms and conditions
substantially similar to those in effect on the date hereof. Between the
date hereof and the Effective Time, the Company and its subsidiaries will
maintain the levels of insurance coverage in effect on the date hereof and
will submit all potential claims existing prior to the Effective Time to
its insurance carrier on or before the Effective Time. The Disclosure
Letter lists all insurance policies maintained by or for the benefit of the
Company, of its subsidiaries or its directors, officers, employees or
agents, specifying the (i) type of policy and a brief
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description thereof, (ii) policy limits and (iii) self insurance amounts.
(z) Risk Management. All swaps, caps, floors, option agreements,
futures and forward contracts and similar risk management arrangements,
whether entered into for the Company's own account or for the account of
one or more of the Company's subsidiaries or their customers, were entered
into (i) in accordance with prudent business practices and all applicable
laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes a valid and legally binding obligation of the Company
or one of its subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors' rights or
by general equity principles), and are in full force and effect. Neither
the Company nor any of its subsidiaries, nor to the Company's knowledge any
other party thereto, is in breach of any of its obligations under any such
agreement or arrangement.
(aa) Registration Obligations. Except as disclosed in the Company's
Disclosure Letter, neither the Company nor any of its subsidiaries is under
any obligation, contingent or otherwise, to register any of its securities
under the Securities Act of 1933, as amended.
(bb) Books and Records. The books and records of the Company and its
subsidiaries have been, and are being, maintained in accordance with
applicable legal and accounting requirements and reflect in all material
respects the substance of events and transactions that should be included
therein. None of the records, systems, controls, data or information of the
Company and its subsidiaries are recorded, stored, maintained, operated or
otherwise wholly or partly dependent on any means (including any
electronic, mechanical or photographic process whether computerized or not)
which (including all means of access thereto and therefrom) are not under
the exclusive ownership and direct
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control of the Company or its subsidiaries or accountants retained by the
Company or its subsidiaries.
(cc) Corporate Documents. The Company has delivered to Parent true
and complete copies of (i) its amended charter and amended by-laws and (ii)
the charter and by-laws of each subsidiary of the Company.
(dd) Indemnification. Neither the Company nor any subsidiary of the
Company is a party to any indemnification agreement with any of its present
or former directors, officers, employees, agents or other persons who serve
or served in any other capacity with any other enterprise at the request of
the Company or a subsidiary of the Company.
(ee) Fair Lending. As of the date hereof, with the exception of
routine investigation of consumer complaints, neither the Company nor any
of its subsidiaries has been advised that it is or may be in violation of
the Equal Credit Opportunity Act or the Fair Housing Act or any similar
federal or state statute.
(ff) No Omission of Material Fact. The representations and warranties
by the Company in this Plan and statements contained in the Reports, when
taken as a whole, do not contain any untrue statement of material fact, or
omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information
regarding the Company or any of its subsidiaries supplied or to be supplied
by the Company or any of its subsidiaries for inclusion in the Proxy
Statement (as defined below) will contain any untrue statement of material
fact, or omit to state a material fact necessary to make the statements or
facts contained therein regarding the Company or its subsidiaries not
misleading.
(gg) Conduct of Business. Since August 31, 1997 except as
contemplated by this Plan, neither the Company nor any of its subsidiaries
has taken any action which would have violated Section 2.1 or Section 2.2
had such Sections been in effect since August 31, 1997. The Company has not
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purchased or caused to be purchased any Company Stock since August 31,
1997.
SECTION 3.2. Representations and Warranties of Parent. Parent
represents and warrants to the Company that:
(a) Recitals True. The facts set forth in the Recitals of this Plan
with respect to Parent are true and correct.
(b) Corporate Organization and Qualification. Parent is a commercial
bank duly organized, validly existing and in good standing under the laws
of Australia. Parent is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the
business conducted, by it requires such qualification, except for such
failure to qualify or be in such good standing which, when taken together
with all other such failures, would not have a Material Adverse Effect on
Parent. Parent has the requisite corporate and other power and authority
(including all federal, state, local and foreign government authorizations)
to carry on its respective businesses as they are now being conducted and
to own or lease their respective properties and assets (except for such
authorizations the absence of which, in the aggregate, would not have a
Material Adverse Effect on the Parent).
(c) Corporate Authority. Parent has the requisite corporate power
and authority and has taken all corporate action necessary in order to
execute and deliver this Plan and to consummate the transactions
contemplated hereby. This Plan is a valid and binding agreement of Parent
enforceable against Parent in accordance with its terms.
(d) No Violations. The execution, delivery and performance of this
Plan by Parent do not, and the consummation of the transactions
contemplated hereby by Parent and Merger Sub will not, constitute (i) a
breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of
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Parent or Merger Sub or to which Parent or Merger Sub (or any of their
respective properties) is subject, which breach, violation or default would
have a Material Adverse Effect on Parent, or enable any person to enjoin
the Merger or any other transaction contemplated hereby, (ii) a breach or
violation of, or a default under, the charter or by-laws of Parent or
Merger Sub or (iii) a breach or violation of, or a default under (or an
event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the properties or assets
of Parent or Merger Sub under, any of the terms, conditions or provisions
of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which Parent or Merger Sub is a
party, or to which any of their respective properties or assets may be
bound or affected, except for any of the foregoing that, individually or in
the aggregate, would not have a Material Adverse Effect on Parent; and the
consummation of the transactions contemplated hereby will not require any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or instrument,
other than (i) the required approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b), (ii) any such approval, consent
or waiver that already has been obtained, and (iii) any other approvals,
consents or waivers the absence of which, individually or in the aggregate,
would not result in a Material Adverse Effect on Parent or enable any
person to enjoin the Merger and the transactions contemplated hereby.
(e) Access to Funds. Parent has all funds necessary to consummate
the Merger, pay the aggregate Merger Consideration and repay any
outstanding indebtedness of the Company required to be repaid in connection
with the transactions contemplated hereby.
