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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
________________
Date of Report (Date of earliest event reported): March 10, 1999
Franchise Mortgage Acceptance Company
(Exact name of registrant as specified in its charter)
Delaware 0-23283 95-4649104
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1888 Century Park East, 90067
3rd Floor (Zip Code)
Los Angeles, CA
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (310) 229-2600
No Change
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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Franchise Mortgage Acceptance Company (the "Registrant") and Bay View
Capital Corporation ("BayView") have entered into an Agreement and Plan of
Merger and Reorganization dated as of March 10, 1999 (the "Merger Agreement"),
which is filed herewith as Exhibit 2 and is incorporated herein by reference.
The Registrant and BayView have issued a joint press release
announcing the Merger Agreement, which is filed herewith as Exhibit 99.1 and is
incorporated herein by reference.
Concurrently with the execution and delivery of the Merger Agreement,
BayView entered into a Voting Agreement dated March 10, 1999, with Imperial
Credit Industries, Inc., which is filed herewith as Exhibit 99.2 and is
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) EXHIBITS:
2 Agreement and Plan of Merger and Reorganization dated as of March 10,
1999, by and between the Registrant and BayView Capital Corporation.
99.1 Press release of the Registrant and BayView Capital Corporation
issued March 11, 1999.
99.2 Voting Agreement dated as of March 10, 1999, between the Registrant
and BayView Capital Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Franchise Mortgage Acceptance Company
(Registrant)
Date: March 12, 1999 /s/Raedelle Walker
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Raedelle Walker
Executive Vice President & Chief Financial Officer
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
2 Agreement and Plan of Merger and Reorganization dated as of March 10,
1999, by and between the Registrant and BayView Capital Corporation.
99.1 Press release of the Registrant and BayView Capital Corporation
issued March 11, 1999.
99.2 Voting Agreement dated as of March 10, 1999, between the Registrant
and BayView Capital Corporation.
</TABLE>
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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and between
BAY VIEW CAPITAL CORPORATION
and
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
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March 10, 1999
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TABLE OF CONTENTS
ARTICLE I
<TABLE>
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THE MERGER AND RELATED MATTERS........................................ 1
1.1 Merger; Surviving Corporation................................... 1
1.2 Effective Time of the Merger.................................... 1
1.3 Merger.......................................................... 2
1.4 Closing......................................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BAY VIEW............................ 7
2.1 Organization.................................................... 7
2.2 Authorization................................................... 8
2.3 Conflicts....................................................... 8
2.4 Anti-takeover Provisions Inapplicable........................... 8
2.5 Capitalization.................................................. 8
2.6 Bay View Financial Statements; Material Changes................. 9
2.7 Bay View Subsidiaries........................................... 9
2.8 Bay View Filings................................................ 10
2.9 Bay View Reports................................................ 10
2.10 Compliance with Laws............................................ 10
2.11 Registration Statement; Proxy Statement......................... 11
2.12 Litigation...................................................... 11
2.13 Licenses........................................................ 11
2.14 Taxes........................................................... 12
2.15 Insurance....................................................... 12
2.16 Loans; Investments.............................................. 13
2.17 Allowance for Possible Loan Losses.............................. 13
2.18 Compliance With Environmental Laws.............................. 13
2.19 Defaults........................................................ 14
2.20 Operations Since December 31, 1998.............................. 15
2.21 Undisclosed Liabilities......................................... 15
2.22 Insider Interests............................................... 15
2.23 Brokers and Finders............................................. 15
2.24 Accuracy of Information......................................... 15
2.25 Governmental Approvals and Other Conditions..................... 15
2.26 Year 2000 Compliant............................................. 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMAC................................ 16
3.1 Organization.................................................... 16
3.2 Authorization................................................... 16
3.3 Conflicts....................................................... 16
3.4 Anti-takeover Provisions Inapplicable........................... 16
3.5 Capitalization and Stockholders................................. 16
3.6 FMAC Financial Statements; Material Changes..................... 17
3.7 FMAC Subsidiaries............................................... 17
3.8 FMAC Filings.................................................... 18
3.9 FMAC Reports.................................................... 18
3.10 Compliance With Laws............................................ 18
3.11 Registration Statement; Proxy Statement......................... 18
</TABLE>
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<TABLE>
<C> <S> <C>
3.12 Litigation...................................................... 19
3.13 Licenses........................................................ 19
3.14 Taxes........................................................... 19
3.15 Insurance....................................................... 20
3.16 Loans; Investments.............................................. 20
3.17 Allowance for Possible Loan Losses.............................. 23
3.18 FMAC Benefit Plans.............................................. 24
3.19 Compliance with Environmental Laws.............................. 26
3.20 Contracts and Commitments....................................... 26
3.21 Defaults........................................................ 27
3.22 Operations Since December 31, 1998.............................. 27
3.23 Records......................................................... 28
3.24 Undisclosed Liabilities......................................... 28
3.25 Assets.......................................................... 29
3.26 Indemnification................................................. 29
3.27 Insider Interests............................................... 29
3.28 Registration Obligations........................................ 29
3.29 Tax and Related Matters......................................... 30
3.30 Brokers and Finders............................................. 30
3.31 Accuracy of Information......................................... 30
3.32 Governmental Approvals and Other Conditions..................... 30
3.33 Year 2000 Compliant............................................. 30
ARTICLE IV
COVENANTS OF FMAC AND BAY VIEW........................................ 30
4.1 FMAC Business in Ordinary Course................................ 30
4.2 Certain Actions................................................. 32
4.3 Bay View Business in Ordinary Course............................ 33
ARTICLE V
ADDITIONAL AGREEMENTS................................................. 34
5.1 Inspection of Records; Confidentiality.......................... 34
5.2 Registration Statement; Stockholder Approval.................... 34
5.3 Agreements of Affiliates........................................ 34
5.4 Expenses........................................................ 35
5.5 Cooperation..................................................... 35
5.6 Regulatory Applications......................................... 36
5.7 Current Information............................................. 36
5.8 Press Release................................................... 36
5.9 Litigation Matters.............................................. 36
5.10 Tax Opinion..................................................... 36
5.11 Benefits and Related Matters.................................... 36
5.12 Reservation of Shares to Satisfy FMAC Continuing Options........ 37
5.13 Listing......................................................... 37
5.14 Indemnification: Directors' and Officers' Insurance............. 37
5.15 Reports to the SEC.............................................. 38
5.16 Environmental Reports........................................... 38
5.17 Impermissible Activities........................................ 38
5.18 Post-Merger..................................................... 38
5.19 FMAC Acknowledgments............................................ 38
5.20 Director of Bay View............................................ 38
5.21 Transfer of FMAC Name........................................... 38
</TABLE>
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<TABLE>
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5.22 Bay View Acknowledgment....................................... 39
5.23 FMAC Employees................................................ 39
5.24 Financial Reporting Obligations and Tax Gross-Up Payments..... 39
ARTICLE VI
CONDITIONS.......................................................... 39
6.1 Conditions to the Obligations of Bay View..................... 39
6.2 Conditions to the Obligations of FMAC......................... 40
6.3 Conditions to the Obligations of the Parties.................. 40
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER...................................... 41
7.1 Termination................................................... 41
7.2 Liabilities and Remedies; Break-Up Fee........................ 43
7.3 Survival of Agreements........................................ 44
7.4 Amendment..................................................... 45
7.5 Waiver........................................................ 45
ARTICLE VIII
GENERAL PROVISIONS.................................................. 45
8.1 Survival...................................................... 45
8.2 Notices....................................................... 45
8.3 Applicable Law................................................ 46
8.4 Headings, Etc................................................. 46
8.5 Severability.................................................. 46
Entire Agreement; Binding Effect; Non-Assignment;
8.6 Counterparts; Effect.......................................... 46
</TABLE>
EXHIBIT LIST
Exhibit A--Form of Voting Agreement
Exhibit B--Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement")
dated March 10, 1999, is by and between BAY VIEW CAPITAL CORPORATION, a
Delaware corporation ("Bay View"), and FRANCHISE MORTGAGE ACCEPTANCE COMPANY,
a Delaware corporation ("FMAC").
A. Bay View and FMAC wish to provide for the terms and conditions of the
following described business combination in which FMAC will be merged (the
"Merger") with and into Bay View with Bay View as the surviving corporation in
the Merger.
B. The respective Boards of Directors of Bay View and FMAC expect that the
Merger, on the terms and conditions set forth herein, is in the best interests
of their stockholders and will further the business interests of their
respective corporations.
C. It is the intent of Bay View that following the Merger it shall
contribute all or substantially all of the assets and liabilities of FMAC
received by Bay View in the Merger to Bay View Bank, N.A., a national bank and
a wholly owned first-tier subsidiary of Bay View ("Bay View Bank"), which in
turn shall contribute such assets and liabilities to a newly formed wholly-
owned subsidiary of Bay View Bank ("New FMAC").
D. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended ("Code"), and this Agreement shall
constitute a plan of reorganization pursuant to Section 368 of the Code.
E. For accounting purposes, it is intended that the Merger shall be
accounted for as a purchase.
F. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
G. Concurrently with the execution and delivery of this Agreement, and as a
condition to and inducement for Bay View to enter into this Agreement, Bay
View and FMAX Holdings, LLC have entered into a voting agreement in the form
attached hereto as Exhibit A ("Voting Agreement").
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger; Surviving Corporation. Subject to the terms and conditions of
this Agreement, and pursuant to the provisions of the Delaware General
Corporation Law ("DGCL"), at the Effective Time (as defined in Section 1.2),
FMAC shall be merged with and into Bay View pursuant to the terms and
conditions set forth herein. Upon the consummation of the Merger, the separate
corporate existence of FMAC shall cease and Bay View shall continue as the
surviving corporation in the Merger under the laws of the state of Delaware.
The name of Bay View as the surviving corporation in the Merger shall be "Bay
View Capital Corporation". The Merger shall have the effects prescribed in the
DGCL, including that from and after the Effective Time Bay View, as the
surviving corporation in the Merger, shall possess all of the properties and
rights of FMAC, including all rights in and to the name "Franchise Mortgage
Acceptance Company".
1.2 Effective Time of the Merger. As soon as practicable after each of the
conditions set forth in Article VI hereof have been satisfied or waived, the
parties will file, or cause to be filed, with the Delaware Secretary of State,
a certificate of merger and such other documents as they may deem necessary or
appropriate to effectuate the Merger, which certificate of merger and such
other documents shall in each case be in the form
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required by and executed in accordance with the applicable provisions of the
DGCL. The Merger shall become effective at such time as is specified in the
certificate of merger ("Effective Time").
1.3 Merger.
(a) Conversion of FMAC Stock. At the Effective Time:
(i) Each share of common stock of FMAC, $.001 par value per share
(the "FMAC Common Stock"), issued and outstanding immediately prior
thereto (except for Dissenting Shares, if applicable (as defined in
Section 1.3(e)) shall, by virtue of the Merger and without any action
on the part of the parties hereto or the holder thereof, but subject to
this Section 1.3(a), Section 1.3(c) and Section 1.3(g), be converted
into the right to receive, at the election of the holder thereof as
provided in Section 1.3(b), either:
(1) $10.25 in cash, as adjusted pursuant to the provisions
hereinafter contained (the "Per Share Cash Consideration"); or
(2) a number of shares of the common stock of Bay View ("Bay View
Common Stock"), par value $.01 per share (and the associated rights
(the "Rights") under the Stockholder Protection Rights Agreement
dated as of July 31, 1990, as amended, between Bay View and
Manufacturers Hanover Trust Company of California, as Rights Agent)
equal to the quotient (the "Exchange Ratio," as subject to possible
adjustment as set forth in Section 7.1(g)) of the Per Share Cash
Consideration divided by $20.00 (the "Per Share Stock
Consideration").
The Merger Consideration (as defined below) shall be increased (A) in
an amount that the good faith estimated decrease in the consolidated
stockholders' equity of FMAC arising from financial reporting
adjustments on account of tax gross up payments or the nondeductability
of payments under Sections 162(m) or 280G of the Code is less than $3.7
million as determined by KPMG, LLP, based upon a value of Bay View
Common Stock equal to $20.00 per share, at least five business days
prior to the date of the mailing of the Proxy Statement (as defined in
Section 2.3) and (B) in an equitable amount reasonably determined by
agreement of the parties in the event that the number of Out-of-the-
Money Options (as defined below) is less than 728,277 after adding back
to such number any Out-of-the-Money Options that have been theretofore
exercised determined as of the fifth business day prior to the mailing
of the Proxy Statement. An "Out-of-the-Money Option" means an Option
with an exercise price per share greater than or equal to $10.25. Any
such increase to the Merger Consideration shall be accomplished by
increasing the Per Share Cash Consideration by an amount equal to the
quotient of the aggregate increase divided by the sum of the number of
shares of FMAC Common Stock issued and outstanding immediately prior to
the Effective Time and the number of shares of FMAC Common Stock
subject to Options (as defined in Section 1.3(h)) immediately prior to
the Effective Time.
Notwithstanding anything contained in this Agreement to the contrary,
or any holder's election, the aggregate number of shares of FMAC Common
Stock to be exchanged for shares of Bay View Common Stock in the Merger
shall be equal to 60% (rounded up) of the total number of shares
(including Dissenting Shares) of FMAC Common Stock issued and
outstanding immediately prior to the Effective Time (the "Stock
Amount"); and further provided, notwithstanding any holder's election,
the aggregate Per Share Stock Consideration to be received by any
person (or any persons presumed to be acting in concert as defined in
12 C.F.R. 3225.41(d) (a "control group")) shall be limited so that when
such consideration is aggregated with all Bay View Common Stock already
owned by such person (or control group), such person (or control group)
will not beneficially own, control or have the power to vote or dispose
of more than 9.99% of the shares of Bay View Common Stock issued and
outstanding immediately after the Merger (the "Beneficial Ownership
Limitation").
(ii) The holders of certificates formerly representing shares of FMAC
Common Stock shall cease to have any rights as stockholders of FMAC,
except such rights, if any, as they may have pursuant to
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the DGCL. Except as provided above, until certificates representing
shares of FMAC Common Stock are surrendered for exchange, the
certificates shall, after the Effective Time, represent for all
purposes only the right to receive the Per Share Cash Consideration
and/or the Per Share Stock Consideration together with the right to
receive the cash value of any fraction of a share of Bay View Common
Stock as provided below (collectively, the "Merger Consideration").
(iii) Notwithstanding any other provision of this Agreement, any
shares of FMAC Common Stock issued and outstanding immediately prior to
the Effective Time which are then owned beneficially or of record by
Bay View or FMAC, or by any direct or indirect Subsidiary (as
hereinafter defined) of any of them, or held in the treasury of FMAC
(other than any shares of FMAC Common Stock held (A) directly or
indirectly in trust accounts, managed accounts and the like, or
otherwise held in a fiduciary capacity, that are beneficially owned by
third parties or (B) in respect of a debt previously contracted) shall,
by virtue of the Merger, be canceled without payment of any
consideration therefor and without any conversion thereof.
(iv) If between the date of this Agreement and the Effective Time the
outstanding shares of Bay View Common Stock shall have been changed
into a different number of shares or into a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, or similar adjustment (each,
a "Stock Adjustment"), the Exchange Ratio to calculate the Per Share
Stock Consideration shall be adjusted correspondingly to the extent
appropriate to reflect the Stock Adjustment.
(b) Election Procedures.
(i) An election form and other appropriate and customary transmittal
materials (the "Election Form"), which specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing FMAC Common Stock shall pass, only upon proper delivery of
such certificates to an exchange agent designated by Bay View (the
"Exchange Agent") shall be mailed approximately 25 days prior to the
anticipated Effective Time ("Mailing Date") to each holder of record of
FMAC Common Stock as of five business days prior to the Mailing Date
(the "Election Form Record Date"). Bay View shall cause an Election
Form to be sent to each holder of FMAC Common Stock who FMAC advises
Bay View has become a holder of FMAC Common Stock after the Election
Form Record Date. Bay View shall determine the anticipated Effective
Time (the "Anticipated Effective Time") in its sole discretion and the
failure of the Effective Time to occur at the Anticipated Effective
Time shall not affect the time periods which are established for
purposes of these election procedures.
(ii) Each Election Form shall permit the holder (or the beneficial
owner through appropriate and customary documentation and instructions)
to designate the number of shares of such holder's FMAC Common Stock
with respect to which the holder elects to receive only the Per Share
Stock Consideration ("Stock Election Shares"), and to designate the
number of shares of such holder's FMAC Common Stock with respect to
which the holder elects to receive only the Per Share Cash
Consideration ("Cash Election Shares").
(iii) Each Election Form shall require the holder to disclose the
number of shares of Bay View Common Stock beneficially owned by the
holder for purposes of compliance with the Bank Holding Company Act and
Regulation Y, 12 C.F.R. Part 225, thereunder.
(iv) Any FMAC Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or
before 5:00 p.m. on the 20th day following the Mailing Date (or such
other time and date as Bay View and FMAC may mutually agree) (the
"Election Deadline") shall be deemed to be "No Election Shares." Any
election shall have been properly made only if the Exchange Agent shall
have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed
only if accompanied by one or more certificates (or
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customary affidavits and indemnification regarding the loss or
destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of FMAC Common Stock covered by
such Election Form, together with duly executed transmittal materials
included in the Election Form. Any Election Form may be revoked or
changed by the person submitting a new Election Form at or prior to the
Election Deadline.
(v) Subject to the terms of this Agreement and of the Election Form,
the Exchange Agent shall have discretion to determine whether any
election, revocation or change has been properly or timely made, to
disregard immaterial defects in the Election Forms and to effect the
allocation as provided in Section 1.3(c), and any good faith decisions
of the Exchange Agent regarding such matters shall be binding and
conclusive. Neither Bay View nor the Exchange Agent shall be under any
obligation to notify any person of any defect in any Election Form.
(c) Allocation Procedures. Within ten business days after the Election
Deadline, unless the Effective Time has not yet occurred, in which case as
soon thereafter as practicable, Bay View shall cause the Exchange Agent to
effect the allocation among the holders of FMAC Common Stock of rights to
receive the Per Share Stock Consideration or the Per Share Cash
Consideration in the Merger in accordance with the Election Forms but
subject to the following:
(i) Stock Elections Less Than Stock Amount. If the number of Stock
Election Shares is less than the Stock Amount, then:
(A) all Stock Election Shares shall be converted into the right to
receive the Per Share Stock Consideration,
(B) the Exchange Agent shall select first pro rata from among the
No Election Shares and then (if necessary) pro rata from among the
Cash Election Shares, a sufficient number of shares ("Stock
Designated Shares") such that the number of shares of FMAC Common
Stock that will be converted into the right to receive the Per Share
Stock Consideration equals as closely as practicable the Stock
Amount, and all Stock Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration; and
(C) the remaining shares (other than Dissenting Shares) shall be
converted into the right to receive the Per Share Cash
Consideration; or
(ii) Stock Elections Not Less Than Stock Amount. If the number of
Stock Election Shares is not less than the Stock Amount, then:
(A) all Cash Election Shares and No Election Shares shall be
converted into the right to receive the Per Share Cash
Consideration,
(B) the Exchange Agent shall (if necessary) select from among the
Stock Election Shares on a pro rata basis, a sufficient number of
shares ("Cash Designated Shares") such that the number of shares of
FMAC Common Stock that will be converted into the right to receive
the Per Share Stock Consideration equals as closely as practicable
the Stock Amount, and all Cash Designated Shares shall be converted
into the right to receive the Per Share Cash Consideration, and
(C) the remaining shares (other than Dissenting Shares) shall be
converted into the right to receive the Per Share Stock
Consideration.
(iii) Beneficial Ownership Limitation. If after the above allocation
any holder of FMAC Common Stock (or any affiliated group of such
persons) has been allocated rights to receive an aggregate of Per Share
Stock Consideration in excess of the Beneficial Ownership Limitation,
such rights to receive the Per Share Stock Consideration as are in
excess of the Beneficial Ownership Limitation shall be converted into
rights to receive the Per Share Cash Consideration, and the Exchange
Agent shall select pro rata from among the other holders of rights to
receive the Per Share Cash
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Consideration an equal number of rights to receive the Per Share Cash
Consideration, which rights shall be converted into rights to receive
the Per Share Stock Consideration such that after taking into account
this subsection (iii) the number of shares of FMAC Common Stock that
will be converted into a right to receive the Per Share Stock
Consideration equals as closely as practicable the Stock Amount.
(d) Reservation of Shares. Prior to the Effective Time, the Board of
Directors of Bay View shall reserve for issuance a sufficient number of
shares of Bay View Common Stock for the purpose of issuing its shares to
the stockholders of FMAC in accordance herewith.
(e) Dissenting Shares. Any shares of FMAC Common Stock held by a holder
who dissents from the Merger in accordance with Section 262 of the DGCL
shall be herein called "Dissenting Shares." Notwithstanding any other
provision of this Agreement, any Dissenting Shares shall not, after the
Effective Time, be Cash Election Shares, Stock Election Shares or No
Election Shares or be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights
as are afforded in respect of Dissenting Shares pursuant to the DGCL.
(f) Exchange Procedures.
(i) Bay View shall timely deposit, or shall cause to be deposited,
with the Exchange Agent, sufficient certificates representing Bay View
Common Stock (and the associated Rights) and sufficient cash funds to
effect the exchange of Certificates for the Per Share Stock
Consideration and the Per Share Cash Consideration to be paid pursuant
to Section 1.3(c) and the aggregate amount of cash to be paid in lieu
of fractional shares pursuant to Section 1.3(g).
(ii) As soon as reasonably practicable after the Effective Time,
those holders of record of certificates formerly representing shares of
FMAC Common Stock ("Certificates") which were not tendered in
connection with an Election Form shall be instructed to tender such
Certificates to the Exchange Agent pursuant to a letter of transmittal
that Bay View shall deliver or cause to be delivered to such holders.
Such letter of transmittal shall specify that risk of loss and title to
Certificates shall pass only upon acceptance of such Certificates by
Bay View or the Exchange Agent and instructions for surrendering the
Certificates in exchange for the Merger Consideration.
(iii) After the Effective Time, each holder of a Certificate which
has been accepted by Bay View or the Exchange Agent will be entitled to
the Merger Consideration payable in respect to the shares represented
thereby.