(f) Knowledge as to Conditions. As of the date hereof, the Parent
knows of no reason why the approvals,
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consents and waivers of governmental authorities referred to in Section
5.1(b) should not be obtained without the imposition of any condition of
the type referred to in the provisos thereto.
(g) Proxy Statement. None of the information regarding the Parent
and Merger Sub supplied or to be supplied by the Parent for inclusion in
the Proxy Statement (as defined below) will contain any untrue statement of
a material fact, or omit to state a material fact necessary to make the
statements or facts contained therein regarding the Parent and Merger Sub
not misleading.
SECTION 3.3. Standard. No representation or warranty of the Company or
Parent contained in Section 3.1 or 3.2 shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or warranty,
as a consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with other facts,
events or circumstances inconsistent with any representation or warranty
contained in Section 3.1 or 3.2 has had or is reasonably likely to have a
Material Adverse Effect with respect to the Company or Parent, respectively (i)
other than Section 3.1(a) (as to the Company only) which shall be true and
correct and (ii) other than Section 3.1(f), 3.1(h)(i), 3.1(o)(i), and 3.1(cc)
which shall be true and correct in all material respects.
ARTICLE IV. COVENANTS
SECTION 4.1. No Solicitation. The Company agrees that neither it nor
any of its subsidiaries nor any of the respective officers and directors of the
Company or its subsidiaries shall, and the Company shall direct and use its
reasonable best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to
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shareholders of the Company) with respect to a merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or any significant portion of the assets or any equity
securities of, the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or, except to
the extent the Board of Directors of the Company determines in good faith, based
on the advice of independent counsel, that its fiduciary obligations require
such action and prior to the receipt of the required Company shareholder
approval, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise knowingly facilitate any effort to implement
an Acquisition Proposal. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and enforce any
confidentiality agreements to which it or any of its subsidiaries is a party.
The Company will take the necessary steps to inform the appropriate individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 4.1. The Company will notify (describing the relevant
facts) Parent immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, the Company and will continue to
inform Parent of the status of such inquiries, proposals, requests, negotiations
and discussions.
SECTION 4.2. Certain Policies of the Company. At the request of
Parent, the Company shall modify and change its loan, litigation, real estate
valuation and risk management policies and practices after the date on which all
required regulatory approvals are received and prior to the Effective Time so as
to be consistent on a mutually satisfactory basis with those of Parent and
generally accepted accounting principles. The Company's representations,
warranties and covenants contained in this Plan shall not be deemed to be untrue
or breached in any respect for any purpose as a consequence of any modifications
or changes undertaken solely on account of this Section 4.2.
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SECTION 4.3. Employee Benefit Matters. (a) Parent agrees that, during
the period commencing on the Effective Time and ending on the first anniversary
thereof, to the extent permitted by law, it will provide or cause the Surviving
Corporation to provide employees of the Company who become employees of the
Surviving Corporation as of the Effective Time ("Covered Employees") with
employee benefit plans, programs and arrangements which in the aggregate are
substantially comparable to those currently provided by the Company and its
subsidiaries (other than stock option or other plans involving the potential
issuance of securities of the Company). For purposes of employee benefit plans,
programs and arrangements provided to Covered Employees maintained or
contributed to by Parent or any of its Subsidiaries, Parent shall, and shall
cause its Subsidiaries to, treat service of each Covered Employee with the
Company and its Subsidiaries (to the same extent such service is recognized
under analogous plans, programs and arrangements of the Company and its
Subsidiaries) as service rendered to Parent and its Subsidiaries, solely for the
purpose of eligibility to participate and vesting thereunder.
(b) Parent will honor, and cause the Surviving Corporation to honor,
pursuant to their terms (as they may be amended or superseded from time to time,
for example, as provided by the Employment Agreements), all employee severance
plans and employment, change of control or severance agreements of the Company
or its subsidiaries that are specifically identified in the Company's Disclosure
Letter.
(c) Nothing in this Section 4.3 shall prevent Parent or the
Surviving Corporation from amending or terminating any Compensation and Benefit
Plans of the Company (or its subsidiaries) or the Parent (or its subsidiaries)
or any other contracts, arrangements, commitments or understandings, in
accordance with their terms and applicable law.
SECTION 4.4. Access and Information. Upon reasonable notice, the
Company shall (and shall cause its subsidiaries to) afford to Parent and its
representatives (including, without limitation, directors, officers and
employees of Parent and its affiliates, and counsel, accountants and other
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advisors retained by Parent and its affiliates) such access (including, without
limitation, for the purpose of conducting supplemental due diligence reviews)
during normal business hours throughout the period prior to the Effective Time
to the books, records (including, without limitation, loan and credit files, tax
returns and work papers of independent auditors), properties, personnel and to
such other information as Parent may reasonably request; provided, however, that
no investigation pursuant to this Section 4.4 shall affect or be deemed to
modify any representation or warranty made herein. Parent will not, and will
cause its representatives not to, use any information obtained pursuant to this
Section 4.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan. Subject to the requirements of law (including,
without limitation, regulatory requirements), Parent will keep confidential, and
will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.4 unless such information (i) was
already known to Parent or an affiliate of Parent and the source of such
information is not known by Parent or such affiliate to be bound by a
confidentiality agreement or other obligation of confidentiality with respect to
such information, (ii) becomes available to Parent or an affiliate of Parent
from other sources not known by such party to be bound by a confidentiality
agreement or other obligation of confidentiality with respect to such
information, (iii) is disclosed with the prior written approval of the Company
or (iv) is or becomes readily ascertainable from published information. In the
event that this Plan is terminated or the transactions contemplated by this Plan
shall otherwise fail to be consummated, each party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
another party hereto (or an affiliate of any party hereto) then in its
possession to be returned to the party which furnished the same. The obligations
contained in the preceding two sentences shall survive the termination of this
Plan.
SECTION 4.5. Certain Filings, Consents and Arrangements. Parent,
Merger Sub and the Company shall, and Parent and the Company shall cause their
respective subsidiaries to, (a) as soon as practicable make any filings and
applications
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required to be filed in order to obtain all approvals, consents and waivers of
governmental authorities necessary or appropriate for the consummation of the
transactions contemplated hereby, (b) cooperate with one another (i) in promptly
determining what filings are required to be made or approvals, consents or
waivers are required to be obtained under any relevant federal, state or foreign
law or regulation and (ii) in promptly making any such filings, furnishing
information required in connection therewith and seeking timely to obtain any
such approvals, consents or waivers (c) deliver to the other copies of the
publicly available portions of all such filings and applications promptly after
they are filed and (d) from time to time advise the other parties of the status
of the foregoing.
SECTION 4.6. Antitakeover Statutes. The Company shall take all actions
necessary (i) to exempt the Company and the Plan from the requirements of any
state antitakeover law by action of its board of directors or otherwise and
(ii), upon the request of Parent, to assist in any challenge by Parent to the
applicability to the Merger of any state antitakeover law.
SECTION 4.7. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take promptly, or cause to be taken promptly, all
actions and to do promptly, or cause to be done promptly, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Plan as soon as practicable,
including using its reasonable best efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents and approvals from all applicable
governmental entities, effecting all necessary registrations, applications and
filings (including, without limitation, filings under any applicable state
securities laws) and obtaining any required contractual consents and regulatory
approvals.
SECTION 4.8. Publicity. The initial press release announcing this Plan
shall be a joint press release and, subject to the requirements of law
(including, without limitation, regulatory requirements) and relevant stock
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exchange or self-regulatory organization obligations, thereafter the Company
and Parent shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the other or the transactions
con templated hereby and in making any filings with any governmental entity or
with any national securities exchange with respect thereto.
SECTION 4.9. Shareholder Meeting. (a) As soon as practicable after the
date hereof, the Company shall prepare a proxy statement to take shareholder
action on the Merger and this Plan (the "Proxy Statement"), file the Proxy
Statement with the SEC, respond to comments of the staff of the SEC and promptly
thereafter mail the Proxy Statement to all holders of record (as of the
applicable record date) of shares of the Company's Common Stock. The Company
represents and covenants that the Proxy Statement and any amendment or
supplement thereto (including any material incorporated by reference), at the
date of mailing to shareholders of the Company and the date of the meeting of
the Company's shareholders to be held in connection with the Merger, will be in
compliance with all relevant rules and regulations of the SEC and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent and the Company shall cooperate with each other in the
preparation of the Proxy Statement. The Company will promptly supply Parent with
all correspondence between the Company or its representatives, on the one hand,
and the SEC or its staff, on the other, after the date hereof. If requested by
Parent, the Company shall, at its expense, employ professional proxy solicitors
to assist it in contacting shareholders in connection with the vote on the
Merger. The Company will not mail any Proxy Statement, or make any amendment or
supplement thereto, to which Parent reasonably objects.
(b) The Company shall take all action necessary, in accordance with
applicable law and its certificate of incorporation and by-laws, to convene a
meeting of the holders of the Company's Common Stock (the "Company Meeting") as
promptly as practicable for the purpose of approving this
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Plan. Except to the extent that the Board of Directors of the Company determines
in good faith based on the advice of independent counsel that such action would
contravene the fiduciary obligations of the Board of Directors, the Board of
Directors of the Company shall recommend at the Company's meeting that this Plan
be approved by the shareholders of the Company.
SECTION 4.10. Notification of Certain Matters. Each party shall give
prompt notice to the others of: (i) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Plan and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of the Company and its subsidiaries taken as a whole to which the
Company or any subsidiary is a party or is subject; and (ii) any material
adverse change in the condition (financial or other), properties, assets,
business, or results of operations of it and its subsidiaries taken as a whole
or the occurrence of any event which, so far as reasonably can be foreseen at
the time of its occurrence, is reasonably likely to result in any such change.
Each of the Company, Parent and Merger Sub shall give prompt notice to the other
party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Plan.
SECTION 4.11. Tax Matters. From the date hereof until the Effective
Time, (i) the Company and its subsidiaries will file all Tax Returns required to
be filed with any taxing authority in accordance with all applicable laws, (ii)
the Company and its subsidiaries will timely pay all Taxes due and, as of the
time of filing, the Tax Returns will correctly reflect the facts regarding the
income, business, assets, operations, activities and the status of the Company
and its subsidiaries in all material respects, and (iii) the Company and its
subsidiaries will promptly notify Parent of any action, suit, proceeding,
investigation, audit or claim commenced against or with respect to the Company
or any subsidiary in respect of any Tax where there is a reasonable
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possibility of a determination or decision which would reasonably be expected to
have a significant adverse effect on the Company's Tax liabilities or other Tax
attributes. The Company shall not, nor shall it permit any of its subsidiaries
to, make any Tax election or settle or compromise any income Tax liability.
SECTION 4.12. Certain Information. Parent and the Company shall, upon
request, furnish each other with all information concerning themselves, their
subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective subsidiaries to any governmental
authority in connection with the Merger and the other transactions contemplated
by this Plan.
SECTION 4.13. Regulatory Communications. Parent and the Company shall
promptly furnish each other with copies of written communications received by
the Company or any of its Subsidiaries, Affiliates or Associates (as such terms
are defined in Rule 12b-2 under the Securities Exchange Act of 1934 as in effect
on the date of this Plan), or by Parent or Merger Sub, as the case may be, from,
or delivered by any of the foregoing to, any governmental authority in respect
of the transactions contemplated hereby; provided, however, that Parent shall
not be required to furnish any communication which (a) contains information that
is confidential in nature, or (b) involves the Bank of England or the Reserve
Bank of Australia.