(iv) The Exchange Agent shall accept Certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may
impose to effect an orderly exchange thereof in accordance with
customary exchange practices. Certificates shall be appropriately
endorsed or accompanied by such instruments of transfer as the Exchange
Agent may reasonably require.
(v) On the Election Form Record Date and again at the Effective Time,
FMAC shall deliver a certified copy of a list of its stockholders to
Bay View or the Exchange Agent. After the Effective Time, there shall
be no further transfer on the records of FMAC of Certificates, and if
such Certificates are presented to Bay View for transfer, they shall be
canceled against delivery of the Merger Consideration. Bay View shall
not be obligated to deliver the Merger Consideration to any holder of
FMAC Common Stock until such holder surrenders the Certificates as
provided herein. No interest will be accrued or paid on the cash
component of the Merger Consideration. No dividends or distributions
declared (including any redemption by Bay View of the Rights associated
therewith) will be remitted to any person entitled to receive Bay View
Common Stock under this Agreement until such person surrenders the
Certificate representing the right to receive such Bay View Common
Stock, at which time such dividends or distributions on whole shares of
Bay View Common Stock with a record date on or after the Effective Time
shall be remitted to such person, without interest and less any taxes
that may have been imposed thereon. Following six months after the
Effective Time, the Exchange Agent shall return to Bay View any
certificate for Bay View Common Stock and cash remaining in the
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possession of the Exchange Agent (together with any dividends or
distributions in respect thereof) and thereafter shareholders of FMAC
shall look exclusively to Bay View for the Merger Consideration to
which they are entitled hereunder and any amounts in respect of
dividends or distributions with respect to Bay View Common Stock.
(vi) Certificates surrendered for exchange by any person constituting
an "affiliate" of FMAC for purposes of Rule 145 under the Securities
Act of 1933, as amended, and the rules and regulations thereunder
("Securities Act") shall not be exchanged for certificates representing
Bay View Common Stock until (A) Bay View has received a written
agreement from such person as specified in Section 5.3 or (B) the date
as such shares of Bay View Common Stock are freely tradeable without
violating the Securities Act. Neither the Exchange Agent nor any party
to this Agreement nor any affiliate thereof shall be liable to any
holder of FMAC Common Stock for any Merger Consideration issuable or
payable in the Merger paid to a public official pursuant to applicable
abandoned property, escheat or similar laws. Bay View and the Exchange
Agent shall be entitled to rely upon the stock transfer books of FMAC
to establish the identity of those persons entitled to receive the
Merger Consideration, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of shares
of FMAC Common Stock represented by any Certificate, Bay View and the
Exchange Agent shall be entitled to deposit any Merger Consideration in
respect thereof in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
(vii) If the Merger Consideration is to be issued to a person other
than a person in whose name a surrendered Certificate is registered, it
shall be a condition of issuance that the surrendered Certificate shall
be properly endorsed or otherwise in proper form for transfer and that
the person requesting such issuance shall pay to Bay View or the
Exchange Agent any required transfer or other taxes or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. Nothing herein shall relieve any of the holders of FMAC
Common Stock of any expenses associated with surrendering such holder=s
Certificate or Certificates to the Exchange Agent.
(viii) In the event any Certificate shall have been lost, stolen or
destroyed, the owner of such lost, stolen or destroyed Certificate
shall deliver to Bay View or the Exchange Agent an affidavit stating
such fact, in form satisfactory to Bay View, and, at Bay View's
discretion, a bond in such reasonable sum as Bay View or the Exchange
Agent may direct as indemnity against any claim that may be made
against Bay View or FMAC or its successor or any other party with
respect to the Certificate alleged to have been lost, stolen or
destroyed. Upon such delivery, the owner shall have the right to
receive the Merger Consideration with respect to the shares represented
by the lost, stolen or destroyed Certificate and any amounts in respect
of dividends or distributions with respect to Bay View Common Stock.
(ix) Bay View shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to
any holder of Certificates, such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Bay View, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of the Certificates in respect of which such deduction and
withholding was made.
(g) No Fractional Shares. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of Bay View
Common Stock shall be issued in the Merger. Each holder who otherwise would
have been entitled to a fraction of a share of Bay View Common Stock shall
receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would
otherwise be entitled by the Per Share Cash Consideration. No such holder
shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share.
(h) Stock Options. Each option (an "Option") granted under the FMAC 1997
Stock Option, Deferred Stock and Restricted Stock Plan ("Option Plan") and
outstanding on the date hereof, but subject
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to cancellation of Options as set forth in Section 3.5(b) (or that is
granted pursuant to Section 4.1(b)(i)(B) and set forth in Section 4.1 of
the FMAC Disclosure Schedule (as defined in Section 3.3)) that remains
outstanding immediately prior to the Effective Time shall, at the Effective
Time, be converted automatically into a right to purchase shares of Bay
View Common Stock (the "Continuing Option") in an amount and at an exercise
price determined as provided below (subject to the terms of the Option
Plan):
(i) the number of shares of Bay View Common Stock to be subject to
the Continuing Option shall be equal to the product of the number of
shares of FMAC Common Stock subject to the original option and the
Exchange Ratio, provided that any fractional share of Bay View Common
Stock resulting from such multiplication shall be rounded to the
nearest share; and
(ii) the exercise price per share of Bay View Common Stock under the
Continuing Option shall be equal to the exercise price per share of
FMAC Common Stock under the original option divided by the Exchange
Ratio, provided that such exercise price shall be rounded to the
nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Code. The duration and other terms of the Continuing Option
shall be the same as the original option, except that all references to
FMAC shall be deemed to be references to Bay View.
(i) Bay View as the Surviving Corporation. The Certificate of
Incorporation and Bylaws of Bay View, as in effect immediately prior to the
Effective Time, shall, without any change, be the Certificate of
Incorporation and Bylaws of Bay View, as the surviving corporation in the
Merger, until either is thereafter amended in accordance with applicable
law. The directors of Bay View immediately prior to the Effective Time, and
Wayne Knyal, shall be the directors of Bay View, as the surviving
corporation in the Merger. The officers of Bay View immediately prior to
the Effective Time shall be the officers of Bay View, as the surviving
corporation in the Merger. Such directors and officers shall continue in
office until their successors are duly elected and qualified or otherwise
duly selected. The outstanding capital stock of Bay View shall continue as
the capital stock of Bay View as the surviving corporation in the Merger
and the holders thereof shall retain their present rights.
1.4 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place as soon as practicable after satisfaction or
waiver of all of the conditions set forth in Article VI hereof, on a date and
at a time and place designated in writing by Bay View, but not later than 30
days following the satisfaction or waiver of such conditions; provided
however, such time of Closing may be extended for up to an additional 30 days
by Bay View in order to implement any action to be taken pursuant to Section
5.5(c) at the direction of Bay View. The date on which the Closing actually
occurs is herein referred to as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BAY VIEW
Bay View represents and warrants to FMAC that:
2.1 Organization. Bay View is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority, corporate and otherwise, to own, operate and
lease its assets and properties and to carry on its business substantially as
it has been and is now being conducted. Bay View is duly qualified to do
business and is in good standing in each jurisdiction where the character of
the assets or properties owned or leased by it or the nature of the business
transacted by it requires that it be so qualified, except where the failure to
be so qualified would not have a Material Adverse Effect (as defined in
Section 2.6) on Bay View. Bay View has all requisite corporate power and
authority to enter into this Agreement and, subject to the adoption of this
Agreement by the stockholders of Bay View and
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the receipt of all requisite regulatory approvals and the expiration of any
applicable waiting periods, to consummate the transactions contemplated
hereby.
2.2 Authorization. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
approved and authorized by the Board of Directors of Bay View, and all
necessary corporate action on its part has been taken, subject to the adoption
of this Agreement by the holders of a majority of the outstanding Bay View
Common Stock. This Agreement has been duly executed and delivered by Bay View
and constitutes the valid and binding obligation of it and is enforceable
against it, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
or equitable principles or doctrines.
2.3 Conflicts. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation, breach or termination of, or default or loss
of a material benefit under, or permit the acceleration of any obligation
under, or result in the creation of any material lien, charge or encumbrance
on any of the property or assets under, any provision of the Certificate of
Incorporation or Bylaws of Bay View or similar documents of any Bay View
Subsidiary (as defined in Section 2.7) or any mortgage, indenture, lease,
agreement or other instrument, permit, concession, grant, franchise, license,
Intellectual Property Right (as defined in Section 2.13), judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Bay View or
any Bay View Subsidiary or their respective properties, other than any such
conflicts, violations or defaults which are disclosed in Section 2.3 of that
certain confidential writing delivered by Bay View to FMAC on or prior to the
date hereof (the "Bay View Disclosure Schedule"). No consent, approval, order
or authorization of, or registration, declaration or filing with, any federal
or state governmental authority is required by or with respect to Bay View in
connection with the execution and delivery of this Agreement or the
consummation by it of the transactions contemplated hereby except for: (i) any
filings and approvals with or from the Board of Governors of the Federal
Reserve System and the Office of the Comptroller of the Currency (the "OCC");
(ii) the filing by Bay View of the registration statement relating to the Bay
View Common Stock to be issued pursuant to this Agreement ("Registration
Statement") with the United States Securities and Exchange Commission ("SEC"),
and the effectiveness thereof, which Registration Statement shall include the
joint proxy statement/prospectus ("Proxy Statement") for use in connection
with the stockholders' meetings to approve the Merger (the "Stockholders'
Meetings"); (iii) the filing of a certificate of merger with the Delaware
Secretary of State, and the approval thereof; (iv) any filings, approvals or
no-action letters with or from state securities authorities; and (v) any anti-
trust filings (including filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976), consents, waivers or approvals.
2.4 Anti-takeover Provisions Inapplicable. No "business combination,"
"moratorium," "control share" or other state anti-takeover statute or
regulation applicable to Bay View (i) applies to the Merger, (ii) prohibits or
restricts the ability of Bay View to perform its obligations under this
Agreement or its ability to consummate the transactions contemplated hereby,
(iii) would have the effect of invalidating or voiding this Agreement or any
provision hereof, or (iv) would subject FMAC to any material impediment or
condition in connection with the exercise of any of its rights under this
Agreement.
2.5 Capitalization.
(a) As of the date hereof, the authorized capital stock of Bay View
consists of (i) 60,000,000 shares of Bay View Common Stock, $0.01 par value
per share, of which, as of February 28, 1999, 19,113,637 shares (and the
associated Rights) were issued and outstanding and (ii) 7,000,000 shares of
preferred stock, $0.01 par value per share, of which none are issued and
outstanding. All of the issued and outstanding shares of Bay View Common
Stock are, and all of the shares of Bay View Common Stock to be issued in
the Merger will be, at the Effective Time, (i) duly and validly authorized
and issued, (ii) fully paid and non-assessable and (iii) free from any
preemptive rights of current or past stockholders. All of the issued and
outstanding shares of Bay View Common Stock will be entitled to vote to
adopt this Agreement.
(b) As of the date hereof, Bay View had 3,007,229 shares of Bay View
Common Stock reserved for issuance under its stock benefit plans for the
benefit of employees and directors of Bay View and the Bay
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View Subsidiaries, pursuant to which awards covering 2,183,400 shares of
Bay View Common Stock are outstanding. Except as set forth in this Section
2.5, as of the date hereof, there are no shares of capital stock or other
equity securities of Bay View outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of Bay View, or contracts,
commitments, understandings, or arrangements by which Bay View is or may be
bound to issue additional shares of its capital stock or options, warrants,
or rights to purchase or acquire any additional shares of its capital
stock.
2.6 Bay View Financial Statements; Material Changes. Bay View has heretofore
delivered to FMAC audited consolidated financial statements for the years
ended December 31, 1998 and December 31, 1997 (together the "Bay View
Financial Statements"). The Bay View Financial Statements (i) have been
prepared in all material respects in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto); and (ii)
fairly present in all material respects the consolidated financial position of
Bay View as of the dates thereof and the consolidated results of its
operations, stockholders' equity, cash flows and changes in financial position
for the periods then ended. Since December 31, 1998 to the date hereof, Bay
View and the Bay View Subsidiaries have not undergone or suffered any Material
Adverse Effect (as defined below).
As used in this Agreement, the term "Material Adverse Effect" with respect
to Bay View or FMAC means any condition, event, change or occurrence that has
or may reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), properties, business, operations or assets
of such entity taken together with its affiliated entities on a consolidated
basis; it being understood that a Material Adverse Effect shall not include:
(i) a change with respect to, or effect on, such entity and its Subsidiaries
resulting from a change in law, rule, regulation, GAAP or regulatory
accounting principles, as such would apply to the financial statements of such
entity on a consolidated basis; (ii) a change with respect to, or effect on,
such entity and its Subsidiaries resulting from expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement; (iii) a change made with the prior written consent of the other
party including, in the case of FMAC, any financial change taken at the
written request of Bay View; or (iv) in the case of Bay View only, a change
with respect to, or effect on, its Subsidiaries resulting from changes in
prevailing interest rates.
2.7 Bay View Subsidiaries.
(a) All of the Bay View Subsidiaries (as defined below) are listed in
Section 2.7 of the Bay View Disclosure Schedule. Except as set forth in
Section 2.7 of the Bay View Disclosure Schedule, as of the date hereof, Bay
View owns directly or indirectly all of the issued and outstanding shares
of capital stock of the Bay View Subsidiaries. As of the date hereof, no
capital stock of any of the Bay View Subsidiaries is, or may become
required to be, issued (other than to Bay View or another Bay View
Subsidiary) by reason of any options, warrants, scrip, right to subscribe
to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of any Bay View Subsidiary. Other than as set forth in
Section 2.7 of the Bay View Disclosure Schedule, as of the date hereof
there are no contracts, commitments, understandings or arrangements
relating to the rights of Bay View to vote the capital stock or to dispose
of any Bay View Subsidiary. All of the shares of capital stock of each Bay
View Subsidiary held by Bay View or a Bay View Subsidiary are fully paid
and non-assessable and are owned by Bay View or another Bay View Subsidiary
free and clear of any claim, lien or encumbrance, except as disclosed in
Section 2.7 of the Bay View Disclosure Schedule.
(b) Each Bay View Subsidiary is either a bank or a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing in each jurisdiction where
the character of the assets or properties owned or leased by it or the
nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified would not have a Material
Adverse Effect on Bay View. Each
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Bay View Subsidiary has the corporate power and authority necessary for it
to own, operate or lease its assets and properties and to carry on its
business substantially as it has been and is now being conducted.
(c) For purposes of this Agreement, a "Bay View Subsidiary" or a
"Subsidiary" of Bay View shall mean each corporation, bank and other entity
in which Bay View owns or controls directly or indirectly 10% or more of
the outstanding equity securities; provided, however, there shall not be
included any such entity acquired in good faith through foreclosure, or any
such entity to the extent that the equity securities of such entity are
owned or controlled in a bona fide fiduciary capacity.
(d) Bay View Bank is a national bank. All eligible deposit accounts
issued by Bay View Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") through the Savings Association Insurance Fund or Bank
Insurance Fund to the full extent permitted under applicable law.
2.8 Bay View Filings. Bay View has previously made available to FMAC true
and correct copies of its (i) proxy statements relating to all meetings of its
stockholders (whether special or annual) during calendar years 1996, 1997, and
1998 and (ii) all other reports, as amended, or filings, as amended, required
to be filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") by Bay View with the SEC since January 1, 1996 including
without limitation on Forms 10-K, 10-Q and 8-K.
2.9 Bay View Reports. Since December 31, 1994, each of Bay View and the Bay
View Subsidiaries has filed, and will continue to file, all reports and
statements, together with any amendment required to be made with respect
thereto, that it was, or will be required to file with the SEC, the FDIC, the
Office of Thrift Supervision, the OCC, the Federal Reserve Board, the National
Association of Securities Dealers ("NASD") and other applicable banking,
securities and other regulatory authorities. As of their respective dates (and
without giving effect to any amendments or modifications filed after the date
of this Agreement with respect to reports and documents filed before the date
of this Agreement), each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all
material respects with all of the statutes, rules and regulations enforced or
promulgated by the authority with which they were filed and did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Other than normal
examinations conducted by the Internal Revenue Service ("IRS"), state and
local taxing authorities, and banking regulators in the regular course of the
business of Bay View or the Bay View Subsidiaries, no federal, state or local
governmental agency, commission or other entity has initiated any proceeding
or, to the best knowledge of Bay View and Bay View Bank, investigation into
the business or operations of Bay View or the Bay View Subsidiaries within the
past two years except as set forth in Section 2.9 of the Bay View Disclosure
Schedule. There is no unresolved violation, criticism or exception by any
agency, commission or entity with respect to any report or statement referred
to herein that is material to Bay View and the Bay View Subsidiaries as taken
as a whole.
2.10 Compliance with Laws.
(a) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, the businesses of Bay View and the Bay View Subsidiaries are
being conducted in compliance in all material respects with all laws,
ordinances and regulations of governmental authorities, including, without
limitation, federal and state securities laws, laws and regulations
relating to financial statements and reports, truth-in-lending, truth-in-
savings, usury, fair credit reporting, consumer protection, occupational
safety, fair employment practices, fair labor standards and laws and
regulations relating to employees and employee benefits, and any statutes
or ordinances relating to the properties occupied or used by Bay View or
any Bay View Subsidiary.
(b) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, no investigation or review by any governmental entity with
respect to Bay View or any Bay View Subsidiary is pending or, to the best
knowledge of Bay View, threatened, nor has any governmental entity
indicated to Bay View or any Bay View Subsidiary an intention to conduct
the same, other than normal regulatory examinations.
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(c) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, since January 1, 1996 neither Bay View nor Bay View Bank has been
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 has been subject to any order or directive by, or has
been 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
depository institutions or depository institution holding companies or
engaged in the insurance of bank and/or savings and loan deposits
("Government Regulators"), nor has it been advised by any Government
Regulator in writing 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.
2.11 Registration Statement; Proxy Statement. The information to be supplied
by Bay View for inclusion in the Registration Statement will not, at the time
the Registration Statement is declared effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information to be supplied by Bay View for inclusion
in the Proxy Statement will not, on the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to Bay View's or
FMAC's stockholders, at the time of the Stockholders' Meeting, and at the
Effective Time, contain any statement that, in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, omits to state any material fact necessary in order to make the
statements made therein not false or misleading, or omits to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meetings
that has become false or misleading. If, at any time prior to the Effective
Time, any event relating to Bay View or any of its affiliates, officers, or
directors is discovered by Bay View that should be set forth in an amendment
to the Registration Statement or a supplement to the Proxy Statement, Bay View
will promptly inform FMAC and such amendment or supplement will be promptly
filed with the SEC and, as required by law, disseminated to the stockholders
of Bay View and FMAC. Notwithstanding the foregoing, Bay View makes no
representation or warranty with respect to any information supplied by FMAC
that is contained in the Registration Statement or the Proxy Statement. The
Proxy Statement and the Registration Statement will (with respect to Bay View)
comply in all material respects as to form and substance with the requirements
of the Exchange Act, the Securities Act, and the rules and regulations
thereunder.
2.12 Litigation. Except as disclosed in Section 2.12 of the Bay View
Disclosure Schedule, there is no suit, action, investigation or proceeding,
legal, quasi-judicial, administrative or otherwise, pending or, to the best
knowledge of Bay View threatened, against or affecting Bay View or any Bay
View Subsidiary, or any of their respective officers, directors, employees or
agents, in their capacities as such, which if adversely determined, could
reasonably be expected to have a Material Adverse Effect on Bay View or which
would affect the ability of Bay View to consummate the transactions
contemplated herein or which is seeking to enjoin consummation of the
transactions provided for herein or to obtain other relief in connection with
this Agreement or the transactions contemplated hereby, nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission agency, instrumentality or arbitrator outstanding
against Bay View or any Bay View Subsidiary or any of their respective
officers, directors, employees or agents, in their capacities as such, having,
or which, insofar as reasonably can be foreseen in the future, would have any
such effect. Bay View has made available to FMAC or its financial advisor all
of its litigation letters dated on or after January 1, 1997.
2.13 Licenses. Bay View and the Bay View Subsidiaries hold all licenses,
certificates, permits, franchises and intellectual property, including but not
limited to, patents, trademarks, service marks, trade names, copyrights and
software systems, or rights thereto (the "Intellectual Property Rights"), and
required authorizations, approvals, consents, licenses, clearances and orders
or registrations with all appropriate federal, state or other authorities that
are material to the conduct of their respective businesses as now conducted
and as
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presently proposed to be conducted. Neither Bay View nor any of its
Subsidiaries has pledged, mortgaged, assigned, licensed, granted permission
with respect to or otherwise transferred any such Intellectual Property Rights
to any third party. No such Intellectual Property Right is subject to any
outstanding injunction, judgment, order, decree, ruling or charge, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the knowledge of Bay View, is threatened that
challenges the legality, validity, use or enforceability of any such
Intellectual Property Right. None of Bay View's or its Subsidiaries' rights
with respect to any such Intellectual Property Rights will be terminated,
limited or otherwise affected by its execution of this Agreement or its
consummation of the transactions contemplated by this Agreement.
2.14 Taxes.
(a) Except as disclosed in Section 2.14 of the Bay View Disclosure
Schedule, Bay View and the Bay View Subsidiaries (i) have each timely filed
all tax and information returns required to be filed (and all such returns
as filed were correct and complete in all material respects) and (ii) have
paid (or Bay View has paid on behalf of its Subsidiaries), or have accrued
on their respective books and established adequate reserves for the payment
of, all taxes for all applicable periods, including taxes anticipated to be
payable in respect of such periods. Neither Bay View nor any Bay View
Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any taxes have been proposed,
asserted or assessed against Bay View or any Bay View Subsidiary that have
not been resolved or settled, and no requests for waivers of the time to
assess any such tax are pending or have been agreed to. Except as set forth
in Section 2.14 of the Bay View Disclosure Schedule, neither Bay View nor
any Bay View Subsidiary is currently subject to audit or examination of any
of its tax returns by the IRS or any state, municipal or other taxing
authority. Neither Bay View nor any Bay View Subsidiary is a party to any
action or proceeding by any governmental authority for the assessment or
the collection of taxes. Deferred taxes of Bay View and the Bay View
Subsidiaries have been accounted for in accordance with GAAP.
(b) Bay View has not filed any consolidated federal income tax return
with an "affiliated group" (within the meaning of Section 1504 of the
Code), where Bay View was not the common parent of the group. In connection
with acquisitions heretofore made by Bay View or a Bay View Subsidiary, Bay
View is not aware of any pre-acquisition tax liability of the acquired
party or any member of the prior affiliated group of the acquired party for
which Bay View or a Bay View Subsidiary may have liability as a successor,
transferee or otherwise that has not been fully paid. Neither Bay View nor
any Bay View Subsidiary is, or has been, a party to any tax allocation
agreement or arrangement pursuant to which it has any contingent or
outstanding liability to anyone other than Bay View or a Bay View
Subsidiary.
(c) Bay View and the Bay View Subsidiaries have each withheld amounts
from its employees, stockholders and others in compliance with the tax
withholding provisions of applicable federal, state and local laws, have
timely filed (including applicable extension periods) all federal, state
and local returns and reports for all periods for which such returns or
reports would be due with respect to income tax withholding, social
security, unemployment taxes, income and other taxes and all payments or
deposits with respect to such taxes have been timely made.
(d) For the purposes of this Agreement, the terms "tax" and "taxes"
include without limitation, any federal, state, local or foreign
governmental income, leasing, franchise, excise, gross receipts, sales,
use, occupational, employment, real property, ad valorem, personal property
or other taxes, levies, duties, imposts, assessments, fees, charges and
withholdings of any nature whatsoever, together with any related penalties,
fines, additions to tax or interest thereon.
2.15 Insurance. Bay View and the Bay View Subsidiaries maintain insurance
with insurers which in the best judgment of management of Bay View are sound
and reputable on their respective assets and upon their respective businesses
and operations against loss or damage, risks, hazards and liabilities as in
their judgment they deem appropriate. Bay View and the Bay View Subsidiaries
maintain in effect all insurance required to be carried by law or by any
agreement by which they are bound. All material claims under all policies of
insurance maintained by Bay View and the Bay View Subsidiaries have been filed
in due and timely fashion. Neither Bay
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View nor any of the Bay View Subsidiaries has, during the past three years,
had an insurance policy canceled or been denied insurance coverage for which
any of such companies has applied.
2.16 Loans; Investments.
(a) Except as otherwise disclosed in Section 2.16 of the Bay View
Disclosure Schedule, each loan reflected as an asset on the Bay View
Financial Statements dated as of December 31, 1998 is evidenced by
appropriate and sufficient documentation and constitutes, the legal, valid
and binding obligation of the obligor named therein, enforceable in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles or doctrines. Except as
set forth in Section 2.16 of the Bay View Disclosure Schedule, all such
loans are, and at the Effective Time will be, free and clear of any
security interest, lien, encumbrance or other charge.
(b) All guarantees of indebtedness owed to Bay View or any Bay View
Subsidiary, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and
federal agencies, are valid and enforceable, except to the extent
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or
doctrines.
(c) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Bay View or any Bay
View Subsidiary is a party or by which any of their properties or assets
may be bound were entered into in the ordinary course of business and, in
accordance with then-customary practice and applicable rules, regulations
and policies of regulatory authorities and with counterparties believed to
be financially responsible at the time and are legal, valid and binding
obligations and are in full force and effect. Bay View and the Bay View
Subsidiaries have duly performed in all material respects all of their
respective obligations thereunder to the extent that such obligations to
perform have accrued, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder. None
of the transactions contemplated by this Agreement would permit (i) a
counterparty under any interest rate swap, cap, floor and option agreement
or any other interest rate risk management agreement or (ii) any party to
any mortgage backed security financing arrangement, to accelerate,
discontinue, terminate, or otherwise modify any such agreement or
arrangement or would require Bay View or any Bay View Subsidiary to
recognize any gain or loss with respect to such arrangement.
2.17 Allowance for Possible Loan Losses. The allowance for possible loan
losses shown on the Bay View Financial Statements as of December 31, 1998 (and
as shown on any financial statements to be delivered by Bay View to FMAC
pursuant to Section 5.7 hereof), was (and will be as of such subsequent
financial statement dates) adequate in all respects to provide for possible or
specific losses, net of recoveries relating to loans previously charged off,
on loans outstanding, and contained (or will contain) an additional amount of
unallocated reserves for unanticipated future losses at a level considered
adequate under the standards applied by applicable federal regulatory
authorities and based upon GAAP applicable to Bay View and the Bay View
Subsidiaries. To the best knowledge of Bay View, the aggregate principal
amount of loans contained (or that will be contained) in the loan portfolio of
Bay View and the Bay View Subsidiaries as of December 31, 1998 (and as of the
dates of any financial statements to be delivered by Bay View to FMAC pursuant
to Section 5.7 hereof), in excess of such reserve, was (and will be) fully
collectible.
2.18 Compliance With Environmental Laws.
(a) Except as set forth in Section 2.18 of the Bay View Disclosure
Schedule: (i) the operations of Bay View and each of the Bay View
Subsidiaries comply in all material respects with all applicable past and
present Environmental Laws (as defined below); (ii) none of the operations
of Bay View or any Bay View Subsidiary, no assets presently or formerly
owned or leased by Bay View or any Bay View Subsidiary and no Mortgaged
Premises or a Participating Facility (as defined below) are subject to any
judicial or administrative proceedings alleging the violation of any past
or present Environmental Law, nor are they
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the subject of any claims alleging damages to health or property, pursuant
to which Bay View, any Bay View Subsidiary or any owner of a Mortgaged
Premises or a Participating Facility would be liable in law or equity;
(iii) none of the operations of Bay View or any Bay View Subsidiary, no
assets presently owned or, formerly owned by Bay View or any Bay View
Subsidiary, and, to the best knowledge of Bay View, no Mortgaged Premises
or Participating Facility are the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond
to a release or threatened release of any Hazardous Substance (as defined
below), or any other substance into the environment, nor has Bay View or
any Bay View Subsidiary, or, any owner of a Mortgaged Premises or
Participating Facility been directed to conduct such investigation,
formally or informally, by any governmental agency, nor have any of them
agreed with any governmental agency or private person to conduct any such
investigation; and (iv) neither Bay View or any Bay View Subsidiary, nor,
any owner of a Mortgaged Premises or a Participating Facility has filed any
notice under any Environmental Law indicating past or present treatment,
storage or disposal of a Hazardous Substance or reporting a spill or
release of a Hazardous Substance, or any other substance into the
environment.
(b) With respect to the real property currently or formerly owned or
currently leased by Bay View or any Bay View Subsidiary ("Bay View
Premises"): (i) no part of the Bay View Premises has been used for the
generation, manufacture, handling, storage, or disposal of Hazardous
Substances; (ii) except as disclosed in Section 2.18 of the Bay View
Disclosure Schedule, the Bay View Premises do not contain, and have never
contained, an underground storage tank; and (iii) the Bay View Premises do
not contain and are not contaminated by any quantity of a Hazardous
Substance from any source. With respect to any underground storage tank
listed in Section 2.18 of the Bay View Disclosure Schedule as an exception
to the foregoing, such underground storage tank has been removed in
compliance with the Environmental Laws, and has not been the source of any
release of a Hazardous Substance into the environment, unless otherwise set
forth in Section 2.18 of the Bay View Disclosure Schedule.
(c) For purposes of this Section, "Mortgaged Premises" shall mean each
(i) real property interest (including without limitation any fee or
leasehold interest) which is encumbered or affected by any mortgage, deed
of trust, deed to secure debt or other similar document or instrument
granting to any party hereto or any of its Subsidiaries a lien on or
security interest in such real property interest and (ii) any other real
property interest upon which is situated assets or other property affected
or encumbered by any document or instrument granting to any party hereto or
any of its Subsidiaries a lien thereon or security interest therein;
provided, however, that the term "Mortgaged Premises" shall not include
one- to four-unit, single-family residences, and in the case of Bay View
and the Bay View Subsidiaries, any real property interest securing a loan
with a principal balance of less than $2,000,000. For purposes of this
Section, "Participating Facility" means any property in which any party
hereto or any of its Subsidiaries participates in the management of such
property and, where the context requires, includes the owner or operator of
such property. For purposes of this Agreement, "Hazardous Substance" has
the meaning set forth in Section 9601 of the Comprehensive Environmental
Response Compensation and Liability Act of 1980, 42 U.S.C.A., Section 9601
et seq., and also includes any substance now or hereafter regulated by or
subject to any Environmental Laws (as defined below) and any other
pollutant, contaminant, or waste, including without limitation, petroleum,
asbestos, fiberglass, radon, and polychlorinated biphenyls. For purposes of
this Agreement, "Environmental Laws" means all laws (civil or common),
ordinances, rules, regulations, guidelines, and orders that: (i) regulate
air, water, soil, and solid waste management, including the generation,
release, containment, storage, handling, transportation, disposition, or
management of any Hazardous Substance; (ii) regulate or prescribe
requirements for air, water, or soil quality; (iii) are intended to protect
public health or the environment; or (iv) establish liability for the
investigation, removal, or cleanup of, or damage caused by, any Hazardous
Substance.
2.19 Defaults. There has not been any default in any material obligation to
be performed by Bay View or any Bay View Subsidiary under any material
contract or commitment. To the best knowledge of Bay View, no other party to
any material contract or commitment is in default in any material obligation
to be performed by such party.
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2.20 Operations Since December 31, 1998. Between December 31, 1998 and the
date hereof, except as set forth in Section 2.20 of the Bay View Disclosure
Schedule, there has not been:
(i) any creation or assumption of indebtedness (including the extension
or renewal of any existing indebtedness, or the increase thereof) by Bay
View or any Bay View Subsidiary for borrowed money, or otherwise, other
than in the ordinary course of business, none of which is in default; or
(ii) any change in Bay View=s independent auditors or historic methods of
accounting (other than as required by GAAP or regulatory accounting
principles).
2.21 Undisclosed Liabilities. All of the obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, and regardless of when asserted) arising out of transactions or
events heretofore entered into, or any action or inaction, including taxes
with respect to or based upon transactions or events heretofore occurring,
that are required to be reflected, disclosed or reserved against in audited
consolidated financial statements in accordance with GAAP ("Liabilities")
have, in the case of Bay View and the Bay View Subsidiaries, been reflected,
disclosed or reserved against in the Bay View Financial Statements as of
December 31, 1998 or in the notes thereto, and Bay View and the Bay View
Subsidiaries have no other Liabilities as of the date hereof except (a)
Liabilities incurred since December 31, 1998 in the ordinary course of
business or (b) as disclosed in Section 2.21 of the Bay View Disclosure
Schedule.
2.22 Insider Interests. All outstanding loans and other contractual
arrangements (including deposit relationships) between Bay View or any Bay
View Subsidiary and any of its officers, directors or employees conform to
applicable rules and regulations and requirements of all applicable regulatory
agencies which were in effect when such loans and other contractual
arrangements were entered into. Except as set forth in Section 2.22 of the Bay
View Disclosure Schedule, no officer, director or employee of Bay View or any
Bay View Subsidiary has any material interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of Bay
View or any Bay View Subsidiary.
2.23 Brokers and Finders. Except as set forth in Section 2.23 of the Bay
View Disclosure Schedule, neither Bay View nor any Bay View Subsidiary nor any
of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finders' fees, and no broker or finder has acted directly
or indirectly for Bay View or any Bay View Subsidiary, in connection with this
Agreement or the transactions contemplated hereby.
2.24 Accuracy of Information. The statements of Bay View contained in this
Agreement, the Bay View Disclosure Schedule and in any other written document
executed and delivered by or on behalf of Bay View pursuant to the terms of
this Agreement are true and correct in all material respects.
2.25 Governmental Approvals and Other Conditions. To the best knowledge of
Bay View, there is no reason relating specifically to Bay View or any Bay View
Subsidiary why (i) the approvals that are required to be obtained from
regulatory authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (ii) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such regulatory authorities in orders approving
acquisitions of the type contemplated hereby or (iii) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
2.26 Year 2000 Compliant. For purposes of this Agreement, "Year 2000
Compliance" shall mean compliance by any party with all year 2000 regulatory
requirements applicable to Bay View or Bay View Bank. To the best knowledge of
Bay View, Bay View and Bay View Bank are in Year 2000 Compliance.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMAC
FMAC represents and warrants to Bay View that:
3.1 Organization. FMAC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
power and authority, corporate and otherwise, to own, operate and lease its
assets and properties and to carry on its business substantially as it has
been and is now being conducted. FMAC is duly qualified to do business and is
in good standing in each jurisdiction where the character of the assets or
properties owned or leased by it or the nature of the business transacted by
it requires that it be so qualified, except where the failure to be so
qualified would not have a Material Adverse Effect on FMAC. FMAC has all
requisite corporate power and authority to enter into this Agreement and,
subject to the adoption of this Agreement by its stockholders and the receipt
of all requisite regulatory approvals and the expiration of any applicable
waiting periods, to consummate the transactions contemplated hereby.
3.2 Authorization. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
approved and authorized by the Board of Directors of FMAC, and all necessary
corporate action on the part of FMAC has been taken, subject to the adoption
of this Agreement by the holders of a majority of the outstanding FMAC Common
Stock. This Agreement has been duly executed and delivered by FMAC and
constitutes the valid and binding obligation of FMAC and is enforceable
against it, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
or equitable principles or doctrines.
3.3 Conflicts. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation, breach or termination of, or default or loss
of a material benefit under, or permit the acceleration of any obligation
under, or result in the creation of any material lien, charge or encumbrance
on any of the property or assets under, any provision of the Certificate of
Incorporation or Bylaws of FMAC or similar documents of any FMAC Subsidiary
(as defined in Section 3.7), any Intellectual Property Rights, judgment,
order, decree, statute, law, ordinance, rule or regulation, or any material
mortgage, indenture, lease, agreement or other material instrument, permit,
concession, grant, franchise, license, applicable to FMAC or any FMAC
Subsidiary or their respective properties, other than any such conflicts,
violations or defaults which are immaterial or are disclosed in Section 3.3 of
that certain confidential writing delivered by FMAC to Bay View on or prior to
the date hereof (the "FMAC Disclosure Schedule"). No consent, approval, order
or authorization of, or registration, declaration or filing with, any federal
or state governmental authority is required by or with respect to FMAC in
connection with the execution and delivery of this Agreement or the
consummation by FMAC of the transactions contemplated hereby except for the
filings, approvals or waivers contemplated by Section 2.3.
3.4 Anti-takeover Provisions Inapplicable. No "business combination,"
"moratorium," "control share" or other state anti-takeover statute or
regulation applicable to it, (i) applies to the Merger or to the Voting
Agreement, (ii) prohibits or restricts the ability of FMAC to perform its
obligations under this Agreement, or the ability of FMAC to consummate the
transactions contemplated hereby, (iii) would have the effect of invalidating
or voiding this Agreement, the Voting Agreement, or any provision hereof or
thereof, or (iv) would subject Bay View or FMAC to any material impediment or
condition in connection with the exercise of any of its right under this
Agreement or the Voting Agreement.
3.5 Capitalization and Stockholders.
(a) As of the date hereof, the authorized capital stock of FMAC consists
of (i) 100,000,000 shares of FMAC Common Stock, of which 28,760,557 shares
are issued and outstanding and no shares are held as treasury shares and
(ii) 10,000,000 shares of preferred stock, of which none are issued and
outstanding. All of the issued and outstanding shares of FMAC Common Stock
have been duly and validly authorized and issued, and are fully paid and
non-assessable. None of the outstanding shares of FMAC Common Stock has
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been issued in violation of any preemptive rights of current or past
stockholders or are subject to any preemptive rights of the current or past
stockholders of FMAC. All of the issued and outstanding shares of FMAC
Common Stock will be entitled to vote to adopt this Agreement.
(b) As of the date hereof, FMAC had 2,871,562 shares of FMAC Common Stock
reserved for issuance under the Option Plan for the benefit of employees
and directors of FMAC and the FMAC Subsidiaries, pursuant to which options
covering 2,401,147 shares of FMAC Common Stock are outstanding (the "FMAC
Stock Options"), and Options covering 1,590,870 shares as identified in
Section 3.5 of the FMAC Disclosure Schedule will be canceled prior to the
Effective Time and shall not otherwise be exercisable. Except as set forth
in this Section, there are no shares of capital stock or other equity
securities of FMAC outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of FMAC, or contracts, commitments,
understandings, or arrangements by which FMAC is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. Section 3.5
of the Disclosure Schedule sets forth the name of the holder of each FMAC
Stock Option and the date of grant of, number of shares represented by,
exercise price and expiration of, each FMAC Stock Option.
3.6 FMAC Financial Statements; Material Changes. FMAC has heretofore
delivered to Bay View its preliminary audited consolidated financial
statements for the years ended December 31, 1998 and December 31, 1997 (the
"Preliminary Statements"). The audited consolidated financial statements for
the years ended December 31, 1998 and December 31, 1997 of FMAC (together the
"FMAC Financial Statements") will not be materially different from the
Preliminary Statements. The FMAC Financial Statements (i) will be prepared in
all material respects in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto);
and (ii) will fairly present in all material respects the consolidated
financial position of FMAC as of the dates thereof and the consolidated
results of its operations, stockholders' equity, cash flows and changes in
financial position for the periods then ended. Since December 31, 1998 to the
date hereof, FMAC and the FMAC Subsidiaries have not undergone or suffered,
and there has not occurred any event that has had or may reasonably be
expected to have, any Material Adverse Effect.
3.7 FMAC Subsidiaries.
(a) All of the FMAC Subsidiaries (as defined below) are listed in Section
3.7 of the FMAC Disclosure Schedule. Except as set forth in Section 3.7 of
the FMAC Disclosure Schedule, FMAC owns directly or indirectly all of the
ownership, profit and loss and all of the other beneficial ownership
interests in the FMAC Subsidiaries. Section 3.7 of the FMAC Disclosure
Schedule sets forth the ownership percentages of the FMAC Subsidiaries to
the extent owned by FMAC or an FMAC Subsidiary. Except as set forth in
Section 3.7 of the FMAC Disclosure Schedule, neither FMAC nor the FMAC
Subsidiaries own directly or indirectly any debt or equity securities, or
other proprietary interest in any other corporation, limited liability
company, joint venture, partnership, entity, association or other business.
There are no options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or rights to acquire,
any ownership, profit or loss or other beneficial ownership interests in
any FMAC Subsidiary. Other than as set forth in Section 3.7 of the FMAC
Disclosure Schedule there are no contracts, commitments, understandings or
arrangements relating to the rights of FMAC to vote the beneficial
ownership interests or to dispose of any FMAC Subsidiary. All securities
and interests in each FMAC Subsidiary held by FMAC or an FMAC Subsidiary
are fully paid and non-assessable and are owned by FMAC or another FMAC
Subsidiary free and clear of any claim, lien or encumbrance, except as
disclosed in Section 3.7 of the FMAC Disclosure Schedule. Neither FMAC nor
any FMAC Subsidiary is or will be liable for any contribution of any kind
to any FMAC Subsidiary.
(b) Each FMAC Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is formed and is
duly qualified to do business and in good standing in each jurisdiction
where the character of the assets or properties owned or leased by it or
the nature of the business
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transacted by it requires it to be so qualified, except where the failure
to be so qualified would not have a Material Adverse Effect on FMAC. Each
FMAC Subsidiary has the power and authority necessary for it to own,
operate or lease its assets and properties and to carry on its business
substantially as it has been and is now being conducted.
(c) For purposes of this Agreement, a "FMAC Subsidiary" or a "Subsidiary"
of FMAC shall mean each entity in which FMAC owns or controls directly or
indirectly 10% or more of the outstanding equity securities, ownership,
profit or loss or other beneficial ownership interests; provided, however,
there shall not be included any such entity acquired in good faith through
foreclosure, or any such entity to the extent that the equity securities of
such entity are owned or controlled in a bona fide fiduciary capacity.
3.8 FMAC Filings. FMAC has previously made available to Bay View true and
correct copies of its (i) proxy statements relating to all meetings of its
stockholders (whether special or annual) and (ii) all other reports, as
amended, or filings, as amended, required to be filed under the Exchange Act
by FMAC with the SEC since its incorporation including without limitation on
Forms 10-K, 10-Q and 8-K.
3.9 FMAC Reports. Since June 30, 1995, each of FMAC and the FMAC
Subsidiaries has filed, and will continue to file, all reports and statements,
together with any amendment required to be made with respect thereto, that it
has, or will be, required to file with the SEC, the NASD, and other regulatory
authorities. As of their respective dates (and without giving effect to any
amendments or modifications filed after the date of this Agreement with
respect to reports and documents filed before the date of this Agreement),
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the authority
with which they were filed and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. No federal, state or local governmental agency,
commission, Investor (as defined in Section 3.16) or other entity has
initiated any proceeding or, to the best knowledge of FMAC, investigation into
the business or operations of FMAC or the FMAC Subsidiaries within the past
two years except as set forth in Section 3.9 or Section 3.12 of the FMAC
Disclosure Schedule. There is no unresolved violation, criticism or exception
by the SEC or other agency, commission or entity with respect to any report or
statement referred to herein that is material to FMAC and the FMAC
Subsidiaries taken as a whole.
3.10 Compliance With Laws.
(a) Except as disclosed in Section 3.10 of the FMAC Disclosure Schedule,
the businesses of FMAC and the FMAC Subsidiaries are being conducted in
compliance in all material respects with all laws, ordinances and
regulations of governmental authorities, including, without limitation,
federal and state securities laws, laws and regulations relating to
financial statements and reports, truth-in-lending, truth-in-savings,
usury, fair credit reporting, consumer protection, occupational safety,
fair employment practices, fair labor standards and laws and regulations
relating to employees and employee benefits, and any statutes or ordinances
relating to the properties occupied or used by FMAC or any FMAC Subsidiary.
(b) Except as disclosed in Section 3.10 of the FMAC Disclosure Schedule,
no investigation or review by any governmental entity with respect to FMAC
or any FMAC Subsidiary is pending or, to the best knowledge of FMAC,
threatened, nor has any governmental entity indicated to FMAC or any FMAC
Subsidiary an intention to conduct the same, other than normal agency
examinations.