SECTION 4.14. Indemnification. (a) From and after the Effective Time
through the sixth anniversary of the Effective Date, Parent agrees to indemnify
and hold harmless each present and former director, officer and employee of the
Company determined as of the Effective Time (the "Indemnified Parties"), against
any costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative,
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arising out of matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
extent to which such Indemnified Parties were entitled under the State
Corporation Law and the Company's certificate of incorporation and by-laws in
effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section IV.4.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify Parent thereof. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent shall have the right to assume
the defense thereof and Parent shall not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if Parent elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between Parent and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent shall pay the reasonable fees
and expenses of one such counsel for the Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate
in the defense of any such matter, (iii) Parent shall not be liable for any
settlement effected without its prior written consent and (iv) Parent will not
settle any claim without the consent of an affected Indemnified Party unless
such settlement provides for a full release for such Indemnified Party; and
provided, further, that the Parent shall not have any obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that the indemnification of such Indemnified Party in the manner
contemplated hereby is not permitted or is prohibited by applicable law.
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(c) The provisions of this Section 4.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
SECTION 4.15. Funding Indebtedness. The Parent shall cause the
Surviving Corporation to repay all indebtedness of the Company and the Surviving
Corporation required to be repaid in connection with the transactions
contemplated hereby.
SECTION 4.16. Hedging and Interest Rate Policies; Correspondent Lending
Agreement. The Company shall between the date hereof and the Effective Time
co-operate with the Parent in reviewing, revising and establishing interest rate
policies and hedging strategies designed to reduce risk and comply with
applicable accounting standards for implementation after the Effective Time or
such other time as may be agreed.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations. The respective
obligations of Parent, Merger Sub and the Company to effect the Merger shall be
subject to the satisfaction or waiver prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. The Plan and the transactions contemplated
hereby shall have been approved by the requisite vote of the shareholders
of the Company in accordance with the Company's charter and applicable law.
(b) Regulatory Approvals. Parent, Merger Sub, the Company and each
of their respective subsidiaries shall have procured, if required in the
reasonable opinion of counsel for Parent, the approvals, authorizations,
consents or waivers with respect to the Plan and the transactions
contemplated hereby by (i) the Reserve Bank of Australia, (ii) the Bank of
England, (iii) the Federal Reserve Board, (iv) relevant state mortgage
banking licensing or supervisory authorities (provided that, if such
approvals cannot be
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obtained in time to permit the consummation of the Merger at a time when it
otherwise could occur, arrangements reasonably acceptable to the Parent
that enable the Company to conduct its business substantially in accordance
with its recent past practices shall have been entered into) and (vi) FNMA,
FHLMC, GNMA and HUD, and all applicable statutory waiting periods shall
have expired; and the parties shall have procured all other regulatory
approvals, consents or waivers of governmental authorities or other persons
that, in the opinion of counsel for Parent, are necessary or appropriate
for the consummation of the transactions contemplated by the Plan;
provided, however, that no approval, authorization, notification, consent
or waiver referred to in this Section 5.1(b) shall be deemed to have been
received if it shall include any condition or requirement that,
individually or in the aggregate, (i) would result in a Material Adverse
Effect on Parent, Michigan National Corporation or the Company, (ii) would
require Parent, the Company or their respective subsidiaries to dispose of
any asset which is material to Parent or the Company, (iii) materially
restricts or curtails the current business operations or activities of
Parent, Michigan National Corporation or the Company, (iv) would require
Parent, Michigan National Corporation or the Company to raise an amount of
capital, the issuance and sale of which, in the absence of the Merger and
the other transactions contemplated by this Plan, would in Parent's
judgment be materially burdensome in light of Parent's capital raising
policies or (v) would reduce the benefits of the transactions contemplated
by the Plan to Parent or Michigan National Corporation in so significant a
manner that Parent, in its reasonable judgment, would not have entered into
this Plan had such condition or requirement been known at the date hereof.
(c) Legal Requirements. All other requirements prescribed by law
which are necessary to the consummation of the transactions contemplated by
this Plan shall have been satisfied.
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(d) No Injunctions. No party hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger or any other
transaction contemplated by this Plan, and no litigation or proceeding
shall be pending against Parent or the Company or any of their subsidiaries
brought by any governmental agency seeking to prevent consummation of the
transactions contemplated hereby.
SECTION 5.2. Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger shall be subject
to the satisfaction or waiver prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Plan shall (subject to the
standard set forth in Section 3.3) have been true and correct on the date
hereof and shall (subject to the standard set forth in Section 3.3) be true
and correct on the Effective Date as if made on such date (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); the Company shall have performed, in all
material respects, each of its covenants and agreements contained in this
Plan; and Parent shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of the Company, dated the
Effective Date, to the foregoing effect.
(b) Termination of Rights and Options. Immediately prior to the
Effective Time, all Rights (including all Options) shall have been duly
terminated and shall thereafter be of no force and effect whatsoever.
(c) No Legal Restrictions. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated,
interpreted, applied or enforced by any governmental authority which
prohibits, restricts or makes illegal consummation of the Merger or any
other transaction contemplated by this Plan or that has an
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effect or consequence set forth in the proviso to Section 5.1(b).
SECTION 5.3. Conditions to the Obligation of the Company. The
obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. Each of the representations,
warranties and covenants of Parent and Merger Sub contained in this Plan
shall (subject to the standard set forth in Section 3.3) have been true and
correct on the date hereof and shall (subject to the standard set forth in
Section 3.3) be true and correct on the Effective Date as if made on such
date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Parent and Merger
Sub shall have performed, in all material respects, each of its covenants
and agreements contained in this Plan; and the Company shall have received
certificates signed by the Chief Financial Officer of Parent and the Chief
Executive Officer and the Chief Financial Officer of Parent, dated the
Effective Date, to the foregoing effect.
(b) No Legal Restrictions. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated,
interpreted, applied or enforced by any governmental authority which
prohibits, restricts or makes illegal consummation of the Merger or any
other transaction contemplated by this Plan.