3.11 Registration Statement; Proxy Statement. The information to be supplied
by FMAC for inclusion in the Registration Statement will not, at the time the
Registration Statement is declared effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information to be supplied by FMAC for inclusion in
the Proxy Statement will not, on the date of the Proxy Statement (or any
amendment thereof or supplement thereto) is first
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mailed to Bay View's or FMAC's stockholders, at the time of the Stockholders'
Meetings, and at the Effective Time, contain any statement that, in light of
the circumstances under which it is made, is false or misleading with respect
to any material fact, omits to state any material fact necessary in order to
make the statements made therein not false or misleading, or omits to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Stockholders' Meetings that has become false or misleading. If at any time
prior to the Effective Time, any event relating to FMAC or any of its
affiliates, officers or directors is discovered by FMAC that should be set
forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, FMAC will promptly inform Bay View, and such amendment or
supplement will be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Bay View and FMAC. Notwithstanding the
foregoing, FMAC makes no representation or warranty with respect to any
information supplied by Bay View that is contained in the Registration
Statement or the Proxy Statement. The Proxy Statement will (with respect to
FMAC) comply in all material respects as to form and substance with the
requirements of the Exchange Act and the rules and regulations thereunder.
3.12 Litigation. Except as disclosed in Section 3.12 of the FMAC Disclosure
Schedule, which Section may be updated prior to Closing, there is no suit,
action, investigation or proceeding, legal, quasi-judicial, administrative or
otherwise, pending or, to the best knowledge of FMAC threatened, against or
affecting FMAC or any FMAC Subsidiary, or any of their respective officers,
directors, employees or agents, in their capacities as such, which is seeking
equitable relief or damages in excess of $50,000 against FMAC, any FMAC
Subsidiary, or any of their respective officers, directors, employees or
agents, in their capacities as such, or which would materially affect the
ability of FMAC to consummate the transactions contemplated herein or which is
seeking to enjoin consummation of the transactions provided for herein or to
obtain other relief in connection with this Agreement or the transactions
contemplated hereby, nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against FMAC or any FMAC Subsidiary
or any of their respective officers, directors, employees or agents, in their
capacities as such.
3.13 Licenses. FMAC and the FMAC Subsidiaries hold all licenses,
certificates, permits, franchises and Intellectual Property Rights and
required authorizations, approvals, consents, licenses, clearances and orders
or registrations with all appropriate federal, state or other authorities that
are material to the conduct of their respective businesses as now conducted
and as presently proposed to be conducted. Neither FMAC nor any of its
Subsidiaries has pledged, mortgaged, assigned, licensed, granted permission
with respect to or otherwise transferred any such Intellectual Property Rights
to any third party. No such Intellectual Property Right is subject to any
outstanding injunction, judgment, order, decree, ruling or charge, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the knowledge of FMAC, is threatened that challenges
the legality, validity, use or enforceability of any such Intellectual
Property Right. None of FMAC's or its Subsidiaries' rights with respect to any
such Intellectual Property Rights will be terminated, limited or otherwise
affected by its execution of this Agreement or its consummation of the
transactions contemplated by this Agreement.
3.14 Taxes
(a) Except as disclosed in Section 3.14 of the FMAC Disclosure Schedule,
FMAC and the FMAC Subsidiaries (i) have each timely filed all tax and
information returns required to be filed (and all such returns as filed
were correct and complete in all material respects), (ii) have paid (or
FMAC has paid on behalf of its Subsidiaries), or have accrued on their
respective books and established adequate reserves for the payment of all
taxes for all applicable periods, including taxes anticipated to be payable
in respect of such periods, (iii) are not delinquent in the payment of any
tax, assessment or governmental charge, and (iv) are not subject to any
proposed, asserted or assessed deficiency for taxes that have not been
resolved or settled. No requests for waivers of the time to assess any such
tax are pending or have been agreed to. Neither FMAC nor any FMAC
Subsidiary has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. Except as set
forth in Section 3.14 of the FMAC Disclosure Schedule, neither
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FMAC nor any FMAC Subsidiary is (x) undergoing an audit or examination of
any of its tax returns by the IRS or any state, municipal or other taxing
authority or (y) a party to any action or proceeding by any governmental
authority for the assessment or the collection of taxes. Deferred taxes of
FMAC and the FMAC Subsidiaries have been accounted for in accordance with
GAAP. There are no liens for the payment of taxes on any assets of FMAC or
any of the FMAC Subsidiaries except for statutory liens for taxes that are
not past due as to payment or are being contested in good faith in
appropriate proceedings. No written claim for taxes has been made by an
authority in a jurisdiction where FMAC or any of the FMAC Subsidiaries does
not file tax returns. There are no tax rulings obtained by FMAC or an FMAC
Subsidiary, requests for rulings by FMAC or any FMAC Subsidiary, or closing
agreements to which FMAC or any FMAC Subsidiary is a party that could
affect its liability for income taxes for any period after the Closing
Date. Neither FMAC nor any of the FMAC Subsidiaries is reporting any income
pursuant to an adjustment under Section 481(a) of the Code.
(b) FMAC has not filed any consolidated federal income tax return with an
"affiliated group" (within the meaning of Section 1504 of the Code) where
FMAC was not the common parent of the group. No FMAC Subsidiary at any time
has been a member of an affiliated group of which FMAC was not the common
parent or otherwise has any liability for taxes of any other person under
Treasury regulations section 1.1502-6 as a transferee, successor or
otherwise. Neither FMAC nor any FMAC Subsidiary is, or has been, a party to
any tax allocation agreement or arrangement pursuant to which it has any
contingent or outstanding liability. Neither FMAC nor any FMAC Subsidiary
has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
(c) FMAC and the FMAC Subsidiaries have each withheld amounts from its
employees, stockholders and others, in compliance with the tax withholding
provisions of applicable federal, state and local laws, have timely filed
(including applicable extension periods) all federal, state and local
returns and reports for all periods for which such returns or reports would
be due with respect to income tax withholding, social security,
unemployment taxes, income and other taxes and all payments or deposits
with respect to such taxes have been timely made.
3.15 Insurance. FMAC and the FMAC Subsidiaries maintain insurance with
insurers which in the best judgment of management of FMAC are sound and
reputable on their respective assets and upon their respective businesses and
operations against loss or damage, risks, hazards and liabilities as in their
judgment they deem appropriate. FMAC and the FMAC Subsidiaries maintain in
effect all insurance required to be carried by law or by any agreement by
which they are bound. All material claims under all policies of insurance
maintained by FMAC and the FMAC Subsidiaries have been filed in due and timely
fashion. Each of FMAC and the FMAC Subsidiaries has taken or will timely take
all requisite action (including without limitation the making of claims and
the giving of notices) pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all rights thereunder with
respect to all matters (other than matters arising in connection with this
Agreement and the transactions contemplated hereby) occurring prior to the
Effective Time. Neither FMAC nor any of the FMAC Subsidiaries has, during the
past three years, had an insurance policy canceled or been denied insurance
coverage for which any of such companies has applied.
3.16 Loans; Investments.
(a) The following terms shall have the meaning ascribed to them below:
(i) "Investor" means any person or entity who has acquired or
hereinafter acquires a Loan from FMAC or any FMAC Subsidiary, other
than Bay View or any Bay View Subsidiary.
(ii) "Investor Requirements" means any outstanding contractual, legal
and regulatory obligation of FMAC or any FMAC Subsidiary to any
Investor, including but not limited to, the representations, warranties
and covenants made by FMAC or any FMAC Subsidiary to any Investor.
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(iii) "Loan" means any loan or lease at any time held, serviced or
sold by FMAC, any FMAC Subsidiary or Bankers Mutual to the extent that
FMAC or any FMAC Subsidiary could have any liability, obligation or
duties with respect thereto.
(iv) "Loans Held for Sale" means all Loans currently held and
hereinafter acquired or originated by FMAC or any FMAC Subsidiary where
beneficial ownership has not been transferred to an Investor.
(v) "Loan Documents" means the note, mortgage, deed of trust,
security agreement, or other instrument securing the note and the
related documents for each Loan.
(vi) "Mortgage Loan" shall mean a Loan secured by a mortgage.
(vii) "Portfolio Loan" means all Loans currently owned or hereinafter
owned for investment by FMAC or any FMAC Subsidiary.
(viii) "Serviced Loans" means all Loans currently and hereinafter
serviced by FMAC or an FMAC Subsidiary for its own account or for
others.
(ix) "Servicing Requirements" means prudent practice and industry
standards together with any contractual, legal or regulatory obligation
of FMAC or any FMAC Subsidiary relating to the Serviced Loans or any
Loan previously serviced by FMAC or any FMAC Subsidiary.
(b) Neither FMAC nor any FMAC Subsidiary has any Portfolio Loan. All
Loans owned by FMAC or any FMAC Subsidiary are Loans Held for Sale, except
Loans held as collateral for a securitization.
(c) The Loan Documents evidencing each Loan (other than Serviced Loans
that have never been owned by FMAC, an FMAC Subsidiary or Bankers Mutual, a
Mortgage Banking Corporation ("Bankers Mutual")) that is currently
outstanding constitute the legal, valid and binding obligations of the
parties thereto and are enforceable against such parties in accordance with
their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the
rights of lending institutions or creditors generally and by general
equitable principles. No Loan is subject to any legally enforceable right
of rescission, set-off, counterclaim or defense, including the defense of
usury or, to the knowledge of FMAC, lack of legal capacity of any borrower
or guarantor, nor will the operation of any of the terms of any Loan, or
the exercise of any legally enforceable right thereunder, render any Loan
or any of the Loan Documents unenforceable, in whole or in part, or subject
to any right of rescission, set-off, counterclaim or defense, including the
defense of usury or, to the knowledge of FMAC, lack of legal capacity of
any borrower or guarantor, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect to any Loan Held for
Sale or any Loan for which there is any recourse against, or responsibility
or exposure of, FMAC or any FMAC Subsidiary.
(d) The Loan Documents for each Loan (other than Serviced Loans that have
never been owned by FMAC, an FMAC Subsidiary or Bankers Mutual) have been
duly executed and recorded, or are in the process of being recorded, and
are in due and proper form, and the information contained therein was true,
accurate and complete in all material respects at the time such Loan
documents were executed. FMAC has at all times maintained the Loan
Documents in all material respects in accordance with Investor
Requirements, Servicing Requirements and otherwise in accordance with all
legal and regulatory requirements and contractual obligations.
(e) Except as set forth on Schedule 3.16, all outstanding Loans sold by
FMAC, any FMAC Subsidiary or Bankers Mutual complied in all material
respects with Investor Requirements on the date of sale.
(f) FMAC and the FMAC Subsidiaries have at all times been and are in
compliance in all material respects with the Servicing Requirements
relating to the Serviced Loans and Loans previously serviced by any of
them.
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(g) Except as set forth in Section 3.16(g) of the FMAC Disclosure
Schedule, neither FMAC nor any FMAC Subsidiary has any advances outstanding
with respect to any Loan, except for advances made under the Servicing
Requirements, the aggregate amount of which is not material.
(h) Neither FMAC nor any FMAC Subsidiary is in material default with
respect to any of its obligations under any Loan.
(i) Neither FMAC nor any FMAC Subsidiary is in violation in any material
respect of any applicable federal, state, or local law, statute, ordinance,
rule, regulation, order or guideline pertaining to the Loans, its
origination or production practices, or otherwise relating to its purchase
or sale of Loans or its lending business, including but not limited to,
real estate settlement procedures, fair credit reporting, and every other
prohibition against unlawful discrimination or governing consumer credit,
and also including, without limitation, the Consumer Credit Reporting Act,
Equal Credit Opportunity Act of 1975 and Regulation B, Fair Credit
Reporting Act, Truth in Lending Law, in particular, Regulation Z as
amended, the Flood Disaster Protection Act of 1973, and state consumer
credit codes and laws.
(j) Except as set forth on Schedule 3.16, all Loans securitized in a
pool, at the time of inclusion in the pool, and at the time of any pool
certification or any recertification, met all applicable guidelines for
such pool. All pools relating to Loans that require certification have been
initially certified, finally certified and/or recertified in accordance
with applicable guidelines. The principal balance outstanding and owing on
the Serviced Loans in each pool equals or exceeds the amount owing to the
corresponding security holder of such pool.
(k) All guarantees of indebtedness owed to FMAC or any FMAC Subsidiary,
including but not limited to those of the Federal Housing Administration,
the Small Business Administration, and other state and federal agencies,
are valid and enforceable, except to the extent enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles or doctrines.
(l) Set forth in Schedule 3.16 is a list, as of the date hereof, of all
interest rate swaps, caps, floors, and option agreements and other interest
rate risk management arrangements to which FMAC or any of its Subsidiaries
is a party or by which any of their properties or assets may be bound. All
interest rate swaps, caps, floors and option agreements and other interest
rate risk management arrangements to which FMAC or any FMAC Subsidiary is a
party or by which any of their properties or assets may be bound were
entered into in the ordinary course of business and, to the best knowledge
of FMAC, in accordance with then-customary practice and all applicable
rules and regulations and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations and
are in full force and effect, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or similar laws relating to or affecting the
enforcement of creditors' rights generally, and by general principles of
equity, whether applied by a court of law or equity. FMAC and the FMAC
Subsidiaries have duly performed in all material respects all of their
respective obligations thereunder to the extent that such obligations to
perform have accrued, and to the best knowledge of FMAC, there are no
material breaches, violations or defaults or allegations or assertions of
such by any party thereunder. Except as set forth in Section 3.16 of the
FMAC Disclosure Schedule, none of the transactions contemplated by this
Agreement would permit: (i) a counterparty under any interest rate swap,
cap, floor and option agreement or any other interest rate risk management
agreement or (ii) any party to any financing arrangement, including, but
not limited to mortgage-backed financing, to accelerate, discontinue,
terminate or otherwise modify any such agreement or arrangement or would
require FMAC or any FMAC Subsidiary to recognize any gain or loss with
respect to such arrangement.
(m) FMAC is a Fannie Mae approved DUS lender in good standing and is a
Fannie Mae and Freddie Mac approved seller/servicer and issuer of
securities in good standing and an approved originator of multi-family
loans for Nations Bank. FMAC has not received notice from any governmental,
quasi-governmental or private agency of pending or threatened actions or
investigations which would question the status of
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FMAC as an approved lender, seller/servicer or issuer of securities. To the
knowledge of FMAC, no event has occurred which, with the passage of time or
the giving of notice, or both, would result in the loss by FMAC of its
qualification as an approved lender, seller/servicer or issuer or of FMAC
as a contractor or as a person otherwise permitted to transact business
with any governmental, quasi-governmental or private agency.
(n) The terms of each Loan have not been impaired, waived, altered or
modified in any material respect from the date of its origination except by
a written instrument, which written instrument has been recorded 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 in writing by: (i) the relevant Investor, to
the extent required by the relevant Investor Requirements; and (ii) the
title insurer, to the extent required by the relevant policies, and its
terms are reflected in the Loan Documents. Except as authorized by the
applicable Investor, where the Investor=s authorization is required,
neither FMAC nor any FMAC Subsidiary has: (i) subordinated the lien of any
Mortgage Loan to any other mortgage or lien or given any other mortgage or
lien equal priority with the lien of a mortgage loan; or (ii) executed any
instrument of release, cancellation or satisfaction with, in whole or in
part, respect to any Mortgage Loan.
(o) As of the date hereof, except as set forth in Schedule 3.16, neither
FMAC nor any FMAC Subsidiary is subject to any repurchase obligation under
any Loan.
(p) All escrows required to be maintained pursuant to the terms of the
Mortgage Loans have been maintained by FMAC or an FMAC Subsidiary and, to
the knowledge of FMAC, all prior servicers, in all material respects in
accordance with all applicable legal rules and Investor Requirements and in
accordance with the mortgage servicing agreements and the Loan Documents
related thereto. FMAC and the FMAC Subsidiaries have credited to the
account of mortgagors all interest required to be paid on any escrow
account. All escrow, custodial, and suspense accounts related to the owned
Mortgage Loans are held in FMAC's or an FMAC Subsidiary's name or in the
Investor's name. With respect to escrow deposits and payments which are
required to be collected, all such payments are in the possession of, or
under the control of, FMAC or an FMAC Subsidiary, and there exist no
material deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. No escrow deposits
or other charges or payments have been capitalized under any mortgage or
the related mortgage note.
(q) Neither FMAC nor any FMAC Subsidiary has received written notice of a
servicing default for any Loan, and each Loan serviced by FMAC or FMAC
Subsidiary has been properly serviced and accounted for in all material
respects in accordance with the applicable Servicing Requirements. To the
extent that any applicable legal requirement in any jurisdiction or any
Investor Requirement requires the payment of interest on escrow accounts
with respect to any particular Loan, all such interest has been properly
paid or arrangements for such payment has been made. All amounts payable in
respect of a Loan, or the property covered by a mortgage which FMAC or any
FMAC Subsidiary is responsible for paying, directly or on behalf of a
mortgagor, have, in all material respects, been paid prior to becoming
delinquent. All pools for which FMAC or any FMAC Subsidiary is responsible
are in compliance in all material respects with all applicable Investor
Requirements, procedures, rules, regulations and guidelines.
(r) Schedule 3.16 contains a description of each Loan which, as of the
date hereof, has a balance over $1 million and a prepayment penalty less
than 5% of the principal amount.
(s) To the knowledge of FMAC, no facts currently exist with respect to
existing securitizations heretofore undertaken by FMAC that would be
reasonably likely to materially and adversely affect the ability of FMAC or
any FMAC Subsidiary to continue to do securitizations in the future in
accordance with existing practices.
3.17 Allowance for Possible Loan Losses. The reserve for losses shown on the
FMAC Financial Statements as of December 31, 1998 (and as shown on any
financial statements to be delivered by FMAC to Bay View pursuant to Section
5.7 hereof), was (and will be as of such subsequent financial statement dates)
adequate in all material respects to provide for possible or specific losses,
and contained (or will contain) an
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additional amount of unallocated reserves for unanticipated future losses, at
a level considered adequate under GAAP and standards applied to the speciality
finance business conducted by FMAC and its Subsidiaries. To the best knowledge
of FMAC, the aggregate principal amount of all receivables including, but not
limited to, Loans and leases contained (or that will be contained) in the Loan
and lease portfolio of FMAC and the FMAC Subsidiaries as of December 31, 1998
(and as of the dates of any financial statements to be delivered by FMAC to
Bay View pursuant to Section 5.7 hereof), in excess of such reserve, was (and
will be) fully collectible.
3.18 FMAC Benefit Plans.
(a) Section 3.18 of the FMAC Disclosure Schedule contains a list and a
true and correct copy (or a description with respect to any oral employee
benefit plan or arrangement that is material to the compensation and
benefit programs of FMAC), including all amendments thereto, of each
compensation, consulting, employment, termination or collective bargaining
agreement, and each stock option agreement (or form of), stock purchase,
stock appreciation right, restricted stock agreement (or form of), life,
health, accident or other insurance, bonus, deferred or incentive
compensation, severance or separation agreement or any agreement providing
any payment or benefit resulting from a change in control, profit sharing,
retirement, or other employee benefit plan, practice, policy or arrangement
of any kind, oral (excluding practices and policies) or written, covering
any employee, former employee, director or former director of FMAC or any
FMAC Subsidiary or his or her beneficiaries, including, but not limited to,
any employee benefit plans within the meaning of Section 3(3) the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which FMAC or
any FMAC Subsidiary maintains, to which FMAC or any FMAC Subsidiary
contributes, or under which any employee, former employee, director or
former director of FMAC or any FMAC Subsidiary is covered or has benefit
rights and pursuant to which any liability of FMAC or any FMAC Subsidiary
exists or is reasonably likely to occur (the "FMAC Benefit Plans"). Except
as set forth in Section 3.18 of the FMAC Disclosure Schedule, FMAC and the
FMAC Subsidiaries neither maintain nor have entered into any FMAC Benefit
Plan or other document, plan or agreement which contains any change in
control provisions or which would cause an increase or acceleration of
benefits or benefit entitlements to employees or former employees or
directors or former directors or their respective beneficiaries by virtue
of entering into this Agreement or the consummation of the transactions
contemplated by this Agreement (a "Change in Control Benefit"). The term
"FMAC Benefit Plans" as used herein refers to all plans contemplated under
the preceding sentences of this Section 3.18, provided that the term "Plan"
or "Plans" is used in this Agreement for convenience only and does not
constitute an acknowledgment that a particular arrangement is an employee
benefit plan within the meaning of Section 3(3) of ERISA. Except as
disclosed in Section 3.18 of the FMAC Disclosure Schedule, no Benefit Plan
is a multi-employer plan within the meaning of Section 3(37) of ERISA.
(b) Each of the FMAC Benefit Plans that is intended to be a pension,
profit sharing, stock bonus, thrift or savings plan that is qualified under
Section 401(a) of the Code ("FMAC Qualified Plans") has been determined by
the IRS to qualify under Section 401(a) of the Code, or an application for
determination of such qualification has been timely made to the IRS prior
to the end of the applicable remedial amendment period under Section 401(b)
of the Code (a copy of each such determination letter or pending
application is included in Section 3.18 of the FMAC Disclosure Schedule)
there exist no circumstances likely to adversely affect the qualified
status of any such FMAC Qualified Plan. All such FMAC Qualified Plans
established or maintained by FMAC or any of the FMAC Subsidiaries or to
which FMAC or any of the FMAC Subsidiaries contribute are in compliance in
all material respects with all applicable requirements of ERISA, and are in
compliance in all material respects with all applicable requirements
(including qualification and non-discrimination requirements ) of the Code
for obtaining the tax benefits the Code thereupon permits with respect to
such FMAC Qualified Plans. Neither FMAC nor any FMAC Subsidiary maintains,
sponsors or contributes to a Qualified Plan that is a defined benefit
pension plan subject to Title IV of ERISA. All accrued contributions and
other payments required to be made by FMAC or any FMAC Subsidiary to any
FMAC Benefit Plan through December 31, 1998, have been made or reserves
adequate for such purposes as of December 31, 1998, have been set aside
therefor and will be reflected in the FMAC Financial Statements dated as of
December 31, 1998. Neither FMAC nor any FMAC Subsidiary is in material
default
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in performing any of its respective contractual obligations under any of
the FMAC Benefit Plans or any related trust agreement or insurance
contract, and there are no material outstanding liabilities of any such
Plan other than liabilities for benefits to be paid to participants in such
Plan and their beneficiaries in accordance with the terms of such Plan.