ARTICLE VI. TERMINATION
SECTION 6.1. Termination. This Plan may be terminated, and the Merger
abandoned, prior to the Effective Date:
(a) by the mutual consent of Parent and the Company if, in the case
of the Company, the board of directors of the Company so determines by vote
of a majority of the members of its entire board;
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(b) by Parent or the Company, by written notice to the other party
(if, in the case of the Company, its board of directors so determines by
vote of a majority of the members of its entire board), in the event of a
material breach by, in the case of a termination by the Company, Parent,
or, in the case of a termination by Parent, the Company, of any
representation, warranty, covenant or agreement contained herein which is
not cured or not curable within 30 days after written notice of such breach
is given to the party committing such breach by Parent or the Company;
(c) by Parent or the Company, by written notice to the other, if
either (i) any approval, consent or waiver of a governmental authority
required to permit consummation of the transactions contemplated hereby
shall have been denied or (ii) any governmental authority of competent
jurisdiction shall have issued a final, unappealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Plan;
(d) by Parent or the Company, by written notice to the other party
(if, in the case of the Company, its board of directors so determines by
vote of a majority of the members of its entire board), in the event that
the Merger is not consummated by June 30, 1998, unless the failure to so
consummate by such time is due to the breach of any representation,
warranty or covenant contained in this Plan by the Company if it is seeking
to terminate or by Parent or Merger Sub if Parent is seeking to terminate;
(e) by Parent, by written notice to the Company, if (i) the Company
takes, causes to be taken or allows to be taken any action that is
prohibited under Section 4.1 or (ii) the Board of Directors of the Company
fails to make or withdraws, rescinds or materially modifies the
recommendation contemplated by Section 4.9(b); or
(f) by the Company by written notice to the Parent prior to the
approval by the shareholders of the Company of this Plan, if, without
breaching Section 4.1, the Company shall contemporaneously enter into a
definitive agreement with a third party providing for an Acquisition
Transaction
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on terms determined in good faith by the Company Board, after consulting
with and considering the advice of the Company's independent counsel and
financial advisors, to be more favorable to the stockholders of the Company
than the Merger and with respect to which the Board of Directors has
determined after such consultation and consideration that to proceed with
the Merger would violate the fiduciary duties of the Board of Directors to
the Company's shareholders; provided, that the right to terminate this Plan
under this Section 6.1(f) shall not be available to the Company unless it
pays to the Parent simultaneously with such termination in immediately
available funds (i) a fee in an amount of US$22,000,000 and (ii) an amount
in cash in US dollars equal to the amount of the Expense Reimbursement Fee
(as defined in Section 6.3). For purposes of this Plan, (a) "Acquisition
Transaction" means (i) a merger or consolidation, or any similar
transaction, involving the Company or any Subsidiary of the Company (a
"Company Subsidiary") or group of Company Subsidiaries that is, or would on
an aggregate basis, constitute a Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the SEC) (other than mergers,
consolidations or similar transactions involving solely the Company and/or
one or more wholly-owned subsidiaries of the Company, provided that any
such transaction is not entered into in violation of the terms of this
Plan), (ii) a purchase, lease or other acquisition of all or substantially
all of the assets or deposits of the Company or any Company Subsidiary or
group of Company Subsidiaries that is, or would on aggregate basis
constitute, a Significant Subsidiary (other than in the case of
subsidiaries of HomeSide Lending Inc., sales of mortgage loans, servicing
rights and related assets in the ordinary course of business consistent
with past practice), or (iii) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing 50% or more of the voting power of the Company or any Company
Subsidiary or group of Company Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary and (b) "Subsidiary"
shall have the meaning set forth in Rule 12b-2 under the Securities
Exchange Act of 1934.
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SECTION 6.2. Effect of Termination. In the event of the termination of
this Plan by either Parent or the Company, as provided above, this Plan shall
thereafter become void and, subject to the provisions of Section 6.3 and Section
8.2 below, there shall be no liability or obligation on the part of any party
hereto or their respective officers or directors, except that any such
termination shall be without prejudice to the rights of any party hereto arising
out of the willful breach by any other party of any covenant or willful
misrepresentation contained in this Plan.
SECTION 6.3. Termination Fee. (a) The Company hereby agrees upon the
occurrence of a Fee Trigger Event (as defined below) to pay to Parent, and
Parent shall be entitled to payment of, (x) a cash fee (the "Fee") of
US$44,000,000 and (y) an amount in cash US dollars equal to the amount of all
out-of-pocket expenses (including fees, expenses and disbursements of
consultants, attorneys and advisors) not exceeding US$10,000,000 incurred by
Parent related to the transactions contemplated by this Plan and its plans to
acquire the Company (the "Expense Reimbursement Fee"); provided, that Parent's
right to receive the Fee and the Expense Reimbursement Fee shall be discontinued
if any of the following occurs prior to a Fee Trigger Event:
(i) The Effective Time;
(ii) Termination of this Plan in accordance with the provisions
hereof, if such termination occurs prior to the occurrence of a Preliminary
Fee Trigger Event, other than a Listed Termination. "Listed Termination"
means a termination of this Plan (i) by Parent pursuant to Section 6.1(b)
because of a knowing, intentional or grossly negligent breach by the
Company or Section 6.1(e) or (ii) by the Company pursuant to Section
6.1(f); or
(iii) Eighteen months after termination of this Plan, if such
termination (A) follows, or occurs at the same time as, a Preliminary Fee
Trigger Event or (B) is a Listed Termination.
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(b) The term "Preliminary Fee Trigger Event" shall mean any of the
following events or transactions (for purposes of this clause (b) the percentage
in the definition of Acquisition Transaction relating to voting power shall be
deemed to be 10%):
(i) The Company or any Company Subsidiary, without having received
Parent's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined above) with any person
(the term "person" for purposes of this Plan having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act,
and the rules and regulations thereunder) other than Parent or any of its
Subsidiaries (each a "Parent Subsidiary") or the Board of Directors of the
Company (the "Company Board") shall have recommended that the shareholders
of the Company approve or accept any Acquisition Transaction other than the
Merger.
(ii) Any person other than the Parent or any Parent Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of securities representing 10% or more of the outstanding voting
power of the Company (the term "beneficial ownership" for purposes of this
Plan having the meaning assigned thereto in Section 13(d) of the Securities
Exchange Act, and the rules and regulations thereunder);
(iii) The shareholders of the Company shall have voted and failed to
approve this Plan and the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of this Plan or shall have been canceled
prior to termination of this Plan if, prior to such meeting (or if such
meeting shall not have been held or shall have been canceled, prior to such
termination), it shall have been publicly announced that any person (other
than Parent or any of its Subsidiaries) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
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(iv) The Company Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Parent its recommendation that the shareholders of the Company
approve the transactions contemplated by this Plan, or the Company or the
Company Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Parent or a Parent Subsidiary;
(v) Any person other than Parent or any Parent Subsidiary shall have
made a proposal to the Company or its shareholders to engage in an
Acquisition Transaction and such proposal shall have become public;
(vi) Any person other than Parent or any Parent Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
(vii) The Company shall have willfully breached any covenant or
obligation contained in this Plan in anticipation of engaging in an
Acquisition Transaction, and following such breach Parent would be entitled
to terminate this Plan (whether immediately or after the giving of notice
or passage of time or both); or
(viii) Any person other than Parent or any Parent Subsidiary shall have
filed an application or notice with the Federal Reserve Board or other
federal or state bank regulatory or antitrust authority, which application
or notice has been accepted for processing, for approval or clearance to
engage in an Acquisition Transaction.
(c) The term "Fee Trigger Event" shall mean any of the following
events or transactions:
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(i) The acquisition by any person (other than Parent or any Parent
Subsidiary) of beneficial ownership of securities representing 20% or more
of the voting power of the Company;
(ii) The consummation of an Acquisition Transaction, except that the
percentage referred to in clause (iii) of the definition of "Acquisition
Transaction" shall be 20% for purposes of this clause (c)(ii); or
(iii) The failure of a Significant Shareholder to vote its shares of
Company Stock in accordance with the terms of the Shareholder Agreement.
(d) For purposes of paragraphs (b) and (c) of this Section 6.3, the
beneficial ownership of securities of the Company held by each of the
Significant Shareholders on the date hereof shall not be considered to be a
Preliminary Fee Trigger Event or a Fee Trigger Event provided that each of the
foregoing shall be deemed to have occurred if any Significant Shareholder
acquires beneficial ownership of additional securities of the Company after the
date hereof constituting in excess of 2% of the voting power of the Company.
(e) The Company shall notify Parent promptly in writing of its
knowledge of the occurrence of a Preliminary Fee Trigger Event or Fee Trigger
Event; provided, however, that the giving of such notice shall not be a
condition to the right of Parent to the Fee and the Expense Reimbursement Fee.
(f) The Fee and the Expense Reimbursement Fee shall be payable,
without setoff, by wire transfer in immediately available funds, to an account
specified by Parent not later than three New York City business days following
the first occurrence of a Fee Trigger Event.
(g) Any amounts paid by Company under Section 6.1(f) shall be
credited against any Fee and Expense Reimbursement Fee payable under Section
6.3.
(h) The Parent shall not be entitled to a Fee or an Expense
Reimbursement Fee under Section 6.3 if the Merger
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Agreement is terminated pursuant to Section 6.1(a) or by the Company pursuant to
Section 6.1(b) or by either party pursuant to Section 6.1(c) or 6.1(d), provided
that, prior to any such termination, the Company (i) shall have made and shall
not have withdrawn, rescinded or materially modified its recommendation to
shareholders to vote favorably on the Plan, (ii) shall not be in breach of its
obligations under Sections 4.1 and 4.9 of this Plan, and (iii) shall not have
acted willfully or knowingly so as to adversely affect the favorable approval of
the Plan by the holders of the Company Stock.
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. Effective Date and Effective Time. On such date as Parent
selects, which shall be within 7 business days after the last to occur of the
expiration of all applicable waiting periods in connection with approvals of
governmental authorities occurs and the receipt of all approvals of governmental
authorities and all conditions to the consummation of the Merger are satisfied
or waived, or on such earlier or later date as may be agreed in writing by the
parties, a certificate of merger shall be executed in accordance with all
appropriate legal requirements and shall be filed as required by law, and the
Merger provided for herein shall become effective upon such filing or on such
date and at such time as may be agreed to by the Company and Parent and
specified in such certificate of merger. The date of such filing or such later
effective date is herein called the "Effective Date". The "Effective Time" of
the Merger shall be the time of such filing or as set forth in such certificate
of merger.
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation. As used in this Plan,
the following terms shall have the meanings indicated:
"material" means (i) with respect to the Company, material with respect
to the Company and its subsidiaries, taken as a whole and (ii) with respect
to Parent and Merger
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<PAGE> 107
Sub, material with respect to the Parent and its subsidiaries taken as a
whole.
"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the condition (financial or other),
properties, assets, business or results of operations of such person and
its subsidiaries, taken as a whole, or (B) the ability of such person to
perform its obligations under, and to consummate the transactions
contemplated by, this Plan. Notwithstanding the foregoing, any change in
the condition (financial or otherwise), properties, assets, business or
results of operations arising by virtue of a change in interest rates or
other event affecting the mortgage banking industry in general shall not be
deemed to cause a Material Adverse Effect.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Plan to Sections or Annex 1, such reference
shall be to a Section of, or Annex 1 to, this Plan unless otherwise indicated.
The table of contents, tie sheet and headings contained in this Plan are for
ease of reference only and shall not affect the meaning or interpretation of
this Plan. Whenever the words "include", "includes", or "including" are used in
this Plan, they shall be deemed followed by the words "without limitation". Any
singular term in this Plan shall be deemed to include the plural, and any plural
term the singular.
SECTION 8.2. Survival. Only those agreements and covenants of the
parties that are by their terms applicable in whole or in part after the
Effective Time shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Plan and shall not survive the Effective Time. If the Plan shall be terminated,
the agreements of the parties in Sections
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<PAGE> 108
6.1, 6.2, 6.3, 8.6 and 8.7, and the last three sentences of Section 4.4, shall
survive such termination.