(c) There is no pending or, to the best knowledge of FMAC, threatened
litigation or pending claim (other than routine benefit claims made in the
ordinary course) by or on behalf of or against any of the FMAC Benefit
Plans (or with respect to the administration of any such Plans) now or
heretofore maintained by FMAC or any FMAC Subsidiary which allege
violations of applicable state or federal law which are reasonably likely
to result in a material liability on the part of FMAC or any FMAC
Subsidiary or any such Plan.
(d) FMAC and the FMAC Subsidiaries and, to the best knowledge of FMAC and
the FMAC Subsidiaries, all other persons having fiduciary or other
responsibilities or duties with respect to any FMAC Benefit Plan are and
have since the inception of each such Plan been in substantial compliance
with, and each such Plan is and has been operated in substantial accordance
with, its provisions and in substantial compliance with the applicable
laws, rules and regulations governing such Plan, including, without
limitation, the rules and regulations promulgated by the Department of
Labor, the Pension Benefit Guaranty Corporation ("PBGC") and the IRS under
ERISA, the Code or any other applicable law. Notwithstanding the foregoing,
no representation is made with respect to compliance by a third party
insurance company. No "reportable event" (as defined in Section 4043(b) of
ERISA) has occurred with respect to any FMAC Qualified Benefit Plan. Except
as disclosed in Section 3.18 of the FMAC Disclosure Schedule, neither FMAC,
any FMAC Subsidiary nor any FMAC Benefit Plan has incurred or is reasonably
likely to incur any liability for any "prohibited transactions" (as defined
in Section 406 of ERISA or Section 4975 of the Code), or any material
liability under Section 601 of ERISA or Section 4980 of the Code. All FMAC
Benefit Plans that are group health plans have been operated in substantial
compliance with the group health plan continuation requirements of Section
4980B of the Code and Section 601 of ERISA.
(e) Except as set forth in Section 3.18 of the FMAC Disclosure Schedule,
neither FMAC nor any FMAC Subsidiary has made any payments, or is or has
been a party to any agreement or any FMAC Benefit Plan, that under any
circumstances could (i) obligate it or its successor to make payments or
deemed payments that are not or will not be deductible because of Sections
162(m) or 280G of the Code or (ii) require Bay View or any Bay View
Subsidiary to record any charge or expense therefor (or any tax gross-up
payments) for financial reporting purposes on a post-acquisition basis.
Consistent herewith, the full financial reporting expense relating to such
payments, deemed payments and tax gross-up payments shall be recorded by
FMAC or the FMAC Subsidiaries for the period prior to the Effective Time.
(f) Section 3.18 of the FMAC Disclosure Schedule, which may be updated
prior to Closing with respect to current employees of FMAC and the FMAC
Subsidiaries who receive benefits under FMAC Benefit Plan existing on the
date hereof, describes any obligation that FMAC or any FMAC Subsidiary has
to provide health or welfare benefits to retirees or other former
employees, directors or their dependents (other than rights under Section
4980B of the Code or Section 601 of ERISA), including information as to the
number of retirees, other former employees or directors and dependents
entitled to such coverage and their ages.
(g) Section 3.18 of the FMAC Disclosure Schedule lists: (i) a copy of
each option agreement relating to FMAC Stock Options described in Section
4.1 of the FMAC Disclosure Schedule and (ii) a copy of each agreement
relating to the stock awards described in Section 4.1 of the FMAC
Disclosure Schedule.
(h) To the best knowledge of FMAC, FMAC and the FMAC Subsidiaries have
filed or caused to be filed, and will continue to file or cause to be
filed, in a timely manner all filings pertaining to each FMAC Benefit Plan
with the IRS, the Department of Labor and the PBGC, as prescribed by the
Code or ERISA, or regulations issued thereunder. To the best knowledge of
FMAC, all such filings, as amended, were complete and accurate in all
material respects as of the dates of such filings. Notwithstanding the
foregoing, no representation is made with respect to filings by a third
party insurance company.
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3.19 Compliance with Environmental Laws.
(a) Except as set forth in Section 3.19 of the FMAC Disclosure Schedule:
(i) the operations of FMAC and each of the FMAC Subsidiaries comply in all
material respects with all applicable past and present Environmental Laws;
(ii) none of the operations of FMAC or any FMAC Subsidiary, no assets
presently or formerly owned or leased by FMAC or any FMAC Subsidiary and no
Mortgaged Premises or Participating Facility are subject to any judicial or
administrative proceedings alleging the violation of any past or present
Environmental Law, nor are they the subject of any claims alleging damages
to health or property, pursuant to which FMAC, any FMAC Subsidiary or any
owner of a Mortgaged Premises or a Participating Facility would be liable
in law or equity; (iii) none of the operations of FMAC or any FMAC
Subsidiary, no assets presently owned or, to the best knowledge of FMAC,
formerly owned by FMAC or any FMAC Subsidiary, and to the best knowledge of
FMAC, no Mortgaged Premises or Participating Facility is the subject of any
federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release or threatened release of any
Hazardous Substance, or any other substance into the environment, nor has
FMAC or any FMAC Subsidiary, or, any owner of a Mortgaged Premises or a
Participating Facility been directed to conduct such investigation,
formally or informally, by any governmental agency, nor have any of them
agreed with any governmental agency or private person to conduct any such
investigation; and (iv) neither FMAC nor any FMAC Subsidiary, nor, any
owner of a Mortgaged Premises or a Participating Facility has filed any
notice under any Environmental Law indicating past or present treatment,
storage or disposal of a Hazardous Substance or reporting a spill or
release of a Hazardous Substance, or any other substance into the
environment.
(b) With respect to the real property currently or formerly owned or
currently leased by FMAC or any FMAC Subsidiary ("FMAC Premises"): (i) no
part of the FMAC Premises has been used for the generation, manufacture,
handling, storage, or disposal of Hazardous Substances; (ii) except as
disclosed in Section 3.19 of the FMAC Disclosure Schedule, the FMAC
Premises do not contain, and have never contained, an underground storage
tank; and (iii) the FMAC Premises do not contain and are not contaminated
by any quantity of a Hazardous Substance from any source. With respect to
any underground storage tank listed in Section 3.19 of the FMAC Disclosure
Schedule as an exception to the foregoing, such underground storage tank
has been removed in compliance with the Environmental Laws, and has not
been the source of any release of a Hazardous Substance into the
environment, unless otherwise set forth in Section 3.19 of the FMAC
Disclosure Schedule.
3.20 Contracts and Commitments. Section 3.20 of the FMAC Disclosure Schedule
sets forth the following (copies of each of such documents has been made
available to Bay View) as of the date hereof:
(a) a list of each outstanding Loan or commitment to extend credit to any
officer or director of FMAC or any FMAC Subsidiary;
(b) a list of each contract or agreement involving goods, services or
occupancy and which (i) has a term of more than one year; (ii) cannot be
terminated on 30 days (or less) written notice without penalty; and (iii)
involves an annual expenditure by FMAC or any FMAC Subsidiary in excess of
$250,000;
(c) a list of each contract or commitment (other than FMAC Permitted
Liens as defined in Section 3.22(c) hereof) affecting ownership of, title
to, use of, or any interest in real property which is currently owned by
FMAC or any FMAC Subsidiary, and a list and description of all real
property owned or leased by FMAC or any FMAC Subsidiary;
(d) a list of all policies of insurance currently maintained by FMAC or
any FMAC Subsidiary and a list and description of all unsettled or
outstanding claims of FMAC or any FMAC Subsidiary which have been, or to
the best knowledge of FMAC, will be, filed with the companies providing
insurance coverage for FMAC or any FMAC Subsidiary (except for routine
claims for health benefits);
(e) each collective bargaining agreement to which FMAC or any FMAC
Subsidiary is a party and all affirmative action plans or programs covering
employees of FMAC or any FMAC Subsidiary, as well as all
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employee handbooks, policy manuals, rules and standards of employment
promulgated by FMAC or any FMAC Subsidiary;
(f) each lease or license with respect to real or personal property or
Intellectual Property Rights, whether as lessor, lessee, licensor or
licensee, with annual rental or other payments due thereunder in excess of
$50,000 to which FMAC or any FMAC Subsidiary is a party, which does not
expire within six months from the date hereof and cannot be terminated upon
30 days (or less) written notice without penalty;
(g) all employment, consulting, financial advisory, investment banking,
and professional services contracts to which FMAC or any FMAC Subsidiary is
a party (in the case of at will employment letters and temporary
administrative help contracts only forms of each type of such agreements
are included);
(h) all judgments, orders, injunctions, court decrees or settlement
agreements arising out of or relating to the labor and employment practices
or decisions of FMAC or any FMAC Subsidiary which, by their terms, continue
to bind or affect FMAC or any FMAC Subsidiary;
(i) all orders, decrees, memorandums, agreements or understandings with
regulatory agencies binding upon or affecting the current operations of
FMAC or any FMAC Subsidiary or any of their directors or officers in their
capacities as such;
(j) all trademarks, trade names, service marks, patents, or copyrights,
whether registered or the subject of an application for registration, which
are owned by FMAC or any FMAC Subsidiary or licensed from a third party;
3.21 Defaults. There has not been any default in any material obligation to
be performed by FMAC or any FMAC Subsidiary under any material contract or
commitment, and neither FMAC nor or any FMAC Subsidiary has waived, and will
not waive prior to the Effective Time, any material right under any material
contract or commitment. To the best knowledge of FMAC, no other party to any
material contract or commitment is in default in any material obligation to be
performed by such party.
3.22 Operations Since December 31, 1998. Between December 31, 1998 and the
date hereof, except as set forth in Section 3.22 of the FMAC Disclosure
Schedule, there has not been:
(a) any increase in the compensation or benefits payable or to become
payable by FMAC or any FMAC Subsidiary to any employee, officer or
director, other than routine annual increases to rank and file employees
consistent with past practices;
(b) any payment of dividends or other distributions by FMAC to its
stockholders or any redemption by FMAC of its capital stock;
(c) any mortgage, pledge or subjection to lien, charge or encumbrance of
any kind of or on any material asset, tangible or intangible, of FMAC or
any FMAC Subsidiary, except the following (each of which, whether arising
before or after the date hereof, is herein referred to as a "FMAC Permitted
Lien"): (i) liens arising out of judgments or awards in respect of which
FMAC or any FMAC Subsidiary is in good faith prosecuting an appeal or
proceeding for review and in respect of which it has secured a subsisting
stay of execution pending such appeal of proceeding; (ii) liens for taxes,
assessments, and other governmental charges or levies, the payment of which
is not past due, or as to which FMAC or any FMAC Subsidiary is diligently
contesting in good faith and by appropriate proceeding either the amount
thereof or the liability therefor or both; (iii) deposits, liens or pledges
to secure payments of worker's compensation, unemployment insurance,
pensions, or other social security obligations, or the performance of bids,
tenders, leases, contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds, or similar
obligations arising in the ordinary course of business; (iv) zoning
restrictions, easements, licenses and other restrictions on the use of real
property or any interest therein, or minor irregularities in title thereto,
which do not materially impair the use of such property or the
merchantability or the value of such property or interest therein; (v)
purchase money mortgages or other purchase money or vendor's liens or
security interests (including, without limitation, finance leases),
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provided that no such mortgage, lien or security interest shall extend to
or cover any other property of FMAC or any FMAC Subsidiary other than that
so purchased; and (vi) liens entered into in the ordinary course of
business in connection with (A) the sale of Loans to third parties and (B)
securitizations;
(d) any creation or assumption of indebtedness (including the extension
or renewal of any existing indebtedness, or the increase thereof) by FMAC
or any FMAC Subsidiary for borrowed money, or otherwise, other than in the
ordinary course of business, none of which has a prepayment penalty or is
in default;
(e) the establishment of any new, modification of or amendment to, or
increase in the formula for contributions to or benefits under, any FMAC
Benefit Plan by FMAC or any FMAC Subsidiary;
(f) any action by FMAC or any FMAC Subsidiary seeking any cancellation
of, or decrease in the insured limit under, or increase in the deductible
amount or the insured's retention (whether pursuant to coinsurance or
otherwise) of or under, any policy of insurance maintained directly or
indirectly by FMAC or any FMAC Subsidiary on any of their respective assets
or businesses, including but not by way of limitation, fire and other
hazard insurance on its assets, automobile liability insurance, general
public liability insurance, and directors' and officers' liability
insurance; and if an insurer takes any such action, FMAC shall promptly
notify Bay View;
(g) any change in FMAC's independent auditors or historic methods of
accounting (other than as required by GAAP);
(h) any purchase, whether for cash or secured or unsecured obligations
(including finance leases) by FMAC or any FMAC Subsidiary of any fixed
asset which either (i) has a purchase price individually or in the
aggregate in excess of $250,000 or (ii) is outside of the ordinary course
of business;
(i) any sale or transfer of any asset by FMAC or any FMAC Subsidiary
outside the ordinary course of business or in excess of $250,000 in the
ordinary course of business, with the exception of any sale of Loans and
marketable securities sold in the ordinary course of business at market
prices, including sales to Bay View or any Bay View Subsidiary;
(j) any cancellation or compromise of any debt to, claim by or right of,
FMAC or any FMAC Subsidiary except in the ordinary course of business and
not in a material amount;
(k) any amendment or termination of any material contract or commitment
to which FMAC or any FMAC Subsidiary is a party, other than in the ordinary
course of business;
(l) any material damage or destruction to any assets or property of FMAC
or any FMAC Subsidiary whether or not covered by insurance;
(m) any material change in the loan underwriting or credit scoring
policies or practices of FMAC or any FMAC Subsidiary;
(n) any material transaction of business or activity undertaken by FMAC
or any FMAC Subsidiary outside the ordinary course of business consistent
with past practices; or
(o) any agreement or commitment to do any of the foregoing.
3.23 Records. The record books, transfer books and stock (or other ownership
interest) ledgers of FMAC and each FMAC Subsidiary are complete and accurate
in all material respects and reflect all meetings, consents and other material
actions of the organizers, incorporators, stockholders, owners, Boards of
Directors (or similar boards) and committees of the Boards of Directors of
FMAC and each such Subsidiary, and all transactions in their respective
securities, since their respective inceptions.
3.24 Undisclosed Liabilities. All of the Liabilities will, in the case of
FMAC and the FMAC Subsidiaries, be reflected, disclosed or reserved against
(to the extent required by GAAP) in the FMAC Financial Statements as of
December 31, 1998 or in the notes thereto, and FMAC and the FMAC Subsidiaries
have no
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other Liabilities except (a) Liabilities incurred since December 31, 1998 in
the ordinary course of business or (b) as disclosed in Section 3.24 of the
FMAC Disclosure Schedule.
3.25 Assets.
(a) FMAC and the FMAC Subsidiaries have good and marketable title to
their real properties, including any leaseholds and ground leases, and
their other assets and properties, all as reflected as owned or held by
FMAC or any FMAC Subsidiary in the FMAC Financial Statements as of December
31, 1998, and those acquired since such date, except for (i) assets and
properties disposed of since such date in the ordinary course of business
and (ii) FMAC Permitted Liens none of which, in the aggregate, except as
set forth in the FMAC Financial Statements dated December 31, 1998 or in
Section 3.25 of the FMAC Disclosure Schedule, are material to FMAC on a
consolidated basis. All buildings, structures, fixtures and appurtenances
comprising part of the real properties of FMAC and the FMAC Subsidiaries
(whether owned or leased) are, in the opinion of management of FMAC, in
good operating condition, reasonable wear and tear excepted. Title to all
real property owned by FMAC and the FMAC Subsidiaries is held in fee
simple, except as otherwise noted in the FMAC Financial Statements as of
December 31, 1998 or as set forth in Section 3.25 of the FMAC Disclosure
Schedule. FMAC and the FMAC Subsidiaries have title or other rights to its
assets sufficient in all material respects for the conduct of their
respective businesses as presently conducted, and except as set forth in
the FMAC Financial Statements dated as of December 31, 1998 or in Section
3.25 of the FMAC Disclosure Schedule, such assets are free, clear and
discharged of and from any and all liens, charges, encumbrances, security
interests and/or equities which are material to FMAC or any FMAC
Subsidiary, other than FMAC Permitted Liens.
(b) All leases and licenses pursuant to which FMAC or any FMAC
Subsidiary, as lessee or licensee, leases or licenses real property,
personal property or Intellectual Property Rights are, to the best
knowledge of FMAC, valid, effective, and enforceable against the lessor in
accordance with their respective terms except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or similar laws relating to or affecting the
enforcement of creditors' rights generally, and by general principles of
equity, whether applied by a court of law or equity. There is not under any
of such leases or licenses any existing material default, or any event
which with notice or lapse of time, or both, would constitute a material
default, with respect to either FMAC or any FMAC Subsidiary, or to the best
knowledge of FMAC, the other party. Except as disclosed in Section 3.25 of
the FMAC Disclosure Schedule, none of such leases involving a rental
payment of more than $50,000 annually or such licenses contains a
prohibition against assignment by FMAC or any FMAC Subsidiary, by operation
of law or otherwise, or any other provision which would preclude the
surviving corporation or any FMAC Subsidiary from possessing and using the
leased premises or licensed property (including Intellectual Property
Rights) for the same purposes and upon the same rental and other terms upon
the consummation of the Merger as are applicable to the use by FMAC or any
FMAC Subsidiary as of the date of this Agreement.
3.26 Indemnification. To the best knowledge of FMAC, except as set forth in
Section 3.26 of the FMAC Disclosure Schedule, no action or failure to take
action by any director, officer, employee or agent of FMAC or any FMAC
Subsidiary has occurred which would give rise to indemnification from FMAC or
any FMAC Subsidiary under the corporate indemnification provisions of FMAC or
any FMAC Subsidiary in effect on the date of this Agreement.
3.27 Insider Interests. Except as set forth in Section 3.27 of the FMAC
Disclosure Schedule, no officer, director or employee of FMAC or any FMAC
Subsidiary has any material interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of FMAC or any
FMAC Subsidiary.
3.28 Registration Obligations. Except as set forth in Section 3.28 of the
FMAC Disclosure Schedule, neither FMAC nor any FMAC Subsidiary is under any
obligation, contingent or otherwise, which will survive the Effective Time by
reason of any agreement to register any of its securities under the Securities
Act or other federal or state securities laws or regulations.
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3.29 Tax and Related Matters. FMAC has not taken or agreed to take any
action, nor does it have knowledge of any fact or circumstance, that would (i)
materially impede or delay the consummation of the transactions contemplated
by this Agreement or the ability of the parties to obtain any approval of any
regulatory authority required for the transactions contemplated by this
Agreement or to perform their covenants and agreements under this Agreement or
(ii) prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
3.30 Brokers and Finders. Except as set forth in Section 3.30 of the FMAC
Disclosure Schedule, neither FMAC nor any FMAC Subsidiary nor any of their
respective officers, directors or employees has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or finders' fees, and no other broker or finder has acted directly
or indirectly for FMAC or any FMAC Subsidiary in connection with this
Agreement or the transactions contemplated hereby.
3.31 Accuracy of Information. The statements of FMAC contained in this
Agreement, the FMAC Disclosure Schedule and in any other written document
executed and delivered by or on behalf of FMAC pursuant to the terms of this
Agreement are true and correct in all material respects.
3.32 Governmental Approvals and Other Conditions. To the best knowledge of
FMAC, there is no reason relating specifically to FMAC or any of its
Subsidiaries why (i) the approvals that are required to be obtained from
regulatory authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (ii) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such regulatory authorities in orders approving
acquisitions of the type contemplated hereby or (iii) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
3.33 Year 2000 Compliant. Set forth in Section 3.33 of the FMAC Disclosure
Schedule is a good faith estimate of FMAC's cost for achieving, to its
knowledge, Year 2000 Compliance in all material respects on or prior to
November 15, 1999. FMAC has no reason to believe that its cost for Year 2000
Compliance will materially exceed the amount of such good faith estimate
unless FMAC, at the request of Bay View, agrees to accelerate the timing of
its Year 2000 Compliance to a date substantially prior to November 15, 1999.
ARTICLE IV
COVENANTS OF FMAC AND BAY VIEW
4.1 FMAC Business in Ordinary Course.
(a) Without the prior written consent of Bay View, FMAC shall not declare
or pay any dividend or make any other distribution with respect to its
capital stock, whether in cash, stock or other property, after the date of
this Agreement.