SECTION 8.3. Waiver. Prior to the Effective Time, any provision of this
Plan may be: (i) waived by the party benefitted by the provision; or (ii)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto, except that, after the vote
by the shareholders of the Company, no amendment may be made that would
contravene Section 251(d) of the State Corporation Law.
SECTION 8.4. Counterparts. This Plan may be executed and delivered in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.5. Governing Law. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware.
SECTION 8.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS PLAN OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.7. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby.
SECTION 8.8. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram, telex or
facsimile (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
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<PAGE> 109
If to the Company, to:
HomeSide, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Telecopier: (904) 281-3745
Attention: Joe K. Pickett
With copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Telecopier: (617) 951-1295
Attention: James Westra, Esq.
If to Parent or Merger Sub, to:
National Australia Bank Limited
Level 35
500 Bourke Street
Melbourne, Australia
Telecopier: 011-613-641-4902
Attention: Chief Financial Officer
With copies to:
National Australia Bank Limited
Level 24
500 Bourke Street
Melbourne, Australia
Telecopier: 011-613-641-4902
Attention: Group Legal
Sullivan & Cromwell
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<PAGE> 110
125 Broad Street
New York, New York 10004
Telecopier: (212) 558-3588
Attention: David M. Huggin, Esq. and
Mark J. Menting, Esq.
SECTION 8.9. Entire Agreement; Etc. This Plan represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made, including the existing confidentiality agreement. All terms and
provisions of the Plan shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Nothing in this
Plan is intended to confer upon any other person any rights or remedies of any
nature whatsoever under or by reason of this Plan.
SECTION 8.10. Assignment. This Plan may not be assigned by any party
hereto without the written consent of the other parties.
SECTION 8.11 Enforcement. Each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any Federal court located in the
State of New York or any New York state court in the event any dispute arises
out of this Plan or any of the transactions contemplated by this Plan and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
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<PAGE> 111
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
NATIONAL AUSTRALIA BANK
LIMITED
/s/ R.M.C. Prowse
By: ___________________
Name: R.M.C. Prowse
Title:
HOMESIDE, INC.
/s/ Hugh R. Harris
By: ___________________
Name:
Title:
_______________________(1)
By: ___________________
Name:
Title:
- --------------
(1) Signature space for execution and delivery by Merger Sub after
formation.
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<PAGE> 112
EXHIBIT B
DELAWARE CODE TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
SEC. 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
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that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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EXHIBIT C-1
[LETTERHEAD OF SMITH BARNEY]
December 15, 1997
The Board of Directors
HomeSide, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of HomeSide, Inc. ("HomeSide") of the
consideration to be received by such holders pursuant to the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
October 25, 1997 (the "Merger Agreement"), by and between National Australia
Bank Limited ("NAB") and HomeSide. As more fully described in the Merger
Agreement, (i) a wholly owned subsidiary of NAB will be merged with and into
HomeSide (the "Merger") and (ii) each outstanding share of the Common Stock, par
value $0.01 per share, of HomeSide (the "HomeSide Common Stock") and each
outstanding share of the Class C Non-Voting Common Stock, par value $1.00 per
share, of HomeSide (the "HomeSide Class C Stock" and, together with the HomeSide
Common Stock, the "HomeSide Stock") will be converted into the right to receive
$27.825 in cash (the "Merger Consideration").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of HomeSide concerning the business, operations and prospects of
HomeSide. We examined certain publicly available business and financial
information relating to HomeSide and NAB as well as certain financial forecasts
and other information and data for HomeSide which were provided to or otherwise
discussed with us by the management of HomeSide. We reviewed the financial terms
of the Merger as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of HomeSide
Common Stock; the historical and projected earnings and other operating data of
HomeSide; and the capitalization and financial condition of HomeSide. We
considered, to the extent publicly available, the financial terms of other
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of HomeSide. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of HomeSide that such forecasts and other information
and data were reasonably prepared reflecting the best currently available
estimates and judgments of the management of HomeSide as to the future financial
performance of HomeSide. We have not made or, except with respect to HomeSide's
servicing portfolio, been provided with an independent evaluation or appraisal
of the assets or liabilities (contingent or otherwise) of HomeSide nor have we
made any physical inspection of the properties or assets of HomeSide. We were
not requested to, and did not, participate in the negotiation or structuring of
the proposed Merger. In connection with our engagement, we were requested to
approach on a selected basis, and we held discussions with, certain third
parties to solicit indications of interest in a possible acquisition of
HomeSide. Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Smith Barney has been engaged to render financial advisory services to HomeSide
in connection with the Merger and will receive a fee for such services, a
significant portion of which is contingent upon
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<PAGE> 117
The Board of Directors
HomeSide, Inc.
December 15, 1997
Page 2
consummation of the Merger. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of HomeSide and NAB for our
own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities. We have in the past
provided investment banking services to HomeSide unrelated to the proposed
Merger, for which services we have received compensation. In addition, we and
our affiliates (including Travelers Group Inc. and its affiliates) may maintain
relationships with HomeSide, NAB and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of HomeSide in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to Smith Barney be made, without our prior
written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the holders of HomeSide Stock.
Very truly yours,
SMITH BARNEY INC.
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EXHIBIT C-2
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
December 15, 1997
Board of Directors
HomeSide, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Members of the Board:
We understand that HomeSide, Inc. ("HomeSide") and National Australia Bank
Limited ("National Australia") have entered into an Agreement and Plan of Merger
dated as of October 25, 1997 (the "Agreement"), pursuant to which a wholly owned
subsidiary of National Australia is to be merged with and into HomeSide in a
transaction (the "Merger") in which each outstanding share of the Common Stock,
par value $0.01 per share, of HomeSide (the "HomeSide Common Stock") and each
outstanding share of the Class C Non-Voting Common Stock, par value $1.00 per
share, of HomeSide (the "HomeSide Class C Stock" and, together with the HomeSide
Common Stock, the "HomeSide Shares") will be converted into the right to receive
$27.825 in cash (the "Cash Consideration"), all as set forth more fully in the
Agreement.