(b) FMAC and the FMAC Subsidiaries shall continue to carry on, after the
date hereof, their respective businesses and the discharge or incurring of
obligations and liabilities, only in the usual, regular and ordinary course
of business, as heretofore conducted, and by way of amplification and not
limitation, FMAC and each of the FMAC Subsidiaries will not, without the
prior written consent of Bay View (or the Chief Credit Officer of Bay View
in the case of subparagraph (vii)) (which in the case of subparagraph (xx)
shall not be unreasonably withheld or delayed);
(i) issue any of its capital stock, ownership, profit and loss, or
other beneficial interests, or any options, warrants, or other rights
to subscribe for or purchase any of the foregoing, except (A) pursuant
to the FMAC Stock Options outstanding on the date hereof and (B)
restricted stock awards, stock options and bonus stock to be awarded as
fully described in Section 4.1 of the FMAC Disclosure Schedule;
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(ii) directly or indirectly redeem, purchase or otherwise acquire any
capital stock, ownership, profit and loss or other beneficial interests
of FMAC or any of the FMAC Subsidiaries;
(iii) effect a reclassification, recapitalization, split-up, exchange
of shares, readjustment or other similar change in or to any
outstanding securities or otherwise reorganize or recapitalize;
(iv) change its Certificate of Incorporation or other organizational
or governmental document;
(v) enter into, modify or renew any employment agreement, severance
agreement, change of control agreement, or plan relative to the
foregoing; or grant any increase (other than ordinary and normal
increases to rank and file employees consistent with past practices) in
the compensation or benefits payable or to become payable to directors,
officers or employees except (A) as required by law and (B) the
restricted stock awards, stock options and bonus stock to be awarded as
fully described in Section 4.1 of the FMAC Disclosure Schedule, pay or
agree to pay any bonus, or adopt or make any change in any bonus,
insurance, pension or other FMAC Benefit Plan;
(vi) except for borrowings in the ordinary course of business that do
not have any prepayment penalty, borrow or agree to borrow any funds,
or indirectly guarantee or agree to guarantee any obligations of
others;
(vii) make or commit to make any Loan, except for Loans on retail
concepts that FMAC or any FMAC Subsidiary make Loans on as of the date
of this Agreement that do not exceed $10,000,000 and that would not
increase the aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $15,000,000 (excluding for this
purpose credit related to Loans that have been sold or securitized),
provided that nothing in this subparagraph shall prohibit FMAC or any
FMAC Subsidiary from honoring any contractual obligation in existence
on the date of this Agreement;
(viii) refinance or restructure any existing Loan, except in the
ordinary course of business consistent with past practice and prudent
lending practices;
(ix) make any material changes in its policies or practices
concerning loan underwriting and credit scoring, or which persons may
approve Loans or credit scoring;
(x) except in the ordinary course of business consistent with past
practices and prudent business practices, enter into any securities
transaction for its own account or purchase or otherwise acquire any
investment security for its own account other than (A) securities
backed by the full faith and credit of the United States or an agency
thereof not in excess of $10,000,000 and (B) other readily marketable
securities not in excess of $1,000,000;
(xi) enter into, modify or extend any agreement, contract or
commitment (other than Loans or securities) involving an expenditure in
excess of $250,000 except as required or desirable for the conduct of
business in the ordinary course;
(xii) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance;
(xiii) cancel any material indebtedness owing to it or any claims
which it may possess or waive any rights of material value;
(xiv) sell or otherwise dispose of any real property or any material
amount of tangible or intangible personal property other than (A)
properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness or (B) Loans sold in the secondary market;
(xv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon;
(xvi) knowingly or wilfully commit any act or fail to commit any act
which will cause a material breach of any agreement, contract or
commitment;
(xvii) engage in any activity or transaction outside the ordinary
course of business;
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(xviii) enter into any new, or modify, amend or extend the terms of
any existing contracts relating to the purchase or sale of financial or
other futures, or any put or call option relating to cash, securities
or commodities or any interest rate swap agreements or other agreements
relating to the hedging of interest rate risk, except in the ordinary
course of business consistent with past practices and prudent business
practices;
(xix) knowingly take any action that would (A) materially impede or
delay the consummation of the transactions contemplated by this
Agreement or the ability of the parties hereto to obtain any approval
of any regulatory authority required for the transactions contemplated
by this Agreement or to perform its covenants and agreements under this
Agreement or (B) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the
Code;
(xx) make any material changes in its pricing policies; or
(xxi) agree in writing or otherwise to take any of the foregoing
actions or engage in any of the foregoing activities.
Notwithstanding the foregoing, FMAC is permitted to sell the FMAC leasing
division upon the written consent of Bay View, which consent shall not be
unreasonably withheld or delayed.
(c) FMAC and the FMAC Subsidiaries shall not, without the prior written
consent of Bay View, engage in any transaction or knowingly take any action
or commit any omission that would render untrue in any material respect any
of the representations and warranties of FMAC contained in Article III
hereof, if such representations and warranties were given as of the date of
such transaction, action or omission.
(d) FMAC will, and will cause the FMAC Subsidiaries to, use their
commercially reasonable efforts to maintain their respective properties and
assets in their present state of repair, order and condition, reasonable
wear and tear excepted, and to maintain and keep in full force and effect
all policies of insurance presently in effect. FMAC will, and will cause
the FMAC Subsidiaries to, use all commercially reasonable efforts to
preserve intact their present business organization, keep available the
services of their present officers and key employees and preserve their
relationships with customers and Investors and others having business
dealings with them. FMAC will, and will cause the FMAC Subsidiaries to,
take all requisite action (including without limitation the making of
claims and the giving of notices) pursuant to its directors' and officers'
liability insurance policy or policies in order to preserve all rights
thereunder which could reasonably give rise to a claim prior to the
Effective Time.
(e) FMAC shall promptly notify Bay View in writing of the occurrence of
any matter or event known to and directly involving FMAC or any FMAC
Subsidiary that would result in any breach of this Agreement, is reasonably
likely to result in a Material Adverse Effect on FMAC or impair the ability
of FMAC to consummate the transactions contemplated herein.
(f) FMAC shall provide to Bay View such reports on litigation involving
FMAC and each of the FMAC Subsidiaries as Bay View shall reasonably
request, provided that FMAC shall not be required to divulge information to
the extent that, in the good faith opinion of its counsel, by doing so, it
would risk waiver of the attorney-client privilege to its detriment.
4.2 Certain Actions
(a) Neither FMAC (nor any of its Subsidiaries) (i) shall solicit,
initiate, participate in discussions of, or encourage or take any other
action to facilitate (including by way of the disclosing or furnishing of
any information that it is not legally obligated to disclose or furnish)
any inquiry or the making of any proposal relating to any Acquisition
Proposal (as defined below) with respect to itself or any of its
Subsidiaries or (ii) shall (A) solicit, initiate, participate in
discussions of, or encourage or take any other action to facilitate any
inquiry or proposal, or (B) enter into any agreement, arrangement, or
understanding (whether written or oral) regarding any proposal or
transaction providing for or requiring it to abandon, terminate or fail to
consummate this Agreement, or compensating it or any of its Subsidiaries
under any of the instances
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described in this clause. FMAC shall immediately instruct and otherwise use
its reasonable best efforts to cause its directors, officers, employees,
agents, advisors (including, without limitation, any investment banker,
attorney, or accountant retained by it or any of its Subsidiaries),
consultants and other representatives to comply with such prohibitions.
FMAC shall immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any parties conducted
heretofore with respect to such activities. Notwithstanding the foregoing,
FMAC may provide information at the request of or enter into negotiations
with a third party with respect to an Acquisition Proposal if the Board of
Directors of FMAC determines, in good faith after consultation with
counsel, that the exercise of its fiduciary duties to FMAC's stockholders
under applicable law requires it to take such action, and, provided
further, that FMAC may not, in any event, provide to such third party any
information which it has not provided to Bay View. FMAC shall promptly
notify Bay View orally and in writing in the event it receives any such
inquiry or proposal and shall provide reasonable detail of all relevant
facts relating to such inquiries. This Section shall not prohibit accurate
disclosure by FMAC in any document (including the Proxy Statement and the
Registration Statement) or other disclosure under applicable law if in the
opinion of the Board of Directors of FMAC, disclosure is appropriate under
applicable law.
(b) "Acquisition Proposal" shall, with respect to FMAC, mean any of the
following (other than the Merger): (i) a merger or consolidation, or any
similar transaction of any entity with either FMAC or any Subsidiary of
FMAC, (ii) a purchase lease or other acquisition of a material portion of
all the assets of either FMAC or any Subsidiary of FMAC, (iii) a purchase
or other acquisition of "beneficial ownership" by any "person" or "group"
(as such terms are defined in Section 13(d)(3) of the Exchange Act)
(including by way of merger, consolidation, share exchange, or otherwise)
which would cause such person or group to become the beneficial owner of
securities representing 25% or more of the voting power of either FMAC or
any Subsidiary of FMAC, (iv) a tender or exchange offer to acquire
securities representing 25% or more of the voting power of FMAC, (v) a
public proxy or consent solicitation made to stockholders of FMAC seeking
proxies in opposition to any proposal relating to any of the transactions
contemplated by this Agreement, (vi) the filing of an application or notice
with any federal or state regulatory authority (which application has been
accepted for processing) seeking approval to engage in one or more of the
transactions referenced in clauses (i) through (iv) above, or (vii) the
making of a bona fide offer to the Board of Directors of FMAC by written
communication, that is or becomes the subject of public disclosure, to
engage in one or more of the transactions referenced in clauses (i) through
(v) above.
4.3 Bay View Business in Ordinary Course.
(a) Without the prior written consent of FMAC, Bay View shall not declare
or pay any dividend or make any other distribution with respect to its
capital stock, whether in cash, stock or other property, after the date of
this Agreement except it may declare and pay its regular quarterly
dividends in amounts as it shall determine from time to time and may effect
any stock split in the form of a stock dividend after consultation with
FMAC.
(b) Neither Bay View nor any Bay View Subsidiary has taken or agreed to
take, or shall knowingly take, any action nor does it have knowledge of any
fact or circumstance, that would (i) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of the parties hereto to obtain any approval of any regulatory
authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (ii)
prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code.
(c) Bay View shall promptly notify FMAC in writing of the occurrence of
any matter or event known to and directly involving Bay View or any Bay
View Subsidiary that would result in any breach of this Agreement, is
reasonably likely to result in a Material Adverse Effect on Bay View or
impair the ability of Bay View to consummate the transactions contemplated
herein.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Inspection of Records; Confidentiality.
(a) Bay View and its Subsidiaries, on the one hand, and FMAC and its
Subsidiaries, on the other hand, shall each afford to the other and to the
other's accountants, counsel and other representatives full access during
normal business hours, during the period prior to the Effective Time, to
all of their respective properties, books, contracts, commitments and
records, including all attorneys' responses to auditors' requests for
information, and accountants' work papers, and will permit their respective
representatives to discuss such information directly with each other's
officers, directors, employees, attorneys and accountants. Bay View and
FMAC shall each use their reasonable best efforts to furnish to the other
all other information concerning its business, properties and personnel as
such other party may reasonably request. The availability or actual
delivery of information shall not affect the representations, warranties,
covenants and agreements of the party providing such information that are
contained in this Agreement or in any certificates or other documents
delivered pursuant hereto.
(b) Each party hereto shall, and shall cause its advisors and
representatives to, (i) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the
other party which is not otherwise public knowledge, (ii) return all
documents (including copies thereof) obtained hereunder from the other
party to such other party and (iii) use its reasonable best efforts to
cause all information obtained pursuant to this Agreement or in connection
with the negotiation of this Agreement to be treated as confidential and
not use, or knowingly permit others to use, any such information unless
such information becomes generally available to the public.
5.2 Registration Statement; Stockholder Approval. (a) As soon as practicable
after the date hereof, Bay View shall file the Registration Statement with the
SEC, and FMAC and Bay View shall use their reasonable best efforts to cause
the Registration Statement to become effective under the Securities Act. Bay
View will take any action required to be taken under the applicable blue sky
or securities laws in connection with the issuance of the shares of Bay View
Common Stock in the Merger. Each party shall furnish all information
concerning it and the holders of its capital stock as the other party may
reasonably request in connection with such action.
(b) Bay View shall call the Bay View Stockholders' Meeting and FMAC shall
call the FMAC Stockholders' Meeting, in each case to be held as soon as
practicable after the Registration Statement becomes effective for the
purpose of voting upon this Agreement and the Merger. The Bay View
Stockholders' Meeting and FMAC Stockholders' Meeting shall be held on the
same date and at the same time. In connection therewith, Bay View shall
prepare the Proxy Statement and, with the approval of each of Bay View and
FMAC, the Proxy Statement shall be filed with the SEC and mailed to the
stockholders of Bay View and FMAC. The Board of Directors of Bay View shall
submit for approval of Bay View's stockholders the matters to be voted upon
in order to authorize the Merger. The Board of Directors of FMAC shall
submit for approval of FMAC's stockholders the matters to be voted upon in
order to authorize the Merger. The Board of Directors of Bay View hereby
does and will recommend this Agreement and the transactions contemplated
hereby to stockholders of Bay View and will use its reasonable best efforts
to obtain any vote of the stockholders of Bay View that is necessary for
the approval and adoption of this Agreement and consummation of the
transactions contemplated hereby. The Board of Directors of FMAC hereby
does and will recommend this Agreement and the transactions contemplated
hereby to stockholders of FMAC and will use its reasonable best efforts to
obtain any vote of the stockholders of FMAC that is necessary for the
approval and adoption of this Agreement and the transactions contemplated
hereby.
5.3 Agreements of Affiliates. As soon as practicable after the date of this
Agreement, FMAC shall deliver to Bay View a letter, reviewed by its counsel,
identifying all persons whom FMAC believes to be "affiliates" of FMAC for
purposes of Rule 145 under the Securities Act. FMAC shall use its reasonable
best efforts to cause each person who is so identified as an "affiliate" to
deliver to Bay View no later than ten
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calendar days after the date hereof, a written agreement in the form of
Exhibit B, providing that from the date of such agreement each such person
will agree not to sell, pledge, transfer or otherwise dispose of any shares of
stock of FMAC held by such person or any shares of Bay View Common Stock to be
received by such person in the Merger at any time, except in compliance with
the applicable provisions of the Securities Act and other applicable laws and
regulations. Prior to the Effective Time, FMAC shall use its reasonable best
efforts to cause each additional person who is identified as an "affiliate" to
execute a written agreement as set forth in this Section 5.3.
5.4 Expenses. Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Agreement and to consummating
the Merger. The fee to be paid to FMAC's financial advisor, Credit Suisse
First Boston ("First Boston"), shall not be in excess of the fee provided for
in the engagement letter between FMAC and First Boston, a copy of which letter
is set forth in Section 5.4 of the FMAC Disclosure Schedule. The amount of the
fees paid or to be paid by FMAC or the FMAC Subsidiaries, collectively (or by
Bay View or New FMAC as successors), in connection with this Agreement for
legal and accounting fees, shall not exceed the amount set forth on Section
5.4 of the FMAC Disclosure Schedule without the written consent of Bay View.
Notwithstanding the foregoing, Bay View and FMAC will share equally all third
party printing costs incurred with respect to the Registration Statement and
Proxy Statement in preliminary and final form.
5.5 Cooperation. (a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement as expeditiously as possible. Each party shall, and shall cause
each of its respective Subsidiaries to, use its reasonable best efforts to
obtain consents of all third parties and regulatory authorities necessary for
the consummation of the transactions contemplated by this Agreement as
expeditiously as possible.
(b) FMAC, in conjunction with its transition team that shall meet at
least twice a month with the Bay View transition team, shall, (i) consult
and cooperate with Bay View regarding the implementation of those policies
and procedures established by Bay View for its governance and that of its
Subsidiaries including, without limitation, policies and procedures
pertaining to accounting, loan accruals and reserves, budgets, computer
systems, asset/liability management, audits, credit, human resources,
treasury and legal functions; (ii) at the request of Bay View, conform
FMAC's existing policies and procedures in respect of such matters to Bay
View's policies and procedures or in the absence of any existing FMAC
policy or procedure regarding any such function, introduce Bay View
policies or procedures in respect thereof; (iii) consult and cooperate with
Bay View with respect to the pricing policies of FMAC; (iv) consult and
cooperate with Bay View with respect to determining appropriate FMAC
accruals, reserves and charges or write-down of various assets and other
appropriate charges and accounting adjustments; (v) consult and cooperate
with Bay View with respect to the amount and the timing for recognizing for
financial accounting purposes its expenses of the Merger and the
restructuring charges relating to or to be incurred in connection with the
Merger; and (vi) establish and take such reserves and accruals at such time
as Bay View shall reasonably request; provided, however, that FMAC shall
not be required to take such action pursuant to this subpart vi more than
five days prior to the Effective Time and not until (A) Bay View agrees in
writing that all conditions to closing set forth in Article VI have been
satisfied or waived and (B) FMAC shall have received a written waiver by
Bay View of its right to terminate this Agreement; and provided, further
that FMAC shall not be required to take any such action that is not
consistent with any applicable law or GAAP and that reserves or accruals
taken at the written request of Bay View may not be a basis to assert a
violation of a breach of a representation, warranty or covenant of FMAC
herein.
(c) Each party agrees to cooperate fully with the other in connection
with matters relating to liability of FMAC to Fannie Mae under the Fannie
Mae DUS Program. In addition, FMAC shall take such actions in connection
therewith as Bay View shall reasonably request; provided, however, that
FMAC shall not be required to take such actions until (i) Bay View agrees
in writing that all conditions to Closing set forth in Article VI have been
satisfied or waived, and (ii) FMAC shall have received a written waiver by
Bay View
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of its right to terminate this Agreement; and provided further, that FMAC
shall not be required to take any such action that is not consistent with
any applicable law or Fannie Mae guidelines and that actions taken at the
written request of Bay View may not be a basis to assert a violation or a
breach of a representation, warranty or covenant of FMAC herein.
5.6 Regulatory Applications. The parties shall, as soon as practicable after
the date of this Agreement, file all necessary applications with all
applicable regulatory authorities, and shall use their reasonable best efforts
to respond as promptly as practicable to all inquiries received concerning
said applications. In the event the Merger is challenged or opposed by any
administrative or legal proceeding, whether by the United States Department of
Justice or otherwise, the determination of whether and to what extent to seek
appeal or review, administrative or otherwise, or other appropriate remedies
shall be made by mutual agreement of Bay View and FMAC. The party filing an
application shall deliver a copy thereof to the other parties hereto in
advance of filing and copies of all responses from or written communications
from regulatory authorities relating to the Merger or this Agreement (to the
extent permitted by law), and the filing party shall also deliver a final copy
of each regulatory application to the other parties promptly after it is filed
with the appropriate regulatory authority.
5.7 Current Information. During the period from the date of this Agreement
to the Effective Time, each party shall promptly furnish the other with copies
of all monthly and other interim financial statements produced in the ordinary
course of business as the same become available and shall cause one or more of
its designated representatives to confer on a regular and frequent basis with
representatives of the other party. Bay View and FMAC shall deliver to each
other not later than 45 days after the end of each quarter, its Report on Form
10-Q for such quarter as filed with the SEC and each party will promptly
furnish to the other any and all other material reports filed with the SEC or
any other regulatory agency. Further, FMAC shall furnish to Bay View within
ten business days of the end of each month a description of all Loans
(including, without limitation, the name of the borrower, the loan amount and
a description of the collateral) originated by FMAC or any of its Subsidiaries
during such month. Each party shall promptly notify the other party of any
material change in its business or operations and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of material
litigation involving such party or the transactions contemplated hereby and
shall keep the other party fully informed of such events.
5.8 Press Release. Except as may be required by law the parties shall
mutually agree to the issuance of any press release or other information to
the press or any third party for general circulation with respect to this
Agreement or the transactions contemplated hereby.
5.9 Litigation Matters. FMAC will consult with Bay View about any proposed
settlement, or any disposition of, any litigation involving amounts in excess
of $150,000.
5.10 Tax Opinion. Bay View agrees to obtain a written opinion of Silver,
Freedman & Taff, L.L.P. ("SF&T") addressed to Bay View, dated the Closing
Date, substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion, the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the Code
and that Bay View and FMAC each will be a party to such reorganization. In
rendering such opinion, SF&T may require and rely upon representations
contained in letters from Bay View, FMAC and others. FMAC agrees to obtain a
written opinion of Dewey Ballantine LLP ("Dewey Ballantine"), addressed to
FMAC, dated the Closing Date, substantially to the effect that, on the basis
of facts, representations and assumptions set forth in such opinion, the
Merger will constitute a "reorganization" within the meaning of Section 368(a)
of the Code and that Bay View and FMAC each will be a party to such
reorganization. In rendering its opinion, Dewey Ballantine may require and
rely upon representations contained in letters from Bay View, FMAC and others.
5.11 Benefits and Related Matters. (a) The FMAC Benefit Plans that apply
generally and uniformly to full-time employees of FMAC and/or the FMAC
Subsidiaries shall be continued after the Effective Time as plans of Bay View,
until such time as such employees are integrated into Bay View's employee
benefit plans that are available to other employees of Bay View and the Bay
View Subsidiaries on a general and uniform basis, subject
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to the terms and conditions specified in such plans and to such changes
therein as may be necessary to reflect the consummation of the Merger. Bay
View shall take such steps as are necessary or required to integrate the
employees of FMAC and the FMAC Subsidiaries in Bay View employee benefit plans
available to other employees of Bay View and Bay View Subsidiaries as soon as
practicable after the Effective Time, (i) with full credit for prior service
with FMAC for all purposes other than determining the amount of benefit
accruals under any defined benefit plan, (ii) without any waiting periods,
evidence of insurability, or application of any pre-existing condition
limitations (to the extent coverage is being provided therefore under FMAC's
health insurance plan), and (iii) with full credit for claims arising prior to
the Effective Time for purposes of deductibles, out-of-pocket maximums,
benefit maximums, and all other similar limitations for the applicable plan
year during which the Merger is consummated.
5.12 Reservation of Shares to Satisfy FMAC Continuing Options. Bay View
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Bay View Common Stock for delivery upon exercise of
Continuing Options. As soon as practicable after the Effective Time, Bay View
shall file an appropriate registration statement with respect to the shares of
Bay View Common Stock subject to Continuing Options and shall use its
reasonable best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
5.13 Listing. Bay View shall use all reasonable efforts to cause the shares
of Bay View Common Stock to be issued in the Merger, and the shares of Bay
View Common Stock to be reserved for issuance upon exercise of Continuing
Options, to be approved for listing on the Nasdaq Stock Market or New York
Stock Exchange, Inc. (or such other national securities exchange or stock
market on which the Bay View Common Stock shall then be traded), subject to
official notice of issuance, prior to or as of the Closing.
5.14 Indemnification: Directors' and Officers' Insurance.
(a) From and after the Effective Time, Bay View shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to
the date hereof or who becomes prior to the Effective Time, an officer,
director or employee of FMAC or any of the FMAC Subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs,
expenses, liabilities or judgments, or amounts that are paid in settlement
with the approval of Bay View (which approval shall not be unreasonably
withheld), of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director, officer or employee
of FMAC or any FMAC Subsidiary, whether pertaining to any matter existing
or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), in each case to the full extent FMAC would have been
permitted under Delaware law and its Certificate of Incorporation and By-
laws to indemnify such person (and FMAC shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by law upon receipt of any undertaking
required by Section 145(e) of the DGCL). Without limiting the foregoing, in
the event any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for
any period after the Effective Time shall be reasonably satisfactory to Bay
View; (ii) after the Effective Time, Bay View shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; and (iii) after the Effective Time, Bay
View will use all reasonable efforts to assist in the defense of any such
matter, provided that Bay View shall not be liable for any settlement of
any claim effected without its written consent, which consent, however,
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.14, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Bay View (but the
failure so to notify Bay View shall not relieve it from any liability which
it may have under this Section 5.14 except to the extent such failure
materially prejudices Bay View), and shall deliver to Bay View the
undertaking, if any, required by Section 145(e) of the DGCL. The
Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
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standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(b) Bay View shall also purchase and keep in force for six years
directors' and officers' liability insurance to provide coverage for acts
or omissions of the type and in the amount currently covered by FMAC's
existing directors' and officers' liability insurance for acts or omissions
occurring prior to the Effective Time, to the extent such insurance may be
purchased or kept in full force without any material increase in the cost
of the premium currently paid by Bay View for its directors' and officers'
liability insurance (provided that if such insurance is not available
without such a material increase, Bay View will substitute or cause FMAC to
substitute therefor to the extent available at a cost not in excess of 200%
of the current annual premium cost, single premium tail coverage with
policy limits equal to FMAC's existing annual coverage limits).