You have asked us whether, in our opinion, the Cash Consideration is fair
from a financial point of view to the holders of HomeSide Shares.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to National Australia and HomeSide that we deemed to
be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the businesses, earnings, assets, liabilities and prospects of
HomeSide furnished to us by senior management of HomeSide;
(3) Conducted discussions with members of senior management of
HomeSide concerning the matters described in clauses (1) and (2) above;
(4) Reviewed the market prices and valuation multiples for the
HomeSide Common Stock and compared them with those of certain publicly
traded companies which we deemed to be relevant;
(5) Reviewed the financial condition and results of operations of
HomeSide and compared them with those of certain publicly traded companies
which we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Reviewed the Agreement; and
(8) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary under the circumstances,
including our assessment of general economic, market and monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of HomeSide or, except with respect to HomeSide's servicing portfolio, been
furnished any such evaluation or appraisal. In addition, we have not assumed any
obligation to conduct, nor have we conducted, any physical inspection of the
properties or facilities of HomeSide. With respect to the financial forecast
information furnished to or discussed with us by HomeSide, we have assumed that
such information has been reasonably prepared and reflects the best
C-2-1
<PAGE> 119
Board of Directors
December 15, 1997
Page 2
currently available estimates and judgements of the senior management of
HomeSide as to the expected future financial performance of HomeSide.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other approvals (contractual or otherwise) for the
Merger, no restrictions, including any amendment or modifications, will be
imposed that will have a material adverse effect on the Merger.
In connection with the preparation of this opinion, we have not been
authorized by HomeSide or the Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or any
part of HomeSide, nor were we requested to, and we did not, participate in the
negotiations or structuring of the proposed Merger.
We have been retained by the Board of Directors of HomeSide to act as
financial advisor to HomeSide in connection with the Merger and will receive a
fee for our services, a significant portion of which is contingent upon the
consummation of the Merger. In addition, HomeSide has agreed to indemnify us for
certain liabilities arising out of our engagement. We have in the past two years
provided financial advisory, investment banking and other services to National
Australia and HomeSide and received customary fees for the rendering of such
services. In the ordinary course of our securities business, we also may
actively trade debt and/or equity securities of National Australia and HomeSide
and their respective affiliates for our own account and the accounts of our
customers, and we therefore may from time to time hold a long or short position
in such securities.
This opinion is for the use and benefit of the Board of Directors of
HomeSide. Our opinion does not address the merits of the underlying decision by
HomeSide to engage in the Merger and does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Cash Consideration is fair from a financial point of
view to the holders of HomeSide Shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
C-2-2
<PAGE> 120
SKU 1623-S-P-97
<PAGE> 121
HOMESIDE, INC.
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 16, 1998
The undersigned hereby appoints Joe K. Pickett, Hugh R. Harris and Robert J.
Jacobs, and each of them, with full power of substitution, proxies to represent
the undersigned at the Special Meeting of Stockholders of HomeSide, Inc., to be
held on January 16, 1998, at 10:00 a.m., at Jacksonville, Florida, and at any
adjournment or adjournments thereof, to vote in the name and place of the
undersigned, with all powers which the undersigned would possess if personally
present, upon such business as may properly come before the meeting, including
the proposal set forth on the reverse side of this Proxy Card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD
RECOMMENDS AN AFFIRMATIVE VOTE ON THE PROPOSAL SPECIFIED. THE SHARES WILL BE
VOTED AS SPECIFIED., IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED WILL BE
VOTED IN FAVOR OF THE MERGER AS SET FORTH IN THE PROXY STATEMENT.
PLEASE COMPLETE, SIGN DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING IN PERSON.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 122
[ ] Please mark votes
as in this example
<TABLE>
<S> <C> <C>
1. To adopt the Agreement and Plan 2. In their discretion, the proxies
of Merger as more fully described in are authorized to vote upon such
the accompanying Proxy Statement. other business as may properly
come before the meeting and any
adjournment thereof.
For Against Abstain
[ ] [ ] [ ]
MARK HERE IF YOU PLAN
TO ATTEND THE MEETING IN
PERSON
[ ]
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
[ ]
MARK HERE IF COMMENTS HAVE
BEEN NOTED ON THE REVERSE
SIDE OF THIS CARD
[ ]
Please be sure to sign and date
this Proxy
Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
</TABLE>
Signature: __________ Date: _____ Signature: __________ Date: _____
<PAGE> 123
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
HomeSide, Inc.
We have audited the accompanying consolidated balance sheet of HomeSide, Inc.,
(a Delaware corporation, see Note 1) and subsidiaries as of February 28, 1997,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the period from March 16, 1996 to February 28, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of HomeSide, Inc.
and subsidiaries as of February 28, 1997 and the consolidated results of their
operations and their cash flows for the period from March 16, 1996 to February
28, 1997, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
----------------------------
Arthur Andersen LLP
Jacksonville, Florida
April 18, 1997
<PAGE> 124
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
BancBoston Mortgage Corporation:
We have audited the accompanying consolidated balance sheet of BancBoston
Mortgage Corporation and subsidiaries (see Note 1) as of March 15, 1996, and the
related consolidated statements of operations and retained earnings and cash
flows for the period from January 1, 1996 to March 15, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BancBoston
Mortgage Corporation and subsidiaries as of March 15, 1996 and the consolidated
results of their operations and their cash flows for the period from January 1,
1996 to March 15, 1996, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Jacksonville, Florida
March 14, 1997
<PAGE> 125
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
BancBoston Mortgage Corporation
We have audited the accompanying consolidated balance sheets of BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the related
consolidated statements of operations and retained earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles
As discussed in Note 2, BancBoston Mortgage Corporation changed its method of
accounting for mortgage servicing fee income, effective January 1, 1994.
/s/ Coopers & Lybrand L.L.P.
Jacksonville, Florida
January 18, 1996, except
for the second paragraph of
Note 1 and the fifth
paragraph of Note 2, as to
which the date is March 4, 1996