(c) The provisions of this Section 5.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and each
Indemnified Party's heirs and representatives.
5.15 Reports to the SEC. On or after the Effective Time, Bay View shall
continue to file all reports and data with the SEC necessary to permit
stockholders of FMAC who may be deemed affiliates of FMAC within the meaning
of Rule 145 under the Securities Act to sell Bay View Common Stock held or
received by them in connection with the Merger pursuant to Rules 144 and 145
under the Securities Act if they would otherwise be so entitled.
5.16 Environmental Reports. FMAC shall cooperate with Bay View so that Bay
View may as soon as reasonably practicable obtain, at Bay View's expense, a
report of a phase one environmental investigation on all real property owned,
leased or operated by FMAC or any of the FMAC Subsidiaries. If advisable in
light of the phase one report with respect to any parcel of real property
referred to above, in the reasonable opinion of Bay View, FMAC shall also
cooperate with Bay View so that Bay View may obtain, at Bay View's expense, a
report of a phase two environmental investigation to such designated parcels.
5.17 Impermissible Activities. FMAC shall use its reasonable best efforts to
sell, transfer or otherwise dispose of, on terms satisfactory to Bay View, any
of its or its Subsidiaries' businesses or activities that would be
impermissible to be engaged in by Bay View Bank, either directly or
indirectly.
5.18 Post-Merger. It is the current intention of Bay View to operate New
FMAC as a wholly owned subsidiary of Bay View Bank, with a Board of Directors
and Credit Committee of such Board that would include persons who are
currently officers or directors of FMAC.
5.19 FMAC Acknowledgments. FMAC acknowledges (i) that nothing in this
Agreement shall prohibit Bay View from, directly or indirectly, redeeming,
purchasing or otherwise acquiring any of its capital stock prior to the
Effective Time and (ii) that the parties shall cooperate with respect to (A)
the possible relocation of the corporate headquarters of the FMAC insurance
subsidiaries at or subsequent to the Effective Time and (B) all other matters
to assure that the FMAC insurance subsidiaries comply with all applicable
banking regulations for Bay View and the Bay View Subsidiaries to continue
such insurance activities at and after the Effective Time.
5.20 Director of Bay View. The Board of Directors of Bay View shall take all
requisite corporate action so that at the Effective Time the class of
directors of Bay View with terms expiring in the year 2000 shall include Wayne
Knyal. Subject to its fiduciary duties, the Board of Directors of Bay View
shall nominate Mr. Knyal with respect to the Annual Meeting of Stockholders of
Bay View scheduled to be held in May 2000 as a director to serve in the class
of directors of Bay View with terms expiring in the year 2002.
5.21 Transfer of FMAC Name. FMAC shall execute any instruments which Bay
View reasonably deems necessary to enable New FMAC to be incorporated with the
name Franchise Mortgage Acceptance Company.
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5.22 Bay View Acknowledgment. Bay View acknowledges that it will succeed to
the Bankers Mutual "earn-out" by operation of law.
5.23 FMAC Employees. It is the intention of New FMAC to retain the employees
of FMAC. New FMAC shall institute a retention bonus program for up to 35 mid-
level managers of FMAC to be named by FMAC upon the Closing, which program
shall provide for a retention bonus of at least three months base salary for
each manager who continues employment for his or her designated retention
period.
5.24 Financial Reporting Obligations and Tax Gross-Up Payments. FMAC shall
cause the full amount of the financial charges and expense relating to (a)
restricted stock awards, bonus stock awards and other stock awards, if any,
and (b) tax gross-up payments to be recorded on its financial books and
records and financial statements for financial reporting purposes under GAAP
on a pre-acquisition basis prior to the Closing Date. All tax gross-up
payments shall be paid by FMAC prior to the Closing Date.
ARTICLE VI
CONDITIONS
6.1 Conditions to the Obligations of Bay View Notwithstanding any other
provision of this Agreement, the obligations of Bay View to consummate the
Merger are subject to the following conditions precedent (except as to those
which Bay View may choose to waive):
(a) all of the representations and warranties made by FMAC in this
Agreement and in any documents or certificates provided by FMAC shall have
been true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and
as of the Effective Time;
(b) FMAC shall have performed in all material respects all obligations
and shall have complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at the Effective Time;
(c) there shall not have been any action taken or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the transactions contemplated by this Agreement by any federal or state
government or governmental agency or instrumentality or court, which would
prohibit ownership or operation of all or a portion of the business or
assets of FMAC or any FMAC Subsidiary by Bay View or any Bay View
Subsidiary, or would compel Bay View or any Bay View Subsidiary to dispose
of all or a portion of the business or assets of FMAC or any FMAC
Subsidiary, as a result of this Agreement, or which would render any party
hereto unable to consummate the transactions contemplated by this
Agreement;
(d) FMAC shall not have suffered a Material Adverse Effect;
(e) no regulatory authority shall impose any unduly burdensome condition
relating to the transactions contemplated by this Agreement such that it
would substantially deprive Bay View of the economic benefits of the
transactions contemplated by this Agreement, as determined in the
reasonable judgment of Bay View;
(f) Bay View shall have received a certificate signed by the President
and Chief Executive Officer of FMAC, dated as of the Effective Time,
certifying that based upon his best knowledge, the conditions set forth in
Sections 6.1(a), (b), (d), (h), (i), (j), (k) and (l) hereof have been
satisfied;
(g) Bay View shall have received the written affiliates' agreements
described in Section 5.3 hereof;
(h) Dissenting Shares shall not exceed 7% of the issued and outstanding
FMAC Common Stock;
(i) The consolidated stockholders' equity of FMAC as of the Closing Date
determined in accordance with GAAP (the "Closing Equity") shall be no less
than $150,000,000, provided that for purposes of this provision the Closing
Equity shall be increased by the after-tax amount of (i) all Merger related
fees, costs
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and expenses, including, but not limited to, the fees and expenses of First
Boston pursuant to its engagement letter set forth in Section 5.4 of the
FMAC Disclosure Schedule, printing and mailing costs, and legal and
accounting fees, subject to the limitation set forth in Section 5.4 of the
FMAC Disclosure Schedule, to the extent previously expensed, and (ii) any
reserves, accruals or charges taken by FMAC at the request of Bay View
pursuant to Section 5.5(b)(vi), in each case to the extent such amounts
have reduced Closing Equity;
(j) FMAC shall have sold, transferred or otherwise disposed of, on terms
reasonably satisfactory to Bay View, all of its or its Subsidiaries'
businesses or activities that would be impermissible to be engaged in by
Bay View Bank, either directly or indirectly;
(k) FMAC shall have obtained all consents, approvals or waivers of all
persons (other than regulatory authorities) under all the material
contracts, agreements, permits, authorizations and licenses set forth on
Section 6.1(k) of the FMAC Disclosure Schedule and all such consents,
approvals or waivers shall be in full force and effect; and
(l) FMAC shall have achieved Year 2000 Compliance.
6.2 Conditions to the Obligations of FMAC. Notwithstanding any other
provision of this Agreement, the obligations of FMAC to consummate the Merger
are subject to the following conditions precedent (except as to those which
FMAC may choose to waive):
(a) all of the representations and warranties made by Bay View in this
Agreement and in any documents or certificates provided by Bay View shall
have been true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and
as of the Effective Time;
(b) Bay View shall have performed in all material respects all of its
obligations and shall have complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it prior to or at the Effective Time;
(c) Bay View shall not have suffered a Material Adverse Effect; and
(d) FMAC shall have received a certificate signed by the President and
Chief Executive Officer of Bay View, dated as of the Effective Time, that
based upon his best knowledge, the conditions set forth in Sections 6.2(a),
(b) and (c) have been satisfied.
6.3 Conditions to the Obligations of the Parties. Notwithstanding any other
provision of this Agreement, the obligations of Bay View on the one hand, and
FMAC on the other hand, to consummate the Merger are subject to the following
conditions precedent (except as to those which Bay View or FMAC may choose to
waive):
(a) this Agreement, including the Merger, shall have received the
requisite approval of the stockholders of Bay View in accordance with the
applicable provisions of the Bylaws of Bay View and the DGCL and the
requisite approval of the stockholders of FMAC in accordance with the
applicable provisions of the Bylaws of FMAC and the DGCL.
(b) no preliminary or permanent injunction or other order by any federal
or state court which prevents the consummation of the Merger shall have
been issued and shall remain in effect;
(c) the parties shall have received all applicable regulatory approvals
and consents to consummate the transactions contemplated in this Agreement
and all required waiting periods shall have expired;
(d) the Registration Statement shall have been declared effective under
the Securities Act and no stop orders shall be in effect and no proceedings
for such purpose shall be pending or threatened by the SEC and, if the
offering for sale of the Bay View Common Stock in the Merger pursuant to
this Agreement is subject to the securities laws of any state, the
Registration Statement shall not be subject to a stop order of any state
securities authority;
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(e) each party shall have received the tax opinion addressed to it
referred to in Section 5.10 of this Agreement; and
(f) the Bay View Common Stock to be issued to holders of FMAC Common
Stock shall have been approved for listing on the Nasdaq National Market or
New York Stock Exchange subject to official notice of issuance.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) By the mutual written consent of the Boards of Directors of Bay View
and FMAC;
(b) By Bay View or FMAC if any governmental authority has denied approval
of the Merger and such denial has become final and nonappealable;
(c) By Bay View or FMAC at any time after the (i) stockholders of FMAC
fail to approve this Agreement and the Merger by the requisite vote at the
FMAC Stockholders' Meeting or (ii) the stockholders of Bay View fail to
approve this Agreement and the Merger by the requisite vote at the Bay View
Stockholders' Meeting;
(d) By Bay View or FMAC, in the event of a material breach by the other
party of any representation, warranty, covenant or agreement contained
herein or in any schedule or document delivered pursuant hereto, which
breach cannot be or is not cured within 30 days after written notice of
such breach is given by the non-breaching party to the party committing
such breach;
(e) By Bay View or FMAC on or after January 15, 2000, in the event the
Merger has not been consummated by such date (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or agreement contained herein or in any schedule or
document delivered pursuant thereto);
(f) By Bay View after March 24, 1999, if employment agreements
satisfactory to Bay View have not been entered into by at least the persons
named on Section 7.1(f) of the Bay View Disclosure Schedule.
(g) By FMAC, if its Board of Directors so determines by a majority vote
of members of its entire Board, at any time during the five-day period
commencing with the Valuation Date, if the following conditions are
satisfied:
(i) the Final Bay View Price is less than $17.50; and
(ii) the Bay View Ratio is less than the Index Ratio;
subject, however, to the following three sentences: If FMAC elects to
exercise its termination right pursuant to this Section 7.1(g), it shall
give prompt written notice to Bay View. During the seven-day period
commencing with its receipt of such notice, Bay View shall have the option
to elect to increase the Exchange Ratio to equal the lesser of: (i) the
quotient obtained by dividing (1) the product of $17.50 and the Exchange
Ratio (as then in effect) by (2) the Final Bay View Price; and (ii) the
quotient obtained by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the Bay View Ratio. If Bay View
makes an election contemplated by the preceding sentence, within such
seven-day period, it shall give prompt written notice to FMAC of such
election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 7.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified)
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and any references in this Agreement to "Exchange Ratio" shall thereafter
be deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section 7.1(g).
For the purposes of this Section 7.1(g), the following terms shall have the
meanings indicated:
"Bay View Ratio" means the number obtained by dividing the Final Bay View
Price by $20.00.
"Index Ratio" means the number obtained by first dividing the Final Index
Price by the Initial Index Price and then subtracting from that quotient
0.125.
"Initial Index Price" means the weighted average of the Initial Prices
for each company comprising the Index Group.
"Initial Price," with respect to any company, means the closing sales
price of a share of common stock of such company, as reported on the
consolidated transaction reporting system for the market or exchange on
which such common stock is principally traded, on the trading day
immediately preceding the public announcement of this Agreement.
"Final Bay View Price" means the Final Price of Bay View Common Stock.
"Final Index Price" means the weighted average of the Final Prices for
each company comprising the Index Group.
"Final Price," with respect to any company, means the average of the
daily closing sales prices of a share of common stock of such company, as
reported on the consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded, during the
period of 20 trading days ending on the Valuation Date. If a company
declares or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between
the date of this Agreement and the Valuation Date, the prices for the
common stock of such company shall be appropriately adjusted for the
purposes of determining the Final Price.
"Index Group" means the 15 companies listed below, the common stock of
all of which shall be publicly traded and as to which there shall not have
been a publicly announced proposal at any time during the period beginning
on the trading day immediately preceding the public announcement of this
Agreement and ending on the Valuation Date for any such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company or companies are removed
from the Index Group, the weights attributed to the remaining companies
will be adjusted proportionately for purposes of determining the Final
Index Price and the Initial Index Price. The 15 companies and the weights
attributed to them are as follows:
<TABLE>
<CAPTION>
Holding Company Weighting
--------------- ---------
<S> <C>
FirstFed Financial Corp............................................ 2.76%
GreenPoint Financial Corp.......................................... 12.36
Sovereign Bancorp, Inc............................................. 21.44
Webster Financial Corp............................................. 4.87
Bank United Corp................................................... 4.12
People's Bank...................................................... 8.32
Downey Financial Corp.............................................. 3.68
Washington Federal Inc............................................. 7.31
St. Paul Bancorp Inc............................................... 5.32
PFF Bancorp Inc.................................................... 2.02
Queens County Bancorp Inc.......................................... 2.78
MAF Bancorp Inc.................................................... 3.26
TCF Financial Corp................................................. 11.18
Harris Financial Inc............................................... 4.39
Northwest Bancorp Inc.............................................. 6.19
</TABLE>
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"Valuation Date" means the day that is the latest of (i) the day on which
the last of the required regulatory approvals is obtained and (ii) the day
on which the last of the required stockholder approvals has been received.
(h) by FMAC, by written notice to Bay View prior to the approval of this
Agreement and the Merger by the FMAC stockholders, if FMAC receives an
Acquisition Proposal on terms and conditions which the FMAC Board of
Directors determines, after receiving the advice of its outside counsel,
that to proceed with the Merger will violate the fiduciary duties of the
Board of Directors to FMAC's stockholders; provided, however, that FMAC
shall not be entitled to terminate this Agreement pursuant to this clause
(h) unless it shall have provided Bay View with written notice of such a
possible determination (which written notice will inform Bay View of the
material terms and conditions of the proposal, including the identity of
the proponent) and a copy not less than two business days prior to such
determination.
(i) By Bay View if FMAC receives an Acquisition Proposal and FMAC's Board
of Directors does not, within ten business days but not later than five
days prior to the FMAC Stockholders' Meeting, publicly recommend against
such proposal, provided that if the Acquisition Proposal is not made
public, FMAC may reject the Acquisition Proposal by written notice to the
offeror and providing Bay View with a copy thereof, and provided, further,
that if Bay View is entitled to terminate pursuant to this Subsection, it
must give its notice of termination during the eleventh through twentieth
business days after FMAC provides Bay View notice of its receipt of such
Acquisition Proposal.
In the event a party elects to effect any termination pursuant to Section
7.1(b) through 7.1(i) above, it shall give written notice to the other party
hereto specifying the basis for such termination and certifying that such
termination has been approved by the vote of a majority of the members of its
Board of Directors.
7.2 Liabilities and Remedies; Break-Up Fee.
(a) In the event of termination of this Agreement as provided in Sections
7.1(a) through 7.1(c), or Sections 7.1(e) through 7.1(i), this Agreement
shall forthwith become void and there shall be no liability or obligation
on the part of Bay View or FMAC or their respective officers or directors
except for the obligations set forth in Section 5.1(b), Section 5.4 and
Section 7.2, which obligations shall survive. Termination under Section
7.1(e) or (f) shall also release the parties from any liability or
obligations under Sections 7.2(b) through 7.2(d). In the event of
termination of this Agreement as provided in Section 7.1(d), Section
5.1(b), Section 5.4 and Section 7.2 shall survive, and the non-breaching
party shall be entitled to such remedies and relief against the breaching
party as are available at law or in equity; provided, however, no remedy at
law or for damages shall be available to the non-breaching party on account
of a breach of representation or warranty by the breaching party unless
such breach was willful. Moreover, the non-breaching party without
terminating this Agreement shall be entitled to specifically enforce the
terms hereof against the breaching party in order to cause the Merger to be
consummated. Each party acknowledges that there is not an adequate remedy
at law to compensate the other parties relating to the non-consummation of
the Merger. To this end, each party, to the extent permitted by law,
irrevocably waives any defense it might have based on the adequacy of a
remedy at law which might be asserted as a bar to specific performance,
injunctive relief or other equitable relief.
(b) Bay View shall be entitled to a break-up fee of $8,000,000 in cash
payable on demand in immediately available funds, as its sole and exclusive
remedy, if: (i) either this Agreement is terminated by FMAC under Section
7.1(h) or by Bay View under Section 7.1(i); or (ii) this Agreement is
terminated for any reason other than a proper termination by FMAC under
Section 7.1(d), and in the case of this subpart (ii) one of the following
events has occurred or occurs:
(i) the FMAC Stockholders' Meeting does not take place by December
31, 1999;
(ii) the Board of Directors of FMAC fails to recommend approval of
this Agreement and the Merger to the stockholders of FMAC, or such
Board of Directors shall adversely alter or modify its
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favorable recommendation of this Agreement and the Merger to the
stockholders of FMAC, and this Agreement and the Merger are not
approved by the stockholders of FMAC by the requisite vote at the FMAC
Stockholders' Meeting; or
(iii) an Acquisition Proposal occurs between the date hereof and the
time of the FMAC Stockholders' Meeting and this Agreement and the
Merger are not approved by the stockholders of FMAC by the requisite
vote at the FMAC Stockholders' Meeting.
In order to obtain the benefit of the break-up fee provided in this Section
7.2(b), Bay View shall be required to execute a waiver of its rights under
Section 7.2(a) above, and shall not have taken any action to enforce any
right that it might have under Section 7.2(a).
(c) FMAC shall be entitled to a break-up fee of $8,000,000 in cash
payable on demand in immediately available funds, as its sole and exclusive
remedy, if: (i) this Agreement is terminated for any reason other than a
proper termination by Bay View under Section 7.1(d) and (ii) one of the
following events has occurred or occurs:
(i) the Bay View Stockholders' Meeting does not take place by
December 31, 1999; or
(ii) the Board of Directors of Bay View fails to recommend approval
of this Agreement and the Merger to the stockholders of Bay View, or
such Board of Directors shall adversely alter or modify its favorable
recommendation of this Agreement and the Merger to the stockholders of
Bay View, and this Agreement and the Merger are not approved by the
stockholders of Bay View by the requisite vote at the Bay View
Stockholders' Meeting.
In order to obtain the benefit of the break-up fee provided in this Section
7.2(c), FMAC shall be required to execute a waiver of its rights under
Section 7.2(a) above, and shall not have taken any action to enforce any
right that it might have under Section 7.2(a).
(d) (i) If FMAC is not then in material breach of this Agreement and
either:
(A) any governmental authority has denied approval of the Merger and
such denial has become final and nonappealable (provided that such
denial is not the result, in whole or in part, of FMAC's failure to
meet such authority's requirements for year 2000 compliance); or
(B) all three of the following conditions are met:
(x) the stockholders of Bay View fail to adopt this Agreement;
(y) the stockholders of FMAC adopt this Agreement; and
(z) FMAC is not then entitled to a break up fee under Section
7.2(c),
then upon termination of this Agreement Bay View shall reimburse FMAC for
its third party expenses relating to this Agreement and the transactions
contemplated hereby in an amount up to $500,000.
(ii) If Bay View is not then in material breach of this Agreement and all
three of the following conditions are met:
(x) the stockholders of FMAC fail to adopt this Agreement;
(y) the stockholders of Bay View adopt this Agreement; and
(z) Bay View is not then entitled to a break up fee under Section
7.2(b),
then upon termination of this Agreement FMAC shall reimburse Bay View for
its third party expenses relating to this Agreement and the transactions
contemplated hereby in an amount up to $500,000.
7.3 Survival of Agreements. In the event of termination of this Agreement by
either Bay View or FMAC as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect except that the agreements contained
in Section 5.1(b), Section 5.4 and Section 7.2 hereof shall survive the
termination hereof.
44
<PAGE>
7.4 Amendment. This Agreement may be amended by the parties hereto by action
taken by their respective Boards of Directors at any time before or after
approval hereof by the stockholders of FMAC and Bay View but, after such
approval, no amendment shall be made which changes the form of consideration
or the value of the consideration to be received by the stockholders of FMAC
without the approval of the stockholders of FMAC and Bay View. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto. The parties may, without approval of their respective
Boards of Directors, make such technical changes to this Agreement, not
inconsistent with the purposes hereof as may be required to effect or
facilitate any regulatory approval or acceptance of the Merger or of this
Agreement or to effect or facilitate any regulatory or governmental filing or
recording required for the consummation of any of the transactions
contemplated hereby.
7.5 Waiver. Any term, provision or condition of this Agreement (other than
the requirement of FMAC stockholder approval) may be waived in writing at any
time by the party which is entitled to the benefits hereof. Each and every
right granted to any party hereunder, or under any other document delivered in
connection herewith or therewith, and each and every right allowed it by law
or equity, shall be cumulative and may be exercised from time to time. The
failure of a party at any time or times to require performance of any
provision hereof shall in no manner affect such party's right at a later time
to enforce the same. No waiver by any party of a condition or of the breach of
any term, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
to be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
covenant, representation or warranty of this Agreement. No investigation,
review or audit by a party of another party prior to or after the date hereof
shall estop or prevent such party from exercising any right hereunder or be
deemed to be a waiver of any such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival. All representations, warranties, covenants, agreements and
obligations of the parties in this Agreement or in any instrument delivered to
one another by the parties pursuant to this Agreement (other than the
covenants, agreements and obligations of Bay View set forth herein which by
their stated terms are to be performed after the Effective Time) shall not
survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, by facsimile
transmission or by registered or certified mail to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice) and shall be deemed to be delivered on the date so
delivered:
(a) if to Bay View:
Edward H. Sondker
President and Chief Executive Officer
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, California 94404
copies to:
Barry P. Taff, P.C.
Christopher R. Kelly, P.C.
Silver, Freedman & Taff, L.L.P.
ll00 New York Ave., N.W.
Washington, D.C. 20005
45
<PAGE>
(b) if to FMAC:
Wayne L. Knyal
Chief Executive Officer
Franchise Mortgage Acceptance Company
1888 Century Park East
3rd Floor
Los Angeles, California 90067
copies to:
Robert M. Smith
Dewey Ballantine LLP
333 South Hope Street
Los Angeles, California 90071
and
Michael L. Matkins
Mark J. Kelson
Allen, Matkins, Leck, Gamble & Mallory LLP
1999 Avenue of the Stars
Suite 1800
Los Angeles, California 90067
8.3 Applicable Law This Agreement shall be construed and interpreted
according to the laws of the State of Delaware without regard to conflicts of
laws principles thereof, except to the extent that the federal laws of the
United States apply.
8.4 Headings, Etc. The article headings and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
8.5 Severability. If any term, provision, covenant, or restriction contained
in this Agreement is held by a final and unappealable order of a court of
competent jurisdiction to be invalid, void, or unenforceable, then the
remainder of the terms, provisions, covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated unless the effect would be to cause this
Agreement to not achieve its essential purposes.
8.6 Entire Agreement; Binding Effect; Non-Assignment; Counterparts;
Effect. Except as otherwise expressly provided herein, this Agreement
(including the documents and instruments referred to herein) (i) constitutes
the entire agreement between the parties hereto and supersedes all other prior
agreements and undertakings, both written and oral, between the parties, with
respect to the subject matter hereof (excluding any confidentiality agreement
between the parties hereto); and (ii) is not intended to confer upon any other
person any rights or remedies hereunder except as specifically provided
herein. This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other party hereto.
This Agreement may be executed in two or more counterparts which together
shall constitute a single agreement.
46
<PAGE>
The undersigned have caused this Agreement to be executed as of the day and
year first above written.
BAY VIEW CAPITAL CORPORATION
By /s/ Edward H. Sondker
___________________________________
Edward H. Sondker
President and Chief Executive
Officer
FRANCHISE MORTGAGE ACCEPTANCE
COMPANY
By /s/ Wayne L. Knyal
___________________________________
Wayne L. Knyal
President and Chief Executive
Officer
47
<PAGE>
EXHIBIT 99.1
[LOGO OF BAY VIEW CAPITAL CORPORATION] News Release
------------
NASDAQ SYMBOL: BVCC
Web Site: www.bayviewcapital.com
Contact: David A. Heaberlin
(650) 312-7272
NASDAQ SYMBOL: FMAX
Web Site: www.fmax.com
Contact: Franchise Mortgage Acceptance Company
Kevin T. Burke
(310) 229-2617
FOR IMMEDIATE RELEASE
March 11, 1999
BAY VIEW CAPITAL AND FRANCHISE MORTGAGE ACCEPTANCE
ANNOUNCE DEFINITIVE MERGER AGREEMENT
San Mateo, California - Bay View Capital Corporation (the "Company" or "Bay
View") and Franchise Mortgage Acceptance Company ("FMAC") today announced that
they have executed a Definitive Merger Agreement providing for the merger of
Southern California-based FMAC with the Company. FMAC is one of the nation's
leading small business lenders specializing in franchise concept loans. Bankers
Mutual ("Bankers"), a division of FMAC, is one of the nation's leading multi-
family lenders. Following the merger, FMAC will operate as a subsidiary of Bay
View Bank, N.A. ("BVB").
Edward H. Sondker, the Company's President and Chief Executive Officer,
commented, "FMAC provides Bay View with a significant small business platform
focused on the restaurant, energy and multi-family lending segments. The focus
of this merger, which is estimated to be accretive to earnings per share from
day one, is asset generation and revenue expansion as compared with cost
savings. We anticipate that FMAC, including Bankers, will originate in excess
of $2.8 billion in loans in the first year following the merger. This level of
asset production provides Bay View with significant future growth opportunities
and helps to resolve the challenge we have faced over the past year with the
high level of mortgage-related prepayments. While we intend to continue selling
Bankers' multi-family loan production through Fannie Mae and Freddie Mac, we do
intend to portfolio a portion of the commercial franchise loans originated,
resulting in an accelerated transformation of our balance sheet to higher-
yielding consumer and commercial assets."
1
<PAGE>
Wayne L. "Buz" Knyal, FMAC's President and Chief Executive Officer,
commented, "This merger significantly enhances our funding alternatives and
provides us with a powerful array of lending products to further solidify our
leadership position in the franchise and multi-family lending sectors."
Transaction Structure
In accordance with the terms of the Definitive Agreement, the Company will
acquire all of the common stock of FMAC for consideration currently valued at
approximately $309 million. Each share of FMAC common stock will be entitled to
receive, at the election of the holder, either $10.25 in cash, or .5125 shares
of the Company's common stock. The FMAC shareholder elections are subject to
the aggregate number of shares of FMAC common stock to be exchanged for the
Company's common stock being equal to 60% of the number of shares of FMAC common
stock outstanding immediately prior to closing the transaction and no FMAC
shareholder owning more than 9.9% of the Company's common stock, on a pro forma
basis.
The Definitive Agreement also provides for an additional payment of up to $30
million in connection with the earn-out provision of FMAC's April 1998 purchase
of Bankers.
Simultaneous with the merger, the Company will contribute substantially all
of the assets and liabilities of FMAC to a newly organized and wholly owned
subsidiary of BVB. The transaction is expected to close during the third
quarter of 1999, subject to approval by both the Company's and FMAC's
shareholders and subject to necessary regulatory approvals.
In connection with the merger, BVB will purchase approximately $400 million
in commercial loans from FMAC through the end of the first quarter of 1999. BVB
may also purchase additional levels of commercial loans through the closing date
of the transaction. This arrangement is expected to mitigate BVB's exposure to
loan prepayments during the first half of 1999.
David A. Heaberlin, the Company's Executive Vice President and Chief
Financial Officer, commented, "The accretive nature of this transaction is
consistent with the Company's mission of enhancing shareholder value. In
addition to providing the Company with national leaders in their respective
market niches, the transaction provides an estimated book EPS accretion of $0.15
per share, or 10%, in the first year following the merger and $1.13 per share,
or 65%, in the second year. Further, the tangible book value dilution associated
with the merger, resulting from the additional goodwill generated, is
anticipated to be recovered after only two years due to the significant levels
of tangible cash earnings generated."
2
<PAGE>
Profile of FMAC
FMAC is a commercial finance company originating and servicing loans to small
businesses, with a primary focus on established national and regional restaurant
franchise concepts and other branded concepts such as service stations and
convenience stores.
Since commencing business in 1991, FMAC has become a leading lender to
national and regional quick service restaurant franchisees and has developed a
growing presence in the casual dining sector. FMAC's focus also includes
financing retail energy licensees (e.g., service stations with multiple sources
of cash flows).
FMAC originates primarily long-term fixed-rate and variable-rate loans and
has traditionally sold such loans either through securitizations or whole loan
sales to institutional investors on a servicing retained basis. FMAC's loan
products are attractive investments to institutional investors because of the
credit profile of its borrowers, relatively long loan terms, call protection
through substantial prepayment penalties, and appropriate risk-adjusted yields.
FMAC originates loans and leases through 35 marketing offices in 20 states.
Since FMAC's inception in 1991 through December 31, 1998, it has funded
approximately $3.8 billion in loans and leases.
During 1998, FMAC formed a wholly owned insurance brokerage subsidiary, FMAC
Insurance Services, Inc., which offers property, casualty and employee benefits
policies and programs to businesses nationwide on an agency basis.
Profile of Bankers Mutual
FMAC acquired substantially all of the assets and liabilities of Bankers
Mutual and Bankers Mutual Mortgage, Inc. under an Asset Purchase Agreement
effective April 1, 1998.
Bankers, founded in 1980, originates multi-family income producing property
loans under programs with Fannie Mae and Freddie Mac. Bankers is one of a
select number of participating members of Fannie Mae's Delegated Underwriting
and Servicing ("DUS") program. During 1998, Bankers was the second largest
originator in Fannie Mae's DUS program nationally. Bankers also participates in
Freddie Mac's Program Plus seller-servicer program. During 1998, Bankers closed
over $1 billion in multi-family loans.
During 1998, FMAC, including Bankers, originated approximately $2.1 billion
in loans and leases and had a combined servicing portfolio, including loans and
leases classified as held-for-sale, of $5.4 billion. Currently, this portfolio
is approximately $6.0 billion.
3
<PAGE>
Management Team
FMAC and Bankers are collectively led by a team of executive officers with
extensive industry and professional experience. Wayne L. "Buz" Knyal, FMAC's
founder and a pioneer in franchise securitizations, is President and Chief
Executive Officer.
Trent D. Brooks, President, Bankers Mutual, has been with FMAC since its
acquisition of Bankers in April 1998. Previously, Mr. Brooks served as
President of Bankers Mutual and Bankers Mutual Mortgage, Inc., having joined
Bankers Mutual in 1984.
Donald W. Hakes serves as President of FMAC's Energy Finance Group, which
provides loans to national and regional businesses that distribute petroleum
products.
Thomas J. Schuldt serves as President of FMAC's Diversified Finance Group,
which includes the restaurant, golf and funeral lending divisions.
Kevin T. Burke, Executive Vice President, Capital Markets, is responsible for
FMAC's investing, financing and securitization activities.
Mr. Knyal and key managerial personnel are expected to remain with the
Company.
Asset Quality
FMAC's and Bankers' borrowers are generally either small business operators
or multi-family income producing property owners, with proven operating
experience and a history of generating positive operating cash flows. FMAC
relies primarily upon its assessment of enterprise value, based in part on
independent third-party valuations, and historical operating cash flows to make
credit determinations, as opposed to relying solely on the value of real estate
and other collateral.
Both FMAC and Bankers have outstanding credit histories as evidenced by their
de minimus level of combined credit losses, aggregating only approximately $2
million, over their eight-year and 20-year lives, respectively. The credit
quality of the portfolio is further evidenced by the low level of loan and lease
delinquencies at December 31, 1998, including serviced assets, as follows:
<TABLE>
<CAPTION>
% of Loans
(Dollars in millions) Balance and Leases
------------------------------ ------- ----------
<S> <C> <C>
Loans and leases in servicing
portfolio $5,423 100.00%
30-59 days delinquent 9 0.16
60-89 days delinquent 2 0.04
90 days or more days delinquent 58 1.06
------ ------
Total delinquent $ 69 1.26%
====== ======
</TABLE>
4
<PAGE>
Financial Analysis
The transaction will be accounted for under the purchase method of accounting
and will generate goodwill currently estimated at approximately $235 million,
which the Company expects to amortize on a straight-line basis over a 15-year
period. As the transaction is structured as a tax-free reorganization, most of
the goodwill generated will be nondeductible for income tax purposes. Assuming
a full pay-out of the $30 million contingent payment in connection with FMAC's
acquisition of Bankers, approximately $68 million of this goodwill will retain
its deductibility for income tax purposes.
The price/earnings ("P/E") multiple for this transaction represents
approximately 10.5x FMAC's estimated 1999 earnings, as reported by First Call.
This P/E multiple includes the impact of the aforementioned $30 million
contingent payment in connection with FMAC's purchase of Bankers. This compares
with an average of 17.0x earnings for comparable commercial finance acquisitions
since 1996. The transaction price represents 2.27x FMAC's book value compared
with an average of 2.6x book value for comparable commercial finance
acquisitions since 1996.
The transaction is expected to be accretive on both a book and tangible cash
earnings per share ("EPS") basis. These projections include securitization gain
assumptions significantly below historically achieved levels, reflecting the
recent illiquidity in the securitization market. Securitization gains are
estimated at 2.7% of securitized assets. This compares with FMAC's actual cash
gains from securitizations of approximately 8% during 1997 and 1998, most of
which were executed prior to the market turbulence of last fall.
The following tables illustrate the estimated accretion during the first and
second years following the merger consummation. The accretive impact is
compared with the Company's consensus estimates assuming that the transaction
closed January 1, 1999.
<TABLE>
<CAPTION> --------------------------------
Year 1
--------------------------------
Book Tangible Cash
---- -------------
<S> <C> <C>
First Call 1999 consensus estimate $1.53 $1.53
Cash basis adjustments:
Intangible amortization (including stock-
based compensation) - 0.53
----- -----
Forecasted before FMAC 1.53 2.06
Accretive impact of merger 0.15 0.43
----- -----
Forecasted after FMAC $1.68 $2.49
===== =====
Percentage accretion 10% 21%
===== =====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION> -------------------------
Year 2
-------------------------
Book Tangible Cash
----- -------------
<S> <C> <C>
First Call 2000 consensus estimate $1.74 $1.74
Cash basis adjustments:
Intangible amortization (including stock-
based compensation) - 0.53
----- -----
Forecasted before FMAC 1.74 2.27
Accretive impact of merger 1.13 1.42
----- -----
Forecasted after FMAC $2.87 $3.69
===== =====
Percentage accretion 65% 62%
===== =====
</TABLE>
Other Considerations
The Definitive Agreement provides that FMAC must be Year 2000 compliant under
regulatory standards as a condition of closing.
A Voting Agreement has been executed with one of FMAC's significant
shareholders, representing approximately 38% of FMAC's outstanding common
shares, which provides that this shareholder may not sell its FMAC shares during
the term of the Definitive Agreement and will vote in favor of the merger.
In conjunction with the merger, Mr. Knyal will have an ownership interest in
the Company in excess of 5% and will hold a seat on the Company's Board of
Directors.
Financial and Legal Advisors
Lehman Brothers acted as financial advisors to the Company and Silver,
Freedman & Taff served as its legal counsel. CS First Boston acted as financial
advisors to FMAC and Dewey Ballantine LLP and Allen, Matkins, Leck, Gamble &
Mallory LLP served as its legal counsel.
BVCC Corporate Profile
Bay View Capital Corporation is a $5.6 billion diversified financial services
holding company headquartered in San Mateo, California. It is the parent
company of Bay View Bank, N.A. and its subsidiaries Bay View Acceptance
Corporation and Bay View Commercial Finance Group.
6
<PAGE>
Forward-Looking Statements
When used in this or future press releases, in the Company's filings with the
Securities and Exchange Commission or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "may", "estimates", "anticipates",
"would like", "will be", "will enable", "will enhance", "should be able",
"should allow", "to be able", "to ensure", "we expect", "we believe", or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which speak only as of the date made, and to advise readers
that various factors, including, but not limited to, regional and national
economic conditions; changes in the levels of market interest rates; credit
risks associated with real estate, consumer, commercial, and other lending
activities; competitive and regulatory factors; changes in accounting
principles; changes in the market value of the Company's common stock; the
Company's inability to achieve synergies in the FMAC, America First Eureka
Holdings, Inc., Ultra Funding, Inc., Bay View Commercial Finance Group, and Bay
View Credit acquisitions and to sustain or improve the performance of its
subsidiaries; the Company's inability to identify suitable future acquisition
candidates; and the Company's inability to achieve the assumptions as defined in
its strategic plans, including any assumptions related to both consummated and
contemplated acquisitions, could cause actual results to differ materially from
those projected. The Company does not undertake, and specifically disclaims any
obligations, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
Non-GAAP Performance Measures
Non-GAAP performance measures contained in this press release, including
tangible cash earnings, are calculated excluding the amortization of intangible
assets. These measures are not measures of performance under generally accepted
accounting principles ("GAAP") and should not be considered an alternative to
net income as an indicator of the Company's operating performance. Such amounts
are included herein as management believes they are useful tools for investors
and analysts in assessing the Company's performance and trends excluding the
impact of such items. These measures may not be comparable to similarly titled
measures reported by other companies.
7
<PAGE>
EXHIBIT 99.2
March 10, 1999
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, California 94404
Dear Sirs:
The undersigned understands that BAY VIEW CAPITAL CORPORATION ("Bay View")
and FRANCHISE MORTGAGE ACCEPTANCE COMPANY ("FMAC") are entering into an
Agreement and Plan of Merger and Reorganization (the "Merger Agreement")
providing for, among other things, the merger of FMAC into Bay View (the
"Merger"), in which the outstanding shares of common stock of FMAC will be
exchanged for a combination of cash and shares of common stock of Bay View.
The undersigned is a stockholder of FMAC and is entering into this agreement
to induce Bay View to enter into the Merger Agreement and to consummate the
transactions contemplated thereby.
The undersigned confirms its agreement with Bay View as follows:
1. The undersigned represents, warrants and agrees that Schedule I annexed
hereto sets forth the shares of the capital stock of FMAC of which the
undersigned is the record or beneficial owner (the "Shares") and that the
undersigned is on the date hereof the lawful owner of the Shares set forth in
Schedule I, free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed in Schedule I.
Except as set forth in Schedule I, the undersigned does not own or hold any
rights to acquire any additional shares of the capital stock of FMAC (by
exercise of stock options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
2. Except as required by law, the undersigned agrees that the undersigned
will not, and will not permit any company, trust or other entity controlled by
the undersigned to, contract to sell, sell or otherwise transfer or dispose of
any of the Shares beneficially owned by the undersigned or any interest
therein or securities convertible thereunto or any voting rights with respect
thereto, other than pursuant to the Merger.
3. The undersigned agrees that all of the Shares, together with any
additional shares of capital stock of FMAC beneficially owned by the
undersigned, directly or indirectly, at the record date for any meeting of
stockholders of FMAC called to consider and vote to adopt the Merger Agreement
and/or the transactions contemplated thereby will be voted by the undersigned
in favor thereof.
4. The undersigned agrees to, and will cause any company, trust or other
entity controlled by the undersigned to, cooperate fully with Bay View in
connection with the Merger Agreement and the transactions contemplated
thereby. The undersigned agrees that the undersigned will not, and will not
permit any such company, trust or other entity to, directly or indirectly,
(including through its officers, directors, employees or other
representatives) initiate, solicit or encourage any discussions, inquiries or
proposals with any third party relating to an Acquisition Proposal (as defined
in the Merger Agreement), or provide any such person with information or
assistance or negotiate with any such person with respect to an Acquisition
Proposal or agree to or otherwise assist in the effectuation of any
Acquisition Proposal except as permitted by the Merger Agreement.
5. The undersigned represents and warrants to Bay View that (i) the
undersigned has all necessary power and authority to enter into this agreement
and (ii) this agreement is the legal, valid and binding agreement of the
undersigned, and is enforceable against the undersigned in accordance with its
terms.
6. The undersigned agrees that damages are an inadequate remedy for the
breach by the undersigned of any term or condition of this agreement and that
Bay View shall be entitled to a temporary restraining order and preliminary
and permanent injunctive relief in order to enforce the agreements provided
herein.
7. This letter agreement shall automatically terminate (i) upon termination
of the Merger Agreement in accordance with its terms or (ii) at the Effective
Time (as defined in the Merger Agreement).
<PAGE>
Bay View Capital Corporation
March 10, 1999
Page 2
8. Except for the obligations set forth in paragraph 4 above (which are the
identical obligations imposed upon the undersigned under the Merger
Agreement), nothing herein is intended to place any restriction for actions to
be taken by the undersigned in the undersigned's capacity as a director or
officer of FMAC. The obligations herein relate to actions to be taken or not
to be taken by the undersigned solely in the undersigned's capacity as a
shareholder of FMAC.
9. This agreement may be amended, modified or supplemented at any time by
the written approval of such amendment, modification or supplement by the
undersigned and Bay View.
10. This agreement evidences the entire agreement among the parties hereto
with respect to the matters provided for herein and there are no agreements,
representations or warranties with respect to the matters provided for herein
other than those set forth herein and in the Merger Agreement.
11. The parties agree that if any provision of this agreement shall under
any circumstances be deemed invalid or inoperative, this agreement shall be
construed with the invalid or inoperative provisions deleted and the rights
and obligations of the parties shall be construed and enforced accordingly.
12. This agreement may be executed in two counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same agreement.
13. The validity, construction, enforcement and effect of this agreement
shall be governed by the internal laws of the State of Delaware.
14. This agreement shall inure to the benefit of Bay View and its
successors, and shall be binding upon and inure to the benefit of the
undersigned and its successors, executors, personal representatives,
administrators, heirs, legatees, guardians and other legal representatives.
This agreement shall survive the death or incapacity of the undersigned.
15. Nothing in this Agreement shall be construed to give Bay View any rights
to exercise or direct the exercise of voting power as owner of the Shares,
either beneficially or otherwise, for any purpose.
16. The undersigned agrees that in the event of his breach Bay View shall be
entitled to such remedies and relief against the undersigned as are available
at law or in equity. The undersigned acknowledges that there is not an
adequate remedy at law to compensate Bay View for a violation of this
Agreement, and irrevocably waives, to the extent permitted by law, any defense
that he might have based on the adequacy of a remedy at law which might be
asserted as a bar to specific performance, injunctive relief, or other
equitable relief. The undersigned agrees to the granting of injunctive relief
without the posting of any bond and further agrees that if any bond shall be
required, such bond shall be in a nominal amount.
17. Bay View agrees that it shall grant to Imperial Credit Industries, Inc.
("ICI") as of the Effective Time (as defined in the Merger Agreement)
registration rights no less favorable than those which ICI enjoys under the
Registration Rights Agreement dated as of August 26, 1997 between ICI and
FMAC.
<PAGE>
Bay View Capital Corporation
March 10, 1999
Page 3
Please confirm that the foregoing correctly states the understanding between
the undersigned and Bay View by signing and returning to Bay View a
counterpart hereof.
Very truly yours,
FMAX HOLDINGS, LLC
By: Imperial Credit Industries,
Inc., a member
By: /s/ H. Wayne Snavley
__________________________________
Name: H. Wayne Snavley
Title: Chairman of the Board,
President and Chief
Executive Officer
Accepted as of the 10th day
of March, 1999
BAY VIEW CAPITAL CORPORATION
By: /s/ Edward H. Sondker
_____________________________
Edward H. Sondker
President and Chief Executive Officer
<PAGE>
SCHEDULE I
<TABLE>
<S> <C>
Number of shares of FMAC common stock beneficially owned.......... 10,823,492
</TABLE>
